I 

108TH CONGRESS 

2D SESSION H. R. 4351 

To amend the Internal Revenue Code of 1986 to restrict the use of abusive 

tax shelters. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 12, 2004 

Mr. EMANUEL introduced the following bill; which was referred to the 

Committee on Ways and Means 

A BILL 

To amend the Internal Revenue Code of 1986 to restrict 

the use of abusive tax shelters. 

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

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Tax Shelter Promoter 

5 Liability Act of 2004’’. 

6 SEC 2. PENALTY FOR PROMOTING ABUSIVE TAX SHELTERS. 

7 (a) PENALTY FOR PROMOTING ABUSIVE TAX SHEL8 TERS.—Section 6700 of the Internal Revenue Code of 

9 1986 (relating to promoting abusive tax shelters, etc.) is 

10 amended— 
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1 (1) by redesignating subsections (b) and (c) as 

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

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

4 through the period in the first sentence of subsection 

5 (a) and inserting ‘‘a penalty determined under sub6 section (b)’’, and 

7 (3) by inserting after subsection (a) the fol8 lowing new subsections: 

9 ‘‘(b) AMOUNT OF PENALTY; CALCULATION OF PEN10 ALTY; LIABILITY FOR PENALTY.— 

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

12 the penalty imposed by subsection (a) shall not ex13 ceed 150 percent of the gross income derived (or to 

14 be derived) from such activity by the person or per15 sons subject to such penalty. 

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

17 amount determined under paragraph (1) shall be 

18 calculated with respect to each instance of an activ19 ity described in subsection (a), each instance in 

20 which income was derived by the person or persons 

21 subject to such penalty, and each person who par22 ticipated in such an activity. 

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

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

25 such activity, all such persons shall be jointly and 
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1 severally liable for the penalty under such sub2 section. 

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

4 any penalty imposed under this section or the payment 

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

6 penalty shall not be considered an ordinary and necessary 

7 expense in carrying on a trade or business for purposes 

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

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

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

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

12 enactment of this Act. 

13 SEC. 3. PENALTY FOR AIDING AND ABETTING THE UNDER14 STATEMENT OF TAX LIABILITY. 

15 (a) IN GENERAL.—Section 6701(a) of the Internal 

16 Revenue Code of 1986 (relating to imposition of penalty) 

17 is amended— 

18 (1) by inserting ‘‘the tax liability or’’ after ‘‘re19 spect to,’’ in paragraph (1), 

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

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

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

23 and 
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1 (3) by inserting ‘‘instance of aid, assistance, 

2 procurement, or advice or each such’’ before ‘‘docu3 ment’’ in the matter following paragraph (3). 

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

5 6701 of such Code (relating to penalties for aiding and 

6 abetting understatement of tax liability) is amended to 

7 read as follows: 

8 ‘‘(b) AMOUNT OF PENALTY; CALCULATION OF PEN9 ALTY; LIABILITY FOR PENALTY.— 

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

11 the penalty imposed by subsection (a) shall not ex12 ceed 150 percent of the gross income derived (or to 

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

14 or advice provided by the person or persons subject 

15 to such penalty. 

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

17 amount determined under paragraph (1) shall be 

18 calculated with respect to each instance of aid, as19 sistance, procurement, or advice described in sub20 section (a), each instance in which income was de21 rived by the person or persons subject to such pen22 alty, and each person who made such an understate23 ment of the liability for tax. 

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

25 person is liable under subsection (a) with respect to 
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1 providing such aid, assistance, procurement, or ad2 vice, all such persons shall be jointly and severally 

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

4 (c) PENALTY NOT DEDUCTIBLE.—Section 6701 of 

5 such Code is amended by adding at the end the following 

6 new subsection: 

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

8 any penalty imposed under this section or the payment 

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

10 penalty shall not be considered an ordinary and necessary 

11 expense in carrying on a trade or business for purposes 

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

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

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

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

16 enactment of this Act. 

17 SEC. 4. PENALTY FOR FAILURE TO REGISTER TAX SHEL18 TER. 

19 (a) IN GENERAL.—Section 6707 of the Internal Rev20 enue Code of 1986 (relating to failure to furnish informa21 tion regarding tax shelters) is amended to read as follows: 
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1 ‘‘SEC. 6707. FAILURE TO FURNISH INFORMATION ON PO2 TENTIALLY ABUSIVE TAX SHELTER OR LIST3 ED TRANSACTION. 

