rights of the covered expatriate to such item shall 
be treated as becoming transferable and not sub-
ject to a substantial risk of forfeiture on the day 
before the expatriation date, 
‘‘(B) no early distribution tax shall apply 
by reason of such treatment, and 
‘‘(C) appropriate adjustments shall be made 
to subsequent distributions from the plan to re-
flect such treatment. 
‘‘(3) 
ELIGIBLE
DEFERRED
COMPENSATION 
ITEMS.—For purposes of this subsection, the term ‘eli-
gible deferred compensation item’ means any deferred 
compensation item with respect to which— 
‘‘(A) the payor of such item is— 
‘‘(i) a United States person, or 
‘‘(ii) a person who is not a United 
States person but who elects to be treated as 
a United States person for purposes of 
paragraph (1) and meets such requirements 
as the Secretary may provide to ensure that 
the payor will meet the requirements of 
paragraph (1), and 
‘‘(B) the covered expatriate— 
‘‘(i) notifies the payor of his status as 
a covered expatriate, and 
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‘‘(ii) makes an irrevocable waiver of 
any right to claim any reduction under any 
treaty with the United States in with-
holding on such item. 
‘‘(4) DEFERRED COMPENSATION ITEM.—For pur-
poses of this subsection, the term ‘deferred compensa-
tion item’ means— 
‘‘(A) any interest in a plan or arrangement 
described in section 219(g)(5), 
‘‘(B) any interest in a foreign pension plan 
or similar retirement arrangement or program, 
‘‘(C) any item of deferred compensation, 
and 
‘‘(D) any property, or right to property, 
which the individual is entitled to receive in con-
nection with the performance of services to the 
extent not previously taken into account under 
section 83 or in accordance with section 83. 
‘‘(5) EXCEPTION.—Paragraphs (1) and (2) shall 
not apply to any deferred compensation item which 
is attributable to services performed outside the 
United States while the covered expatriate was not a 
citizen or resident of the United States. 
‘‘(6) SPECIAL RULES.— 
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‘‘(A) 
APPLICATION
OF
WITHHOLDING 
RULES.—Rules similar to the rules of subchapter 
B of chapter 3 shall apply for purposes of this 
subsection. 
‘‘(B) APPLICATION OF TAX.—Any item sub-
ject to the withholding tax imposed under para-
graph (1) shall be subject to tax under section 
871. 
‘‘(C) COORDINATION
WITH
OTHER
WITH-
HOLDING REQUIREMENTS.—Any item subject to 
withholding under paragraph (1) shall not be 
subject to withholding under section 1441 or 
chapter 24. 
‘‘(e) TREATMENT OF SPECIFIED TAX DEFERRED AC-
COUNTS.— 
‘‘(1) ACCOUNT TREATED AS DISTRIBUTED.—In 
the case of any interest in a specified tax deferred ac-
count held by a covered expatriate on the day before 
the expatriation date— 
‘‘(A) the covered expatriate shall be treated 
as receiving a distribution of his entire interest 
in such account on the day before the expatria-
tion date, 
‘‘(B) no early distribution tax shall apply 
by reason of such treatment, and 
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‘‘(C) appropriate adjustments shall be made 
to subsequent distributions from the account to 
reflect such treatment. 
‘‘(2) SPECIFIED TAX DEFERRED ACCOUNT.—For 
purposes of paragraph (1), the term ‘specified tax de-
ferred account’ means an individual retirement plan 
(as defined in section 7701(a)(37)) other than any ar-
rangement described in subsection (k) or (p) of section 
408, a qualified tuition program (as defined in sec-
tion 529), a Coverdell education savings account (as 
defined in section 530), a health savings account (as 
defined in section 223), and an Archer MSA (as de-
fined in section 220). 
