TITLE II—OTHER MEASURES TO 
COMBAT TAX HAVEN AND TAX 
SHELTER ABUSES 
SEC. 201. PENALTY FOR FAILING TO DISCLOSE OFFSHORE 
HOLDINGS. 
(a) SECURITIES EXCHANGE ACT OF 1934.—Section 
21(d)(3)(B) of the Securities Exchange Act of 1934 (15 
U.S.C. 78u(d)(3)(B)) is amended by adding at the end 
the following: 
‘‘(iv) 
FOURTH
TIER.—Notwithstanding 
clauses (i), (ii), and (iii), the amount of the 
penalty for each such violation shall not exceed 
$1,000,000 for any person if the violation de-
scribed in subparagraph (A) involved a knowing 
failure to disclose any holding or transaction in-
volving equity or debt instruments of an issuer 
and known by such person to involve a foreign 
entity, including any trust, corporation, limited 
liability company, partnership, or foundation 
that is directly or indirectly controlled by such 
person, and which would have been otherwise 
subject to disclosure by such person under this 
title.’’. 
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(b) SECURITIES ACT OF 1933.—Section 20(d)(2) of 
the Securities Act of 1933 (15 U.S.C. 77t(d)(2)) is 
amended by adding at the end the following: 
‘‘(D) 
FOURTH
TIER.—Notwithstanding 
subparagraphs (A), (B), and (C), the amount of 
penalty for each such violation shall not exceed 
$1,000,000 for any person, if the violation de-
scribed in paragraph (1) involved a knowing 
failure to disclose any holding or transaction in-
volving equity or debt instruments of an issuer 
and known by such person to involve a foreign 
entity, including any trust, corporation, limited 
liability company, partnership, or foundation, 
directly or indirectly controlled by such person, 
and which would have been otherwise subject to 
disclosure by such person under this title.’’. 
(c) INVESTMENT COMPANY ACT OF 1940.—Section 
9(d)(2) of the Investment Company Act of 1940 (15 
U.S.C. 80a–9(d)(2)) is amended by adding at the end the 
following: 
‘‘(D) 
FOURTH
TIER.—Notwithstanding 
subparagraphs (A), (B), and (C), the amount of 
penalty for each such violation shall not exceed 
$1,000,000 for any person, if the violation de-
scribed in paragraph (1) involved a knowing 
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failure to disclose any holding or transaction in-
volving equity or debt instruments of an issuer 
and known by such person to involve a foreign 
entity, including any trust, corporation, limited 
liability company, partnership, or foundation, 
directly or indirectly controlled by such person, 
and which would have been otherwise subject to 
disclosure by such person under this title.’’. 
(d) INVESTMENT ADVISERS ACT OF 1940.—Section 
203(i)(2) of the Investment Advisers Act of 1940 (15 
U.S.C. 80b–3(i)(2)) is amended by adding at the end the 
following: 
‘‘(D) 
FOURTH
TIER.—Notwithstanding 
subparagraphs (A), (B), and (C), the amount of 
penalty for each such violation shall not exceed 
$1,000,000 for any person, if the violation de-
scribed in paragraph (1) involved a knowing 
failure to disclose any holding or transaction in-
volving equity or debt instruments of an issuer 
and known by such person to involve a foreign 
entity, including any trust, corporation, limited 
liability company, partnership, or foundation, 
directly or indirectly controlled by such person, 
and which would have been otherwise subject to 
disclosure by such person under this title.’’. 
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SEC. 202. DEADLINE FOR ANTI-MONEY LAUNDERING RULE 
FOR HEDGE FUNDS AND PRIVATE EQUITY 
FUNDS. 
(a) IN GENERAL.—Not later than 180 days after the 
date of the enactment of this Act, the Secretary of the 
Treasury, in consultation with the Chairman of the Secu-
rities and Exchange Commission and the Chairman of the 
Commodity Futures Trading Commission, shall publish a 
final rule in the Federal Register requiring unregistered 
investment companies, including hedge funds or private 
equity funds, to establish anti-money laundering programs 
and submit suspicious activity reports under subsections 
(g) and (h) of section 5318 of title 31, United States Code. 
