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[104th Congress Public Law 168]
[From the U.S. Government Printing Office]

<DOC>
[DOCID: f:publ168.104]

[[Page 1451]]

                        TAXPAYER BILL OF RIGHTS 2

[[Page 110 STAT. 1452]]

Public Law 104-168
104th Congress

                                 An Act

 
  To amend the Internal Revenue Code of 1986 to provide for increased 
     taxpayer protections. <<NOTE:  July 30, 1996 -  [H.R. 2337]>> 

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled, <<NOTE: Taxpayer Bill of 
Rights 2.>> 

SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE; TABLE OF CONTENTS.

    (a) <<NOTE: 26 USC 1 note.>>  Short Title.--This Act may be cited as 
the ``Taxpayer Bill of Rights 2''.

    (b) Amendment of 1986 Code.--Except as otherwise expressly provided, 
whenever in this Act an amendment or repeal is expressed in terms of an 
amendment to, or repeal of, a section or other provision, the reference 
shall be considered to be made to a section or other provision of the 
Internal Revenue Code of 1986.
    (c) Table of Contents.--

Sec. 1. Short title; amendment of 1986 Code; table of contents.

                       TITLE I--TAXPAYER ADVOCATE

Sec. 101. Establishment of position of Taxpayer Advocate within Internal 
           Revenue Service.
Sec. 102. Expansion of authority to issue Taxpayer Assistance Orders.

       TITLE II--MODIFICATIONS TO INSTALLMENT AGREEMENT PROVISIONS

Sec. 201. Notification of reasons for termination of installment 
           agreements.
Sec. 202. Administrative review of termination of installment agreement.

             TITLE III--ABATEMENT OF INTEREST AND PENALTIES

Sec. 301. Expansion of authority to abate interest.
Sec. 302. Review of IRS failure to abate interest.
Sec. 303. Extension of interest-free period for payment of tax after 
           notice and demand.
Sec. 304. Abatement of penalty for failure to make required deposits of 
           payroll taxes in certain cases.

                         TITLE IV--JOINT RETURNS

Sec. 401. Studies of joint return-related issues.
Sec. 402. Joint return may be made after separate returns without full 
           payment of tax.
Sec. 403. Disclosure of collection activities.

                     TITLE V--COLLECTION ACTIVITIES

Sec. 501. Modifications to lien and levy provisions.
Sec. 502. Modifications to certain levy exemption amounts.
Sec. 503. Offers-in-compromise.

                      TITLE VI--INFORMATION RETURNS

Sec. 601. Civil damages for fraudulent filing of information returns.
Sec. 602. Requirement to conduct reasonable investigations of 
           information returns.

[[Page 110 STAT. 1453]]

              TITLE VII--AWARDING OF COSTS AND CERTAIN FEES

Sec. 701. United States must establish that its position in proceeding 
           was substantially justified.
Sec. 702. Increased limit on attorney fees.
Sec. 703. Failure to agree to extension not taken into account.
Sec. 704. Award of litigation costs permitted in declaratory judgment 
           proceedings.

 TITLE VIII--MODIFICATION TO RECOVERY OF CIVIL DAMAGES FOR UNAUTHORIZED 
                           COLLECTION ACTIONS

Sec. 801. Increase in limit on recovery of civil damages for 
           unauthorized collection actions.
Sec. 802. Court discretion to reduce award for litigation costs for 
           failure to exhaust administrative remedies.

 TITLE IX--MODIFICATIONS TO PENALTY FOR FAILURE TO COLLECT AND PAY OVER 
                                   TAX

Sec. 901. Preliminary notice requirement.
Sec. 902. Disclosure of certain information where more than 1 person 
           liable for penalty for failure to collect and pay over tax.
Sec. 903. Right of contribution where more than 1 person liable for 
           penalty for failure to collect and pay over tax.
Sec. 904. Volunteer board members of tax-exempt organizations exempt 
           from penalty for failure to collect and pay over tax.

          TITLE X--MODIFICATIONS OF RULES RELATING TO SUMMONSES

Sec. 1001. Enrolled agents included as third-party recordkeepers.
Sec. 1002. Safeguards relating to designated summonses.
Sec. 1003. Annual report to Congress concerning designated summonses.

  TITLE XI--RELIEF FROM RETROACTIVE APPLICATION OF TREASURY DEPARTMENT 
                               REGULATIONS

Sec. 1101. Relief from retroactive application of Treasury Department 
           regulations.

                   TITLE XII--MISCELLANEOUS PROVISIONS

Sec. 1201. Phone number of person providing payee statements required to 
           be shown on such statement.
Sec. 1202. Required notice of certain payments.
Sec. 1203. Unauthorized enticement of information disclosure.
Sec. 1204. Annual reminders to taxpayers with outstanding delinquent 
           accounts.
Sec. 1205. 5-year extension of authority for undercover operations.
Sec. 1206. Disclosure of Form 8300 information on cash transactions.
Sec. 1207. Disclosure of returns and return information to designee of 
           taxpayer.
Sec. 1208. Study of netting of interest on overpayments and liabilities.
Sec. 1209. Expenses of detection of underpayments and fraud, etc.
Sec. 1210. Use of private delivery services for timely-mailing-as-
           timely-filing rule.
Sec. 1211. Reports on misconduct of IRS employees.

                       TITLE XIII--REVENUE OFFSETS

 Subtitle A--Application of Failure-to-Pay Penalty to Substitute Returns

Sec. 1301. Application of failure-to-pay penalty to substitute returns.

     Subtitle B--Excise Taxes on Amounts of Private Excess Benefits

Sec. 1311. Excise taxes for failure by certain charitable organizations 
           to meet certain qualification requirements.
Sec. 1312. Reporting of certain excise taxes and other information.
Sec. 1313. Exempt organizations required to provide copy of return.
Sec. 1314. Increase in penalties on exempt organizations for failure to 
           file complete and timely annual returns.

                       TITLE I--TAXPAYER ADVOCATE

SEC. 101. ESTABLISHMENT OF POSITION OF TAXPAYER ADVOCATE WITHIN INTERNAL 
            REVENUE SERVICE.

    (a) General Rule.--Section 7802 (relating to Commissioner of 
Internal Revenue; Assistant Commissioner (Employee Plans and

[[Page 110 STAT. 1454]]

Exempt Organizations)) is amended by adding at the end the following new 
subsection:
    ``(d) <<NOTE: Establishment. Government organization.>>  Office of 
Taxpayer Advocate.--
            ``(1) In general.--There is established in the Internal 
        Revenue Service an office to be known as the `Office of the 
        Taxpayer Advocate'. Such office shall be under the supervision 
        and direction of an official to be known as the `Taxpayer 
        Advocate' who shall be appointed by and report directly to the 
        Commissioner of Internal Revenue. The Taxpayer Advocate shall be 
        entitled to compensation at the same rate as the highest level 
        official reporting directly to the Deputy Commissioner of the 
        Internal Revenue Service.
            ``(2) Functions of office.--
                    ``(A) In general.--It shall be the function of the 
                Office of Taxpayer Advocate to--
                          ``(i) assist taxpayers in resolving problems 
                      with the Internal Revenue Service,
                          ``(ii) identify areas in which taxpayers have 
                      problems in dealings with the Internal Revenue 
                      Service,
                          ``(iii) to the extent possible, propose 
                      changes in the administrative practices of the 
                      Internal Revenue Service to mitigate problems 
                      identified under clause (ii), and
                          ``(iv) identify potential legislative changes 
                      which may be appropriate to mitigate such 
                      problems.
                    ``(B) Annual reports.--
                          ``(i) Objectives.--Not later than June 30 of 
                      each calendar year after 1995, the Taxpayer 
                      Advocate shall report to the Committee on Ways and 
                      Means of the House of Representatives and the 
                      Committee on Finance of the Senate on the 
                      objectives of the Taxpayer Advocate for the fiscal 
                      year beginning in such calendar year. Any such 
                      report shall contain full and substantive 
                      analysis, in addition to statistical information.
                          ``(ii) Activities.--Not later than December 31 
                      of each calendar year after 1995, the Taxpayer 
                      Advocate shall report to the Committee on Ways and 
                      Means of the House of Representatives and the 
                      Committee on Finance of the Senate on the 
                      activities of the Taxpayer Advocate during the 
                      fiscal year ending during such calendar year. Any 
                      such report shall contain full and substantive 
                      analysis, in addition to statistical information, 
                      and shall--
                                    ``(I) identify the initiatives the 
                                Taxpayer Advocate has taken on improving 
                                taxpayer services and Internal Revenue 
                                Service responsiveness,
                                    ``(II) contain recommendations 
                                received from individuals with the 
                                authority to issue Taxpayer Assistance 
                                Orders under section 7811,
                                    ``(III) contain a summary of at 
                                least 20 of the most serious problems
encountered by taxpayers, including a description of the nature of such 
problems,
                                    ``(IV) contain an inventory of the 
                                items described in subclauses (I), (II), 
                                and (III) for which action has been 
                                taken and the result of such action,

[[Page 110 STAT. 1455]]

                                    ``(V) contain an inventory of the 
                                items described in subclauses (I), (II), 
                                and (III) for which action remains to be 
                                completed and the period during which 
                                each item has remained on such 
                                inventory,
                                    ``(VI) contain an inventory of the 
                                items described in subclauses (II) and 
                                (III) for which no action has been 
                                taken, the period during which each item 
                                has remained on such inventory, the 
                                reasons for the inaction, and identify 
                                any Internal Revenue Service official 
                                who is responsible for such inaction,
                                    ``(VII) identify any Taxpayer 
                                Assistance Order which was not honored 
                                by the Internal Revenue Service in a 
                                timely manner, as specified under 
                                section 7811(b),
                                    ``(VIII) contain recommendations for 
                                such administrative and legislative 
                                action as may be appropriate to resolve 
                                problems encountered by taxpayers,
                                    ``(IX) describe the extent to which 
                                regional problem resolution officers 
                                participate in the selection and 
                                evaluation of local problem resolution 
                                officers, and
                                    ``(X) include such other information 
                                as the Taxpayer Advocate may deem 
                                advisable.
                          ``(iii) Report to be submitted directly.--Each 
                      report required under this subparagraph shall be 
                      provided directly to the Committees referred to in 
                      clauses (i) and (ii) without any prior review or 
                      comment from the Commissioner, the Secretary of 
                      the Treasury, any other officer or employee of the 
                      Department of the Treasury, or the Office of 
                      Management and Budget.
            ``(3) Responsibilities of commissioner.--The Commissioner of 
        Internal Revenue shall establish procedures requiring a formal 
        response to all recommendations submitted to the Commissioner by 
        the Taxpayer Advocate within 3 months after submission to the 
        Commissioner.''.

