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877A(e)(3) of the Internal Revenue Code of 1986) 
and who is not in compliance with section 877A 
of such Code (relating to expatriation) is inad-
missible.’’. 
(2) AVAILABILITY OF INFORMATION.— 
(A) IN GENERAL.—Section 6103(l) (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: 
‘‘(21) DISCLOSURE TO DENY VISA OR ADMISSION 
TO CERTAIN EXPATRIATES.—Upon written request of 
the Attorney General or the Attorney General’s dele-
gate, the Secretary shall disclose whether an indi-
vidual is in compliance with section 877A (and if not 
in compliance, any items of noncompliance) to offi-
cers and employees of the Federal agency responsible 
for administering section 212(a)(10)(E) of the Immi-
gration and Nationality Act solely for the purpose of, 
and to the extent necessary in, administering such 
section 212(a)(10)(E).’’. 
(B) SAFEGUARDS.—Section 6103(p)(4) (re-
lating to safeguards) is amended by striking ‘‘or 
(20)’’ each place it appears and inserting ‘‘(20), 
or (21)’’. 
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(3) EFFECTIVE DATES.—The amendments made 
by this subsection shall apply to individuals who re-
linquish United States citizenship on or after the date 
of the enactment of this Act. 
(e) CONFORMING AMENDMENTS.— 
(1) Section 877 is amended by adding at the end 
the following new subsection: 
‘‘(h) APPLICATION.—This section shall not apply to an 
expatriate (as defined in section 877A(e)) whose expatria-
tion date (as so defined) occurs on or after the date of the 
enactment of this subsection.’’. 
(2) Section 2107 is amended by adding at the 
end the following new subsection: 
‘‘(f) APPLICATION.—This section shall not apply to 
any expatriate subject to section 877A.’’. 
(3) Section 2501(a)(3) is amended by adding at 
the end the following new subparagraph: 
‘‘(C) APPLICATION.—This paragraph shall 
not apply to any expatriate subject to section 
877A.’’. 
(4) Section 6039G(a) is amended by inserting 
‘‘or 877A’’ after ‘‘section 877(b)’’. 
(5) The second sentence of section 6039G(d) is 
amended by inserting ‘‘or who relinquishes United 
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States citizenship (within the meaning of section 
877A(e)(3))’’ after ‘‘section 877(a))’’. 
(f) CLERICAL AMENDMENT.—The table of sections for 
subpart A of part II of subchapter N of chapter 1 is amend-
ed by inserting after the item relating to section 877 the 
following new item: 
‘‘Sec. 877A. Tax responsibilities of expatriation’’. 
(g) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as provided in this 
subsection, the amendments made by this section shall 
apply to expatriates (within the meaning of section 
877A(e) of the Internal Revenue Code of 1986, as 
added by this section) whose expatriation date (as so 
defined) occurs on or after the date of the enactment 
of this Act. 
(2) GIFTS AND BEQUESTS.—Section 102(d) of 
the Internal Revenue Code of 1986 (as added by sub-
section (b)) shall apply to gifts and bequests received 
on or after the date of the enactment of this Act, from 
an individual or the estate of an individual whose ex-
patriation date (as so defined) occurs after such date. 
(3) DUE DATE FOR TENTATIVE TAX.—The due 
date under section 877A(h)(2) of the Internal Revenue 
Code of 1986, as added by this section, shall in no 
event occur before the 90th day after the date of the 
enactment of this Act. 
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SEC. 536. LIMITATION ON ANNUAL AMOUNTS WHICH MAY 
BE DEFERRED UNDER NONQUALIFIED DE-
FERRED COMPENSATION ARRANGEMENTS. 