(b) CONTENTS.—The final rule published under this 
section— 
(1) shall require, at a minimum, that to safe-
guard against terrorist financing and money laun-
dering, 
all 
unregistered 
investment 
companies 
shall— 
(A) use risk-based due diligence policies, 
procedures, and controls that are reasonably de-
signed to ascertain the identity of and evaluate 
foreign persons (including, where appropriate, 
the nominal and beneficial owner or beneficiary 
of a foreign corporation, partnership, trust, or 
other foreign entity) planning to supply or sup-
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plying funds to be invested with the advice or 
assistance of that unregistered investment com-
pany; and 
(B) be subject to section 5318(k)(2) of 
title 31, United States Code; and 
(2) may incorporate aspects of the proposed 
rule for unregistered investment companies pub-
lished in the Federal Register on September 26, 
2002 (67 Fed. Reg. 60617) (relating to anti-money 
laundering programs). 
(c) DEFINITIONS.—In this section— 
(1) the terms ‘‘investment company’’ and 
‘‘issuer’’ have the same meanings as in section 2 of 
the Investment Company Act of 1940 (15 U.S.C. 
80a–2); and 
(2) the term ‘‘unregistered investment com-
pany’’ means an issuer that would be an investment 
company, but for the exclusion under paragraph (1) 
or (7) of section 3(c) of the Investment Company 
Act of 1940 (15 U.S.C. 80a–3(c)). 
SEC. 203. ANTI-MONEY LAUNDERING REQUIREMENTS FOR 
FORMATION AGENTS. 
(a) ANTI-MONEY LAUNDERING OBLIGATIONS
FOR 
FORMATION AGENTS.—Section 5312(a)(2) of title 31, 
United States Code, is amended— 
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(1) in subparagraph (Y), by striking ‘‘or’’ at 
the end; 
(2) by redesignating subparagraph (Z) as sub-
paragraph (AA); and 
(3) by inserting after subparagraph (Y) the fol-
lowing: 
‘‘(Z) persons involved in forming new cor-
porations, limited liability companies, partner-
ships, trusts, or other legal entities; or’’. 
(b) DEADLINE
FOR
ANTI-MONEY
LAUNDERING 
RULE FOR FORMATION AGENTS.—Not later than 90 days 
after the date of the enactment of this Act, after con-
sulting with the Attorney General of the United States, 
the Commissioner of the Internal Revenue Service, and 
Chairman of the Securities and Exchange Commission, 
the Secretary of the Treasury shall publish a proposed rule 
in the Federal Register requiring persons described in sec-
tion 5312(a)(2)(Z) of title 31, United States Code, as 
added by this section, to establish anti-money laundering 
programs under subsection (h) of section 5318 of that 
title. The Secretary shall publish such rule in final form 
in the Federal Register not later than 180 days after the 
date of the enactment of this Act. 
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SEC. 204. STRENGTHENING SUMMONS IN CASES INVOLVING 
OFFSHORE SECRECY JURISDICTIONS. 
(a) IN GENERAL.—Subsection (f) of section 7609 is 
amended to read as follows: 
‘‘(f) ADDITIONAL REQUIREMENT IN THE CASE OF A 
JOHN DOE SUMMONS.— 
‘‘(1) GENERAL RULE.—Any summons described 
in subsection (c)(1) which does not identify the per-
son with respect to whose liability the summons is 
issued may be served only after a court proceeding 
in which the Secretary establishes that— 
‘‘(A) the summons relates to the investiga-
tion of a particular person or ascertainable 
group or class of persons, 
‘‘(B) there is a reasonable basis for believ-
ing that such person or group or class of per-
sons may fail or may have failed to comply with 
any provision of any internal revenue law, and 
‘‘(C) the information sought to be obtained 
from the examination of the records or testi-
mony (and the identity of the person or persons 
with respect to whose liability the summons is 
issued) is not readily available from other 
sources. 