    (b) Conforming Amendments.--
            (1) Section 7811 (relating to Taxpayer Assistance Orders) is 
        amended--
                    (A) by striking ``the Office of Ombudsman'' in 
                subsection (a) and inserting ``the Office of the 
                Taxpayer Advocate'', and
                    (B) by striking ``Ombudsman'' each place it appears 
                (including in the headings of subsections (e) and (f)) 
                and inserting ``Taxpayer Advocate''.
            (2) The heading for section 7802 is amended to read as 
        follows:

[[Page 110 STAT. 1456]]

``SEC. 7802. COMMISSIONER OF INTERNAL REVENUE; ASSISTANT COMMISSIONERS; 
            TAXPAYER ADVOCATE.''.

            (3) The table of sections for subchapter A of chapter 80 is 
        amended by striking the item relating to section 7802 and 
        inserting the following new item:

``Sec. 7802. Commissioner of Internal Revenue; Assistant Commissioners; 
           Taxpayer Advocate.''.

    (c) <<NOTE: 26 USC 7802 note.>>  Effective Date.--The amendments 
made by this section shall take effect on the date of the enactment of 
this Act.

SEC. 102. EXPANSION OF AUTHORITY TO ISSUE TAXPAYER ASSISTANCE ORDERS.

    (a) Terms of Orders.--Subsection (b) of section 7811 (relating to 
terms of Taxpayer Assistance Orders) is amended--
            (1) by inserting ``within a specified time period'' after 
        ``the Secretary'', and
            (2) by inserting ``take any action as permitted by law,'' 
        after ``cease any action,''.

    (b) Limitation on Authority To Modify or Rescind.--Section 7811(c) 
(relating to authority to modify or rescind) is amended to read as 
follows:
    ``(c) Authority To Modify or Rescind.--Any Taxpayer Assistance Order 
issued by the Taxpayer Advocate under this section may be modified or 
rescinded--
            ``(1) only by the Taxpayer Advocate, the Commissioner of 
        Internal Revenue, or the Deputy Commissioner of Internal 
        Revenue, and
            ``(2) only if a written explanation of the reasons for the 
        modification or rescission is provided to the Taxpayer 
        Advocate.''.

    (c) <<NOTE: 26 USC 7811 note.>>  Effective Date.--The amendments 
made by this section shall take effect on the date of the enactment of 
this Act.

       TITLE II--MODIFICATIONS TO INSTALLMENT AGREEMENT PROVISIONS

SEC. 201. NOTIFICATION OF REASONS FOR TERMINATION OF INSTALLMENT 
            AGREEMENTS.

    (a) Terminations.--Subsection (b) of section 6159 (relating to 
extent to which agreements remain in effect) is amended by adding at the 
end the following new paragraph:
            ``(5) Notice requirements.--The Secretary may not take any 
        action under paragraph (2), (3), or (4) unless--
                    ``(A) a notice of such action is provided to the 
                taxpayer not later than the day 30 days before the date 
                of such action, and
                    ``(B) such notice includes an explanation why the 
                Secretary intends to take such action.
        The preceding sentence shall not apply in any case in which the 
        Secretary believes that collection of any tax to which an 
        agreement under this section relates is in jeopardy.''.

    (b) Conforming Amendment.--Paragraph (3) of section 6159(b) is 
amended to read as follows:
            ``(3) Subsequent change in financial conditions.--If the 
        Secretary makes a determination that the financial condition

[[Page 110 STAT. 1457]]

        of a taxpayer with whom the Secretary has entered into an 
        agreement under subsection (a) has significantly changed, the 
        Secretary may alter, modify, or terminate such agreement.''.

    (c) <<NOTE: 26 USC 6159 note.>>  Effective Date.--The amendments 
made by this section shall take effect on the date 6 months after the 
date of the enactment of this Act.

SEC. 202. ADMINISTRATIVE REVIEW OF TERMINATION OF INSTALLMENT AGREEMENT.

    (a) General Rule.--Section 6159 (relating to agreements for payment 
of tax liability in installments) is amended by adding at the end the 
following new subsection:
    ``(c) Administrative Review.--The Secretary shall establish 
procedures for an independent administrative review of terminations of 
installment agreements under this section for taxpayers who request such 
a review.''.
    (b) <<NOTE: 26 USC 6159 note.>>  Effective Date.--The amendment made 
by subsection (a) shall take effect on January 1, 1997.

             TITLE III--ABATEMENT OF INTEREST AND PENALTIES

SEC. 301. EXPANSION OF AUTHORITY TO ABATE INTEREST.

    (a) General Rule.--Paragraph (1) of section 6404(e) (relating to 
abatement of interest in certain cases) is amended--
            (1) by inserting ``unreasonable'' before ``error'' each 
        place it appears in subparagraphs (A) and (B), and
            (2) by striking ``in performing a ministerial act'' each 
        place it appears and inserting ``in performing a ministerial or 
        managerial act''.

    (b) Clerical Amendment.--The subsection heading for subsection (e) 
of section 6404 is amended--
            (1) by striking ``Assessments'' and inserting ``Abatement'', 
        and
            (2) by inserting ``Unreasonable'' before ``Errors''.

    (c) <<NOTE: 26 USC 6404 note.>>  Effective Date.--The amendments 
made by this section shall apply to interest accruing with respect to 
deficiencies or payments for taxable years beginning after the date of 
the enactment of this Act.

SEC. 302. REVIEW OF IRS FAILURE TO ABATE INTEREST.

    (a) In General.--Section 6404 is amended by adding at the end the 
following new subsection:
    ``(g) Review of Denial of Request for Abatement of Interest.--
            ``(1) <<NOTE: Courts.>>  In general.--The Tax Court shall 
        have jurisdiction over any action brought by a taxpayer who 
        meets the requirements referred to in section 7430(c)(4)(A)(iii) 
        to determine whether the Secretary's failure to abate interest 
        under this section was an abuse of discretion, and may order an 
        abatement, if such action is brought within 180 days after the 
        date of the mailing of the Secretary's final determination not 
        to abate such interest.
            ``(2) <<NOTE: Applicability.>>  Special rules.--

[[Page 110 STAT. 1458]]

                    ``(A) Date of mailing.--Rules similar to the rules 
                of section 6213 shall apply for purposes of determining 
                the date of the mailing referred to in paragraph (1).
                    ``(B) Relief.--Rules similar to the rules of section 
                6512(b) shall apply for purposes of this subsection.
                    ``(C) Review.--An order of the Tax Court under this 
                subsection shall be reviewable in the same manner as a 
                decision of the Tax Court, but only with respect to the 
                matters determined in such order.''.

    (b) <<NOTE: 26 USC 6404 note.>>  Effective Date.--The amendment made 
by this section shall apply to requests for abatement after the date of 
the enactment of this Act.

SEC. 303. EXTENSION OF INTEREST-FREE PERIOD FOR PAYMENT OF TAX AFTER 
            NOTICE AND DEMAND.

    (a) General Rule.--Paragraph (3) of section 6601(e) (relating to 
payments made within 10 days after notice and demand) is amended to read 
as follows:
            ``(3) Payments made within specified period after notice and 
        demand.--If notice and demand is made for payment of any amount 
        and if such amount is paid within 21 calendar days (10 business 
        days if the amount for which such notice and demand is made 
        equals or exceeds $100,000) after the date of such notice and 
        demand, interest under this section on the amount so paid shall 
        not be imposed for the period after the date of such notice and 
        demand.''.

    (b) Conforming Amendments.--
            (1) Subparagraph (A) of section 6601(e)(2) is amended by 
        striking ``10 days from the date of notice and demand therefor'' 
        and inserting ``21 calendar days from the date of notice and 
        demand therefor (10 business days if the amount for which such 
        notice and demand is made equals or exceeds $100,000)''.
            (2) Paragraph (3) of section 6651(a) is amended by striking 
        ``10 days of the date of the notice and demand therefor'' and 
        inserting ``21 calendar days from the date of notice and demand 
        therefor (10 business days if the amount for which such notice 
        and demand is made equals or exceeds $100,000)''.

    (c) <<NOTE: 26 USC 6601 note.>>  Effective Date.--The amendments 
made by this section shall apply in the case of any notice and demand 
given after December 31, 1996.

SEC. 304. ABATEMENT OF PENALTY FOR FAILURE TO MAKE REQUIRED DEPOSITS OF 
            PAYROLL TAXES IN CERTAIN CASES.

    (a) In General.--Section 6656 (relating to failure to make deposit 
of taxes) is amended by adding at the end the following new subsections:
    ``(c) Exception for First-Time Depositors of Employment Taxes.--The 
Secretary may waive the penalty imposed by subsection (a) on a person's 
inadvertent failure to deposit any employment tax if--
            ``(1) such person meets the requirements referred to in 
        section 7430(c)(4)(A)(iii),
            ``(2) such failure occurs during the 1st quarter that such 
        person was required to deposit any employment tax, and
            ``(3) the return of such tax was filed on or before the due 
        date.

For purposes of this subsection, the term `employment taxes' means the 
taxes imposed by subtitle C.

[[Page 110 STAT. 1459]]

    ``(d) Authority To Abate Penalty Where Deposit Sent to Secretary.--
The Secretary may abate the penalty imposed by subsection (a) with 
respect to the first time a depositor is required to make a deposit if 
the amount required to be deposited is inadvertently sent to the 
Secretary instead of to the appropriate government depository.''.
    (b) <<NOTE: 26 USC 6656 note.>>  Effective Date.--The amendment made 
by subsection (a) shall apply to deposits required to be made after the 
date of the enactment of this Act.

                         TITLE IV--JOINT RETURNS

SEC. 401. STUDIES OF JOINT RETURN-RELATED ISSUES.