(a) IN GENERAL.—Section 409A(a) of the Internal 
Revenue Code of 1986 (relating to inclusion of gross income 
under nonqualified deferred compensation plans) is amend-
ed— 
(1) by striking ‘‘and (4)’’ in subclause (I) of 
paragraph (1)(A)(i) and inserting ‘‘(4), and (5)’’, 
and 
(2) by adding at the end the following new para-
graph: 
‘‘(5) ANNUAL
LIMITATION
ON
AGGREGATE
DE-
FERRED AMOUNTS.— 
‘‘(A) LIMITATION.—The requirements of this 
paragraph are met if the plan provides that the 
aggregate amount of compensation which is de-
ferred for any taxable year with respect to a par-
ticipant under the plan may not exceed the ap-
plicable dollar amount for the taxable year. 
‘‘(B) INCLUSION OF FUTURE EARNINGS.—If 
an amount is includible under paragraph (1) in 
the gross income of a participant for any taxable 
year by reason of any failure to meet the require-
ments of this paragraph, any income (whether 
actual or notional) for any subsequent taxable 
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year shall be included in gross income under 
paragraph (1)(A) in such subsequent taxable 
year to the extent such income— 
‘‘(i) is attributable to compensation (or 
income attributable to such compensation) 
required to be included in gross income by 
reason of such failure (including by reason 
of this subparagraph), and 
‘‘(ii) is not subject to a substantial risk 
of forfeiture and has not been previously in-
cluded in gross income. 
‘‘(C) AGGREGATION RULE.—For purposes of 
this paragraph, all nonqualified deferred com-
pensation plans maintained by all employers 
treated as a single employer under subsection 
(d)(6) shall be treated as 1 plan. 
‘‘(D) APPLICABLE
DOLLAR
AMOUNT.—For 
purposes of this paragraph— 
‘‘(i) IN GENERAL.—The term ‘applica-
ble dollar amount’ means, with respect to 
any participant, the lesser of— 
‘‘(I) the average annual com-
pensation which was payable during 
the base period to the participant by 
the employer maintaining the non-
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qualified deferred compensation plan 
(or any predecessor of the employer) 
and which was includible in the par-
ticipant’s gross income for taxable 
years in the base period, or 
‘‘(II) $1,000,000. 
‘‘(ii) BASE PERIOD.— 
‘‘(I) IN GENERAL.—The term ‘base 
period’ means, with respect to any 
computation year, the 5-taxable year 
period ending with the taxable year 
preceding the computation year. 
‘‘(II) ELECTIONS
MADE
BEFORE 
COMPUTATION YEAR.—If, before the be-
ginning of the computation year, an 
election described in paragraph (4)(B) 
is made by the participant to have 
compensation for services performed in 
the computation year deferred under a 
nonqualified 
deferred 
compensation 
plan, the base period shall be the 5-tax-
able year period ending with the tax-
able year preceding the taxable year in 
which the election is made. 
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‘‘(III) COMPUTATION YEAR.—For 
purposes of this clause, the term ‘com-
putation year’ means any taxable year 
of the participant for which the limita-
tion under subparagraph (A) is being 
determined. 
‘‘(IV) SPECIAL
RULE
FOR
EM-
PLOYEES OF LESS THAN 5 YEARS.—If 
a participant did not perform services 
for the employer maintaining the non-
qualified deferred compensation plan 
(or any predecessor of the employer) 
during the entire 5-taxable year period 
referred to in subparagraph (A) or (B), 
only the portion of such period during 
which the participant performed such 
services shall be taken into account.’’. 
(b) EFFECTIVE DATE.— 
(1) IN
GENERAL.—The amendments made by 
this section shall apply to taxable years beginning 
after December 31, 2006, except that— 
(A) the amendments shall only apply to 
amounts deferred after December 31, 2006 (and 
to earnings on such amounts), and 
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(B) taxable years beginning on or before 
December 31, 2006, shall be taken into account 
in determining the average annual compensation 
of a participant during any base period for pur-
poses of section 409A(a)(5)(D) of the Internal 
Revenue Code of 1986 (as added by such amend-
ments). 