‘‘(f) SPECIAL RULES FOR NONGRANTOR TRUSTS.— 
‘‘(1) IN GENERAL.—In the case of a distribution 
(directly or indirectly) of any property from a non-
grantor trust to a covered expatriate— 
‘‘(A) the trustee shall deduct and withhold 
from such distribution an amount equal to 30 
percent of the taxable portion of the distribution, 
and 
‘‘(B) if the fair market value of such prop-
erty exceeds its adjusted basis in the hands of the 
trust, gain shall be recognized to the trust as if 
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such property were sold to the expatriate at its 
fair market value. 
‘‘(2) TAXABLE PORTION.—For purposes of this 
subsection, the term ‘taxable portion’ means, with re-
spect to any distribution, that portion of the distribu-
tion which would be includible in the gross income of 
the covered expatriate if such expatriate continued to 
be subject to tax as a citizen or resident of the United 
States. 
‘‘(3) NONGRANTOR TRUST.—For purposes of this 
subsection, the term ‘nongrantor trust’ means the por-
tion of any trust that the individual is not considered 
the owner of under subpart E of part I of subchapter 
J. The determination under the preceding sentence 
shall be made immediately before the expatriation 
date. 
‘‘(4) SPECIAL
RULES
RELATING
TO
WITH-
HOLDING.—For purposes of this subsection— 
‘‘(A) rules similar to the rules of subsection 
(d)(6) shall apply, and 
‘‘(B) the covered expatriate shall be treated 
as having waived any right to claim any reduc-
tion under any treaty with the United States in 
withholding on any distribution to which para-
graph (1)(A) applies. 
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‘‘(g) DEFINITIONS AND SPECIAL RULES RELATING TO 
EXPATRIATION.—For purposes of this section— 
‘‘(1) COVERED EXPATRIATE.— 
‘‘(A) IN GENERAL.—The term ‘covered expa-
triate’ means an expatriate who meets the re-
quirements of subparagraph (A), (B), or (C) of 
section 877(a)(2). 
‘‘(B) EXCEPTIONS.—An individual shall 
not be treated as meeting the requirements of 
subparagraph (A) or (B) of section 877(a)(2) 
if— 
‘‘(i) the individual— 
‘‘(I) became at birth a citizen of 
the United States and a citizen of an-
other country and, as of the expatria-
tion date, continues to be a citizen of, 
and is taxed as a resident of, such 
other country, and 
‘‘(II) has been a resident of the 
United States (as defined in section 
7701(b)(1)(A)(ii)) for not more than 
10 taxable years during the 15-taxable 
year period ending with the taxable 
year during which the expatriation 
date occurs, or 
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‘‘(ii)(I) the individual’s relinquishment 
of United States citizenship occurs before 
such individual attains age 181⁄2, and 
‘‘(II) the individual has been a resi-
dent of the United States (as so defined) for 
not more than 10 taxable years before the 
date of relinquishment. 
‘‘(C) COVERED EXPATRIATES ALSO SUBJECT 
TO
TAX
AS
CITIZENS
OR
RESIDENTS.—In the 
case of any covered expatriate who is subject to 
tax as a citizen or resident of the United States 
for any period beginning after the expatriation 
date, such individual shall not be treated as a 
covered expatriate during such period for pur-
poses of subsections (d)(1) and (f) and section 
2801. 
‘‘(2) 
EXPATRIATE.—The 
term 
‘expatriate’ 
means— 
‘‘(A) any United States citizen who relin-
quishes his citizenship, and 
‘‘(B) any long-term resident of the United 
States who ceases to be a lawful permanent resi-
dent of the United States (within the meaning of 
section 7701(b)(6)). 
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‘‘(3) EXPATRIATION DATE.—The term ‘expatria-
tion date’ means— 
‘‘(A) the date an individual relinquishes 
United States citizenship, or 
‘‘(B) in the case of a long-term resident of 
the United States, the date on which the indi-
vidual ceases to be a lawful permanent resident 
of the United States (within the meaning of sec-
tion 7701(b)(6)). 