‘‘(2) EXCEPTION.—Paragraph (1) shall not 
apply to any summons which specifies that it is lim-
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ited to information regarding a United States cor-
respondent 
account 
(as 
defined 
in 
section 
5318A(e)(1)(B) of title 31, United States Code) or 
a United States payable-through account (as defined 
in section 5318A(e)(1)(C) of such title) of a finan-
cial institution in an offshore secrecy jurisdiction. 
‘‘(3) PRESUMPTION IN CASES INVOLVING OFF-
SHORE SECRECY JURISDICTIONS.—For purposes of 
this section, in any case in which the particular per-
son or ascertainable group or class of persons has fi-
nancial accounts in or transactions related to off-
shore secrecy jurisdictions, there shall be a presump-
tion that there is a reasonable basis for believing 
that such person or group or class of persons may 
fail or may have failed to comply with provisions of 
internal revenue law. 
‘‘(4) PROJECT JOHN DOE SUMMONSES.— 
‘‘(A) IN
GENERAL.—Notwithstanding the 
requirements of paragraph (1), the Secretary 
may issue a summons described in paragraph 
(1) if the summons— 
‘‘(i) relates to a project which is ap-
proved under subparagraph (B), 
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‘‘(ii) is issued to a person who is a 
member of the group or class established 
under subparagraph (B)(i), and 
‘‘(iii) is issued within 3 years of the 
date on which such project was approved 
under subparagraph (B). 
‘‘(B) APPROVAL OF PROJECTS.—A project 
may only be approved under this subparagraph 
after a court proceeding in which the Secretary 
establishes that— 
‘‘(i) any summons issues with respect 
to the project will be issued to a member 
of an ascertainable group or class of per-
sons, and 
‘‘(ii) any summons issued with respect 
to such project will meet the requirements 
of subparagraphs (A), (B), and (C) of 
paragraph (1). 
‘‘(C) EXTENSION.—Upon application of 
the Secretary, the court may extend the time 
for issuing such summonses under subpara-
graph (A)(i) for additional 3-year periods, but 
only if the court continues to exercise oversight 
of such project under subparagraph (D). 
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‘‘(D) ONGOING COURT OVERSIGHT.—Dur-
ing any period in which the Secretary is author-
ized to issue summonses in relation to a project 
approved under subparagraph (B) (including 
during any extension under subparagraph (C)), 
the Secretary shall report annually to the court 
on the use of such authority, provide copies of 
all summonses with such report, and comply 
with the court’s direction with respect to the 
issuance of any John Doe summons under such 
project.’’. 
(b) JURISDICTION OF COURT.— 
(1) IN
GENERAL.—Paragraph (1) of section 
7609(h) is amended by inserting after the first sen-
tence the following new sentence: ‘‘Any United 
States district court in which a member of the group 
or class to which a summons may be issued resides 
or is found shall have jurisdiction to hear and deter-
mine the approval of a project under subsection 
(f)(4)(B).’’. 
(2) CONFORMING AMENDMENT.—The first sen-
tence of section 7609(h)(1) is amended by striking 
‘‘(f)’’ and inserting ‘‘(f)(1)’’. 
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(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to summonses issued after the date 
of the enactment of this Act. 
(d) GAO REPORT.—Not later than the date which 
is 5 years after the date of the enactment of this Act, 
the Comptroller General of the United States shall issue 
a report on the implementation of section 7609(f)(4) of 
the Internal Revenue Code of 1986, as added by this sec-
tion. 
SEC. 205. IMPROVING ENFORCEMENT OF FOREIGN FINAN-
CIAL ACCOUNT REPORTING. 
(a) CLARIFYING THE CONNECTION OF FOREIGN FI-
NANCIAL ACCOUNT REPORTING
TO TAX ADMINISTRA-
TION.—Paragraph (4) of section 6103(b) (relating to tax 
administration) is amended by adding at the end the fol-
lowing new sentence: 
‘‘For purposes of clause (i), section 5314 of title 31, 
United States Code, and sections 5321 and 5322 of 
such title (as such sections pertain to such section 
5314), shall be considered to be an internal revenue 
law.’’. 