(2) GUIDANCE RELATING TO CERTAIN EXISTING 
ARRANGEMENTS.—Not later than 60 days after the 
date of the enactment of this Act, the Secretary of the 
Treasury shall issue guidance providing a limited pe-
riod during which a nonqualified deferred compensa-
tion plan adopted before December 31, 2006, may, 
without violating the requirements of section 409A(a) 
of such Code, be amended— 
(A) to provide that a participant may, no 
later than December 31, 2007, cancel or modify 
an outstanding deferral election with regard to 
all or a portion of amounts deferred after Decem-
ber 31, 2006, to the extent necessary for the plan 
to meet the requirements of section 409A(a)(5) of 
such Code (as added by the amendments made by 
this section), but only if amounts subject to the 
cancellation or modification are, to the extent 
not previously included in gross income, includ-
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ible in income of the participant when no longer 
subject to substantial risk of forfeiture, and 
(B) to conform to the requirements of sec-
tion 409A(a)(5) of such Code (as added by the 
amendments made by this section) with regard 
to amounts deferred after December 31, 2006. 
SEC. 537. MODIFICATION OF CRIMINAL PENALTIES FOR 
WILLFUL FAILURES INVOLVING TAX PAY-
MENTS AND FILING REQUIREMENTS. 
(a) INCREASE IN PENALTY FOR ATTEMPT TO EVADE 
OR DEFEAT TAX.—Section 7201 (relating to attempt to 
evade or defeat tax) is amended— 
(1) by striking ‘‘$100,000’’ and inserting 
‘‘$500,000’’, 
(2) by striking ‘‘$500,000’’ and inserting 
‘‘$1,000,000’’, and 
(3) by striking ‘‘5 years’’ and inserting ‘‘10 
years’’. 
(b) MODIFICATION OF PENALTIES FOR WILLFUL FAIL-
URE TO FILE RETURN, SUPPLY INFORMATION, OR PAY 
TAX.— 
(1) IN GENERAL.—Section 7203 (relating to will-
ful failure to file return, supply information, or pay 
tax) is amended— 
(A) in the first sentence— 
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(i) by striking ‘‘Any person’’ and in-
serting the following: 
‘‘(a) IN GENERAL.—Any person’’, and 
(ii) by striking ‘‘$25,000’’ and insert-
ing ‘‘$50,000’’, 
(B) in the third sentence, by striking ‘‘sec-
tion’’ and inserting ‘‘subsection’’, and 
(C) by adding at the end the following new 
subsection: 
‘‘(b) AGGRAVATED FAILURE TO FILE.— 
‘‘(1) IN GENERAL.—In the case of any failure de-
scribed in paragraph (2), the first sentence of sub-
section (a) shall be applied by substituting— 
‘‘(A) ‘felony’ for ‘misdemeanor’, 
‘‘(B) ‘$250,000 ($500,000’ for ‘$50,000 
($100,000’, and 
‘‘(C) ‘5 years’ for ‘1 year’. 
‘‘(2) FAILURE DESCRIBED.—A failure described 
in this paragraph is— 
‘‘(A) a failure to make a return described in 
subsection (a) for any 3 taxable years occurring 
during any period of 5 consecutive taxable years 
if the aggregate tax liability for such period is 
not less than $50,000, or 
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‘‘(B) a failure to make a return if the tax 
liability giving rise to the requirement to make 
such return is attributable to an activity which 
is a felony under any State or Federal law.’’. 
(2) PENALTY MAY BE APPLIED IN ADDITION TO 
OTHER PENALTIES.—Section 7204 (relating to fraud-
ulent statement or failure to make statement to em-
ployees) is amended by striking ‘‘the penalty provided 
in section 6674’’ and inserting ‘‘the penalties pro-
vided in sections 6674 and 7203(b)’’. 
(c) FRAUD AND FALSE STATEMENTS.—Section 7206 
(relating to fraud and false statements) is amended— 
(1) by striking ‘‘$100,000’’ and inserting 
‘‘$500,000’’, 
(2) by striking ‘‘$500,000’’ and inserting 
‘‘$1,000,000’’, and 
(3) by striking ‘‘3 years’’ and inserting ‘‘5 
years’’. 
