II 

112TH CONGRESS 

1ST SESSION S. 1346 

To restrict the use of offshore tax havens and abusive tax shelters to 

inappropriately avoid Federal taxation, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

JULY 12, 2011 

Mr. LEVIN (for himself, Mr. CONRAD, Mr. NELSON of Florida, Mr. SANDERS, 

Mrs. SHAHEEN, and Mr. WHITEHOUSE) introduced the following bill; 

which was read twice and referred to the Committee on Finance 

A BILL 

To restrict the use of offshore tax havens and abusive tax 

shelters to inappropriately avoid Federal taxation, and 

for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE; ETC. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Stop Tax Haven Abuse Act’’. 

6 (b) AMENDMENT OF 1986 CODE.—Except as other7 wise expressly provided, whenever in this Act an amend8 ment or repeal is expressed in terms of an amendment 

9 to, or repeal of, a section or other provision, the reference 


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1 shall be considered to be made to a section or other provi2 sion of the Internal Revenue Code of 1986. 

3 (c) TABLE OF CONTENTS.—The table of contents of 

4 this Act is as follows: 

Sec. 1. Short title; etc. 

TITLE I—DETERRING THE USE OF TAX HAVENS FOR TAX 

EVASION 

Sec. 101. Authorizing special measures against foreign jurisdictions, financial 

institutions, and others that impede United States tax enforcement. 

Sec. 102. Strengthening the Foreign Account Tax Compliance Act (FATCA). 

Sec. 103. Treatment of foreign corporations managed and controlled in the 

United States as domestic corporations. 

Sec. 104. Reporting United States beneficial owners of foreign owned financial 

accounts. 

Sec. 105. Credit default swap payments made from the United States to persons offshore. 

Sec. 106. Tax on income of controlled foreign corporation deposited in financial 

account located in the United States. 

TITLE II—OTHER MEASURES TO COMBAT TAX HAVEN AND TAX 

SHELTER ABUSES 

Sec. 201. Country-by-country reporting. 

Sec. 202. Penalty for failing to disclose offshore holdings. 

Sec. 203. Deadline for anti-money laundering rule for hedge funds and private 

equity funds. 

Sec. 204. Anti-money laundering requirements for formation agents. 

Sec. 205. Strengthening John Doe summons proceedings. 

Sec. 206. Improving enforcement of foreign financial account reporting. 

TITLE III—COMBATING TAX SHELTER PROMOTERS 

Sec. 301. Penalty for promoting abusive tax shelters. 

Sec. 302. Penalty for aiding and abetting the understatement of tax liability. 

Sec. 303. Prohibited fee arrangement. 

Sec. 304. Preventing tax shelter activities by financial institutions. 

Sec. 305. Information sharing for enforcement purposes. 

Sec. 306. Disclosure of information to Congress. 

Sec. 307. Tax opinion standards for tax practitioners. 


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1 TITLE I—DETERRING THE USE 

2 OF TAX HAVENS FOR TAX 

3 EVASION 

4 SEC. 101. AUTHORIZING SPECIAL MEASURES AGAINST FOR5 EIGN JURISDICTIONS, FINANCIAL INSTITU6 TIONS, AND OTHERS THAT IMPEDE UNITED 

7 STATES TAX ENFORCEMENT. 

8 (a) IN GENERAL.—Section 5318A of title 31, United 

9 States Code, is amended— 

10 (1) by striking the section heading and insert11 ing the following new heading: 

12 ‘‘§ 5318A. Special measures for jurisdictions, financial 

13 institutions, or international transactions 

14 that are of primary money laundering 

15 concern or impede United States tax en16 forcement’’; 

17 (2) in subsection (a), by striking all before 

18 paragraph (1) and inserting the following: 

19 ‘‘(a) SPECIAL MEASURES TO COUNTER MONEY

20 LAUNDERING AND EFFORTS TO IMPEDE UNITED STATES

21 TAX ENFORCEMENT.—’’; 

22 (3) in subsection (c), by striking all before 

23 paragraph (1) and inserting the following: 

24 ‘‘(c) CONSULTATIONS AND INFORMATION TO BE

25 CONSIDERED IN FINDING JURISDICTIONS, INSTITUTIONS, 


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1 TYPES OF ACCOUNTS, OR TRANSACTIONS TO BE OF PRI2 MARY MONEY LAUNDERING CONCERN OR TO BE IMPED3 ING UNITED STATES TAX ENFORCEMENT.—’’; 

4 (4) in subsection (a)(1), by inserting ‘‘or is im5 peding United States tax enforcement’’ after ‘‘pri6 mary money laundering concern’’; 

7 (5) in subsection (a)(4)— 

8 (A) in subparagraph (A)— 

9 (i) by inserting ‘‘in matters involving 

10 money laundering,’’ before ‘‘shall consult’’; 

11 and 

12 (ii) by striking ‘‘and’’ at the end; 

13 (B) by redesignating subparagraph (B) as 

14 subparagraph (C); and 

15 (C) by inserting after subparagraph (A) 

16 the following new subparagraph: 

17 ‘‘(B) in matters involving United States 

18 tax enforcement, shall consult with the Commis19 sioner of the Internal Revenue Service, the Sec20 retary of State, the Attorney General of the 

21 United States, and in the sole discretion of the 

22 Secretary, such other agencies and interested 

23 parties as the Secretary may find to be appro24 priate; and’’; 


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1 (6) in each of paragraphs (1)(A), (2), (3), and 

2 (4) of subsection (b), by inserting ‘‘or to be imped3 ing United States tax enforcement’’ after ‘‘primary 

4 money laundering concern’’ each place that term ap5 pears; 

6 (7) in subsection (b), by striking paragraph (5) 

7 and inserting the following new paragraph: 

8 ‘‘(5) PROHIBITIONS OR CONDITIONS ON OPEN9 ING OR MAINTAINING CERTAIN CORRESPONDENT OR

10 PAYABLE-THROUGH ACCOUNTS OR AUTHORIZING

11 CERTAIN PAYMENT CARDS.—If the Secretary finds a 

12 jurisdiction outside of the United States, 1 or more 

13 financial institutions operating outside of the United 

14 States, or 1 or more classes of transactions within 

15 or involving a jurisdiction outside of the United 

16 States to be of primary money laundering concern or 

17 to be impeding United States tax enforcement, the 

18 Secretary, in consultation with the Secretary of 

19 State, the Attorney General of the United States, 

20 and the Chairman of the Board of Governors of the 

21 Federal Reserve System, may prohibit, or impose 

22 conditions upon— 

23 ‘‘(A) the opening or maintaining in the 

24 United States of a correspondent account or 

25 payable-through account; or 


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1 ‘‘(B) the authorization, approval, or use in 

2 the United States of a credit card, charge card, 

3 debit card, or similar credit or debit financial 

4 instrument by any domestic financial institu5 tion, financial agency, or credit card company 

6 or association, for or on behalf of a foreign 

7 banking institution, if such correspondent ac8 count, payable-through account, credit card, 

9 charge card, debit card, or similar credit or 

10 debit financial instrument, involves any such ju11 risdiction or institution, or if any such trans12 action may be conducted through such cor13 respondent account, payable-through account, 

14 credit card, charge card, debit card, or similar 

15 credit or debit financial instrument.’’; 

16 (8) in subsection (c)(1), by inserting ‘‘or is im17 peding United States tax enforcement’’ after ‘‘pri18 mary money laundering concern’’; 

19 (9) in subsection (c)(2)(A)— 

20 (A) in clause (ii), by striking ‘‘bank secrecy 

21 or special regulatory advantages’’ and inserting 

22 ‘‘bank, tax, corporate, trust, or financial secrecy 

23 or regulatory advantages’’; 

24 (B) in clause (iii), by striking ‘‘supervisory 

25 and counter-money’’ and inserting ‘‘supervisory, 


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1 international tax enforcement, and counter2 money’’; 

3 (C) in clause (v), by striking ‘‘banking or 

4 secrecy’’ and inserting ‘‘banking, tax, or se5 crecy’’; and 

6 (D) in clause (vi), by inserting ‘‘, tax trea7 ty, or tax information exchange agreement’’ 

8 after ‘‘treaty’’; 

9 (10) in subsection (c)(2)(B)— 

10 (A) in clause (i), by inserting ‘‘or tax eva11 sion’’ after ‘‘money laundering’’; and 

12 (B) in clause (iii), by inserting ‘‘, tax eva13 sion,’’ after ‘‘money laundering’’; and 

14 (11) in subsection (d), by inserting ‘‘involving 

15 money laundering, and shall notify, in writing, the 

16 Committee on Finance of the Senate and the Com17 mittee on Ways and Means of the House of Rep18 resentatives of any such action involving United 

19 States tax enforcement’’ after ‘‘such action’’. 

20 (b) EFFECTIVE DATE.—The amendments made by 

21 this section shall take effect on the date of the enactment 

22 of this Act. 


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1 SEC. 102. STRENGTHENING THE FOREIGN ACCOUNT TAX 

2 COMPLIANCE ACT (FATCA). 

3 (a) REPORTING ACTIVITIES WITH RESPECT TO PAS4 SIVE FOREIGN INVESTMENT COMPANIES.—Section 

5 1298(f) is amended by inserting ‘‘, or who directly or indi6 rectly forms, transfers assets to, is a beneficiary of, has 

7 a beneficial interest in, or receives money or property or 

8 the use thereof from,’’ after ‘‘shareholder of’’. 