    The Secretary of the Treasury or his delegate and the Comptroller 
General of the United States shall each conduct separate studies of--
            (1) the effects of changing the liability for tax on a joint 
        return from being joint and several to being proportionate to 
        the tax attributable to each spouse,
            (2) the effects of providing that, if a divorce decree 
        allocates liability for tax on a joint return filed before the 
        divorce, the Secretary may collect such liability only in 
        accordance with the decree,
            (3) whether those provisions of the Internal Revenue Code of 
        1986 intended to provide relief to innocent spouses provide 
        meaningful relief in all cases where such relief is appropriate, 
        and
            (4) the effect of providing that community income (as 
        defined in section 66(d) of such Code) which, in accordance with 
        the rules contained in section 879(a) of such Code, would be 
        treated as the income of one spouse is exempt from a levy for 
        failure to pay any tax imposed by subtitle A by the other spouse 
        for a taxable year ending before their marriage.

<<NOTE: Reports.>> The reports of such studies shall be submitted to the 
Committee on Ways and Means of the House of Representatives and the 
Committee on Finance of the Senate within 6 months after the date of the 
enactment of this Act.

SEC. 402. JOINT RETURN MAY BE MADE AFTER SEPARATE RETURNS WITHOUT FULL 
            PAYMENT OF TAX.

    (a) General Rule.--Paragraph (2) of section 6013(b) (relating to 
limitations on filing of joint return after filing separate returns) is 
amended by striking subparagraph (A) and redesignating the following 
subparagraphs accordingly.

    (b) <<NOTE: 26 USC 6013 note.>>  Effective Date.--The amendment made 
by subsection (a) shall apply to taxable years beginning after the date 
of the enactment of this Act.

SEC. 403. DISCLOSURE OF COLLECTION ACTIVITIES.

    (a) In General.--Subsection (e) of section 6103 (relating to 
disclosure to persons having material interest) is amended by adding at 
the end the following new paragraph:
            ``(8) Disclosure of collection activities with respect to 
        joint return.--If any deficiency of tax with respect to a joint 
        return is assessed and the individuals filing such return are no 
        longer married or no longer reside in the same household, upon 
        request in writing by either of such individuals,

[[Page 110 STAT. 1460]]

        the Secretary shall disclose in writing to the individual making 
        the request whether the Secretary has attempted to collect such 
        deficiency from such other individual, the general nature of 
        such collection activities, and the amount collected. The 
        preceding sentence shall not apply to any deficiency which may 
        not be collected by reason of section 6502.''.

    (b) <<NOTE: 26 USC 6103 note.>>  Effective Date.--The amendment made 
by this section shall apply to requests made after the date of the 
enactment of this Act.

                     TITLE V--COLLECTION ACTIVITIES

SEC. 501. MODIFICATIONS TO LIEN AND LEVY PROVISIONS.

    (a) Withdrawal of Certain Notices.--Section 6323 (relating to 
validity and priority against certain persons) is amended by adding at 
the end the following new subsection:
    ``(j) Withdrawal of Notice in Certain Circumstances.--
            ``(1) In general.--The Secretary may withdraw a notice of a 
        lien filed under this section and this chapter shall be applied 
        as if the withdrawn notice had not been filed, if the Secretary 
        determines that--
                    ``(A) the filing of such notice was premature or 
                otherwise not in accordance with administrative 
                procedures of the Secretary,
                    ``(B) the taxpayer has entered into an agreement 
                under section 6159 to satisfy the tax liability for 
                which the lien was imposed by means of installment 
                payments, unless such agreement provides otherwise,
                    ``(C) the withdrawal of such notice will facilitate 
                the collection of the tax liability, or
                    ``(D) with the consent of the taxpayer or the 
                Taxpayer Advocate, the withdrawal of such notice would 
                be in the best interests of the taxpayer (as determined 
                by the Taxpayer Advocate) and the United States.
        Any such withdrawal shall be made by filing notice at the same 
        office as the withdrawn notice. A copy of such notice of 
        withdrawal shall be provided to the taxpayer.
            ``(2) Notice to credit agencies, etc.--Upon written request 
        by the taxpayer with respect to whom a notice of a lien was 
        withdrawn under paragraph (1), the Secretary shall promptly make 
        reasonable efforts to notify credit reporting agencies, and any 
        financial institution or creditor whose name and address is 
        specified in such request, of the withdrawal of such notice. Any 
        such request shall be in such form as the Secretary may 
        prescribe.''.

    (b) Return of Levied Property in Certain Cases.--Section 6343 
(relating to authority to release levy and return property) is amended 
by adding at the end the following new subsection:
    ``(d) Return of Property in Certain Cases.--If--
            ``(1) any property has been levied upon, and
            ``(2) the Secretary determines that--
                    ``(A) the levy on such property was premature or 
                otherwise not in accordance with administrative 
                procedures of the Secretary,
                    ``(B) the taxpayer has entered into an agreement 
                under section 6159 to satisfy the tax liability for 
                which the levy

[[Page 110 STAT. 1461]]

                was imposed by means of installment payments, unless 
                such agreement provides otherwise,
                    ``(C) the return of such property will facilitate 
                the collection of the tax liability, or
                    ``(D) with the consent of the taxpayer or the 
                Taxpayer Advocate, the return of such property would be 
                in the best interests of the taxpayer (as determined by 
                the Taxpayer Advocate) and the United States,

the provisions of subsection (b) shall apply in the same manner as if 
such property had been wrongly levied upon, except that no interest 
shall be allowed under subsection (c).''.
    (d) <<NOTE: 26 USC 6323 note.>>  Effective Date.--The amendments 
made by this section shall take effect on the date of the enactment of 
this Act.

SEC. 502. MODIFICATIONS TO CERTAIN LEVY EXEMPTION AMOUNTS.

    (a) Fuel, Etc.--Paragraph (2) of section 6334(a) (relating to fuel, 
provisions, furniture, and personal effects exempt from levy) is 
amended--
            (1) by striking ``If the taxpayer is the head of a family, 
        so'' and inserting ``So'',
            (2) by striking ``his household'' and inserting ``the 
        taxpayer's household'', and
            (3) by striking ``$1,650 ($1,550 in the case of levies 
        issued during 1989)'' and inserting ``$2,500''.

    (b) Books, Etc.--Paragraph (3) of section 6334(a) (relating to books 
and tools of a trade, business, or profession) is amended by striking 
``$1,100 ($1,050 in the case of levies issued during 1989)'' and 
inserting ``$1,250''.
    (c) Inflation Adjustment.--Section 6334 (relating to property exempt 
from levy) is amended by adding at the end the following new subsection:
    ``(f) Inflation Adjustment.--
            ``(1) In general.--In the case of any calendar year 
        beginning after 1997, each dollar amount referred to in 
        paragraphs (2) and (3) of subsection (a) shall be increased by 
        an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined under 
                section 1(f)(3) for such calendar year, by substituting 
                `calendar year 1996' for `calendar year 1992' in 
                subparagraph (B) thereof.
            ``(2) Rounding.--If any dollar amount after being increased 
        under paragraph (1) is not a multiple of $10, such dollar amount 
        shall be rounded to the nearest multiple of $10.''.

    (d) <<NOTE: 26 USC 6334 note.>>  Effective Date.--The amendments 
made by this section shall take effect with respect to levies issued 
after December 31, 1996.

SEC. 503. OFFERS-IN-COMPROMISE.

    (a) Review Requirements.--Subsection (b) of section 7122 (relating 
to records) is amended by striking ``$500.'' and inserting ``$50,000. 
However, such compromise shall be subject to continuing quality review 
by the Secretary.''.
    (b) <<NOTE: 26 USC 7122 note.>>  Effective Date.--The amendment made 
by this section shall take effect on the date of the enactment of this 
Act.

[[Page 110 STAT. 1462]]

                      TITLE VI--INFORMATION RETURNS

SEC. 601. CIVIL DAMAGES FOR FRAUDULENT FILING OF INFORMATION RETURNS.

    (a) General Rule.--Subchapter B of chapter 76 (relating to 
proceedings by taxpayers and third parties) is
amended by redesignating section 7434 as section 7435 and by inserting 
after section 7433 the following new section:

``SEC. 7434. CIVIL DAMAGES FOR FRAUDULENT FILING OF INFORMATION RETURNS.

    ``(a) In General.--If any person willfully files a fraudulent 
information return with respect to payments purported to be made to any 
other person, such other person may bring a civil action for damages 
against the person so filing such return.
    ``(b) Damages.--In any action brought under subsection (a), upon a 
finding of liability on the part of the defendant, the defendant shall 
be liable to the plaintiff in an amount equal to the greater of $5,000 
or the sum of--
            ``(1) any actual damages sustained by the plaintiff as a 
        proximate result of the filing of the fraudulent information 
        return (including any costs attributable to resolving 
        deficiencies asserted as a result of such filing),
            ``(2) the costs of the action, and
            ``(3) in the court's discretion, reasonable attorneys fees.

    ``(c) Period for Bringing Action.--Notwithstanding any other 
provision of law, an action to enforce the liability created under this 
section may be brought without regard to the amount in controversy and 
may be brought only within the later of--
            ``(1) 6 years after the date of the filing of the fraudulent 
        information return, or
            ``(2) 1 year after the date such fraudulent information 
        return would have been discovered by exercise of reasonable 
        care.

    ``(d) Copy of Complaint Filed With IRS--Any person bringing an 
action under subsection (a) shall provide a copy of the complaint to the 
Internal Revenue Service upon the filing of such complaint with the 
court.
    ``(e) Finding of Court To Include Correct Amount of Payment.--The 
decision of the court awarding damages in an action brought under 
subsection (a) shall include a finding of the correct amount which 
should have been reported in the information return.
    ``(f) Information Return.--For purposes of this section, the term 
`information return' means any statement described in section 
6724(d)(1)(A).''.
    (b) Clerical Amendment.--The table of sections for subchapter B of 
chapter 76 is amended by striking the item relating to section 7434 and 
inserting the following:

``Sec. 7434. Civil damages for fraudulent filing of information returns.
``Sec. 7435. Cross references.''.

    (c) <<NOTE: 26 USC 7434 note.>>  Effective Date.--The amendments 
made by this section shall apply to fraudulent information returns filed 
after the date of the enactment of this Act.