(d) INCREASE IN MONETARY LIMITATION FOR UNDER-
PAYMENT OR OVERPAYMENT OF TAX DUE TO FRAUD.—Sec-
tion 7206 (relating to fraud and false statements), as 
amended by subsection (a)(3), is amended— 
(1) by striking ‘‘Any person who—’’ and insert-
ing ‘‘(a) IN GENERAL.—Any person who—’’, and 
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(2) by adding at the end the following new sub-
section: 
‘‘(b) INCREASE IN MONETARY LIMITATION FOR UN-
DERPAYMENT OR OVERPAYMENT OF TAX DUE TO FRAUD.— 
If any portion of any underpayment (as defined in section 
6664(a)) or overpayment (as defined in section 6401(a)) of 
tax required to be shown on a return is attributable to 
fraudulent action described in subsection (a), the applicable 
dollar amount under subsection (a) shall in no event be less 
than an amount equal to such portion. A rule similar to 
the rule under section 6663(b) shall apply for purposes of 
determining the portion so attributable.’’. 
(e) EFFECTIVE DATE.—The amendments made by this 
section shall apply to actions, and failures to act, occurring 
after the date of the enactment of this Act. 
SEC. 538. DOUBLING OF CERTAIN PENALTIES, FINES, AND 
INTEREST ON UNDERPAYMENTS RELATED TO 
CERTAIN OFFSHORE FINANCIAL ARRANGE-
MENTS. 
(a) DETERMINATION OF PENALTY.— 
(1) IN
GENERAL.—Notwithstanding any other 
provision of law, in the case of an applicable tax-
payer— 
(A) the determination as to whether any in-
terest or applicable penalty is to be imposed with 
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respect to any arrangement described in para-
graph (2), or to any underpayment of Federal 
income tax attributable to items arising in con-
nection with any such arrangement, shall be 
made without regard to the rules of subsections 
(b), (c), and (d) of section 6664 of the Internal 
Revenue Code of 1986, and 
(B) if any such interest or applicable pen-
alty is imposed, the amount of such interest or 
penalty shall be equal to twice that determined 
without regard to this section. 
(2) APPLICABLE
TAXPAYER.—For purposes of 
this subsection— 
(A) IN
GENERAL.—The term ‘‘applicable 
taxpayer’’ means a taxpayer which— 
(i) has underreported its United States 
income tax liability with respect to any 
item which directly or indirectly involves— 
(I) any financial arrangement 
which in any manner relies on the use 
of offshore payment mechanisms (in-
cluding credit, debit, or charge cards) 
issued by banks or other entities in for-
eign jurisdictions, or 
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(II) any offshore financial ar-
rangement (including any arrange-
ment with foreign banks, financial in-
stitutions, corporations, partnerships, 
trusts, or other entities), and 
(ii) has neither signed a closing agree-
ment pursuant to the Voluntary Offshore 
Compliance Initiative established by the De-
partment of the Treasury under Revenue 
Procedure 2003–11 nor voluntarily dis-
closed its participation in such arrange-
ment by notifying the Internal Revenue 
Service of such arrangement prior to the 
issue being raised by the Internal Revenue 
Service during an examination. 
(B) AUTHORITY TO WAIVE.—The Secretary 
of the Treasury or the Secretary’s delegate may 
waive the application of paragraph (1) to any 
taxpayer if the Secretary or the Secretary’s dele-
gate determines that the use of such offshore pay-
ment mechanisms is incidental to the trans-
action and, in addition, in the case of a trade 
or business, such use is conducted in the ordi-
nary course of the type of trade or business of the 
taxpayer. 
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(C) ISSUES RAISED.—For purposes of sub-
paragraph (A)(ii), an item shall be treated as an 
issue raised during an examination if the indi-
vidual examining the return— 
(i) communicates to the taxpayer 
knowledge about the specific item, or 
(ii) has made a request to the taxpayer 
for information and the taxpayer could not 
make a complete response to that request 
without giving the examiner knowledge of 
the specific item. 