9 (b) WITHHOLDABLE PAYMENTS TO FOREIGN FINAN10 CIAL INSTITUTIONS.—Section 1471(d) is amended— 

11 (1) by inserting ‘‘or transaction’’ after ‘‘any de12 pository’’ in paragraph (2)(A), and 

13 (2) by striking ‘‘or any interest’’ and all that 

14 follows in paragraph (5)(C) and inserting ‘‘deriva15 tives, or any interest (including a futures or forward 

16 contract, swap, or option) in such securities, part17 nership interests, commodities, or derivatives.’’. 

18 (c) WITHHOLDABLE PAYMENTS TO OTHER FOREIGN

19 FINANCIAL INSTITUTIONS.—Section 1472 is amended— 

20 (1) by inserting ‘‘as a result of any customer 

21 identification, anti-money laundering, anti-corrup22 tion, or similar obligation to identify account hold23 ers,’’ after ‘‘reason to know,’’ in subsection (b)(2), 

24 and 


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1 (2) by inserting ‘‘as posing a low risk of tax 

2 evasion’’ after ‘‘this subsection’’ in subsection 

3 (c)(1)(G). 

4 (d) DEFINITIONS.—Clauses (i) and (ii) of section 

5 1473(2)(A) are each amended by inserting ‘‘or as a bene6 ficial owner’’ after ‘‘indirectly’’. 

7 (e) SPECIAL RULES.—Section 1474(c) is amended— 

8 (1) by inserting ‘‘, except that information pro9 vided under sections 1471(c) or 1472(b) may be dis10 closed to any Federal law enforcement agency, upon 

11 request or upon the initiation of the Secretary, to in12 vestigate or address a possible violation of United 

13 States law’’ after ‘‘shall apply’’ in paragraph (1), 

14 and 

15 (2) by inserting ‘‘, or has had an agreement 

16 terminated under such section,’’ after ‘‘section 

17 1471(b)’’ in paragraph (2). 

18 (f) INFORMATION WITH RESPECT TO FOREIGN FI19 NANCIAL ASSETS.—Section 6038D(a) is amended by in20 serting ‘‘ownership or beneficial ownership’’ after ‘‘holds 

21 any’’. 

22 (g) ESTABLISHING PRESUMPTIONS FOR ENTITIES

23 AND TRANSACTIONS INVOLVING NON-FATCA INSTITU24 TIONS.— 

25 (1) PRESUMPTIONS FOR TAX PURPOSES.— 


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1 (A) IN GENERAL.—Chapter 76 is amended 

2 by inserting after section 7491 the following 

3 new subchapter: 

4 ‘‘Subchapter F—Presumptions for Certain 

5 Legal Proceedings 

‘‘Sec. 7492. Presumptions pertaining to entities and transactions involving nonFATCA institutions. 

6 ‘‘SEC. 7492. PRESUMPTIONS PERTAINING TO ENTITIES AND 

7 TRANSACTIONS INVOLVING NON-FATCA IN8 STITUTIONS. 

9 ‘‘(a) CONTROL.—For purposes of any United States 

10 civil judicial or administrative proceeding to determine or 

11 collect tax, there shall be a rebuttable presumption that 

12 a United States person (other than an entity with shares 

13 regularly traded on an established securities market) who, 

14 directly or indirectly, formed, transferred assets to, was 

15 a beneficiary of, had a beneficial interest in, or received 

16 money or property or the use thereof from an entity, in17 cluding a trust, corporation, limited liability company, 

18 partnership, or foundation (other than an entity with 

19 shares regularly traded on an established securities mar20 ket), that holds an account, or in any other manner has 

21 assets, in a non-FATCA institution, exercised control over 

22 such entity. The presumption of control created by this 

23 subsection shall not be applied to prevent the Secretary 

24 from determining or arguing the absence of control. 


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1 ‘‘(b) TRANSFERS OF INCOME.—For purposes of any 

2 United States civil judicial or administrative proceeding 

3 to determine or collect tax, there shall be a rebuttable pre4 sumption that any amount or thing of value received by 

5 a United States person (other than an entity with shares 

6 regularly traded on an established securities market) di7 rectly or indirectly from an account or from an entity 

8 (other than an entity with shares regularly traded on an 

9 established securities market) that holds an account, or 

10 in any other manner has assets, in a non-FATCA institu11 tion, constitutes income of such person taxable in the year 

12 of receipt; and any amount or thing of value paid or trans13 ferred by or on behalf of a United States person (other 

14 than an entity with shares regularly traded on an estab15 lished securities market) directly or indirectly to an ac16 count, or entity (other than an entity with shares regularly 

17 traded on an established securities market) that holds an 

18 account, or in any other manner has assets, in a non19 FATCA institution, represents previously unreported in20 come of such person taxable in the year of the transfer. 

21 ‘‘(c) REBUTTING THE PRESUMPTIONS.—The pre22 sumptions established in this section may be rebutted only 

23 by clear and convincing evidence, including detailed docu24 mentary, testimonial, and transactional evidence, estab25 lishing that— 


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1 ‘‘(1) in subsection (a), such taxpayer exercised 

2 no control, directly or indirectly, over account or en3 tity at the time in question, and 

4 ‘‘(2) in subsection (b), such amounts or things 

5 of value did not represent income related to such 

6 United States person. 

7 Any court having jurisdiction of a civil proceeding in which 

8 control of such an offshore account or offshore entity or 

9 the income character of such receipts or amounts trans10 ferred is an issue shall prohibit the introduction by the 

11 taxpayer of any foreign based document that is not au12 thenticated in open court by a person with knowledge of 

13 such document, or any other evidence supplied by a person 

14 outside the jurisdiction of a United States court, unless 

15 such person appears before the court.’’. 

16 (B) The table of subchapters for chapter 

17 76 is amended by inserting after the item relat18 ing to subchapter E the following new item: 

‘‘SUBCHAPTER F—PRESUMPTIONS FOR CERTAIN LEGAL PROCEEDINGS’’. 

19 (2) DEFINITION OF NON-FATCA INSTITUTION.— 

20 Section 7701(a) is amended by adding at the end 

21 the following new paragraph: 

22 ‘‘(51) NON-FATCA INSTITUTION.—The term 

23 ‘non-FATCA institution’ means any financial insti24 tution that does not meet the reporting requirements 

25 of section 1471(b).’’. 


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1 (3) PRESUMPTIONS FOR SECURITIES LAW PUR2 POSES.—Section 21 of the Securities Exchange Act 

3 of 1934 (15 U.S.C. 78u) is amended by adding at 

4 the end the following new subsection: 

5 ‘‘(j) PRESUMPTIONS PERTAINING TO CONTROL AND

6 BENEFICIAL OWNERSHIP.— 

7 ‘‘(1) CONTROL.—For purposes of any civil judi8 cial or administrative proceeding under this title, 

9 there shall be a rebuttable presumption that a 

10 United States person (other than an entity with 

11 shares regularly traded on an established securities 

12 market) who, directly or indirectly, formed, trans13 ferred assets to, was a beneficiary of, had a bene14 ficial interest in, or received money or property or 

15 the use thereof from an entity, including a trust, 

16 corporation, limited liability company, partnership, 

17 or foundation (other than an entity with shares reg18 ularly traded on an established securities market), 

19 that holds an account, or in any other manner has 

20 assets, in a non-FATCA institution (as defined in 

21 section 7701(a)(51) of the Internal Revenue Code of 

22 1986), exercised control over such entity. The pre23 sumption of control created by this paragraph shall 

24 not be applied to prevent the Commission from de25 termining or arguing the absence of control. 


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1 ‘‘(2) BENEFICIAL OWNERSHIP.—For purposes 

2 of any civil judicial or administrative proceeding 

3 under this title, there shall be a rebuttable presump4 tion that securities that are nominally owned by an 

5 entity, including a trust, corporation, limited liability 

6 company, partnership, or foundation (other than an 

7 entity with shares regularly traded on an established 

8 securities market), and that are held in a non9 FATCA institution (as so defined), are beneficially 

10 owned by any United States person (other than an 

11 entity with shares regularly traded on an established 

12 securities market) who directly or indirectly exer13 cised control over such entity. The presumption of 

14 beneficial ownership created by this paragraph shall 

15 not be applied to prevent the Commission from de16 termining or arguing the absence of beneficial own17 ership.’’. 

18 (4) PRESUMPTION FOR REPORTING PURPOSES

19 RELATING TO FOREIGN FINANCIAL ACCOUNTS.—Sec20 tion 5314 of title 31, United States Code, is amend21 ed by adding at the end the following new sub22 section: 

23 ‘‘(d) REBUTTABLE PRESUMPTION.—For purposes of 

24 this section, there shall be a rebuttable presumption that 

25 any account with a non-FATCA institution (as defined in 


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1 section 7701(a)(51) of the Internal Revenue Code of 

2 1986) contains funds in an amount that is at least suffi3 cient to require a report prescribed by regulations under 

4 this section.’’. 

5 (5) REGULATORY AUTHORITY.—Not later than 

6 180 days after the date of the enactment of this Act, 

7 the Secretary of the Treasury and the Chairman of 

8 the Securities and Exchange Commission shall each 

9 adopt regulations or other guidance necessary to im10 plement the amendments made by this subsection. 