[[Page 110 STAT. 1463]]

SEC. 602. REQUIREMENT TO CONDUCT REASONABLE INVESTIGATIONS OF 
            INFORMATION RETURNS.

    (a) General Rule.--Section 6201 (relating to assessment authority) 
is amended by redesignating subsection (d) as subsection (e) and by 
inserting after subsection (c) the following new subsection:
    ``(d) Required Reasonable Verification of Information Returns.--In 
any court proceeding, if a taxpayer asserts a reasonable dispute with 
respect to any item of income reported on an information return filed 
with the Secretary under subpart B or C of part III of subchapter A of 
chapter 61 by a third party and the taxpayer has fully cooperated with 
the Secretary (including providing, within a reasonable period of time, 
access to and inspection of all witnesses, information, and documents 
within the control of the taxpayer as reasonably requested by the 
Secretary), the Secretary shall have the burden of producing reasonable 
and probative information concerning such deficiency in addition to such 
information return.''.
    (b) <<NOTE: 26 USC 6201 note.>>  Effective Date.--The amendment made 
by subsection (a) shall take effect on the date of the enactment of this 
Act.

              TITLE VII--AWARDING OF COSTS AND CERTAIN FEES

SEC. 701. UNITED STATES MUST ESTABLISH THAT ITS POSITION IN PROCEEDING 
            WAS SUBSTANTIALLY JUSTIFIED.

    (a) General Rule.--Subparagraph (A) of section 7430(c)(4) (defining 
prevailing party) is amended by striking clause (i) and by redesignating 
clauses (ii) and (iii) as clauses (i) and (ii), respectively.
    (b) Burden of Proof on United States.--Paragraph (4) of section 
7430(c) is amended by redesignating subparagraph (B) as subparagraph (C) 
and by inserting after subparagraph (A) the following new subparagraph:
                    ``(B) Exception if united states establishes that 
                its position was substantially justified.--
                          ``(i) General rule.--A party shall not be 
                      treated as the prevailing party in a proceeding to 
                      which subsection (a) applies if the United States 
                      establishes that the position of the United States 
                      in the proceeding was substantially justified.
                          ``(ii) Presumption of no justification if 
                      internal revenue service did not follow certain 
                      published guidance.--For purposes of clause (i), 
                      the position of the United States shall be 
                      presumed not to be substantially justified if the 
                      Internal Revenue Service did not follow its 
                      applicable published guidance in the 
                      administrative proceeding. Such presumption may be 
                      rebutted.
                          ``(iii) Applicable published guidance.--For 
                      purposes of clause (ii), the term `applicable 
                      published guidance' means--
                                    ``(I) regulations, revenue rulings, 
                                revenue procedures, information 
                                releases, notices, and announcements, 
                                and

[[Page 110 STAT. 1464]]

                                    ``(II) any of the following which 
                                are issued to the taxpayer: private 
                                letter rulings, technical advice 
                                memoranda, and determination letters.''.

    (c) Conforming Amendments.--
            (1) Subparagraph (B) of section 7430(c)(2) is amended by 
        striking ``paragraph (4)(B)'' and inserting ``paragraph 
        (4)(C)''.
            (2) Subparagraph (C) of section 7430(c)(4), as redesignated 
        by subsection (b), is amended by striking ``subparagraph (A)'' 
        and inserting ``this paragraph''.
            (3) Sections 6404(g) and 6656(c)(1), as amended by this Act, 
        are each amended by striking ``section 7430(c)(4)(A)(iii)'' and 
        inserting ``section 7430(c)(4)(A)(ii)''.

    (d) <<NOTE: 26 USC 6404 note.>>  Effective Date.--The amendments 
made by this section shall apply in the case of proceedings commenced 
after the date of the enactment of this Act.

SEC. 702. INCREASED LIMIT ON ATTORNEY FEES.

    (a) In General.--Paragraph (1) of section 7430(c) (defining 
reasonable litigation costs) is amended--
            (1) by striking ``$75'' in clause (iii) of subparagraph (B) 
        and inserting ``$110'',
            (2) by striking ``an increase in the cost of living or'' in 
        clause (iii) of subparagraph (B), and
            (3) by adding after clause (iii) the following:
        ``In the case of any calendar year beginning after 1996, the 
        dollar amount referred to in clause (iii) shall be increased by 
        an amount equal to such dollar amount multiplied by the cost-of-
        living adjustment determined under section 1(f)(3) for such 
        calendar year, by substituting `calendar year 1995' for 
        `calendar year 1992' in subparagraph (B) thereof. If any dollar 
        amount after being increased under the preceding sentence is not 
        a multiple of $10, such dollar amount shall be rounded to the 
        nearest multiple of $10.''.

    (b) <<NOTE: 26 USC 7430 note.>>  Effective Date.--The amendment made 
by this section shall apply in the case of proceedings commenced after 
the date of the enactment of this Act.

SEC. 703. FAILURE TO AGREE TO EXTENSION NOT TAKEN INTO ACCOUNT.

    (a) In General.--Paragraph (1) of section 7430(b) (relating to 
requirement that administrative remedies be exhausted) is amended by 
adding at the end the following new sentence: ``Any failure to agree to 
an extension of the time for the assessment of any tax shall not be 
taken into account for purposes of determining whether the prevailing 
party meets the requirements of the preceding sentence.''.
    (b) <<NOTE: 26 USC 7430 note.>>  Effective Date.--The amendment made 
by this section shall apply in the case of proceedings commenced after 
the date of the enactment of this Act.

SEC. 704. AWARD OF LITIGATION COSTS PERMITTED IN DECLARATORY JUDGMENT 
            PROCEEDINGS.

    (a) In General.--Subsection (b) of section 7430 is amended by 
striking paragraph (3) and by redesignating paragraph (4) as paragraph 
(3).
    (b) <<NOTE: 26 USC 7430 note.>>  Effective Date.--The amendment made 
by this section shall apply in the case of proceedings commenced after 
the date of the enactment of this Act.

[[Page 110 STAT. 1465]]

 TITLE VIII--MODIFICATION TO RECOVERY OF CIVIL DAMAGES FOR UNAUTHORIZED 
                           COLLECTION ACTIONS

SEC. 801. INCREASE IN LIMIT ON RECOVERY OF CIVIL DAMAGES FOR 
            UNAUTHORIZED COLLECTION ACTIONS.

    (a) General Rule.--Subsection (b) of section 7433 (relating to 
damages) is amended by striking ``$100,000'' and inserting 
``$1,000,000''.
    (b) <<NOTE: 26 USC 7433 note.>>  Effective Date.--The amendment made 
by subsection (a) shall apply to actions by officers or employees of the 
Internal Revenue Service after the date of the enactment of this Act.

SEC. 802. COURT DISCRETION TO REDUCE AWARD FOR LITIGATION COSTS FOR 
            FAILURE TO EXHAUST ADMINISTRATIVE REMEDIES.

    (a) General Rule.--Paragraph (1) of section 7433(d) (relating to 
civil damages for certain unauthorized collection actions) is amended to 
read as follows:
            ``(1) Award for damages may be reduced if administrative 
        remedies not exhausted.--The amount of damages awarded under 
        subsection (b) may be reduced if the court determines that the 
        plaintiff has not exhausted the administrative remedies 
        available to such plaintiff within the Internal Revenue 
        Service.''.

    (b) <<NOTE: 26 USC 7433 note.>>  Effective Date.--The amendment made 
by this section shall apply in the case of proceedings commenced after 
the date of the enactment of this Act.

 TITLE IX--MODIFICATIONS TO PENALTY FOR FAILURE TO COLLECT AND PAY OVER 
                                   TAX

SEC. 901. PRELIMINARY NOTICE REQUIREMENT.

    (a) In General.--Section 6672 (relating to failure to collect and 
pay over tax, or attempt to evade or defeat tax) is amended by 
redesignating subsection (b) as subsection (c) and by inserting after 
subsection (a) the following new subsection:
    ``(b) Preliminary Notice Requirement.--
            ``(1) In general.--No penalty shall be imposed under 
        subsection (a) unless the Secretary notifies the taxpayer in 
        writing by mail to an address as determined under section 
        6212(b) that the taxpayer shall be subject to an assessment of 
        such penalty.
            ``(2) Timing of notice.--The mailing of the notice described 
        in paragraph (1) shall precede any notice and demand of any 
        penalty under subsection (a) by at least 60 days.
            ``(3) Statute of limitations.--If a notice described in 
        paragraph (1) with respect to any penalty is mailed before the 
        expiration of the period provided by section 6501 for the 
        assessment of such penalty (determined without regard to this 
        paragraph), the period provided by such section for the 
        assessment of such penalty shall not expire before the later 
        of--

[[Page 110 STAT. 1466]]

                    ``(A) the date 90 days after the date on which such 
                notice was mailed, or
                    ``(B) if there is a timely protest of the proposed 
                assessment, the date 30 days after the Secretary makes a 
                final administrative determination with respect to such 
                protest.
            ``(4) Exception for jeopardy.--This subsection shall not 
        apply if the Secretary finds that the collection of the penalty 
        is in jeopardy.''.

    (b) <<NOTE: 26 USC 6672 note.>>  Effective Date.--The amendment made 
by subsection (a) shall apply to proposed assessments made after June 
30, 1996.

SEC. 902. DISCLOSURE OF CERTAIN INFORMATION WHERE MORE THAN 1 PERSON 
            LIABLE FOR PENALTY FOR FAILURE TO COLLECT AND PAY OVER TAX.

    (a) In General.--Subsection (e) of section 6103 (relating to 
disclosure to persons having material interest), as amended by section 
403, is
amended by adding at the end the following new paragraph:
            ``(9) Disclosure of certain information where more than 1 
        person subject to penalty under section 6672.--If the Secretary 
        determines that a person is liable for a penalty under section 
        6672(a) with respect to any failure, upon request in writing of 
        such person, the Secretary shall disclose in writing to such 
        person--
                    ``(A) the name of any other person whom the 
                Secretary has determined to be liable for such penalty 
                with respect to such failure, and
                    ``(B) whether the Secretary has attempted to collect 
                such penalty from such other person, the general nature 
                of such collection activities, and the amount 
                collected.''.