(b) APPLICABLE PENALTY.—For purposes of this sec-
tion, the term ‘‘applicable penalty’’ means any penalty, ad-
dition to tax, or fine imposed under chapter 68 of the Inter-
nal Revenue Code of 1986. 
(c) EFFECTIVE DATE.—The provisions of this section 
shall apply to interest, penalties, additions to tax, and fines 
with respect to any taxable year if, as of the date of the 
enactment of this Act, the assessment of any tax, penalty, 
or interest with respect to such taxable year is not prevented 
by the operation of any law or rule of law. 
SEC. 539. INCREASE IN PENALTY FOR BAD CHECKS AND 
MONEY ORDERS. 
(a) IN GENERAL.—Section 6657 (relating to bad 
checks) is amended— 
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(1) by striking ‘‘$750’’ and inserting ‘‘$1,250’’, 
and 
(2) by striking ‘‘$15’’ and inserting ‘‘$25’’. 
(b) EFFECTIVE DATE.—The amendments made by this 
section apply to checks or money orders received after the 
date of the enactment of this Act. 
SEC. 540. TREATMENT OF CONTINGENT PAYMENT CON-
VERTIBLE DEBT INSTRUMENTS. 
(a) IN GENERAL.—Section 1275(d) (relating to regula-
tion authority) is amended— 
(1) by striking ‘‘The Secretary’’ and inserting 
the following: 
‘‘(1) IN GENERAL.—The Secretary’’, and 
(2) by adding at the end the following new para-
graph: 
‘‘(2) TREATMENT OF CONTINGENT PAYMENT CON-
VERTIBLE DEBT.— 
‘‘(A) IN GENERAL.—In the case of a debt in-
strument which— 
‘‘(i) is convertible into stock of the 
issuing corporation, into stock or debt of a 
related party (within the meaning of section 
267(b) or 707(b)(1)), or into cash or other 
property in an amount equal to the approx-
imate value of such stock or debt, and 
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‘‘(ii) provides for 1 or more contingent 
payments, 
any regulations which require original issue dis-
count to be determined by reference to the com-
parable yield of a fixed-rate debt instrument 
shall be applied as if the regulations require that 
such comparable yield be determined by reference 
to a fixed-rate debt instrument which is convert-
ible into stock. 
‘‘(B) SPECIAL RULE.—For purposes of sub-
paragraph (A), the comparable yield shall be de-
termined without taking into account the yield 
resulting from the conversion of a debt instru-
ment into stock.’’. 
(b) CROSS REFERENCE.—Section 163(e)(6) (relating 
to cross references) is amended by adding at the end the 
following: 
‘‘For the treatment of contingent payment 
convertible debt, see section 1275(d)(2).’’. 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall apply to debt instruments issued on or after 
the date of the enactment of this Act. 
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HR 1591 PP 
SEC. 541. EXTENSION OF IRS USER FEES. 
Subsection (c) of section 7528 (relating to Internal 
Revenue Service user fees) is amended by striking ‘‘Sep-
tember 30, 2014’’ and inserting ‘‘September 30, 2016’’. 
SEC. 542. MODIFICATION OF COLLECTION DUE PROCESS 
PROCEDURES FOR EMPLOYMENT TAX LIABIL-
ITIES. 
(a) IN GENERAL.—Section 6330(f) (relating to jeop-
ardy and State refund collection) is amended— 
(1) by striking ‘‘; or’’ at the end of paragraph 
(1) and inserting a comma, 
(2) by adding ‘‘or’’ at the end of paragraph (2), 
and 
(3) by inserting after paragraph (2) the fol-
lowing new paragraph: 
‘‘(3) the Secretary has served a levy in connec-
tion with the collection of taxes under chapter 21, 22, 
23, or 24,’’. 
(b) EFFECTIVE DATE.—The amendments made by this 
section shall apply to levies issued on or after the date that 
is 120 days after the date of the enactment of this Act. 
SEC. 543. MODIFICATIONS TO WHISTLEBLOWER REFORMS. 