11 The Secretary and the Chairman may by regulation 

12 or guidance provide that the presumption of control 

13 shall not extend to particular classes of transactions, 

14 such as corporate reorganizations or transactions 

15 below a specified dollar threshold, if either deter16 mines that applying such amendments to such trans17 actions is not necessary to carry out the purposes of 

18 such amendments. 

19 (h) EFFECTIVE DATE.—The amendments made by 

20 this section shall take effect on the date which is 180 days 

21 after the date of the enactment of this Act, whether or 

22 not regulations are issued under subsection (g)(5). 


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1 SEC. 103. TREATMENT OF FOREIGN CORPORATIONS MAN2 AGED AND CONTROLLED IN THE UNITED 

3 STATES AS DOMESTIC CORPORATIONS. 

4 (a) IN GENERAL.—Section 7701 is amended by re5 designating subsection (p) as subsection (q) and by insert6 ing after subsection (o) the following new subsection: 

7 ‘‘(p) CERTAIN CORPORATIONS MANAGED AND CON8 TROLLED IN THE UNITED STATES TREATED AS DOMES9 TIC FOR INCOME TAX.— 

10 ‘‘(1) IN GENERAL.—Notwithstanding subsection 

11 (a)(4), in the case of a corporation described in 

12 paragraph (2) if— 

13 ‘‘(A) the corporation would not otherwise 

14 be treated as a domestic corporation for pur15 poses of this title, but 

16 ‘‘(B) the management and control of the 

17 corporation occurs, directly or indirectly, pri18 marily within the United States, 

19 then, solely for purposes of chapter 1 (and any other 

20 provision of this title relating to chapter 1), the cor21 poration shall be treated as a domestic corporation. 

22 ‘‘(2) CORPORATION DESCRIBED.— 

23 ‘‘(A) IN GENERAL.—A corporation is de24 scribed in this paragraph if— 


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1 ‘‘(i) the stock of such corporation is 

2 regularly traded on an established securi3 ties market, or 

4 ‘‘(ii) the aggregate gross assets of 

5 such corporation (or any predecessor there6 of), including assets under management 

7 for investors, whether held directly or indi8 rectly, at any time during the taxable year 

9 or any preceding taxable year is 

10 $50,000,000 or more. 

11 ‘‘(B) GENERAL EXCEPTION.—A corpora12 tion shall not be treated as described in this 

13 paragraph if— 

14 ‘‘(i) such corporation was treated as a 

15 corporation described in this paragraph in 

16 a preceding taxable year, 

17 ‘‘(ii) such corporation— 

18 ‘‘(I) is not regularly traded on an 

19 established securities market, and 

20 ‘‘(II) has, and is reasonably ex21 pected to continue to have, aggregate 

22 gross assets (including assets under 

23 management for investors, whether 

24 held directly or indirectly) of less than 

25 $50,000,000, and 


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1 ‘‘(iii) the Secretary grants a waiver to 

2 such corporation under this subparagraph. 

3 ‘‘(C) EXCEPTION FROM GROSS ASSETS

4 TEST.—Subparagraph (A)(ii) shall not apply to 

5 a corporation which is a controlled foreign cor6 poration (as defined in section 957) and which 

7 is a member of an affiliated group (as defined 

8 section 1504, but determined without regard to 

9 section 1504(b)(3)) the common parent of 

10 which— 

11 ‘‘(i) is a domestic corporation (deter12 mined without regard to this subsection), 

13 and 

14 ‘‘(ii) has substantial assets (other 

15 than cash and cash equivalents and other 

16 than stock of foreign subsidiaries) held for 

17 use in the active conduct of a trade or 

18 business in the United States. 

19 ‘‘(3) MANAGEMENT AND CONTROL.— 

20 ‘‘(A) IN GENERAL.—The Secretary shall 

21 prescribe regulations for purposes of deter22 mining cases in which the management and 

23 control of a corporation is to be treated as oc24 curring primarily within the United States. 


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1 ‘‘(B) EXECUTIVE OFFICERS AND SENIOR

2 MANAGEMENT.—Such regulations shall provide 

3 that— 

4 ‘‘(i) the management and control of a 

5 corporation shall be treated as occurring 

6 primarily within the United States if sub7 stantially all of the executive officers and 

8 senior management of the corporation who 

9 exercise day-to-day responsibility for mak10 ing decisions involving strategic, financial, 

11 and operational policies of the corporation 

12 are located primarily within the United 

13 States, and 

14 ‘‘(ii) individuals who are not executive 

15 officers and senior management of the cor16 poration (including individuals who are of17 ficers or employees of other corporations in 

18 the same chain of corporations as the cor19 poration) shall be treated as executive offi20 cers and senior management if such indi21 viduals exercise the day-to-day responsibil22 ities of the corporation described in clause 

23 (i). 

24 ‘‘(C) CORPORATIONS PRIMARILY HOLDING

25 INVESTMENT ASSETS.—Such regulations shall 


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1 also provide that the management and control 

2 of a corporation shall be treated as occurring 

3 primarily within the United States if— 

4 ‘‘(i) the assets of such corporation (di5 rectly or indirectly) consist primarily of as6 sets being managed on behalf of investors, 

7 and 

8 ‘‘(ii) decisions about how to invest the 

9 assets are made in the United States.’’. 

10 (b) EFFECTIVE DATE.—The amendments made by 

11 this section shall apply to taxable years beginning on or 

12 after the date which is 2 years after the date of the enact13 ment of this Act, whether or not regulations are issued 

14 under section 7701(p)(3) of the Internal Revenue Code 

15 of 1986, as added by this section. 

16 SEC. 104. REPORTING UNITED STATES BENEFICIAL OWN17 ERS OF FOREIGN OWNED FINANCIAL AC18 COUNTS. 

19 (a) IN GENERAL.—Subpart B of part III of sub20 chapter A of chapter 61 is amended by inserting after sec21 tion 6045B the following new sections: 


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1 ‘‘SEC. 6045C. RETURNS REGARDING UNITED STATES BENE2 FICIAL OWNERS OF FINANCIAL ACCOUNTS 

3 LOCATED IN THE UNITED STATES AND HELD 

4 IN THE NAME OF A FOREIGN ENTITY. 

5 ‘‘(a) REQUIREMENT OF RETURN.—If— 

6 ‘‘(1) any withholding agent under sections 1441 

7 and 1442 has the control, receipt, custody, disposal, 

8 or payment of any amount constituting gross income 

9 from sources within the United States of any foreign 

10 entity, including a trust, corporation, limited liability 

11 company, partnership, or foundation (other than an 

12 entity with shares regularly traded on an established 

13 securities market), and 

14 ‘‘(2) such withholding agent determines for pur15 poses of titles 14, 18, or 31 of the United States 

16 Code that a United States person has any beneficial 

17 interest in the foreign entity or in the account in 

18 such entity’s name (hereafter in this section referred 

19 to as ‘United States beneficial owner’), 

20 then the withholding agent shall make a return according 

21 to the forms or regulations prescribed by the Secretary. 

22 ‘‘(b) REQUIRED INFORMATION.—For purposes of 

23 subsection (a) the information required to be included on 

24 the return shall include— 


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1 ‘‘(1) the name, address, and, if known, the tax2 payer identification number of the United States 

3 beneficial owner, 

4 ‘‘(2) the known facts pertaining to the relation5 ship of such United States beneficial owner to the 

6 foreign entity and the account, 

7 ‘‘(3) the gross amount of income from sources 

8 within the United States (including gross proceeds 

9 from brokerage transactions), and 

10 ‘‘(4) such other information as the Secretary 

11 may by forms or regulations provide. 

12 ‘‘(c) STATEMENTS TO BE FURNISHED TO BENE13 FICIAL OWNERS WITH RESPECT TO WHOM INFORMATION

14 IS REQUIRED TO BE REPORTED.—A withholding agent 

15 required to make a return under subsection (a) shall fur16 nish to each United States beneficial owner whose name 

17 is required to be set forth in such return a statement 

18 showing— 

19 ‘‘(1) the name, address, and telephone number 

20 of the information contact of the person required to 

21 make such return, and 

22 ‘‘(2) the information required to be shown on 

23 such return with respect to such United States bene24 ficial owner. 


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1 The written statement required under the preceding sen2 tence shall be furnished to the United States beneficial 

3 owner on or before January 31 of the year following the 

4 calendar year for which the return under subsection (a) 

5 was required to be made. In the event the person filing 

6 such return does not have a current address for the United 

7 States beneficial owner, such written statement may be 

8 mailed to the address of the foreign entity. 