    (b) <<NOTE: 26 USC 6103 note.>>  Effective Date.--The amendment made 
by subsection (a) shall take effect on the date of the enactment of this 
Act.

SEC. 903. RIGHT OF CONTRIBUTION WHERE MORE THAN 1 PERSON LIABLE FOR 
            PENALTY FOR FAILURE TO COLLECT AND PAY OVER TAX.

    (a) In General.--Section 6672 (relating to failure to collect and 
pay over tax, or attempt to evade or defeat tax) is amended by adding at 
the end the following new subsection:
    ``(d) Right of Contribution Where More Than 1 Person Liable for 
Penalty.--If more than 1 person is liable for the penalty under 
subsection (a) with respect to any tax, each person who paid such 
penalty shall be entitled to recover from other persons who are liable 
for such penalty an amount equal to the excess of the amount paid by 
such person over such person's proportionate share of the penalty. Any 
claim for such a recovery may be made only in a proceeding which is 
separate from, and is not joined or consolidated with--
            ``(1) an action for collection of such penalty brought by 
        the United States, or
            ``(2) a proceeding in which the United States files a 
        counterclaim or third-party complaint for the collection of such 
        penalty.''.

    (b) <<NOTE: 26 USC 6672 note.>>  Effective Date.--The amendment made 
by subsection (a) shall apply to penalties assessed after the date of 
the enactment of this Act.

[[Page 110 STAT. 1467]]

SEC. 904. VOLUNTEER BOARD MEMBERS OF TAX-EXEMPT ORGANIZATIONS EXEMPT 
            FROM PENALTY FOR FAILURE TO COLLECT AND PAY OVER TAX.

    (a) In General.--Section 6672 is amended by adding at the end the 
following new subsection:
    ``(e) Exception for Voluntary Board Members of Tax-Exempt 
Organizations.--No penalty shall be imposed by subsection (a) on any 
unpaid, volunteer member of any board of trustees or directors of an 
organization exempt from tax under subtitle A if such member--
            ``(1) is solely serving in an honorary capacity,
            ``(2) does not participate in the day-to-day or financial 
        operations of the organization, and
            ``(3) does not have actual knowledge of the failure on which 
        such penalty is imposed.

The preceding sentence shall not apply if it results in no person being 
liable for the penalty imposed by subsection (a).''.
    (b) <<NOTE: 26 USC 6672 note.>>  Public Information Requirements.--
            (1) In general.--The Secretary of the Treasury or the 
        Secretary's delegate (hereafter in this subsection referred to 
        as the ``Secretary'') shall take such actions as may be 
        appropriate to ensure that employees are aware of their 
        responsibilities under the Federal tax depository system, the 
        circumstances under which employees may be liable for the 
        penalty imposed by section 6672 of the Internal Revenue Code of 
        1986, and the responsibility to promptly report to the Internal 
        Revenue Service any failure referred to in subsection (a) of 
        such section 6672. Such actions shall include--
                    (A) printing of a warning on deposit coupon booklets 
                and the appropriate tax returns that certain employees 
                may be liable for the penalty imposed by such section 
                6672, and
                    (B) the development of a special information packet.
            (2) Development of explanatory materials.--The Secretary 
        shall develop materials explaining the circumstances under which 
        board members of tax-exempt organizations (including voluntary 
        and honorary members) may be subject to penalty under section 
        6672 of such Code. Such materials shall be made available to 
        tax-exempt organizations.
            (3) IRS instructions.--The Secretary shall clarify the 
        instructions to Internal Revenue Service employees on the 
        application of the penalty under section 6672 of such Code with 
        regard to voluntary members of boards of trustees or directors 
        of tax-exempt organizations.

          TITLE X--MODIFICATIONS OF RULES RELATING TO SUMMONSES

SEC. 1001. ENROLLED AGENTS INCLUDED AS THIRD-PARTY RECORDKEEPERS.

    (a) In General.--Paragraph (3) of section 7609(a) (relating to 
third-party recordkeeper defined) is amended by striking ``and'' at the 
end of subparagraph (G), by striking the period at the end of 
subparagraph (H) and inserting ``; and'', and by adding at the end the 
following the subparagraph:

[[Page 110 STAT. 1468]]

                    ``(I) any enrolled agent.''.

    (b) <<NOTE: 26 USC 7609 note.>>  Effective Date.--The amendment made 
by subsection (a) shall apply to summonses issued after the date of the 
enactment of this Act.

SEC. 1002. SAFEGUARDS RELATING TO DESIGNATED SUMMONSES.

    (a) Standard of Review.--Subparagraph (A) of section 6503(k)(2) 
(defining designated summons) is amended by redesignating clauses (i) 
and (ii) as clauses (ii) and (iii), respectively, and by inserting 
before clause (ii) (as so redesignated) the following new clause:
                          ``(i) the issuance of such summons is preceded 
                      by a review of such issuance by the regional 
                      counsel of the Office of Chief Counsel for the 
                      region in which the examination of the corporation 
                      is being conducted,''.

    (b) Limitation on Persons to Whom Designated Summons May Be 
Issued.--Paragraph (1) of section 6503(k) is amended by striking ``with 
respect to any return of tax by a corporation'' and inserting ``to a 
corporation (or to any other person to whom the corporation has 
transferred records) with respect to any return of tax by such 
corporation for a taxable year (or other period) for which such 
corporation is being examined under the coordinated examination program 
(or any successor program) of the Internal Revenue Service''.
    (c) Clerical Amendment.--Section 6503 is amended by redesignating 
subsections (k) and (l) (as amended by this section) as subsections (j) 
and (k), respectively.
    (d) <<NOTE: 26 USC 6503 note.>>  Effective Date.--The amendments 
made by this section shall apply to summonses issued after the date of 
the enactment of this Act.

SEC. 1003. <<NOTE: 26 USC 6503 note.>>  ANNUAL REPORT TO CONGRESS 
            CONCERNING DESIGNATED SUMMONSES.

    Not later than December 31 of each calendar year after 1995, the 
Secretary of the Treasury or his delegate shall report to the Committee 
on Ways and Means of the House of Representatives and the Committee on 
Finance of the Senate on the number of designated summonses (as defined 
in section 6503(j) of the Internal Revenue Code of 1986) which were 
issued during the preceding 12 months.

  TITLE XI--RELIEF FROM RETROACTIVE APPLICATION OF TREASURY DEPARTMENT 
                               REGULATIONS

SEC. 1101. RELIEF FROM RETROACTIVE APPLICATION OF TREASURY DEPARTMENT 
            REGULATIONS.

    (a) In General.--Subsection (b) of section 7805 (relating to rules 
and regulations) is amended to read as follows:
    ``(b) Retroactivity of Regulations.--
            ``(1) In general.--Except as otherwise provided in this 
        subsection, no temporary, proposed, or final regulation relating 
        to the internal revenue laws shall apply to any taxable period 
        ending before the earliest of the following dates:

[[Page 110 STAT. 1469]]

                    ``(A) The date on which such regulation is filed 
                with the Federal Register.
                    ``(B) In the case of any final regulation, the date 
                on which any proposed or temporary regulation to which 
                such final regulation relates was filed with the Federal 
                Register.
                    ``(C) The date on which any notice substantially 
                describing the expected contents of any
temporary, proposed, or final regulation is issued to the public.
            ``(2) Exception for promptly issued regulations.--Paragraph 
        (1) shall not apply to regulations filed or issued within 18 
        months of the date of the enactment of the statutory provision 
        to which the regulation relates.
            ``(3) Prevention of abuse.--The Secretary may provide that 
        any regulation may take effect or apply retroactively to prevent 
        abuse.
            ``(4) Correction of procedural defects.--The Secretary may 
        provide that any regulation may apply retroactively to correct a 
        procedural defect in the issuance of any prior regulation.
            ``(5) Internal regulations.--The limitation of paragraph (1) 
        shall not apply to any regulation relating to internal Treasury 
        Department policies, practices, or procedures.
            ``(6) Congressional authorization.--The limitation of 
        paragraph (1) may be superseded by a legislative grant from 
        Congress authorizing the Secretary to prescribe the effective 
        date with respect to any regulation.
            ``(7) Election to apply retroactively.--The Secretary may 
        provide for any taxpayer to elect to apply any regulation before 
        the dates specified in paragraph (1).
            ``(8) Application to rulings.--The Secretary may prescribe 
        the extent, if any, to which any ruling (including any judicial 
        decision or any administrative determination other than by 
        regulation) relating to the internal revenue laws shall be 
        applied without retroactive effect.''.

    (b) <<NOTE: 26 USC 7805 note.>>  Effective Date.--The amendment made 
by subsection (a) shall apply with respect to regulations which relate 
to statutory provisions enacted on or after the date of the enactment of 
this Act.

                   TITLE XII--MISCELLANEOUS PROVISIONS

SEC. 1201. PHONE NUMBER OF PERSON PROVIDING PAYEE STATEMENTS REQUIRED TO 
            BE SHOWN ON SUCH STATEMENT.

    (a) General Rule.--The following provisions are each amended by 
striking ``name and address'' and inserting ``name, address, and phone 
number of the information contact'':
            (1) Section 6041(d)(1).
            (2) Section 6041A(e)(1).
            (3) Section 6042(c)(1).
            (4) Section 6044(e)(1).
            (5) Section 6045(b)(1).
            (6) Section 6049(c)(1)(A).
            (7) Section 6050B(b)(1).
            (8) Section 6050H(d)(1).
            (9) Section 6050I(e)(1).

[[Page 110 STAT. 1470]]

            (10) Section 6050J(e).
            (11) Section 6050K(b)(1).
            (12) Section 6050N(b)(1).

    (b) <<NOTE: 26 USC 6041 note.>>  Effective Date.--The amendments 
made by subsection (a) shall apply to statements required to be 
furnished after December 31, 1996 (determined without regard to any 
extension).

SEC. 1202. <<NOTE: 26 USC 6311 note.>>  REQUIRED NOTICE OF CERTAIN 
            PAYMENTS.

    If any payment is received by the Secretary of the Treasury or his 
delegate from any taxpayer and the Secretary cannot associate such 
payment with such taxpayer, the Secretary shall make reasonable efforts 
to notify the taxpayer of such inability within 60 days after the 
receipt of such payment.