(b) SIMPLIFYING THE CALCULATION OF FOREIGN 
FINANCIAL ACCOUNT REPORTING PENALTIES.—Section 
5321(a)(5)(D)(ii) of title 31, United States Code, is 
amended by striking ‘‘the balance in the account at the 
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time of the violation’’ and inserting ‘‘the highest balance 
in the account during the reporting period to which the 
violation relates’’. 
(c) CLARIFYING THE USE OF SUSPICIOUS ACTIVITY 
REPORTS UNDER THE BANK SECRECY ACT FOR CIVIL 
TAX LAW ENFORCEMENT.—Section 5319 of title 31, 
United States Code, is amended by inserting ‘‘the civil and 
criminal enforcement divisions of the Internal Revenue 
Service,’’ after ‘‘including’’. 
TITLE III—COMBATING TAX 
SHELTER PROMOTERS 
SEC. 301. PENALTY FOR PROMOTING ABUSIVE TAX SHEL-
TERS. 
(a) PENALTY FOR PROMOTING ABUSIVE TAX SHEL-
TERS.—Section 6700 (relating to promoting abusive tax 
shelters, etc.) is amended— 
(1) by redesignating subsections (b) and (c) as 
subsections (d) and (e), respectively, 
(2) by striking ‘‘a penalty’’ and all that follows 
through the period in the first sentence of subsection 
(a) and inserting ‘‘a penalty determined under sub-
section (b)’’, and 
(3) by inserting after subsection (a) the fol-
lowing new subsections: 
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‘‘(b) AMOUNT OF PENALTY; CALCULATION OF PEN-
ALTY; LIABILITY FOR PENALTY.— 
‘‘(1) AMOUNT OF PENALTY.—The amount of 
the penalty imposed by subsection (a) shall not ex-
ceed 150 percent of the gross income derived (or to 
be derived) from such activity by the person or per-
sons subject to such penalty. 
‘‘(2) CALCULATION OF PENALTY.—The penalty 
amount determined under paragraph (1) shall be 
calculated with respect to each instance of an activ-
ity described in subsection (a), each instance in 
which income was derived by the person or persons 
subject to such penalty, and each person who par-
ticipated in such an activity. 
‘‘(3) LIABILITY FOR PENALTY.—If more than 1 
person is liable under subsection (a) with respect to 
such activity, all such persons shall be jointly and 
severally liable for the penalty under such sub-
section. 
‘‘(c) PENALTY NOT DEDUCTIBLE.—The payment of 
any penalty imposed under this section or the payment 
of any amount to settle or avoid the imposition of such 
penalty shall not be considered an ordinary and necessary 
expense in carrying on a trade or business for purposes 
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of this title and shall not be deductible by the person who 
is subject to such penalty or who makes such payment.’’. 
(b) CONFORMING AMENDMENT.—Section 6700(a) is 
amended by striking the last sentence. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to activities after the date of the 
enactment of this Act. 
SEC. 302. PENALTY FOR AIDING AND ABETTING THE UN-
DERSTATEMENT OF TAX LIABILITY. 
(a) IN GENERAL.—Section 6701(a) (relating to impo-
sition of penalty) is amended— 
(1) by inserting ‘‘the tax liability or’’ after ‘‘re-
spect to,’’ in paragraph (1), 
(2) by inserting ‘‘aid, assistance, procurement, 
or advice with respect to such’’ before ‘‘portion’’ 
both places it appears in paragraphs (2) and (3), 
and 
(3) by inserting ‘‘instance of aid, assistance, 
procurement, or advice or each such’’ before ‘‘docu-
ment’’ in the matter following paragraph (3). 