9 ‘‘SEC. 6045D. RETURNS BY FINANCIAL INSTITUTIONS RE10 GARDING ESTABLISHMENT OF ACCOUNTS IN 

11 NON-FATCA INSTITUTIONS. 

12 ‘‘(a) REQUIREMENT OF RETURN.—Any financial in13 stitution directly or indirectly opening a bank, brokerage, 

14 or other financial account for or on behalf of an offshore 

15 entity, including a trust, corporation, limited liability com16 pany, partnership, or foundation (other than an entity 

17 with shares regularly traded on an established securities 

18 market), in a non-FATCA institution (as defined in sec19 tion 7701(a)(51)) at the direction of, on behalf of, or for 

20 the benefit of a United States person shall make a return 

21 according to the forms or regulations prescribed by the 

22 Secretary. 

23 ‘‘(b) REQUIRED INFORMATION.—For purposes of 

24 subsection (a) the information required to be included on 

25 the return shall include— 


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1 ‘‘(1) the name, address, and taxpayer identifica2 tion number of such United States person, 

3 ‘‘(2) the name and address of the financial in4 stitution at which a financial account is opened, the 

5 type of account, the account number, the name 

6 under which the account was opened, and the 

7 amount of the initial deposit, 

8 ‘‘(3) if the account is held in the name of an 

9 entity, the name and address of such entity, the type 

10 of entity, and the name and address of any company 

11 formation agent or other professional employed to 

12 form or acquire the entity, and 

13 ‘‘(4) such other information as the Secretary 

14 may by forms or regulations provide. 

15 ‘‘(c) STATEMENTS TO BE FURNISHED TO UNITED

16 STATES PERSONS WITH RESPECT TO WHOM INFORMA17 TION IS REQUIRED TO BE REPORTED.—A financial insti18 tution required to make a return under subsection (a) 

19 shall furnish to each United States person whose name 

20 is required to be set forth in such return a statement 

21 showing— 

22 ‘‘(1) the name, address, and telephone number 

23 of the information contact of the person required to 

24 make such return, and 


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1 ‘‘(2) the information required to be shown on 

2 such return with respect to such United States per3 son. 

4 The written statement required under the preceding sen5 tence shall be furnished to such United States person on 

6 or before January 31 of the year following the calendar 

7 year for which the return under subsection (a) was re8 quired to be made. 

9 ‘‘(d) EXEMPTION.—The Secretary may by regula10 tions exempt any class of United States persons or any 

11 class of accounts or entities from the requirements of this 

12 section if the Secretary determines that applying this sec13 tion to such persons, accounts, or entities is not necessary 

14 to carry out the purposes of this section.’’. 

15 (b) PENALTIES.— 

16 (1) RETURNS.—Section 6724(d)(1)(B) is 

17 amended by striking ‘‘or’’ at the end of clause 

18 (xxiv), by striking ‘‘and’’ at the end of clause (xxv), 

19 and by adding after clause (xxv) the following new 

20 clauses: 

21 ‘‘(xxvi) section 6045C(a) (relating to 

22 returns regarding United States beneficial 

23 owners of financial accounts located in the 

24 United States and held in the name of a 

25 foreign entity), or 


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•S 1346 IS

1 ‘‘(xxvii) section 6045D(a) (relating to 

2 returns by financial institutions regarding 

3 establishment of accounts at non-FATCA 

4 institutions), and’’. 

5 (2) PAYEE STATEMENTS.—Section 6724(d)(2) 

6 is amended by striking ‘‘or’’ at the end of subpara7 graph (GG), by striking the period at the end of 

8 subparagraph (HH), and by inserting after subpara9 graph (HH) the following new subparagraphs: 

10 ‘‘(II) section 6045C(c) (relating to returns 

11 regarding United States beneficial owners of fi12 nancial accounts located in the United States 

13 and held in the name of a foreign entity), 

14 ‘‘(JJ) section 6045D(c) (relating to re15 turns by financial institutions regarding estab16 lishment of accounts at non-FATCA institu17 tions).’’. 

18 (c) CLERICAL AMENDMENT.—The table of sections 

19 for subpart B of part III of subchapter A of chapter 61 

20 is amended by inserting after the item relating to section 

21 6045B the following new items: 

‘‘Sec. 6045C. Returns regarding United States beneficial owners of financial 

accounts located in the United States and held in the name of 

a foreign entity. 

‘‘Sec. 6045D. Returns by financial institutions regarding establishment of accounts at non-FATCA institutions.’’. 

22 (d) ADDITIONAL PENALTIES.— 


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1 (1) ADDITIONAL PENALTIES ON BANKS.—Sec2 tion 5239(b)(1) of the Revised Statutes (12 U.S.C. 

3 93(b)(1)) is amended by inserting ‘‘or any of the 

4 provisions of section 6045D of the Internal Revenue 

5 Code of 1986,’’ after ‘‘any regulation issued pursu6 ant to,’’. 

7 (2) ADDITIONAL PENALTIES ON SECURITIES

8 FIRMS.—Section 21(d)(3)(A) of the Securities Ex9 change Act of 1934 (15 U.S.C. 78u(d)(3)(A)) is 

10 amended by inserting ‘‘any of the provisions of sec11 tion 6045D of the Internal Revenue Code of 1986,’’ 

12 after ‘‘the rules or regulations thereunder,’’. 

13 (e) REGULATORY AUTHORITY AND EFFECTIVE

14 DATE.— 

15 (1) REGULATORY AUTHORITY.—Not later than 

16 180 days after the date of the enactment of this Act, 

17 the Secretary of the Treasury shall adopt regula18 tions, forms, or other guidance necessary to imple19 ment this section. 

20 (2) EFFECTIVE DATE.—Section 6045C of the 

21 Internal Revenue Code of 1986 (as added by this 

22 section) and the amendment made by subsection 

23 (d)(1) shall take effect with respect to amounts paid 

24 into foreign owned accounts located in the United 

25 States after December 31 of the year of the date of 


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•S 1346 IS

1 the enactment of this Act. Section 6045D of such 

2 Code (as so added) and the amendment made by 

3 subsection (d)(2) shall take effect with respect to ac4 counts opened after December 31 of the year of the 

5 date of the enactment of this Act. 

6 SEC. 105. CREDIT DEFAULT SWAP PAYMENTS MADE FROM 

7 THE UNITED STATES TO PERSONS OFF8 SHORE. 

9 (a) TAX ON CREDIT DEFAULT SWAP PAYMENTS RE10 CEIVED BY FOREIGN PERSONS.—Section 871(a)(1) is 

11 amended— 

12 (1) by inserting ‘‘credit default swap pay13 ments,’’ after ‘‘annuities,’’ in subparagraph (A), and 

14 (2) by adding at the end the following new sen15 tence: ‘‘In the case of credit default swap payments, 

16 the source of a credit default swap payment is deter17 mined by reference to the location of the payor.’’. 

18 (b) TAX ON CREDIT DEFAULT SWAP PAYMENTS RE19 CEIVED BY FOREIGN CORPORATIONS.—Section 881(a) is 

20 amended— 

21 (1) by inserting ‘‘credit default swap pay22 ments,’’ after ‘‘annuities,’’ in paragraph (1), and 

23 (2) by adding at the end the following new sen24 tence: ‘‘In the case of credit default swap payments, 


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•S 1346 IS

1 the source of a credit default swap payment is deter2 mined by reference to the location of the payor.’’. 

3 SEC. 106. TAX ON INCOME OF CONTROLLED FOREIGN COR4 PORATION DEPOSITED IN FINANCIAL AC5 COUNT LOCATED IN THE UNITED STATES. 

6 Section 952(a) is amended by adding at the end the 

7 following new sentence: ‘‘Notwithstanding section 

8 956(c)(2)(A), any property (as defined in section 317(a)) 

9 of such controlled foreign corporation that is deposited 

10 and maintained, directly or indirectly, for or on behalf of 

11 such corporation in a financial account located in the 

12 United States, including in a correspondent account of a 

13 financial institution, is a constructive distribution with re14 spect to the stock which such United States shareholder 

15 owns.’’. 

16 TITLE II—OTHER MEASURES TO 

17 COMBAT TAX HAVEN AND TAX 

18 SHELTER ABUSES 

19 SEC. 201. COUNTRY-BY-COUNTRY REPORTING. 

20 (a) IN GENERAL.—Section 13 of the Securities Ex21 change Act of 1934 (15 U.S.C. 78m) is amended by add22 ing at the end the following new subsection: 

23 ‘‘(r) DISCLOSURE OF FINANCIAL PERFORMANCE ON

24 A COUNTRY-BY-COUNTRY BASIS.— 

25 ‘‘(1) DEFINITIONS.—In this subsection— 


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1 ‘‘(A) the term ‘issuer group’ shall mean 

2 the issuer, each subsidiary of the issuer, and 

3 each entity under the control of the issuer; 

4 ‘‘(B) the term ‘country of operation’ shall 

5 mean each country in which a member of the 

6 issuer group is incorporated or organized, or 

7 maintains employees or conducts business ac8 tivities; and 

9 ‘‘(C) the term ‘world-wide allocation of 

10 group members’ shall mean each member of the 

11 issuer group listed according to their country of 

12 operation. 