SEC. 1203. UNAUTHORIZED ENTICEMENT OF INFORMATION DISCLOSURE.

    (a) In General.--Subchapter B of chapter 76 (relating to proceedings 
by taxpayers and third parties), as amended by section 601(a), is 
amended by redesignating section 7435 as section 7436 and by inserting 
after section 7434 the following new section:

``SEC. 7435. CIVIL DAMAGES FOR UNAUTHORIZED ENTICEMENT OF INFORMATION 
            DISCLOSURE.

    ``(a) In General.--If any officer or employee of the United States 
intentionally compromises the determination or collection of any tax due 
from an attorney, certified public accountant, or enrolled agent 
representing a taxpayer in exchange for information conveyed by the 
taxpayer to the attorney, certified public accountant, or enrolled agent 
for purposes of obtaining advice concerning the taxpayer's tax 
liability, such taxpayer may bring a civil action for damages against 
the United States in a district court of the United States. Such civil 
action shall be the exclusive remedy for recovering damages resulting 
from such actions.
    ``(b) Damages.--In any action brought under subsection (a), upon a 
finding of liability on the part of the defendant, the defendant shall 
be liable to the plaintiff in an amount equal to the lesser of $500,000 
or the sum of--
            ``(1) actual, direct economic damages sustained by the 
        plaintiff as a proximate result of the information disclosure, 
        and
            ``(2) the costs of the action.

Damages shall not include the taxpayer's liability for any civil or 
criminal penalties, or other losses attributable to incarceration or the 
imposition of other criminal sanctions.
    ``(c) Payment Authority.--Claims pursuant to this section shall be 
payable out of funds appropriated under section 1304 of title 31, United 
States Code.
    ``(d) Period for Bringing Action.--Notwithstanding any other 
provision of law, an action to enforce liability created under this 
section may be brought without regard to the amount in controversy and 
may be brought only within 2 years after the date the actions creating 
such liability would have been discovered by exercise of reasonable 
care.
    ``(e) Mandatory Stay.--Upon a certification by the Commissioner or 
the Commissioner's delegate that there is an ongoing investigation or 
prosecution of the taxpayer, the district court before which an action 
under this section is pending shall stay all proceedings with respect to 
such action pending the conclusion of the investigation or prosecution.

[[Page 110 STAT. 1471]]

    ``(f) Crime-Fraud Exception.--Subsection (a) shall not apply to 
information conveyed to an attorney, certified public accountant, or 
enrolled agent for the purpose of perpetrating a fraud or crime.''.
    (b) Clerical Amendment.--The table of sections for subchapter B of 
chapter 76, as amended by section 601(b), is amended by striking the 
item relating to section 7435 and by adding at the end the following new 
items:

``Sec. 7435. Civil damages for unauthorized enticement of information 
           disclosure.
``Sec. 7436. Cross references.''.

    (c) <<NOTE: 26 USC 7435 note.>>  Effective Date.--The amendments 
made by this section shall apply to actions after the date of the 
enactment of this Act.

SEC. 1204. ANNUAL REMINDERS TO TAXPAYERS WITH OUTSTANDING DELINQUENT 
            ACCOUNTS.

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

``SEC. 7524. ANNUAL NOTICE OF TAX DELINQUENCY.

    ``Not less often than annually, the Secretary shall send a written 
notice to each taxpayer who has a tax delinquent account of the amount 
of the tax delinquency as of the date of the notice.''.
    (b) Clerical Amendment.--The table of sections for chapter 77 is 
amended by adding at the end the following new item:

``Sec. 7524. Annual notice of tax delinquency.''.

    (c) <<NOTE: 26 USC 7524 note.>>  Effective Date.--The amendments 
made by this section shall apply to calendar years after 1996.

SEC. 1205. 5-YEAR EXTENSION OF AUTHORITY FOR UNDERCOVER OPERATIONS.

    (a) In General.--Paragraph (3) of section 7601(c) of the Anti-Drug 
Abuse Act of 1988 is amended by striking all that follows ``this Act'' 
and inserting a period.
    (b) Restoration of Authority for 5 Years.--Subsection (c) of section 
7608 is amended by adding at the end the following new paragraph:
            ``(6) Application of section.--The provisions of this 
        subsection--
                    ``(A) shall apply after November 17, 1988, and 
                before January 1, 1990, and
                    ``(B) shall apply after the date of the enactment of 
                this paragraph and before January 1, 2001.
        All amounts expended pursuant to this subsection during the 
        period described in subparagraph (B) shall be recovered to the 
        extent possible, and deposited in the Treasury of the United 
        States as miscellaneous receipts, before January 1, 2001.''.

    (c) Enhanced Oversight.--
            (1) Additional information required in reports to 
        congress.--Subparagraph (B) of section 7608(c)(4) is amended--
                    (A) by striking ``preceding the period'' in clause 
                (ii),
                    (B) by striking ``and'' at the end of clause (ii), 
                and
                    (C) by striking clause (iii) and inserting the 
                following:
                          ``(iii) the number, by programs, of undercover 
                      investigative operations closed in the 1-year 
                      period for which such report is submitted, and
                          ``(iv) the following information with respect 
                      to each undercover investigative operation pending 
                      as of the

[[Page 110 STAT. 1472]]

                      end of the 1-year period for which such report is 
                      submitted or closed during such 1-year period--
                                    ``(I) the date the operation began 
                                and the date of the certification 
                                referred to in the last sentence of 
                                paragraph (1),
                                    ``(II) the total expenditures under 
                                the operation and the amount and use of 
                                the proceeds from the operation,
                                    ``(III) a detailed description of 
                                the operation including the potential 
                                violation being investigated and whether 
                                the operation is being conducted under 
                                grand jury auspices, and
                                    ``(IV) the results of the operation 
                                including the results of criminal 
                                proceedings.''.
            (2) Audits required without regard to amounts involved.--
        Subparagraph (C) of section 7608(c)(5) is amended to read as 
        follows:
                    ``(C) Undercover investigative operation.--The term 
                `undercover investigative operation' means any 
                undercover investigative operation of the Service; 
                except that, for purposes of subparagraphs (A) and (C) 
                of paragraph (4), such term only includes an operation 
                which is exempt from section 3302 or 9102 of title 31, 
                United States Code.''.
            (3) <<NOTE: 26 USC 7608 note.>>  Effective date.--The 
        amendments made by this subsection shall take effect on the date 
        of the enactment of this Act.

SEC. 1206. DISCLOSURE OF FORM 8300 INFORMATION ON CASH TRANSACTIONS.

    (a) In General.--Subsection (l) of section 6103 (relating to 
disclosure of returns and return information for purposes other than tax 
administration) is amended by adding at the end the following new 
paragraph:
            ``(15) Disclosure of returns filed under section 6050i.--The 
        Secretary may, upon written request, disclose to officers and 
        employees of--
                    ``(A) any Federal agency,
                    ``(B) any agency of a State or local government, or
                    ``(C) any agency of the government of a foreign 
                country,
        information contained on returns filed under section 6050I. Any 
        such disclosure shall be made on the same basis, and subject to 
        the same conditions, as apply to disclosures of information on 
        reports filed under section 5313 of title 31, United States 
        Code; except that no disclosure under this paragraph shall be 
        made for purposes of the administration of any tax law.''.

    (b) Conforming Amendments.--
            (1) Subsection (i) of section 6103 is amended by striking 
        paragraph (8).
            (2) Subparagraph (A) of section 6103(p)(3) is amended--
                    (A) by striking ``(7)(A)(ii), or (8)'' and inserting 
                ``or (7)(A)(ii)'', and
                    (B) by striking ``or (14)'' and inserting ``(14), or 
                (15)''.
            (3) The material preceding subparagraph (A) of section 
        6103(p)(4) is amended--
                    (A) by striking ``(5), or (8)'' and inserting ``or 
                (5)'',

[[Page 110 STAT. 1473]]

                    (B) by striking ``(i)(3)(B)(i), or (8)'' and 
                inserting ``(i)(3)(B)(i),'', and
                    (C) by striking ``or (12)'' and inserting ``(12), or 
                (15)''.
            (4) Clause (ii) of section 6103(p)(4)(F) is amended--
                    (A) by striking ``(5), or (8)'' and inserting ``or 
                (5)'', and
                    (B) by striking ``or (14)'' and inserting ``(14), or 
                (15)''.
            (5) Paragraph (2) of section 7213(a) is amended by striking 
        ``or (12)'' and inserting ``(12), or (15)''.

    (c) <<NOTE: 26 USC 6103 note.>>  Effective Date.--The amendments 
made by this section shall take effect on the date of the enactment of 
this Act.

SEC. 1207. DISCLOSURE OF RETURNS AND RETURN INFORMATION TO DESIGNEE OF 
            TAXPAYER.

    Subsection (c) of section 6103 (relating to disclosure of returns 
and return information to designee of taxpayer) is amended by striking 
``written request for or consent to such disclosure'' and inserting 
``request for or consent to such disclosure''.

SEC. 1208. STUDY OF NETTING OF INTEREST ON OVERPAYMENTS AND LIABILITIES.

    (a) In General.--The Secretary of the Treasury or his delegate 
shall--
            (1) conduct a study of the manner in which the Internal 
        Revenue Service has implemented the netting of interest on 
        overpayments and underpayments and of the policy and 
        administrative implications of global netting, and
            (2) before submitting the report of such study, hold a 
        public hearing to receive comments on the matters included in 
        such study.

    (b) Report.--The report of such study shall be submitted not later 
than 6 months after the date of the enactment of this Act to the 
Committee on Ways and Means of the House of Representatives and the 
Committee on Finance of the Senate.

SEC. 1209. EXPENSES OF DETECTION OF UNDERPAYMENTS AND FRAUD, ETC.

    (a) In General.--Section 7623 (relating to expenses of deduction and 
punishment of frauds) is amended to read as follows:

``SEC. 7623. EXPENSES OF DETECTION OF UNDERPAYMENTS AND FRAUD, ETC.

     <<NOTE: Regulations.>> ``The Secretary, under regulations 
prescribed by the Secretary, is authorized to pay such sums as he deems 
necessary for--
            ``(1) detecting underpayments of tax, and
            ``(2) detecting and bringing to trial and punishment persons 
        guilty of violating the internal revenue laws or conniving at 
        the same,

in cases where such expenses are not otherwise provided for by law. Any 
amount payable under the preceding sentence shall be paid from the 
proceeds of amounts (other than interest) collected by reason of the 
information provided, and any amount so collected shall be available for 
such payments.''.