4 ‘‘(a) IN GENERAL.—If a person who is required to 

5 file a return under section 6111 with respect to any poten6 tially abusive tax shelter— 

7 ‘‘(1) fails to file such return on or before the 

8 date prescribed therefor, or 

9 ‘‘(2) files false or incomplete information with 

10 the Secretary with respect to such shelter, 

11 such person shall pay a penalty with respect to such return 

12 in the amount determined under subsection (b). 

13 ‘‘(b) AMOUNT OF PENALTY.— 

14 ‘‘(1) IN GENERAL.—Except as provided in para15 graph (2), the penalty imposed under subsection (a) 

16 with respect to any failure shall be not less than 

17 $50,000 and not more than $100,000. 

18 ‘‘(2) LISTED TRANSACTIONS.—The penalty im19 posed under subsection (a) with respect to any listed 

20 transaction shall be an amount equal to the greater 

21 of— 

22 ‘‘(A) $200,000, or 

23 ‘‘(B) 100 percent of the gross income de24 rived by such person for providing aid, assist25 ance, procurement, advice, or other services 

26 with respect to the listed transaction before the 
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1 date the return including the transaction is 

2 filed under section 6111. 

3 Subparagraph (B) shall be applied by substituting 

4 ‘150 percent’ for ‘100 percent’ in the case of an in5 tentional failure or act described in subsection (a). 

6 ‘‘(c) CERTAIN RULES TO APPLY.—The provisions of 

7 section 6707A(d) allowing the Commissioner of Internal 

8 Revenue to rescind a penalty under certain circumstances 

9 shall apply to any penalty imposed under this section. 

10 ‘‘(d) POTENTIALLY ABUSIVE TAX SHELTERS AND

11 LISTED TRANSACTIONS.—The terms ‘potentially abusive 

12 tax shelter’ and ‘listed transaction’ have the respective 

13 meanings given to such terms by section 6707A(c). 

14 ‘‘(e) PENALTY NOT DEDUCTIBLE.—The payment of 

15 any penalty imposed under this section or the payment 

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

17 penalty shall not be considered an ordinary and necessary 

18 expense in carrying on a trade or business for purposes 

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

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

21 (b) CLERICAL AMENDMENT.—The item relating to 

22 section 6707 in the table of sections for part I of sub23 chapter B of chapter 68 of such Code is amended by strik24 ing ‘‘regarding tax shelters’’ and inserting ‘‘on potentially 

25 abusive tax shelter or listed transaction’’. 
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1 (c) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to returns the due date for which 

3 is after the date of the enactment of this Act. 

4 SEC. 5. PENALTY FOR FAILING TO MAINTAIN CLIENT LIST. 

5 (a) IN GENERAL.—Subsection (a) of section 6708 of 

6 the Internal Revenue Code of 1986 (relating to failure to 

7 maintain lists of investors in potentially abusive tax shel8 ters) is amended to read as follows: 

9 ‘‘(a) IMPOSITION OF PENALTY.— 

10 ‘‘(1) IN GENERAL.—If any person who is re11 quired to maintain a list under section 6112(a) fails 

12 to make such list available upon written request to 

13 the Secretary in accordance with section 

14 6112(b)(1)(A) within 20 business days after the 

15 date of the Secretary’s request, such person shall 

16 pay a penalty of $10,000 for each day of such fail17 ure after such 20th day. If such person makes avail18 able an incomplete list upon such request, such per19 son shall pay a penalty of $100 per each omitted 

20 name for each day of such omission after such 20th 

21 day. 