13 ‘‘(2) COUNTRY-BY-COUNTRY REPORTING.—The 

14 Commission shall issue rules that require each issuer 

15 to include in an annual report filed by the issuer 

16 with the Commission information indicative of finan17 cial performance on a country-by-country basis dur18 ing the covered period, including— 

19 ‘‘(A) a list of each country of operation; 

20 ‘‘(B) the world-wide allocation of group 

21 members; 

22 ‘‘(C) the financial performance of each 

23 member of the issuer group in each country of 

24 operation, without exception, including, and set 

25 forth according to— 


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1 ‘‘(i) total number of employees phys2 ically working in the country of operation; 

3 ‘‘(ii) total sales by the member of the 

4 issuer group to third parties; 

5 ‘‘(iii) total sales by the member of the 

6 issuer group to other members of the 

7 issuer group and total sales to each such 

8 member; 

9 ‘‘(iv) total purchases by the member 

10 of the issuer group from third parties; 

11 ‘‘(v) total purchases by the member of 

12 the issuer group from other members of 

13 the issuer group and total purchases from 

14 each such member; 

15 ‘‘(vi) total financing payments made 

16 by the member of the issuer group to third 

17 parties; 

18 ‘‘(vii) total financing payments made 

19 by the member of the issuer group to other 

20 members of the issuer group and total fi21 nancing payments made to each such 

22 member; 

23 ‘‘(viii) pre-tax gross revenues of the 

24 member of the issuer group; 


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1 ‘‘(ix) pre-tax net revenues of the 

2 member of the issuer group; and 

3 ‘‘(x) such other financial information 

4 as the Commission may determine is indic5 ative of the financial performance of the 

6 issuer; 

7 ‘‘(D) the tax paid by each member of the 

8 issuer group in each country of operation, with9 out exception, including, and set forth accord10 ing to— 

11 ‘‘(i) total Federal, regional, local, and 

12 other tax assessed against each member of 

13 the issuer group with respect to each coun14 try of operation during the covered period; 

15 ‘‘(ii) after taking into account any tax 

16 deductions, tax credits, tax forgiveness, or 

17 other tax benefits or waivers, total amount 

18 of tax paid from the treasury of the mem19 ber of the issuer group to the government 

20 of each country of operation during the 

21 covered period; and 

22 ‘‘(iii) such other financial information 

23 as the Commission may determine is nec24 essary or appropriate to inform the public 


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•S 1346 IS

1 of the tax obligations of and payments by 

2 each member of the issuer group; and 

3 ‘‘(E) such other financial information as 

4 the Commission may determine is necessary or 

5 appropriate in the public interest or for the pro6 tection of investors.’’. 

7 (b) RULEMAKING.— 

8 (1) DEADLINES.—Not later than 180 days 

9 after the date of the enactment of this Act, the 

10 Commission shall issue a proposed rule to carry out 

11 this section and, not later than 270 days after the 

12 date of the enactment of this Act, shall issue a final 

13 rule to carry out this section. 

14 (2) CONSULTATION.—In issuing the rules under 

15 this section, the Commission shall consult with the 

16 Secretary of the Treasury and the Commissioner of 

17 Internal Revenue and, to the extent practicable and 

18 in furtherance of its obligation to protect investors, 

19 shall issue rules that support Federal efforts to re20 duce offshore tax evasion and abuses. 

21 (3) INTERACTIVE DATA FORMAT.—The rules 

22 issued under this section shall require that the infor23 mation provided by issuers in their annual reports 

24 be submitted in an interactive data format as pro25 vided in section 13(q)(2)(D) of the Securities ExVerDate Mar 15 2010 22:48 Jul 12, 2011 Jkt 099200 PO 00000 Frm 00033 Fmt 6652 Sfmt 6201 E:\BILLS\S1346.IS S1346

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1 change Act of 1934 (15 U.S.C. 78m(q)(2)(D)), and 

2 to the extent practicable, the Commission shall make 

3 available online, to the public, a compilation of such 

4 information. 

5 (4) AGGREGATE DATA.—The rules may allow 

6 issuers to provide the financial information required 

7 under section 13(r) of the Securities Exchange Act 

8 of 1934 (15 U.S.C. 78m(r)), as added by this sec9 tion, aggregated at the level of each country of oper10 ation instead of with respect to each member of the 

11 issuer group individually, provided that the Commis12 sion retains the authority, at its discretion, to re13 quire further disaggregation. 

14 (5) EFFECTIVE DATE.—Each issuer shall be re15 quired to comply with the requirements of section 

16 13(r) of the Securities Exchange Act of 1934 (15 

17 U.S.C. 78m(r)), as added by this section, not later 

18 than the date on which the issuer must file with the 

19 Commission its first annual report that is due not 

20 later than 1 year after the date on which the Com21 mission issues a final rule under this section. 

22 SEC. 202. PENALTY FOR FAILING TO DISCLOSE OFFSHORE 

23 HOLDINGS. 

24 (a) SECURITIES EXCHANGE ACT OF 1934.—Section 

25 21(d)(3)(B) of the Securities Exchange Act of 1934 (15 


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•S 1346 IS

1 U.S.C. 78u(d)(3)(B)) is amended by adding at the end 

2 the following: 

3 ‘‘(iv) FOURTH TIER.—Notwithstanding 

4 clauses (i), (ii), and (iii), the amount of the 

5 penalty for each such violation shall not exceed 

6 $1,000,000 for any person if the violation de7 scribed in subparagraph (A) involved a knowing 

8 failure to disclose any holding or transaction in9 volving equity or debt instruments of an issuer 

10 and known by such person to involve a foreign 

11 entity, including any trust, corporation, limited 

12 liability company, partnership, or foundation 

13 that is directly or indirectly controlled by such 

14 person, and which would have been otherwise 

15 subject to disclosure by such person under this 

16 title.’’. 

17 (b) SECURITIES ACT OF 1933.—Section 20(d)(2) of 

18 the Securities Act of 1933 (15 U.S.C. 77t(d)(2)) is 

19 amended by adding at the end the following: 

20 ‘‘(D) FOURTH TIER.—Notwithstanding 

21 subparagraphs (A), (B), and (C), the amount of 

22 penalty for each such violation shall not exceed 

23 $1,000,000 for any person, if the violation de24 scribed in paragraph (1) involved a knowing 

25 failure to disclose any holding or transaction inVerDate Mar 15 2010 22:48 Jul 12, 2011 Jkt 099200 PO 00000 Frm 00035 Fmt 6652 Sfmt 6201 E:\BILLS\S1346.IS S1346

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•S 1346 IS

1 volving equity or debt instruments of an issuer 

2 and known by such person to involve a foreign 

3 entity, including any trust, corporation, limited 

4 liability company, partnership, or foundation, 

5 directly or indirectly controlled by such person, 

6 and which would have been otherwise subject to 

7 disclosure by such person under this title.’’. 

8 (c) INVESTMENT COMPANY ACT OF 1940.—Section 

9 9(d)(2) of the Investment Company Act of 1940 (15 

10 U.S.C. 80a–9(d)(2)) is amended by adding at the end the 

11 following: 

12 ‘‘(D) FOURTH TIER.—Notwithstanding 

13 subparagraphs (A), (B), and (C), the amount of 

14 penalty for each such violation shall not exceed 

15 $1,000,000 for any person, if the violation de16 scribed in paragraph (1) involved a knowing 

17 failure to disclose any holding or transaction in18 volving equity or debt instruments of an issuer 

19 and known by such person to involve a foreign 

20 entity, including any trust, corporation, limited 

21 liability company, partnership, or foundation, 

22 directly or indirectly controlled by such person, 

23 and which would have been otherwise subject to 

24 disclosure by such person under this title.’’. 


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1 (d) INVESTMENT ADVISERS ACT OF 1940.—Section 

2 203(i)(2) of the Investment Advisers Act of 1940 (15 

3 U.S.C. 80b–3(i)(2)) is amended by adding at the end the 

4 following: 

5 ‘‘(D) FOURTH TIER.—Notwithstanding 

6 subparagraphs (A), (B), and (C), the amount of 

7 penalty for each such violation shall not exceed 

8 $1,000,000 for any person, if the violation de9 scribed in paragraph (1) involved a knowing 

10 failure to disclose any holding or transaction in11 volving equity or debt instruments of an issuer 

12 and known by such person to involve a foreign 

13 entity, including any trust, corporation, limited 

14 liability company, partnership, or foundation, 

15 directly or indirectly controlled by such person, 

16 and which would have been otherwise subject to 

17 disclosure by such person under this title.’’. 

18 SEC. 203. DEADLINE FOR ANTI-MONEY LAUNDERING RULE 

19 FOR HEDGE FUNDS AND PRIVATE EQUITY 

20 FUNDS. 

21 (a) IN GENERAL.— 

22 (1) PROPOSED RULE.—Not later than 90 days 

23 after the date of the enactment of this Act, the Sec24 retary of the Treasury, in consultation with the 

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1 sion and the Chairman of the Commodity Futures 

2 Trading Commission, shall publish a proposed rule 

3 in the Federal Register requiring unregistered in4 vestment companies, including hedge funds or pri5 vate equity funds, to establish anti-money laundering 

6 programs and submit suspicious activity reports 

7 under subsections (g) and (h) of section 5318 of title 

8 31, United States Code. 

9 (2) FINAL RULE.—Not later than 180 days 

10 after the date of the enactment of this Act, the Sec11 retary of the Treasury shall publish a final rule in 

12 the Federal Register on the matter described in 

13 paragraph (1). 

14 (b) CONTENTS.—The final rule published under this 

15 section— 

16 (1) shall require, at a minimum, that to safe17 guard against terrorist financing and money laun18 dering, all unregistered investment companies 

19 shall— 

20 (A) use risk-based due diligence policies, 

21 procedures, and controls that are reasonably de22 signed to ascertain the identity of any foreign 

23 person (including the nominal and beneficial 

24 owner or beneficiary of a foreign corporation, 

25 partnership, trust, or other foreign entity) planVerDate Mar 15 2010 22:48 Jul 12, 2011 Jkt 099200 PO 00000 Frm 00038 Fmt 6652 Sfmt 6201 E:\BILLS\S1346.IS S1346

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1 ning to supply or supplying funds to be invested 

2 with the advice or assistance of that unregis3 tered investment company; and 

4 (B) be subject to section 5318(k)(2) of 

5 title 31, United States Code; and 

6 (2) may incorporate aspects of the proposed 

7 rule for unregistered investment companies pub8 lished in the Federal Register on September 26, 

9 2002 (67 Fed. Reg. 60617) (relating to anti-money 

10 laundering programs). 