[[Page 110 STAT. 1474]]

    (b) Clerical Amendment.--The table of sections for subchapter B of 
chapter 78 is amended by striking the item relating to section 7623 and 
inserting the following new item:

``Sec. 7623. Expenses of detection of underpayments and fraud, etc.''.

    (c) <<NOTE: 26 USC 7623 note.>>  Effective Date.--The amendments 
made by this section shall take effect on the date which is 6 months 
after the date of the enactment of this Act.

    (d) <<NOTE: 26 USC 7623 note.>>  Report.--The Secretary of the 
Treasury or his delegate shall submit an annual report to the Committee
on Ways and Means of the House of Representatives and the Committee on 
Finance of the Senate on the payments under section 7623 of the Internal 
Revenue Code of 1986 during the year and on the amounts collected for 
which such payments were made.

SEC. 1210. USE OF PRIVATE DELIVERY SERVICES FOR TIMELY-MAILING-AS-
            TIMELY-FILING RULE.

    Section 7502 (relating to timely mailing treated as timely filing 
and paying) is amended by adding at the end the following new 
subsection:
    ``(f) Treatment of Private Delivery Services.--
            ``(1) In general.--Any reference in this section to the 
        United States mail shall be treated as including a reference to 
        any designated delivery service, and any reference in this 
        section to a postmark by the United States Postal Service shall 
        be treated as including a reference to any date recorded or 
        marked as described in paragraph (2)(C) by any designated 
        delivery service.
            ``(2) Designated delivery service.--For purposes of this 
        subsection, the term `designated delivery service' means any 
        delivery service provided by a trade or business if such service 
        is designated by the Secretary for purposes of this section. The 
        Secretary may designate a delivery service under the preceding 
        sentence only if the Secretary determines that such service--
                    ``(A) is available to the general public,
                    ``(B) is at least as timely and reliable on a 
                regular basis as the United States mail,
                    ``(C) records electronically to its data base, kept 
                in the regular course of its business, or marks on the 
                cover in which any item referred to in this section is 
                to be delivered, the date on which such item was given 
                to such trade or business for delivery, and
                    ``(D) meets such other criteria as the Secretary may 
                prescribe.
            ``(3) Equivalents of registered and certified mail.--The 
        Secretary may provide a rule similar to the rule of paragraph 
        (1) with respect to any service provided by a designated 
        delivery service which is substantially equivalent to United 
        States registered or certified mail.''.

SEC. 1211. <<NOTE: 26 USC 7803 note.>>  REPORTS ON MISCONDUCT OF IRS 
            EMPLOYEES.

    On or before June 1 of each calendar year after 1996, the Secretary 
of the Treasury shall submit to the Committee on Ways and Means of the 
House of Representatives and the Committee on Finance of the Senate a 
report on--

[[Page 110 STAT. 1475]]

            (1) all categories of instances involving the misconduct of 
        employees of the Internal Revenue Service during the preceding 
        calendar year, and
            (2) the disposition during the preceding calendar year of 
        any such instances (without regard to the year of the 
        misconduct).

                       TITLE XIII--REVENUE OFFSETS

 Subtitle A--Application of Failure-to-Pay Penalty to Substitute Returns

SEC. 1301. APPLICATION OF FAILURE-TO-PAY PENALTY TO SUBSTITUTE RETURNS.

    (a) General Rule.--Section 6651 (relating to failure to file tax 
return or to pay tax) is amended by adding at the end the following new 
subsection:
    ``(g) Treatment of Returns Prepared by Secretary Under Section 
6020(b).--In the case of any return made by the Secretary under section 
6020(b)--
            ``(1) such return shall be disregarded for purposes of 
        determining the amount of the addition under paragraph (1) of 
        subsection (a), but
            ``(2) such return shall be treated as the return filed by 
        the taxpayer for purposes of determining the amount of the 
        addition under paragraphs (2) and (3) of subsection (a).''.

    (b) <<NOTE: 26 USC 6651 note.>>  Effective Date.--The amendment made 
by subsection (a) shall apply in the case of any return the due date for 
which (determined without regard to extensions) is after the date of the 
enactment of this Act.

     Subtitle B--Exicse Taxes on Amounts of Private Excess Benefits

SEC. 1311. EXCISE TAXES FOR FAILURE BY CERTAIN CHARITABLE ORGANIZATIONS 
            TO MEET CERTAIN QUALIFICATION REQUIREMENTS.

    (a) In General.--Chapter 42 (relating to private foundations and 
certain other tax-exempt organizations) is amended by redesignating 
subchapter D as subchapter E and by inserting after subchapter C the 
following new subchapter:

  ``Subchapter D--Failure by Certain Charitable Organizations To Meet 
                   Certain Qualification Requirements

``Sec. 4958. Taxes on excess benefit transactions.

``SEC. 4958. TAXES ON EXCESS BENEFIT TRANSACTIONS.

    ``(a) Initial Taxes.--
            ``(1) On the disqualified person.--There is hereby imposed 
        on each excess benefit transaction a tax equal to 25 percent of 
        the excess benefit. The tax imposed by this paragraph shall be 
        paid by any disqualified person referred to in subsection (f)(1) 
        with respect to such transaction.

[[Page 110 STAT. 1476]]

            ``(2) On the management.--In any case in which a tax is 
        imposed by paragraph (1), there is hereby imposed on the 
        participation of any organization manager in the excess benefit 
        transaction, knowing that it is such a transaction, a tax equal 
        to 10 percent of the excess benefit, unless such participation 
        is not willful and is due to reasonable cause. The tax imposed 
        by this paragraph shall be paid by any organization manager who 
        participated in the excess benefit transaction.

    ``(b) Additional Tax on the Disqualified Person.--In any case in 
which an initial tax is imposed by subsection (a)(1) on an excess 
benefit transaction and the excess benefit involved in such transaction 
is not corrected within the taxable period, there is hereby imposed a 
tax equal to 200 percent of the excess benefit involved. The tax imposed 
by this subsection shall be paid by any disqualified person referred to 
in subsection (f)(1) with respect to such transaction.
    ``(c) Excess Benefit Transaction; Excess Benefit.--For purposes of 
this section--
            ``(1) Excess benefit transaction.--
                    ``(A) In general.--The term `excess benefit 
                transaction' means any transaction in which an economic 
                benefit is provided by an applicable tax-exempt 
                organization directly or indirectly to or for the use of 
                any disqualified person if the value of the economic 
                benefit provided exceeds the value of the consideration 
                (including the performance of services) received for 
                providing such benefit. For purposes of the preceding 
                sentence, an economic benefit shall not be treated as 
                consideration for the performance of services unless 
                such organization clearly indicated its intent to so 
                treat such benefit.
                    ``(B) Excess benefit.--The term `excess benefit' 
                means the excess referred to in subparagraph (A).
            ``(2) Authority to include certain other private 
        inurement.--To the extent provided in regulations prescribed by 
        the Secretary, the term `excess benefit transaction' includes 
        any transaction in which the amount of any economic benefit 
        provided to or for the use of a disqualified person is 
        determined in whole or in part by the revenues of 1 or more 
        activities of the organization but only if such transaction 
        results in inurement not permitted under paragraph (3) or (4) of 
        section 501(c), as the case may be. In the case of any such 
        transaction, the excess benefit shall be the amount of the 
        inurement not so permitted.

    ``(d) Special Rules.--For purposes of this section--
            ``(1) Joint and several liability.--If more than 1 person is 
        liable for any tax imposed by subsection (a) or subsection (b), 
        all such persons shall be jointly and severally liable for such 
        tax.
            ``(2) Limit for management.--With respect to any 1 excess 
        benefit transaction, the maximum amount of the tax imposed by 
        subsection (a)(2) shall not exceed $10,000.

    ``(e) Applicable Tax-Exempt Organization.--For purposes of this 
subchapter, the term `applicable tax-exempt organization' means--
            ``(1) any organization which (without regard to any excess 
        benefit) would be described in paragraph (3) or (4) of section 
        501(c) and exempt from tax under section 501(a), and

[[Page 110 STAT. 1477]]

            ``(2) any organization which was described in paragraph (1) 
        at any time during the 5-year period ending on the date of the 
        transaction.

Such term shall not include a private foundation (as defined in section 
509(a)).

    ``(f) Other Definitions.--For purposes of this section--
            ``(1) Disqualified person.--The term `disqualified person' 
        means, with respect to any transaction--
                    ``(A) any person who was, at any time during the 5-
                year period ending on the date of such transaction, in a 
                position to exercise substantial influence over the 
                affairs of the organization,
                    ``(B) a member of the family of an individual 
                described in subparagraph (A), and
                    ``(C) a 35-percent controlled entity.
            ``(2) Organization manager.--The term `organization manager' 
        means, with respect to any applicable tax-exempt organization, 
        any officer, director, or trustee of such organization (or any 
        individual having powers or responsibilities similar to those of 
        officers, directors, or trustees of the organization).
            ``(3) 35-percent controlled entity.--
                    ``(A) In general.--The term `35-percent controlled 
                entity' means--
                          ``(i) a corporation in which persons described 
                      in subparagraph (A) or (B) of paragraph (1) own 
                      more than 35 percent of the total combined voting 
                      power,
                          ``(ii) a partnership in which such persons own 
                      more than 35 percent of the profits interest, and
                          ``(iii) a trust or estate in which such 
                      persons own more than 35 percent of the beneficial 
                      interest.
                    ``(B) Constructive ownership rules.--Rules similar 
                to the rules of paragraphs (3) and (4) of section 
                4946(a) shall apply for purposes of this paragraph.
            ``(4) Family members.--The members of an individual's family 
        shall be determined under section 4946(d); except that such 
        members also shall include the brothers and sisters (whether by 
        the whole or half blood) of the individual and their spouses.
            ``(5) Taxable period.--The term `taxable period' means, with 
        respect to any excess benefit transaction, the period beginning 
        with the date on which the transaction occurs and ending on the 
        earliest of--
                    ``(A) the date of mailing a notice of deficiency 
                under section 6212 with respect to the tax imposed by 
                subsection (a)(1), or
                    ``(B) the date on which the tax imposed by 
                subsection (a)(1) is assessed.
            ``(6) Correction.--The terms `correction' and `correct' 
        mean, with respect to any excess benefit transaction, undoing 
        the excess benefit to the extent possible, and taking any 
        additional measures necessary to place the organization in a 
        financial position not worse than that in which it would be if 
        the disqualified person were dealing under the highest fiduciary 
        standards.''.