22 ‘‘(2) GOOD CAUSE EXCEPTION.—No penalty 

23 shall be imposed by paragraph (1) with respect to 

24 the failure on any day if, in the judgment of the 

25 Secretary, such failure is due to good cause.’’. 
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1 (b) PENALTY NOT DEDUCTIBLE.—Section 6708 of 

2 such Code is amended by adding at the end the following 

3 new subsection: 

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

5 any penalty imposed under this section or the payment 

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

7 penalty shall not be considered an ordinary and necessary 

8 expense in carrying on a trade or business for purposes 

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

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

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

12 this section shall apply to requests made by the Secretary 

13 of the Treasury after the date of the enactment of this 

14 Act. 

15 SEC. 6. PENALTY FOR FAILING TO DISCLOSE POTENTIALLY 

16 ABUSIVE TAX SHELTER. 

17 (a) IN GENERAL.—Part I of subchapter B of chapter 

18 68 of the Internal Revenue Code of 1986 (relating to as19 sessable penalties) is amended by inserting after section 

20 6707 the following new section: 

21 ‘‘SEC. 6707A. PENALTY FOR FAILURE TO INCLUDE POTEN22 TIALLY ABUSIVE TAX SHELTER INFORMA23 TION WITH RETURN OR STATEMENT. 

24 ‘‘(a) IMPOSITION OF PENALTY.—Any person who 

25 fails to include on any return or statement any informa-
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1 tion with respect to a potentially abusive tax shelter which 

2 is required under section 6011 to be included with such 

3 return or statement shall pay a penalty in the amount de4 termined under subsection (b). 

5 ‘‘(b) AMOUNT OF PENALTY.— 

6 ‘‘(1) IN GENERAL.—Except as provided in para7 graphs (2) and (3), the amount of the penalty under 

8 subsection (a) shall be $50,000. 

9 ‘‘(2) LISTED TRANSACTION.—Except as pro10 vided in paragraph 3, the amount of the penalty 

11 under subsection (a) with respect to a listed trans12 action shall be $100,000. 

13 ‘‘(3) INCREASE IN PENALTY FOR INTENTIONAL

14 NONDISCLOSURE.—In the case of an intentional fail15 ure by any person under subsection (a), the penalty 

16 under paragraph (1) shall be $100,000 and the pen17 alty under paragraph (2) shall be $200,000. 

18 ‘‘(c) DEFINITIONS.—For purposes of this section— 

19 ‘‘(1) POTENTIALLY ABUSIVE TAX SHELTER.— 

20 The term ‘potentially abusive tax shelter’ means any 

21 transaction with respect to which information is re22 quired to be included with a return or statement, be23 cause the Secretary has determined by regulation or 

24 otherwise that such transaction has a potential for 

25 tax avoidance or evasion. 
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1 ‘‘(2) LISTED TRANSACTION.—Except as pro2 vided in regulations, the term ‘listed transaction’ 

3 means a potentially abusive tax shelter which is the 

4 same as, or substantially similar to, a transaction 

5 specifically identified by the Secretary as a tax 

6 avoidance transaction for purposes of section 6011. 

7 ‘‘(d) AUTHORITY TO RESCIND PENALTY.— 

8 ‘‘(1) IN GENERAL.—The Commissioner of In9 ternal Revenue may rescind all or any portion of a 

10 penalty imposed by this section with respect to any 

11 violation if— 

12 ‘‘(A) the violation is with respect to a po13 tentially abusive tax shelter other than a listed 

14 transaction, 

15 ‘‘(B) the person on whom the penalty is 

16 imposed has a history of complying with the re17 quirements of this title, 

18 ‘‘(C) it is shown that the violation is due 

19 to an unintentional mistake of fact, 

20 ‘‘(D) imposing the penalty would be 

21 against equity and good conscience, and 

22 ‘‘(E) rescinding the penalty would promote 

23 compliance with the requirements of this title 

24 and effective tax administration. 
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1 ‘‘(2) DISCRETION.—The exercise of authority 

2 under paragraph (1) shall be at the sole discretion 

3 of the Commissioner and may be delegated only to 

4 the head of the Office of Tax Shelter Analysis. The 

5 Commissioner, in the Commissioner’s sole discretion, 

6 may establish a procedure to determine if a penalty 

7 should be referred to the Commissioner or the head 

8 of such Office for a determination under paragraph 

9 (1). 

10 ‘‘(3) NO APPEAL.—Notwithstanding any other 

11 provision of law, any determination under this sub12 section may not be reviewed in any administrative or 

13 judicial proceeding. 

14 ‘‘(4) RECORDS.—If a penalty is rescinded under 

15 paragraph (1), the Commissioner shall place in the 

16 file in the Office of the Commissioner the opinion of 

17 the Commissioner or the head of the Office of Tax 

18 Shelter Analysis with respect to the determination, 

19 including— 

20 ‘‘(A) the facts and circumstances of the 

21 transaction, 

22 ‘‘(B) the reasons for the rescission, and 

23 ‘‘(C) the amount of the penalty rescinded. 