(b) AMOUNT OF PENALTY.—Subsection (b) of section 
6701 (relating to penalties for aiding and abetting under-
statement of tax liability) is amended to read as follows: 
‘‘(b) AMOUNT OF PENALTY; CALCULATION OF PEN-
ALTY; LIABILITY FOR PENALTY.— 
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‘‘(1) AMOUNT OF PENALTY.—The amount of 
the penalty imposed by subsection (a) shall not ex-
ceed 150 percent of the gross income derived (or to 
be derived) from such aid, assistance, procurement, 
or advice provided by the person or persons subject 
to such penalty. 
‘‘(2) CALCULATION OF PENALTY.—The penalty 
amount determined under paragraph (1) shall be 
calculated with respect to each instance of aid, as-
sistance, procurement, or advice described in sub-
section (a), each instance in which income was de-
rived by the person or persons subject to such pen-
alty, and each person who made such an understate-
ment of the liability for tax. 
‘‘(3) LIABILITY FOR PENALTY.—If more than 1 
person is liable under subsection (a) with respect to 
providing such aid, assistance, procurement, or ad-
vice, all such persons shall be jointly and severally 
liable for the penalty under such subsection.’’. 
(c) PENALTY NOT DEDUCTIBLE.—Section 6701 is 
amended by adding at the end the following new sub-
section: 
‘‘(g) PENALTY NOT DEDUCTIBLE.—The payment of 
any penalty imposed under this section or the payment 
of any amount to settle or avoid the imposition of such 
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penalty shall not be considered an ordinary and necessary 
expense in carrying on a trade or business for purposes 
of this title and shall not be deductible by the person who 
is subject to such penalty or who makes such payment.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to activities after the date of the 
enactment of this Act. 
SEC. 303. PROHIBITION ON TAX SHELTER PATENTS. 
(a) IN GENERAL.—Section 102 of title 35, United 
States Code, is amended— 
(1) by redesignating subsection (g) as sub-
section (h); and 
(2) by inserting after subsection (f) the fol-
lowing: 
‘‘(g) the invention is designed to minimize, avoid, 
defer, or otherwise affect the liability for Federal, State, 
local, or foreign tax, or’’. 
(b) EFFECTIVE
DATE
AND
APPLICATION.—The 
amendment made by this section shall take effect on the 
date of the enactment of this Act and apply to any applica-
tion for a patent that has not been granted by that date. 
SEC. 304. PROHIBITED FEE ARRANGEMENT. 
(a) IN GENERAL.—Section 6701, as amended by this 
Act, is amended— 
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(1) by redesignating subsections (f) and (g) as 
subsections (g) and (h), respectively, 
(2) by striking ‘‘subsection (a).’’ in paragraphs 
(2) and (3) of subsection (g) (as redesignated by 
paragraph (1)) and inserting ‘‘subsection (a) or 
(f).’’, and 
(3) by inserting after subsection (e) the fol-
lowing new subsection: 
‘‘(f) PROHIBITED FEE ARRANGEMENT.— 
‘‘(1) IN GENERAL.—Any person who makes an 
agreement for, charges, or collects a fee which is for 
services provided in connection with the internal rev-
enue laws, and the amount of which is calculated ac-
cording to, or is dependent upon, a projected or ac-
tual amount of— 
‘‘(A) tax savings or benefits, or 
‘‘(B) losses which can be used to offset 
other taxable income, 
shall pay a penalty with respect to each such fee ac-
tivity in the amount determined under subsection 
(b). 
‘‘(2) RULES.—The Secretary may issue rules to 
carry out the purposes of this subsection and may 
provide exceptions for fee arrangements that are in 
the public interest.’’. 
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(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to fee agreements, charges, and 
collections made after the date of the enactment of this 
Act. 
SEC. 305. PREVENTING TAX SHELTER ACTIVITIES BY FI-
NANCIAL INSTITUTIONS. 
(a) EXAMINATIONS.— 
(1) DEVELOPMENT
OF
EXAMINATION
TECH-
NIQUES.—Each of the Federal banking agencies and 
the Commission shall, in consultation with the Inter-
nal Revenue Service, develop examination techniques 
to detect potential violations of section 6700 or 6701 
of the Internal Revenue Code of 1986, by depository 
institutions, brokers, dealers, and investment advis-
ers, as appropriate. 