    (b) Application of Private Inurement Rule to Tax-Exempt 
Organizations Described in Section 501(c)(4).--

[[Page 110 STAT. 1478]]

            (1) In general.--Paragraph (4) of section 501(c) is amended 
        by inserting ``(A)'' after ``(4)'' and by adding at the end the 
        following:
            ``(B) Subparagraph (A) shall not apply to an entity unless 
        no part of the net earnings of such entity inures to the benefit 
        of any private shareholder or individual.''.
            (2) <<NOTE: 26 USC 501 note.>>  Special rule for certain 
        cooperatives.--In the case of an organization operating on a 
        cooperative basis which, before the date of the enactment of 
        this Act, was determined by the Secretary of the Treasury or his 
        delegate, to be described in section 501(c)(4) of the Internal 
        Revenue Code of 1986 and exempt from tax under section 501(a) of 
        such Code,
the allocation or return of net margins or capital to the members of 
such organization in accordance with its incorporating statute and 
bylaws shall not be treated for purposes of such Code as the inurement 
of the net earnings of such organization to the benefit of any private 
shareholder or individual. The preceding sentence shall apply only if 
such statute and bylaws are substantially as such statute and bylaws 
were in existence on the date of the enactment of this Act.

    (c) Technical and Conforming Amendments.--
            (1) Subsection (e) of section 4955 is amended--
                    (A) by striking ``Section 4945'' in the heading and 
                inserting ``Sections 4945 and 4958'', and
                    (B) by inserting before the period ``or an excess 
                benefit for purposes of section 4958''.
            (2) Subsections (a), (b), and (c) of section 4963 are each 
        amended by inserting ``4958,'' after ``4955,''.
            (3) Subsection (e) of section 6213 is amended by inserting 
        ``4958 (relating to private excess benefit),'' before ``4971''.
            (4) Paragraphs (2) and (3) of section 7422(g) are each 
        amended by inserting ``4958,'' after ``4955,''.
            (5) Subsection (b) of section 7454 is amended by inserting 
        ``or whether an organization manager (as defined in section 
        4958(f)(2)) has `knowingly' participated in an excess benefit 
        transaction (as defined in section 4958(c)),'' after ``section 
        4912(b),''.
            (6) The table of subchapters for chapter 42 is amended by 
        striking the last item and inserting the following:

``Subchapter D. Failure by certain charitable organizations to meet 
           certain qualification requirements.
``Subchapter E. Abatement of first and second tier taxes in certain 
           cases.''.

    (d) Effective Dates.--
            (1) <<NOTE: 26 USC 4955 note.>>  In general.--The amendments 
        made by this section (other than subsection (b)) shall apply to 
        excess benefit transactions occurring on or after September 14, 
        1995.
            (2) <<NOTE: 26 USC 4955 note.>>  Binding contracts.--The 
        amendments referred to in paragraph (1) shall not apply to any 
        benefit arising from a transaction pursuant to any written 
        contract which was binding on September 13, 1995, and at all 
        times thereafter before such transaction occurred.
            (3) <<NOTE: 26 USC 501 note.>>  Application of private 
        inurement rule to tax-exempt organizations described in section 
        501(c)(4).--
                    (A) In general.--The amendment made by subsection 
                (b) shall apply to inurement occurring on or after 
                September 14, 1995.

[[Page 110 STAT. 1479]]

                    (B) Binding contracts.--The amendment made by 
                subsection (b) shall not apply to any inurement 
                occurring before January 1, 1997, pursuant to a written 
                contract which was binding on September 13, 1995, and at 
                all times thereafter before such inurement occurred.

SEC. 1312. REPORTING OF CERTAIN EXCISE TAXES AND OTHER INFORMATION.

    (a) Reporting by Organizations Described in Section 501(c)(3).--
Subsection (b) of section 6033 (relating to certain organizations 
described in section 501(c)(3)) is amended by striking ``and'' at the 
end of paragraph (9), by redesignating paragraph (10) as paragraph (14), 
and by inserting after paragraph (9) the following new paragraphs:
            ``(10) the respective amounts (if any) of the taxes paid by 
        the organization during the taxable year under the following 
        provisions:
                    ``(A) section 4911 (relating to tax on excess 
                expenditures to influence legislation),
                    ``(B) section 4912 (relating to tax on disqualifying 
                lobbying expenditures of certain organizations), and
                    ``(C) section 4955 (relating to taxes on political 
                expenditures of section 501(c)(3) organizations),
            ``(11) the respective amounts (if any) of the taxes paid by 
        the organization, or any disqualified person with respect to 
        such organization, during the taxable year under section 4958 
        (relating to taxes on private excess benefit from certain 
        charitable organizations),
            ``(12) such information as the Secretary may require with 
        respect to any excess benefit transaction (as defined in section 
        4958),
            ``(13) such information with respect to disqualified persons 
        as the Secretary may prescribe, and''.

    (b) Organizations Described in Section 501(c)(4).--Section 6033 is 
amended by redesignating subsection (f) as subsection (g) and by 
inserting after subsection (e) the following new subsection:
    ``(f) Certain Organizations Described in Section 501(c)(4).--Every 
organization described in section 501(c)(4) which is subject to the 
requirements of subsection (a) shall include on the return required 
under subsection (a) the information referred to in paragraphs (11), 
(12) and (13) of subsection (b) with respect to such organization.''.
    (c) <<NOTE: 26 USC 6033 note.>>  Effective Date.--The amendments 
made by this section shall apply to returns for taxable years beginning 
after the date of the enactment of this Act.

SEC. 1313. EXEMPT ORGANIZATIONS REQUIRED TO PROVIDE COPY OF RETURN.

    (a) Requirement To Provide Copy.--
            (1) Subparagraph (A) of section 6104(e)(1) (relating to 
        public inspection of annual returns) is amended to read as 
        follows:
                    ``(A) In general.--During the 3-year period 
                beginning on the filing date--
                          ``(i) a copy of the annual return filed under 
                      section 6033 (relating to returns by exempt 
                      organizations) by any organization to which this 
                      paragraph applies shall be made available by such 
                      organization for inspection during regular 
                      business hours by any individual at

[[Page 110 STAT. 1480]]

                      the principal office of such organization and, if 
                      such organization regularly maintains 1 or more 
                      regional or district offices having 3 or more 
                      employees, at each such regional or district 
                      office, and
                          ``(ii) upon request of an individual made at 
                      such principal office or such a regional or 
                      district office, a copy of such annual return 
                      shall be provided to such individual without 
                      charge other than a reasonable fee for any 
                      reproduction and mailing costs.
                The request described in clause (ii) must be made in 
                person or in writing. If the request under clause (ii) 
                is made in person, such copy shall be provided 
                immediately and, if made in writing, shall be provided 
                within 30 days.''.
            (2) Clause (ii) of section 6104(e)(2)(A) is amended by 
        inserting before the period at the end the following: ``(and, 
        upon request of an individual made at such principal office or 
        such a regional or district office, a copy of the material 
        requested to be available for inspection under this subparagraph 
        shall be provided (in accordance with the last sentence of 
        paragraph (1)(A)) to such individual without charge other than 
        reasonable fee for any reproduction and mailing costs)''.
            (3) Subsection (e) of section 6104 is amended by adding at 
        the end the following new paragraph:
            ``(3) Limitation.--Paragraph (1)(A)(ii) (and the 
        corresponding provision of paragraph (2)) shall not apply to any 
        request if, in accordance with regulations promulgated by the 
        Secretary, the organization
has made the requested documents widely available, or, the Secretary 
determines, upon application by an organization, that such request is 
part of a harassment campaign and that compliance with such request is 
not in the public interest.''.

    (b) Increase in Penalty for Willful Failure To Allow Public 
Inspection of Certain Returns, Etc.--Section 6685 is amended by striking 
``$1,000'' and inserting ``$5,000''.
    (c) <<NOTE: 26 USC 6104 note.>>  Effective Date.--The amendments 
made by this section shall apply to requests made on or after the 60th 
day after the Secretary of the Treasury first issues the regulations 
referred to section 6104(e)(3) of the Internal Revenue Code of 1986 (as 
added by subsection (a)(3)).

SEC. 1314. INCREASE IN PENALTIES ON EXEMPT ORGANIZATIONS FOR FAILURE TO 
            FILE COMPLETE AND TIMELY ANNUAL RETURNS.

    (a) In General.--Subparagraph (A) of section 6652(c)(1) (relating to 
annual returns under section 6033) is amended by striking ``$10'' and 
inserting ``$20'' and by striking ``$5,000'' and inserting ``$10,000''.
    (b) Larger Penalty on Organizations Having Gross Receipts in Excess 
of $1,000,000.--Subparagraph (A) of section 6652(c)(1) is amended by 
adding at the end the following new sentence: ``In the case of an 
organization having gross receipts exceeding $1,000,000 for any year, 
with respect to the return required under section 6033 for such year, 
the first sentence of this subparagraph shall be applied by substituting 
`$100' for `$20' and, in lieu of applying the second sentence of this 
subparagraph, the maximum penalty under this subparagraph shall not 
exceed $50,000.''.

[[Page 110 STAT. 1481]]

    (c) <<NOTE: 26 USC 6652 note.>>  Effective Date.--The amendments 
made by this section shall apply to returns for taxable years ending on 
or after the date of the enactment of this Act.

    Approved July 30, 1996.

LEGISLATIVE HISTORY--H.R. 2337:
---------------------------------------------------------------------------

HOUSE REPORTS: No. 104-506 (Comm. on Ways and Means).
CONGRESSIONAL RECORD, Vol. 142 (1996):
            Apr. 16, considered and passed House.
            July 11, considered and passed Senate.
WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 32 (1996):
            July 30, Presidential remarks.

                                  <all>
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