(a) 
MODIFICATION
OF
TAX
THRESHOLD
FOR 
AWARDS.—Subparagraph (B) of section 7623(b)(5), as 
added by the Tax Relief and Health Care Act of 2006, is 
amended by striking ‘‘$2,000,000’’ and inserting ‘‘$20,000’’. 
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(b) WHISTLEBLOWER OFFICE.— 
(1) IN GENERAL.—Section 7623 is amended by 
adding at the end the following new subsections: 
‘‘(c) WHISTLEBLOWER OFFICE.— 
‘‘(1) IN GENERAL.—There is established in the 
Internal Revenue Service an office to be known as the 
‘Whistleblower Office’ which— 
‘‘(A) shall at all times operate at the direc-
tion of the Commissioner and coordinate and 
consult with other divisions in the Internal Rev-
enue Service as directed by the Commissioner, 
‘‘(B) shall analyze information received 
from any individual described in subsection (b) 
and either investigate the matter itself or assign 
it to the appropriate Internal Revenue Service 
office, 
‘‘(C) shall monitor any action taken with 
respect to such matter, 
‘‘(D) shall inform such individual that it 
has accepted the individual’s information for 
further review, 
‘‘(E) may require such individual and any 
legal representative of such individual to not dis-
close any information so provided, 
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‘‘(F) in its sole discretion, may ask for ad-
ditional assistance from such individual or any 
legal representative of such individual, and 
‘‘(G) shall determine the amount to be 
awarded to such individual under subsection (b). 
‘‘(2) FUNDING FOR OFFICE.—There is authorized 
to be appropriated $10,000,000 for each fiscal year 
for the Whistleblower Office. These funds shall be used 
to maintain the Whistleblower Office and also to re-
imburse other Internal Revenue Service offices for re-
lated costs, such as costs of investigation and collec-
tion. 
‘‘(3) REQUEST FOR ASSISTANCE.— 
‘‘(A) IN
GENERAL.—Any assistance re-
quested under paragraph (1)(F) shall be under 
the direction and control of the Whistleblower Of-
fice or the office assigned to investigate the mat-
ter under subparagraph (A). No individual or 
legal representative whose assistance is so re-
quested may by reason of such request represent 
himself or herself as an employee of the Federal 
Government. 
‘‘(B) FUNDING OF ASSISTANCE.—From the 
amounts available for expenditure under sub-
section (b), the Whistleblower Office may, with 
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the agreement of the individual described in sub-
section (b), reimburse the costs incurred by any 
legal representative of such individual in pro-
viding assistance described in subparagraph (A). 
‘‘(d) REPORTS.—The Secretary shall each year con-
duct a study and report to Congress on the use of this sec-
tion, including— 
‘‘(1) an analysis of the use of this section during 
the preceding year and the results of such use, and 
‘‘(2) any legislative or administrative rec-
ommendations regarding the provisions of this section 
and its application.’’. 
(2) CONFORMING AMENDMENT.—Section 406 of 
division A of the Tax Relief and Health Care Act of 
2006 is amended by striking subsections (b) and (c). 
(3) REPORT
ON
IMPLEMENTATION.—Not later 
than 6 months after the date of the enactment of this 
Act, the Secretary of the Treasury shall submit to 
Congress a report on the establishment and operation 
of the Whistleblower Office under section 7623(c) of 
the Internal Revenue Code of 1986. 
(c) PUBLICITY OF AWARD APPEALS.—Paragraph (4) 
of section 7623(b), as added by the Tax Relief and Health 
Care Act of 2006, is amended to read as follows: 
‘‘(4) APPEAL OF AWARD DETERMINATION.— 
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‘‘(A) IN GENERAL.—Any determination re-
garding an award under paragraph (1), (2), or 
(3) may, within 30 days of such determination, 
be appealed to the Tax Court (and the Tax Court 
shall have jurisdiction with respect to such mat-
ter). 