(2) IMPLEMENTATION.—Each of the Federal 
banking agencies and the Commission shall imple-
ment the examination techniques developed under 
paragraph (1) with respect to each of the depository 
institutions, brokers, dealers, or investment advisers 
subject to their enforcement authority. Such exam-
ination shall, to the extent possible, be combined 
with any examination by such agency otherwise re-
quired or authorized by Federal law. 
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(b) REPORT TO INTERNAL REVENUE SERVICE.—In 
any case in which an examination conducted under this 
section with respect to a financial institution or other enti-
ty reveals a potential violation, such agency shall promptly 
notify the Internal Revenue Service of such potential viola-
tion for investigation and enforcement by the Internal 
Revenue Service, in accordance with applicable provisions 
of law. 
(c) REPORT TO CONGRESS.—The Federal banking 
agencies and the Commission shall submit a joint written 
report to Congress in 2009 and 2012 on their progress 
in preventing violations of sections 6700 and 6701 of the 
Internal Revenue Code of 1986, by depository institutions, 
brokers, dealers, and investment advisers, as appropriate. 
(d) DEFINITIONS.—For purposes of this section— 
(1) the terms ‘‘broker’’, ‘‘dealer’’, and ‘‘invest-
ment adviser’’ have the same meanings as in section 
3 of the Securities Exchange Act of 1934 (15 U.S.C. 
78c); 
(2) the term ‘‘Commission’’ means the Securi-
ties and Exchange Commission; 
(3) the term ‘‘depository institution’’ has the 
same meaning as in section 3(c) of the Federal De-
posit Insurance Act (12 U.S.C. 1813(c)); 
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(4) the term ‘‘Federal banking agencies’’ has 
the same meaning as in section 3(q) of the Federal 
Deposit Insurance Act (12 U.S.C. 1813(q)); and 
(5) the term ‘‘Secretary’’ means the Secretary 
of the Treasury. 
SEC. 306. INFORMATION SHARING FOR ENFORCEMENT 
PURPOSES. 
(a) PROMOTION OF PROHIBITED TAX SHELTERS OR 
TAX AVOIDANCE SCHEMES.—Section 6103(h) (relating to 
disclosure to certain Federal officers and employees for 
purposes of tax administration, etc.) is amended by adding 
at the end the following new paragraph: 
‘‘(7) DISCLOSURE OF RETURNS AND RETURN 
INFORMATION RELATED TO PROMOTION OF PROHIB-
ITED
TAX
SHELTERS
OR
TAX
AVOIDANCE 
SCHEMES.— 
‘‘(A) WRITTEN
REQUEST.—Upon receipt 
by the Secretary of a written request which 
meets the requirements of subparagraph (B) 
from the head of the United States Securities 
and Exchange Commission, an appropriate 
Federal banking agency as defined under sec-
tion 1813(q) of title 12, United States Code, or 
the Public Company Accounting Oversight 
Board, a return or return information shall be 
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disclosed to such requestor’s officers and em-
ployees who are personally and directly engaged 
in an investigation, examination, or proceeding 
by such requestor to evaluate, determine, penal-
ize, or deter conduct by a financial institution, 
issuer, or public accounting firm, or associated 
person, in connection with a potential or actual 
violation of section 6700 (promotion of abusive 
tax shelters), 6701 (aiding and abetting under-
statement of tax liability), or activities related 
to promoting or facilitating inappropriate tax 
avoidance or tax evasion. Such disclosure shall 
be solely for use by such officers and employees 
in such investigation, examination, or pro-
ceeding. In the discretion of the Secretary, such 
disclosure may take the form of the participa-
tion of Internal Revenue Service employees in a 
joint investigation, examination, or proceeding 
with the Securities Exchange Commission, Fed-
eral banking agency, or Public Company Ac-
counting Oversight Board. 