11 (c) DEFINITIONS.—In this section— 

12 (1) the terms ‘‘investment company’’ and 

13 ‘‘issuer’’ have the same meanings as in section 2 of 

14 the Investment Company Act of 1940 (15 U.S.C. 

15 80a–2); and 

16 (2) the term ‘‘unregistered investment com17 pany’’ means an issuer that would be an investment 

18 company, but for the exclusion under paragraph (1) 

19 or (7) of section 3(c) of the Investment Company 

20 Act of 1940 (15 U.S.C. 80a–3(c)). 

21 SEC. 204. ANTI-MONEY LAUNDERING REQUIREMENTS FOR 

22 FORMATION AGENTS. 

23 (a) ANTI-MONEY LAUNDERING OBLIGATIONS FOR

24 FORMATION AGENTS.—Section 5312(a)(2) of title 31, 

25 United States Code, is amended, by— 


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1 (1) in subparagraph (Y), by striking ‘‘or’’ at 

2 the end; 

3 (2) by redesignating subparagraph (Z) as sub4 paragraph (AA); and 

5 (3) by inserting after subparagraph (Y) the fol6 lowing: 

7 ‘‘(Z) persons engaged in the business of 

8 forming new corporations, limited liability com9 panies, partnerships, trusts, or other legal enti10 ties; or’’. 

11 (b) DEADLINE FOR ANTI-MONEY LAUNDERING

12 RULE FOR FORMATION AGENTS.— 

13 (1) PROPOSED RULE.—Not later than 120 days 

14 after the date of the enactment of this Act, the Sec15 retary of the Treasury, in consultation with the At16 torney General of the United States, the Secretary 

17 of Homeland Security, and the Commissioner of In18 ternal Revenue, shall publish a proposed rule in the 

19 Federal Register requiring persons described in sec20 tion 5312(a)(2)(Z) of title 31, United States Code, 

21 as added by this section, to establish anti-money 

22 laundering programs under subsections (g) and (h) 

23 of section 5318 of that title. 

24 (2) FINAL RULE.—Not later than 270 days 

25 after such date of enactment, the Secretary of the 


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1 Treasury shall publish a final rule in the Federal 

2 Register on the matter described in paragraph (1). 

3 (3) EXCLUSIONS.—Any rule promulgated under 

4 this subsection shall exclude from the category of 

5 persons engaged in the business of forming new cor6 porations or other entities— 

7 (A) any government agency; and 

8 (B) any attorney or law firm that uses a 

9 paid formation agent operating within the 

10 United States to form such corporations or 

11 other entities. 

12 SEC. 205. STRENGTHENING JOHN DOE SUMMONS PRO13 CEEDINGS. 

14 (a) IN GENERAL.—Subsection (f) of section 7609 is 

15 amended to read as follows: 

16 ‘‘(f) ADDITIONAL REQUIREMENT IN THE CASE OF A

17 JOHN DOE SUMMONS.— 

18 ‘‘(1) GENERAL RULE.—Any summons described 

19 in subsection (c)(1) which does not identify the per20 son with respect to whose liability the summons is 

21 issued may be served only after a court proceeding 

22 in which the Secretary establishes that— 

23 ‘‘(A) the summons relates to the investiga24 tion of a particular person or ascertainable 

25 group or class of persons, 


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•S 1346 IS

1 ‘‘(B) there is a reasonable basis for believ2 ing that such person or group or class of per3 sons may fail or may have failed to comply with 

4 any provision of any internal revenue law, and 

5 ‘‘(C) the information sought to be obtained 

6 from the examination of the records or testi7 mony (and the identity of the person or persons 

8 with respect to whose liability the summons is 

9 issued) is not readily available from other 

10 sources. 

11 ‘‘(2) EXCEPTION.—Paragraph (1) shall not 

12 apply to any summons which specifies that it is lim13 ited to information regarding a United States cor14 respondent account (as defined in section 

15 5318A(e)(1)(B) of title 31, United States Code) or 

16 a United States payable-through account (as defined 

17 in section 5318A(e)(1)(C) of such title) of a finan18 cial institution that is held at a non-FATCA institu19 tion (as defined in section 7701(a)(51)). 

20 ‘‘(3) PRESUMPTION IN CASES INVOLVING NON21 FATCA INSTITUTIONS.—For purposes of this section, 

22 in any case in which the particular person or ascer23 tainable group or class of persons have financial ac24 counts in or transactions related to a non-FATCA 

25 institution (as defined in section 7701(a)(51)), there 


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•S 1346 IS

1 shall be a presumption that there is a reasonable 

2 basis for believing that such person or group or class 

3 of persons may fail or may have failed to comply 

4 with provisions of internal revenue law. 

5 ‘‘(4) PROJECT JOHN DOE SUMMONSES.— 

6 ‘‘(A) IN GENERAL.—Notwithstanding the 

7 requirements of paragraph (1), the Secretary 

8 may issue a summons described in paragraph 

9 (1) if the summons— 

10 ‘‘(i) relates to a project which is ap11 proved under subparagraph (B), 

12 ‘‘(ii) is issued to a person who is a 

13 member of the group or class established 

14 under subparagraph (B)(i), and 

15 ‘‘(iii) is issued within 3 years of the 

16 date on which such project was approved 

17 under subparagraph (B). 

18 ‘‘(B) APPROVAL OF PROJECTS.—A project 

19 may only be approved under this subparagraph 

20 after a court proceeding in which the Secretary 

21 establishes that— 

22 ‘‘(i) any summons issues with respect 

23 to the project will be issued to a member 

24 of an ascertainable group or class of per25 sons, and 


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1 ‘‘(ii) any summons issued with respect 

2 to such project will meet the requirements 

3 of paragraph (1). 

4 ‘‘(C) EXTENSION.—Upon application of 

5 the Secretary, the court may extend the time 

6 for issuing such summonses under subpara7 graph (A)(i) for additional 3-year periods, but 

8 only if the court continues to exercise oversight 

9 of such project under subparagraph (D). 

10 ‘‘(D) ONGOING COURT OVERSIGHT.—Dur11 ing any period in which the Secretary is author12 ized to issue summonses in relation to a project 

13 approved under subparagraph (B) (including 

14 during any extension under subparagraph (C)), 

15 the Secretary shall report annually to the court 

16 on the use of such authority, provide copies of 

17 all summonses with such report, and comply 

18 with the court’s direction with respect to the 

19 issuance of any John Doe summons under such 

20 project.’’. 

21 (b) JURISDICTION OF COURT.— 

22 (1) IN GENERAL.—Paragraph (1) of section 

23 7609(h) is amended by inserting after the first sen24 tence the following new sentence: ‘‘Any United 

25 States district court in which a member of the group 


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•S 1346 IS

1 or class to which a summons may be issued resides 

2 or is found shall have jurisdiction to hear and deter3 mine the approval of a project under subsection 

4 (f)(2)(B).’’. 

5 (2) CONFORMING AMENDMENT.—The first sen6 tence of section 7609(h)(1) is amended by striking 

7 ‘‘(f)’’ and inserting ‘‘(f)(1)’’. 

8 (c) EFFECTIVE DATE.—The amendments made by 

9 this section shall apply to summonses issued after the date 

10 of the enactment of this Act. 

11 (d) GAO REPORT.—Not later than the date which 

12 is 5 years after the date of the enactment of this Act, 

13 the Comptroller General of the United States shall issue 

14 a report on the implementation of section 7609(f)(2) of 

15 the Internal Revenue Code of 1986, as added by this sec16 tion. 

17 SEC. 206. IMPROVING ENFORCEMENT OF FOREIGN FINAN18 CIAL ACCOUNT REPORTING. 

19 (a) CLARIFYING THE CONNECTION OF FOREIGN FI20 NANCIAL ACCOUNT REPORTING TO TAX ADMINISTRA21 TION.—Paragraph (4) of section 6103(b) is amended by 

22 adding at the end the following new sentence: 

23 ‘‘For purposes of subparagraph (A)(i), section 5314 

24 of title 31, United States Code, and sections 5321 

25 and 5322 of such title (as such sections pertain to 


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1 such section 5314), shall be considered related stat2 utes.’’. 

3 (b) SIMPLIFYING THE CALCULATION OF FOREIGN

4 FINANCIAL ACCOUNT REPORTING PENALTIES.—Section 

5 5321(a)(5)(D)(ii) of title 31, United States Code, is 

6 amended by striking ‘‘the balance in the account at the 

7 time of the violation’’ and inserting ‘‘the highest balance 

8 in the account during the reporting period to which the 

9 violation relates’’. 