‘‘(B) PUBLICITY
OF
APPEALS.—Notwith-
standing sections 7458 and 7461, the Tax Court 
may, in order to preserve the anonymity, pri-
vacy, or confidentiality of any person under this 
subsection, provide by rules adopted under sec-
tion 7453 that portions of filings, hearings, testi-
mony, evidence, and reports in connection with 
proceedings under this subsection may be closed 
to the public or to inspection by the public.’’. 
(d) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section shall 
apply to information provided on or after the date of 
the enactment of this Act. 
(2) 
PUBLICITY
OF
AWARD
APPEALS.—The 
amendment made by subsection (c) shall take effect as 
if included in the amendments made by section 406 
of the Tax Relief and Health Care Act of 2006. 
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SEC. 544. MODIFICATIONS OF DEFINITION OF EMPLOYEES 
COVERED BY DENIAL OF DEDUCTION FOR EX-
CESSIVE EMPLOYEE REMUNERATION. 
(a) IN GENERAL.—Paragraph (3) of section 162(m) is 
amended to read as follows: 
‘‘(3) COVERED EMPLOYEE.—For purposes of this 
subsection, the term ‘covered employee’ means, with 
respect to any taxpayer for any taxable year, an indi-
vidual who— 
‘‘(A) was the chief executive officer of the 
taxpayer, or an individual acting in such a ca-
pacity, at any time during the taxable year, 
‘‘(B) is 1 of the 4 highest compensated offi-
cers of the taxpayer for the taxable year (other 
than the individual described in subparagraph 
(A)), or 
‘‘(C) was a covered employee of the taxpayer 
(or any predecessor) for any preceding taxable 
year beginning after December 31, 2006. 
‘‘In the case of an individual who was a covered 
employee for any taxable year beginning after Decem-
ber 31, 2006, the term ‘covered employee’ shall include 
a beneficiary of such employee with respect to any re-
muneration for services performed by such employee 
as a covered employee (whether or not such services 
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are performed during the taxable year in which the 
remuneration is paid).’’. 
(b) EFFECTIVE DATE.—The amendment made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2006. 
SEC. 545. INCREASE IN AGE OF MINOR CHILDREN WHOSE 
UNEARNED INCOME IS TAXED AS IF PARENT’S 
INCOME. 
(a) IN
GENERAL.—Subparagraph (A) of section 
1(g)(2) (relating to child to whom subsection applies) is 
amended to read as follows: 
‘‘(A) such child— 
‘‘(i) has not attained age 18 before the 
close of the taxable year, or 
‘‘(ii)(I) has attained age 18 before the 
close of the taxable year and meets the age 
requirements of section 152(c)(3) (deter-
mined without regard to subparagraph (B) 
thereof), and 
‘‘(II) whose earned income (as defined 
in section 911(d)(2)) for such taxable year 
does not exceed one-half of the amount of the 
individual’s support (within the meaning of 
section 152(c)(1)(D) after the application of 
section 152(f)(5) (without regard to sub-
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paragraph (A) thereof) for such taxable 
year,’’. 
(b) EFFECTIVE DATE.—The amendment made by this 
section shall apply to taxable years beginning after the date 
of the enactment of this Act. 
SEC. 546. INCREASE IN INFORMATION RETURN PENALTIES. 
(a) FAILURE TO FILE CORRECT INFORMATION RE-
TURNS.— 
(1) IN GENERAL.—Section 6721(a)(1) is amend-
ed— 
(A) by striking ‘‘$50’’ and inserting 
‘‘$250’’, and 
(B) by striking ‘‘$250,000’’ and inserting 
‘‘$3,000,000’’. 
(2) REDUCTION WHERE CORRECTION IN SPECI-
FIED PERIOD.— 
(A) CORRECTION WITHIN 30 DAYS.—Section 
6721(b)(1) is amended— 
(i) by striking ‘‘$15’’ and inserting 
‘‘$50’’, 
(ii) by striking ‘‘$50’’ and inserting 
‘‘$250’’, and 
(iii) by striking ‘‘$75,000’’ and insert-
ing ‘‘$500,000’’. 
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