‘‘(B) REQUIREMENTS.—A request meets 
the requirements of this subparagraph if it sets 
forth— 
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‘‘(i) the nature of the investigation, 
examination, or proceeding, 
‘‘(ii) the statutory authority under 
which such investigation, examination, or 
proceeding is being conducted, 
‘‘(iii) the name or names of the finan-
cial institution, issuer, or public accounting 
firm to which such return information re-
lates, 
‘‘(iv) the taxable period or periods to 
which such return information relates, and 
‘‘(v) the specific reason or reasons 
why such disclosure is, or may be, relevant 
to such investigation, examination or pro-
ceeding. 
‘‘(C) FINANCIAL
INSTITUTION.—For the 
purposes of this paragraph, the term ‘financial 
institution’ means a depository institution, for-
eign bank, insured institution, industrial loan 
company, broker, dealer, investment company, 
investment advisor, or other entity subject to 
regulation or oversight by the United States Se-
curities and Exchange Commission or an appro-
priate Federal banking agency.’’. 
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(b) FINANCIAL AND ACCOUNTING FRAUD INVESTIGA-
TIONS.—Section 6103(i) (relating to disclosure to Federal 
officers or employees for administration of Federal laws 
not relating to tax administration) is amended by adding 
at the end the following new paragraph: 
‘‘(9) DISCLOSURE OF RETURNS AND RETURN 
INFORMATION
FOR
USE
IN
FINANCIAL
AND
AC-
COUNTING FRAUD INVESTIGATIONS.— 
‘‘(A) WRITTEN
REQUEST.—Upon receipt 
by the Secretary of a written request which 
meets the requirements of subparagraph (B) 
from the head of the United States Securities 
and Exchange Commission or the Public Com-
pany Accounting Oversight Board, a return or 
return information shall be disclosed to such re-
questor’s officers and employees who are per-
sonally and directly engaged in an investigation, 
examination, or proceeding by such requestor to 
evaluate the accuracy of a financial statement 
or report, or to determine whether to require a 
restatement, penalize, or deter conduct by an 
issuer, investment company, or public account-
ing firm, or associated person, in connection 
with a potential or actual violation of auditing 
standards or prohibitions against false or mis-
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leading statements or omissions in financial 
statements or reports. Such disclosure shall be 
solely for use by such officers and employees in 
such investigation, examination, or proceeding. 
‘‘(B) REQUIREMENTS.—A request meets 
the requirements of this subparagraph if it sets 
forth— 
‘‘(i) the nature of the investigation, 
examination, or proceeding, 
‘‘(ii) the statutory authority under 
which such investigation, examination, or 
proceeding is being conducted, 
‘‘(iii) the name or names of the issuer, 
investment company, or public accounting 
firm to which such return information re-
lates, 
‘‘(iv) the taxable period or periods to 
which such return information relates, and 
‘‘(v) the specific reason or reasons 
why such disclosure is, or may be, relevant 
to such investigation, examination or pro-
ceeding.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to disclosures and to information 
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and document requests made after the date of the enact-
ment of this Act. 
SEC. 307. DISCLOSURE OF INFORMATION TO CONGRESS. 
(a) DISCLOSURE BY TAX RETURN PREPARER.— 
(1) IN GENERAL.—Subparagraph (B) of section 
7216(b)(1) (relating to disclosures) is amended to 
read as follows: 
‘‘(B) pursuant to any one of the following 
documents, if clearly identified: 
‘‘(i) The order of any Federal, State, 
or local court of record. 
‘‘(ii) A subpoena issued by a Federal 
or State grand jury. 
‘‘(iii) An administrative order, sum-
mons, or subpoena which is issued in the 
performance of its duties by— 
‘‘(I) any Federal agency, includ-
ing Congress or any committee or 
subcommittee thereof, or 
‘‘(II) any State agency, body, or 
commission charged under the laws of 
the State or a political subdivision of 
the State with the licensing, registra-
tion, or regulation of tax return pre-
parers.’’. 
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(2) EFFECTIVE DATE.—The amendment made 
by this subsection shall apply to disclosures made 
after the date of the enactment of this Act pursuant 
to any document in effect on or after such date. 