24 A copy of such opinion shall be provided upon writ25 ten request to the Committee on Ways and Means 
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1 of the House of Representatives, the Committee on 

2 Finance of the Senate, the Joint Committee on Tax3 ation, or the General Accounting Office. 

4 ‘‘(5) REPORT.—The Commissioner shall each 

5 year report to the Committee on Ways and Means 

6 of the House of Representatives and the Committee 

7 on Finance of the Senate— 

8 ‘‘(A) a summary of the total number and 

9 aggregate amount of penalties imposed, and re10 scinded, under this section, and 

11 ‘‘(B) a description of each penalty re12 scinded under this subsection and the reasons 

13 therefor. 

14 ‘‘(e) PENALTY REPORTED TO SEC.—In the case of 

15 a person— 

16 ‘‘(1) which is required to file periodic reports 

17 under section 13 or 15(d) of the Securities Ex18 change Act of 1934 or is required to be consolidated 

19 with another person for purposes of such reports, 

20 and 

21 ‘‘(2) which— 

22 ‘‘(A) is required to pay a penalty under 

23 this section with respect to a listed transaction, 

24 ‘‘(B) is required to pay a penalty under 

25 section 6662A with respect to any potentially 
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1 abusive tax shelter at a rate prescribed under 

2 section 6662A(c), or 

3 ‘‘(C) is required to pay a penalty under 

4 section 6662B with respect to any noneconomic 

5 substance transaction, 

6 the requirement to pay such penalty shall be disclosed in 

7 such reports filed by such person for such periods as the 

8 Secretary shall specify. Failure to make a disclosure in 

9 accordance with the preceding sentence shall be treated 

10 as a failure to which the penalty under subsection (b)(2) 

11 applies. 

12 ‘‘(f) PENALTY IN ADDITION TO OTHER PEN13 ALTIES.—The penalty imposed by this section shall be in 

14 addition to any other penalty provided by law. 

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

16 any penalty imposed under this section or the payment 

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

18 penalty shall not be considered an ordinary and necessary 

19 expense in carrying on a trade or business for purposes 

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

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

22 (b) CONFORMING AMENDMENT.—The table of sec23 tions for part I of subchapter B of chapter 68 of such 

24 Code is amended by inserting after the item relating to 

25 section 6707 the following: 
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‘‘Sec. 6707A. Penalty for failure to include potentially abusive tax 

shelter information with return or statement.’’. 

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

2 this section shall apply to returns and statements the due 

3 date for which is after the date of the enactment of this 

4 Act. 

5 SEC. 7. IMPROVED DISCLOSURE OF POTENTIALLY ABUSIVE 

6 TAX SHELTERS. 

7 (a) IN GENERAL.—Section 6111 of the Internal Rev8 enue Code of 1986 (relating to registration of tax shelters) 

9 is amended to read as follows: 

10 ‘‘SEC. 6111. DISCLOSURE OF POTENTIALLY ABUSIVE TAX 

11 SHELTERS. 

12 ‘‘(a) IN GENERAL.—Each material advisor with re13 spect to any potentially abusive tax shelter shall make a 

14 return (in such form as the Secretary may prescribe) set15 ting forth— 

16 ‘‘(1) information identifying and describing 

17 such shelter, 

18 ‘‘(2) information describing any potential tax 

19 benefits expected to result from the shelter, and 

20 ‘‘(3) such other information as the Secretary 

21 may prescribe. 

22 Such return shall be filed not later than the date which 

23 is 30 days before the date on which the first sale of such 
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1 shelter occurs or on any other date specified by the Sec2 retary. 

3 ‘‘(b) DEFINITIONS.—For purposes of this section— 

4 ‘‘(1) MATERIAL ADVISOR.— 

5 ‘‘(A) IN GENERAL.—The term ‘material 

6 advisor’ means any person— 

7 ‘‘(i) who provides any material aid, 

8 assistance, or advice with respect to de9 signing, organizing, managing, promoting, 

10 selling, implementing, or carrying out any 

11 potentially abusive tax shelter, and 

12 ‘‘(ii) who directly or indirectly derives 

13 gross income in excess of the threshold 

14 amount for such aid, assistance, or advice. 