10 (c) CLARIFYING THE USE OF SUSPICIOUS ACTIVITY

11 REPORTS UNDER THE BANK SECRECY ACT FOR CIVIL

12 TAX LAW ENFORCEMENT.—Section 5319 of title 31, 

13 United States Code, is amended by inserting ‘‘the civil and 

14 criminal enforcement divisions of the Internal Revenue 

15 Service,’’ after ‘‘including’’. 

16 TITLE III—COMBATING TAX 

17 SHELTER PROMOTERS 

18 SEC. 301. PENALTY FOR PROMOTING ABUSIVE TAX SHEL19 TERS. 

20 (a) PENALTY FOR PROMOTING ABUSIVE TAX SHEL21 TERS.—Section 6700 is amended— 

22 (1) by redesignating subsections (b) and (c) as 

23 subsections (d) and (e), respectively, 

24 (2) by striking ‘‘a penalty’’ and all that follows 

25 through the period in the first sentence of subsection 


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1 (a) and inserting ‘‘a penalty determined under sub2 section (b)’’, and 

3 (3) by inserting after subsection (a) the fol4 lowing new subsections: 

5 ‘‘(b) AMOUNT OF PENALTY; CALCULATION OF PEN6 ALTY; LIABILITY FOR PENALTY.— 

7 ‘‘(1) AMOUNT OF PENALTY.—The amount of 

8 the penalty imposed by subsection (a) shall not ex9 ceed 150 percent of the gross income derived (or to 

10 be derived) from such activity by the person or per11 sons subject to such penalty. 

12 ‘‘(2) CALCULATION OF PENALTY.—The penalty 

13 amount determined under paragraph (1) shall be 

14 calculated with respect to each instance of an activ15 ity described in subsection (a), each instance in 

16 which income was derived by the person or persons 

17 subject to such penalty, and each person who par18 ticipated in such an activity. 

19 ‘‘(3) LIABILITY FOR PENALTY.—If more than 1 

20 person is liable under subsection (a) with respect to 

21 such activity, all such persons shall be jointly and 

22 severally liable for the penalty under such sub23 section. 

24 ‘‘(c) PENALTY NOT DEDUCTIBLE.—The payment of 

25 any penalty imposed under this section or the payment 


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1 of any amount to settle or avoid the imposition of such 

2 penalty shall not be considered an ordinary and necessary 

3 expense in carrying on a trade or business for purposes 

4 of this title and shall not be deductible by the person who 

5 is subject to such penalty or who makes such payment.’’. 

6 (b) CONFORMING AMENDMENT.—Section 6700(a) is 

7 amended by striking the last sentence. 

8 (c) EFFECTIVE DATE.—The amendments made by 

9 this section shall apply to activities after the date of the 

10 enactment of this Act. 

11 SEC. 302. PENALTY FOR AIDING AND ABETTING THE UN12 DERSTATEMENT OF TAX LIABILITY. 

13 (a) IN GENERAL.—Section 6701(a) is amended— 

14 (1) by inserting ‘‘the tax liability or’’ after ‘‘re15 spect to,’’ in paragraph (1), 

16 (2) by inserting ‘‘aid, assistance, procurement, 

17 or advice with respect to such’’ before ‘‘portion’’ 

18 both places it appears in paragraphs (2) and (3), 

19 and 

20 (3) by inserting ‘‘instance of aid, assistance, 

21 procurement, or advice or each such’’ before ‘‘docu22 ment’’ in the matter following paragraph (3). 

23 (b) AMOUNT OF PENALTY.—Subsection (b) of section 

24 6701 is amended to read as follows: 


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•S 1346 IS

1 ‘‘(b) AMOUNT OF PENALTY; CALCULATION OF PEN2 ALTY; LIABILITY FOR PENALTY.— 

3 ‘‘(1) AMOUNT OF PENALTY.—The amount of 

4 the penalty imposed by subsection (a) shall not ex5 ceed 150 percent of the gross income derived (or to 

6 be derived) from such aid, assistance, procurement, 

7 or advice provided by the person or persons subject 

8 to such penalty. 

9 ‘‘(2) CALCULATION OF PENALTY.—The penalty 

10 amount determined under paragraph (1) shall be 

11 calculated with respect to each instance of aid, as12 sistance, procurement, or advice described in sub13 section (a), each instance in which income was de14 rived by the person or persons subject to such pen15 alty, and each person who made such an understate16 ment of the liability for tax. 

17 ‘‘(3) LIABILITY FOR PENALTY.—If more than 1 

18 person is liable under subsection (a) with respect to 

19 providing such aid, assistance, procurement, or ad20 vice, all such persons shall be jointly and severally 

21 liable for the penalty under such subsection.’’. 

22 (c) PENALTY NOT DEDUCTIBLE.—Section 6701 is 

23 amended by adding at the end the following new sub24 section: 


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1 ‘‘(g) PENALTY NOT DEDUCTIBLE.—The payment of 

2 any penalty imposed under this section or the payment 

3 of any amount to settle or avoid the imposition of such 

4 penalty shall not be considered an ordinary and necessary 

5 expense in carrying on a trade or business for purposes 

6 of this title and shall not be deductible by the person who 

7 is subject to such penalty or who makes such payment.’’. 

8 (d) EFFECTIVE DATE.—The amendments made by 

9 this section shall apply to activities after the date of the 

10 enactment of this Act. 

11 SEC. 303. PROHIBITED FEE ARRANGEMENT. 

12 (a) IN GENERAL.—Section 6701, as amended by this 

13 Act, is amended— 

14 (1) by redesignating subsections (f) and (g) as 

15 subsections (g) and (h), respectively, 

16 (2) by striking ‘‘subsection (a).’’ in paragraphs 

17 (2) and (3) of subsection (g) (as redesignated by 

18 paragraph (1)) and inserting ‘‘subsection (a) or 

19 (f).’’, and 

20 (3) by inserting after subsection (e) the fol21 lowing new subsection: 

22 ‘‘(f) PROHIBITED FEE ARRANGEMENT.— 

23 ‘‘(1) IN GENERAL.—Any person who makes an 

24 agreement for, charges, or collects a fee which is for 

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1 enue laws, and the amount of which is calculated ac2 cording to, or is dependent upon, a projected or ac3 tual amount of— 

4 ‘‘(A) tax savings or benefits, or 

5 ‘‘(B) losses which can be used to offset 

6 other taxable income, 

7 shall pay a penalty with respect to each such fee ac8 tivity in the amount determined under subsection 

9 (b). 

10 ‘‘(2) RULES.—The Secretary may issue rules to 

11 carry out the purposes of this subsection and may 

12 provide exceptions for fee arrangements that are in 

13 the public interest.’’. 

14 (b) EFFECTIVE DATE.—The amendments made by 

15 this section shall apply to fee agreements, charges, and 

16 collections made after the date of the enactment of this 

17 Act. 

18 SEC. 304. PREVENTING TAX SHELTER ACTIVITIES BY FI19 NANCIAL INSTITUTIONS. 

20 (a) EXAMINATIONS.— 

21 (1) DEVELOPMENT OF EXAMINATION TECH22 NIQUES.—Each of the Federal banking agencies and 

23 the Commission shall, in consultation with the Inter24 nal Revenue Service, develop examination techniques 

25 to detect potential violations of section 6700 or 6701 


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1 of the Internal Revenue Code of 1986, by depository 

2 institutions, brokers, dealers, and investment advis3 ers, as appropriate. 

4 (2) IMPLEMENTATION.—Each of the Federal 

5 banking agencies and the Commission shall imple6 ment the examination techniques developed under 

7 paragraph (1) with respect to each of the depository 

8 institutions, brokers, dealers, or investment advisers 

9 subject to their enforcement authority. Such exam10 ination shall, to the extent possible, be combined 

11 with any examination by such agency otherwise re12 quired or authorized by Federal law. 

13 (b) REPORT TO INTERNAL REVENUE SERVICE.—In 

14 any case in which an examination conducted under this 

15 section with respect to a financial institution or other enti16 ty reveals a potential violation, such agency shall promptly 

17 notify the Internal Revenue Service of such potential viola18 tion for investigation and enforcement by the Internal 

19 Revenue Service, in accordance with applicable provisions 

20 of law. 

21 (c) REPORT TO CONGRESS.—The Federal banking 

22 agencies and the Commission shall submit a joint written 

23 report to Congress in 2013 on their progress in preventing 

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1 enue Code of 1986, by depository institutions, brokers, 

2 dealers, and investment advisers, as appropriate. 

3 (d) DEFINITIONS.—For purposes of this section— 

4 (1) the terms ‘‘broker’’, ‘‘dealer’’, and ‘‘invest5 ment adviser’’ have the same meanings as in section 

6 3 of the Securities Exchange Act of 1934 (15 U.S.C. 

7 78c); 

8 (2) the term ‘‘Commission’’ means the Securi9 ties and Exchange Commission; 

10 (3) the term ‘‘depository institution’’ has the 

11 same meaning as in section 3(c) of the Federal De12 posit Insurance Act (12 U.S.C. 1813(c)); 

13 (4) the term ‘‘Federal banking agencies’’ has 

14 the same meaning as in section 3(q) of the Federal 

15 Deposit Insurance Act (12 U.S.C. 1813(q)); and 

16 (5) the term ‘‘Secretary’’ means the Secretary 

17 of the Treasury. 