(b) DISCLOSURE BY SECRETARY.—Paragraph (2) of 
section 6104(a) (relating to inspection of applications for 
tax exemption or notice of status) is amended to read as 
follows: 
‘‘(2) INSPECTION BY CONGRESS.— 
‘‘(A) IN
GENERAL.—Upon receipt of a 
written request from a committee or sub-
committee of Congress, copies of documents re-
lated to a determination by the Secretary to 
grant, deny, revoke, or restore an organization’s 
exemption from taxation under section 501 
shall be provided to such committee or sub-
committee, including any application, notice of 
status, or supporting information provided by 
such organization to the Internal Revenue Serv-
ice; any letter, analysis, or other document pro-
duced by or for the Internal Revenue Service 
evaluating, determining, explaining, or relating 
to the tax exempt status of such organization 
(other than returns, unless such returns are 
available to the public under this section or sec-
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tion 6103 or 6110); and any communication be-
tween the Internal Revenue Service and any 
other party relating to the tax exempt status of 
such organization. 
‘‘(B) ADDITIONAL INFORMATION.—Section 
6103(f) shall apply with respect to— 
‘‘(i) the application for exemption of 
any organization described in subsection 
(c) or (d) of section 501 which is exempt 
from taxation under section 501(a) for any 
taxable year and any application referred 
to in subparagraph (B) of subsection 
(a)(1) of this section, and 
‘‘(ii) any other papers which are in 
the possession of the Secretary and which 
relate to such application, 
as if such papers constituted returns.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to disclosures and to information 
and document requests made after the date of the enact-
ment of this Act. 
SEC. 308. TAX OPINION STANDARDS FOR TAX PRACTI-
TIONERS. 
Section 330(d) of title 31, United States Code, is 
amended to read as follows: 
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‘‘(d) The Secretary of the Treasury shall impose 
standards applicable to the rendering of written advice 
with respect to any listed transaction or any entity, plan, 
arrangement, or other transaction which has a potential 
for tax avoidance or evasion. Such standards shall ad-
dress, but not be limited to, the following issues: 
‘‘(1) Independence of the practitioner issuing 
such written advice from persons promoting, mar-
keting, or recommending the subject of the advice. 
‘‘(2) Collaboration among practitioners, or be-
tween a practitioner and other party, which could re-
sult in such collaborating parties having a joint fi-
nancial interest in the subject of the advice. 
‘‘(3) Avoidance of conflicts of interest which 
would impair auditor independence. 
‘‘(4) For written advice issued by a firm, stand-
ards for reviewing the advice and ensuring the con-
sensus support of the firm for positions taken. 
‘‘(5) Reliance on reasonable factual representa-
tions by the taxpayer and other parties. 
‘‘(6) Appropriateness of the fees charged by the 
practitioner for the written advice. 
‘‘(7) Preventing practitioners and firms from 
aiding or abetting the understatement of tax liability 
by clients. 
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‘‘(8) Banning the promotion of potentially abu-
sive or illegal tax shelters.’’. 
SEC. 309. DENIAL OF DEDUCTION FOR CERTAIN FINES, 
PENALTIES, AND OTHER AMOUNTS. 
(a) IN GENERAL.—Subsection (f) of section 162 (re-
lating to trade or business expenses) is amended to read 
as follows: 
‘‘(f) FINES, PENALTIES, AND OTHER AMOUNTS.— 
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), no deduction otherwise allowable shall be 
allowed under this chapter for any amount paid or 
incurred (whether by suit, agreement, or otherwise) 
to, or at the direction of, a government or entity de-
scribed in paragraph (4) in relation to the violation 
of any law or the investigation or inquiry by such 
government or entity into the potential violation of 
any law. 
‘‘(2) EXCEPTION FOR AMOUNTS CONSTITUTING 
RESTITUTION.—Paragraph (1) shall not apply to 
any amount which— 
‘‘(A) the taxpayer establishes constitutes 
restitution (including remediation of property) 
for damage or harm caused by or which may be 
caused by the violation of any law or the poten-
tial violation of any law, and 
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