15 ‘‘(B) THRESHOLD AMOUNT.—For purposes 

16 of subparagraph (A), the threshold amount is— 

17 ‘‘(i) $50,000 in the case of a poten18 tially abusive tax shelter substantially all 

19 of the tax benefits from which are provided 

20 to natural persons, and 

21 ‘‘(ii) $100,000 in any other case. 

22 ‘‘(2) POTENTIALLY ABUSIVE TAX SHELTER.— 

23 The term ‘potentially abusive tax shelter’ has the 

24 meaning given to such term by section 6707A(c). 
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1 ‘‘(c) REGULATIONS.—The Secretary may prescribe 

2 regulations which provide— 

3 ‘‘(1) that only 1 person shall be required to 

4 meet the requirements of subsection (a) in cases in 

5 which 2 or more persons would otherwise be re6 quired to meet such requirements, 

7 ‘‘(2) exemptions from the requirements of this 

8 section, and 

9 ‘‘(3) such rules as may be necessary or appro10 priate to carry out the purposes of this section.’’. 

11 (b) CONFORMING AMENDMENTS.— 

12 (1) The item relating to section 6111 in the 

13 table of sections for subchapter B of chapter 61 of 

14 such Code is amended to read as follows: 

‘‘Sec. 6111. Disclosure of potentially abusive tax shelters.’’. 

15 (2)(A) So much of section 6112 of such Code 

16 as precedes subsection (c) thereof is amended to 

17 read as follows: 

18 ‘‘SEC. 6112. MATERIAL ADVISORS OF POTENTIALLY ABU19 SIVE TAX SHELTERS MUST KEEP CLIENT 

20 LISTS. 

21 ‘‘(a) IN GENERAL.—Each material advisor (as de22 fined in section 6111) with respect to any potentially abu23 sive tax shelter (as defined in section 6707A(c)) shall 

24 maintain, in such manner as the Secretary may by regula25 tions prescribe, a list— 
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1 ‘‘(1) identifying each person with respect to 

2 whom such advisor acted as such a material advisor 

3 with respect to such shelter, and 

4 ‘‘(2) containing such other information as the 

5 Secretary may by regulations require. 

6 This section shall apply without regard to whether a mate7 rial advisor is required to file a return under section 6111 

8 with respect to such transaction.’’. 

9 (B) Section 6112 of such Code is amended by 

10 redesignating subsection (c) as subsection (b). 

11 (C) Section 6112(b) of such Code, as redesig12 nated by subparagraph (B), is amended— 

13 (i) by inserting ‘‘written’’ before ‘‘request’’ 

14 in paragraph (1)(A), and 

15 (ii) by striking ‘‘shall prescribe’’ in para16 graph (2) and inserting ‘‘may prescribe’’. 

17 (D) The item relating to section 6112 in the 

18 table of sections for subchapter B of chapter 61 of 

19 such Code is amended to read as follows: 

‘‘Sec. 6112. Material advisors of potentially abusive tax shelters 

must keep client lists.’’. 

20 (3)(A) The heading for section 6708 of such 

21 Code is amended to read as follows: 
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1 ‘‘SEC. 6708. FAILURE TO MAINTAIN CLIENT LISTS WITH RE2 SPECT TO POTENTIALLY ABUSIVE TAX SHEL3 TERS.’’. 

4 (B) The item relating to section 6708 in the 

5 table of sections for part I of subchapter B of chap6 ter 68 of such Code is amended to read as follows: 

‘‘Sec. 6708. Failure to maintain client lists with respect to potentially abusive tax shelters.’’. 

7 (c) REQUIRED DISCLOSURE NOT SUBJECT TO CLAIM

8 OF CONFIDENTIALITY.—Section 6112(b)(1) of such Code, 

9 as redesignated by subsection (b)(2)(B), is amended by 

10 adding at the end the following new flush sentence: 

11 ‘‘For purposes of this section, the identity of any 

12 person on such list shall not be privileged.’’. 