18 SEC. 305. INFORMATION SHARING FOR ENFORCEMENT 

19 PURPOSES. 

20 (a) PROMOTION OF PROHIBITED TAX SHELTERS OR

21 TAX AVOIDANCE SCHEMES.—Section 6103(h) is amended 

22 by adding at the end the following new paragraph: 

23 ‘‘(7) DISCLOSURE OF RETURNS AND RETURN

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1 ITED TAX SHELTERS OR TAX AVOIDANCE

2 SCHEMES.— 

3 ‘‘(A) WRITTEN REQUEST.—Upon receipt 

4 by the Secretary of a written request which 

5 meets the requirements of subparagraph (B) 

6 from the head of the United States Securities 

7 and Exchange Commission, an appropriate 

8 Federal banking agency as defined under sec9 tion 1813(q) of title 12, United States Code, or 

10 the Public Company Accounting Oversight 

11 Board, a return or return information shall be 

12 disclosed to such requestor’s officers and em13 ployees who are personally and directly engaged 

14 in an investigation, examination, or proceeding 

15 by such requestor to evaluate, determine, penal16 ize, or deter conduct by a financial institution, 

17 issuer, or public accounting firm, or associated 

18 person, in connection with a potential or actual 

19 violation of section 6700 (promotion of abusive 

20 tax shelters), 6701 (aiding and abetting under21 statement of tax liability), or activities related 

22 to promoting or facilitating inappropriate tax 

23 avoidance or tax evasion. Such disclosure shall 

24 be solely for use by such officers and employees 

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1 ceeding. In the discretion of the Secretary, such 

2 disclosure may take the form of the participa3 tion of Internal Revenue Service employees in a 

4 joint investigation, examination, or proceeding 

5 with the Securities Exchange Commission, Fed6 eral banking agency, or Public Company Ac7 counting Oversight Board. 

8 ‘‘(B) REQUIREMENTS.—A request meets 

9 the requirements of this subparagraph if it sets 

10 forth— 

11 ‘‘(i) the nature of the investigation, 

12 examination, or proceeding, 

13 ‘‘(ii) the statutory authority under 

14 which such investigation, examination, or 

15 proceeding is being conducted, 

16 ‘‘(iii) the name or names of the finan17 cial institution, issuer, or public accounting 

18 firm to which such return information re19 lates, 

20 ‘‘(iv) the taxable period or periods to 

21 which such return information relates, and 

22 ‘‘(v) the specific reason or reasons 

23 why such disclosure is, or may be, relevant 

24 to such investigation, examination or pro25 ceeding. 


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1 ‘‘(C) FINANCIAL INSTITUTION.—For the 

2 purposes of this paragraph, the term ‘financial 

3 institution’ means a depository institution, for4 eign bank, insured institution, industrial loan 

5 company, broker, dealer, investment company, 

6 investment advisor, or other entity subject to 

7 regulation or oversight by the United States Se8 curities and Exchange Commission or an appro9 priate Federal banking agency.’’. 

10 (b) FINANCIAL AND ACCOUNTING FRAUD INVESTIGA11 TIONS.—Section 6103(i) is amended by adding at the end 

12 the following new paragraph: 

13 ‘‘(9) DISCLOSURE OF RETURNS AND RETURN

14 INFORMATION FOR USE IN FINANCIAL AND AC15 COUNTING FRAUD INVESTIGATIONS.— 

16 ‘‘(A) WRITTEN REQUEST.—Upon receipt 

17 by the Secretary of a written request which 

18 meets the requirements of subparagraph (B) 

19 from the head of the United States Securities 

20 and Exchange Commission or the Public Com21 pany Accounting Oversight Board, a return or 

22 return information shall be disclosed to such re23 questor’s officers and employees who are per24 sonally and directly engaged in an investigation, 

25 examination, or proceeding by such requester to 


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•S 1346 IS

1 evaluate the accuracy of a financial statement 

2 or report, or to determine whether to require a 

3 restatement, penalize, or deter conduct by an 

4 issuer, investment company, or public account5 ing firm, or associated person, in connection 

6 with a potential or actual violation of auditing 

7 standards or prohibitions against false or mis8 leading statements or omissions in financial 

9 statements or reports. Such disclosure shall be 

10 solely for use by such officers and employees in 

11 such investigation, examination, or proceeding. 

12 ‘‘(B) REQUIREMENTS.—A request meets 

13 the requirements of this subparagraph if it sets 

14 forth— 

15 ‘‘(i) the nature of the investigation, 

16 examination, or proceeding, 

17 ‘‘(ii) the statutory authority under 

18 which such investigation, examination, or 

19 proceeding is being conducted, 

20 ‘‘(iii) the name or names of the issuer, 

21 investment company, or public accounting 

22 firm to which such return information re23 lates, 

24 ‘‘(iv) the taxable period or periods to 

25 which such return information relates, and 


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•S 1346 IS

1 ‘‘(v) the specific reason or reasons 

2 why such disclosure is, or may be, relevant 

3 to such investigation, examination or pro4 ceeding.’’. 

5 (c) EFFECTIVE DATE.—The amendments made by 

6 this section shall apply to disclosures and to information 

7 and document requests made after the date of the enact8 ment of this Act. 

9 SEC. 306. DISCLOSURE OF INFORMATION TO CONGRESS. 

10 (a) DISCLOSURE BY TAX RETURN PREPARER.— 

11 (1) IN GENERAL.—Subparagraph (B) of section 

12 7216(b)(1) is amended to read as follows: 

13 ‘‘(B) pursuant to any 1 of the following 

14 documents, if clearly identified: 

15 ‘‘(i) The order of any Federal, State, 

16 or local court of record. 

17 ‘‘(ii) A subpoena issued by a Federal 

18 or State grand jury. 

19 ‘‘(iii) An administrative order, sum20 mons, or subpoena which is issued in the 

21 performance of its duties by— 

22 ‘‘(I) any Federal agency, includ23 ing Congress or any committee or 

24 subcommittee thereof, or 


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1 ‘‘(II) any State agency, body, or 

2 commission charged under the laws of 

3 the State or a political subdivision of 

4 the State with the licensing, registra5 tion, or regulation of tax return pre6 parers.’’. 

7 (2) EFFECTIVE DATE.—The amendment made 

8 by this subsection shall apply to disclosures made 

9 after the date of the enactment of this Act pursuant 

10 to any document in effect on or after such date. 

11 (b) DISCLOSURE BY SECRETARY.—Paragraph (2) of 

12 section 6104(a) is amended to read as follows: 

13 ‘‘(2) INSPECTION BY CONGRESS.— 

14 ‘‘(A) IN GENERAL.—Upon receipt of a 

15 written request from a committee or sub16 committee of Congress, copies of documents re17 lated to a determination by the Secretary to 

18 grant, deny, revoke, or restore an organization’s 

19 exemption from taxation under section 501 

20 shall be provided to such committee or sub21 committee, including any application, notice of 

22 status, or supporting information provided by 

23 such organization to the Internal Revenue Serv24 ice; any letter, analysis, or other document pro25 duced by or for the Internal Revenue Service 


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1 evaluating, determining, explaining, or relating 

2 to the tax exempt status of such organization 

3 (other than returns, unless such returns are 

4 available to the public under this section or sec5 tion 6103 or 6110); and any communication be6 tween the Internal Revenue Service and any 

7 other party relating to the tax exempt status of 

8 such organization. 

9 ‘‘(B) ADDITIONAL INFORMATION.—Section 

10 6103(f) shall apply with respect to— 

11 ‘‘(i) the application for exemption of 

12 any organization described in subsection 

13 (c) or (d) of section 501 which is exempt 

14 from taxation under section 501(a) for any 

15 taxable year and any application referred 

16 to in subparagraph (B) of subsection 

17 (a)(1) of this section, and 

18 ‘‘(ii) any other papers which are in 

19 the possession of the Secretary and which 

20 relate to such application, 

21 as if such papers constituted returns.’’. 

22 (c) EFFECTIVE DATE.—The amendments made by 

23 this section shall apply to disclosures and to information 

24 and document requests made after the date of the enact25 ment of this Act. 


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1 SEC. 307. TAX OPINION STANDARDS FOR TAX PRACTI2 TIONERS. 

3 Section 330(d) of title 31, United States Code, is 

4 amended to read as follows: 

5 ‘‘(d) The Secretary of the Treasury shall impose 

6 standards applicable to the rendering of written advice 

7 with respect to any listed transaction or any entity, plan, 

8 arrangement, or other transaction which has a potential 

9 for tax avoidance or evasion. Such standards shall ad10 dress, but not be limited to, the following issues: 

11 ‘‘(1) Independence of the practitioner issuing 

12 such written advice from persons promoting, mar13 keting, or recommending the subject of the advice. 

14 ‘‘(2) Collaboration among practitioners, or be15 tween a practitioner and other party, which could re16 sult in such collaborating parties having a joint fi17 nancial interest in the subject of the advice. 

18 ‘‘(3) Avoidance of conflicts of interest which 

19 would impair auditor independence. 

20 ‘‘(4) For written advice issued by a firm, stand21 ards for reviewing the advice and ensuring the con22 sensus support of the firm for positions taken. 

23 ‘‘(5) Reliance on reasonable factual representa24 tions by the taxpayer and other parties. 

25 ‘‘(6) Appropriateness of the fees charged by the 

26 practitioner for the written advice. 


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1 ‘‘(7) Preventing practitioners and firms from 

2 aiding or abetting the understatement of tax liability 

3 by clients. 

4 ‘‘(8) Banning the promotion of potentially abu5 sive or illegal tax shelters.’’. 

Æ 


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