13 (d) EFFECTIVE DATE.— 

14 (1) IN GENERAL.—Except as provided in para15 graph (2), the amendments made by this section 

16 shall apply to transactions with respect to which ma17 terial aid, assistance, or advice referred to in section 

18 6111(b)(1)(A)(i) of the Internal Revenue Code of 

19 1986 (as added by this section) is provided after the 

20 date of the enactment of this Act. 

21 (2) NO CLAIM OF CONFIDENTIALITY AGAINST

22 DISCLOSURE.—The amendment made by subsection 

23 (c) shall take effect as if included in the amend-
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1 ments made by section 142 of the Deficit Reduction 

2 Act of 1984. 

3 SEC. 8. EXTENSION OF STATUTE OF LIMITATIONS FOR UN4 DISCLOSED TAX SHELTER. 

5 (a) IN GENERAL.—Section 6501(c) of the Internal 

6 Revenue Code of 1986 (relating to exceptions) is amended 

7 by adding at the end the following new paragraph: 

8 ‘‘(10) POTENTIALLY ABUSIVE TAX SHEL9 TERS.—If a taxpayer fails to include on any return 

10 or statement for any taxable year any information 

11 with respect to a potentially abusive tax shelter (as 

12 defined in section 6707A(c)) which is required under 

13 section 6011 to be included with such return or 

14 statement, the time for assessment of any tax im15 posed by this title with respect to such transaction 

16 shall not expire before the date which is 2 years 

17 after the earlier of— 

18 ‘‘(A) the date on which the Secretary is 

19 furnished the information so required; or 

20 ‘‘(B) the date that a material advisor (as 

21 defined in section 6111) meets the requirements 

22 of section 6112 with respect to a request by the 

23 Secretary under section 6112(b) relating to 

24 such transaction with respect to such tax25 payer.’’. 
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1 (b) EFFECTIVE DATE.—The amendment made by 

2 this section shall apply to taxable years with respect to 

3 which the period for assessing a deficiency did not expire 

4 before the date of the enactment of this Act. 

5 SEC. 9. PENALTY FOR FAILING TO REPORT INTERESTS IN 

6 FOREIGN FINANCIAL ACCOUNTS. 

7 (a) IN GENERAL.—Section 5321(a)(5) of title 31, 

8 United States Code, is amended to read as follows: 

9 ‘‘(5) FOREIGN FINANCIAL AGENCY TRANS10 ACTION VIOLATION.— 

11 ‘‘(A) PENALTY AUTHORIZED.—The Sec12 retary of the Treasury may impose a civil 

13 money penalty on any person who violates, or 

14 causes any violation of, any provision of section 

15 5314. 

16 ‘‘(B) AMOUNT OF PENALTY.— 

17 ‘‘(i) IN GENERAL.—Except as pro18 vided in subparagraph (C), the amount of 

19 any civil penalty imposed under subpara20 graph (A) shall not exceed $10,000. 

21 ‘‘(ii) REASONABLE CAUSE EXCEP22 TION.—No penalty shall be imposed under 

23 subparagraph (A) with respect to any vio24 lation if— 
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1 ‘‘(I) such violation was due to 

2 reasonable cause, and 

3 ‘‘(II) the amount of the trans4 action or the balance in the account 

5 at the time of the transaction was 

6 properly reported. 

7 ‘‘(C) WILLFUL VIOLATIONS.—In the case 

8 of any person willfully violating, or willfully 

9 causing any violation of, any provision of sec10 tion 5314, the amount of the civil penalty im11 posed under subparagraph (A) shall be— 

12 ‘‘(i) not less than $5,000, 

13 ‘‘(ii) not more than 50 percent of the 

14 amount determined under subparagraph 

15 (D), and 

16 ‘‘(iii) subparagraph (B)(ii) shall not 

17 apply. 

18 ‘‘(D) AMOUNT.—The amount determined 

19 under this subparagraph is— 

20 ‘‘(i) in the case of a violation involving 

21 a transaction, the amount of the trans22 action, or 

23 ‘‘(ii) in the case of a violation involv24 ing a failure to report the existence of an 

25 account or any identifying information re-
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1 quired to be provided with respect to an 

2 account, the balance in the account at the 

3 time of the violation.’’. 

4 (b) EFFECTIVE DATE.—The amendment made by 

5 this section shall apply to violations occurring after the 

6 date of the enactment of this Act. 

Æ