‘‘(4) RELINQUISHMENT OF CITIZENSHIP.—A cit-
izen shall be treated as relinquishing his United 
States citizenship on the earliest of— 
‘‘(A) the date the individual renounces his 
United States nationality before a diplomatic or 
consular officer of the United States pursuant to 
paragraph (5) of section 349(a) of the Immigra-
tion and Nationality Act (8 U.S.C. 1481(a)(5)), 
‘‘(B) the date the individual furnishes to the 
United States Department of State a signed 
statement of voluntary relinquishment of United 
States nationality confirming the performance of 
an act of expatriation specified in paragraph 
(1), (2), (3), or (4) of section 349(a) of the Im-
migration and Nationality Act (8 U.S.C. 
1481(a)(1)–(4)), 
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‘‘(C) the date the United States Department 
of State issues to the individual a certificate of 
loss of nationality, or 
‘‘(D) the date a court of the United States 
cancels a naturalized citizen’s certificate of natu-
ralization. 
Subparagraph (A) or (B) shall not apply to any in-
dividual unless the renunciation or voluntary relin-
quishment is subsequently approved by the issuance to 
the individual of a certificate of loss of nationality by 
the United States Department of State. 
‘‘(5) LONG-TERM
RESIDENT.—The term ‘long- 
term resident’ has the meaning given to such term by 
section 877(e)(2). 
‘‘(6) EARLY
DISTRIBUTION
TAX.—The term 
‘early distribution tax’ means any increase in tax im-
posed under section 72(t), 220(e)(4), 223(f)(4), 
409A(a)(1)(B), 529(c)(6), or 530(d)(4). 
‘‘(h) OTHER RULES.— 
‘‘(1) TERMINATION OF DEFERRALS, ETC.—In the 
case of any covered expatriate, notwithstanding any 
other provision of this title— 
‘‘(A) any time period for acquiring prop-
erty which would result in the reduction in the 
amount of gain recognized with respect to prop-
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erty disposed of by the taxpayer shall terminate 
on the day before the expatriation date, and 
‘‘(B) any extension of time for payment of 
tax shall cease to apply on the day before the ex-
patriation date and the unpaid portion of such 
tax shall be due and payable at the time and in 
the manner prescribed by the Secretary. 
‘‘(2) STEP-UP IN BASIS.—Solely for purposes of 
determining any tax imposed by reason of subsection 
(a), property which was held by an individual on the 
date the individual first became a resident of the 
United States (within the meaning of section 7701(b)) 
shall be treated as having a basis on such date of not 
less than the fair market value of such property on 
such date. The preceding sentence shall not apply if 
the individual elects not to have such sentence apply. 
Such an election, once made, shall be irrevocable. 
‘‘(3) COORDINATION WITH SECTION 684.—If the 
expatriation of any individual would result in the 
recognition of gain under section 684, this section 
shall be applied after the application of section 684. 
‘‘(i) REGULATIONS.—The Secretary shall prescribe 
such regulations as may be necessary or appropriate to 
carry out the purposes of this section.’’. 
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(b) TAX
ON GIFTS
AND BEQUESTS RECEIVED
BY 
UNITED STATES CITIZENS AND RESIDENTS FROM EXPA-
TRIATES.— 
(1) IN GENERAL.—Subtitle B (relating to estate 
and gift taxes) is amended by inserting after chapter 
14 the following new chapter: 
‘‘CHAPTER 15—GIFTS AND BEQUESTS 
FROM EXPATRIATES 
‘‘Sec. 2801. Imposition of tax. 
‘‘SEC. 2801. IMPOSITION OF TAX. 
‘‘(a) IN GENERAL.—If, during any calendar year, any 
United States citizen or resident receives any covered gift 
or bequest, there is hereby imposed a tax equal to the prod-
uct of— 
‘‘(1) the highest rate of tax specified in the table 
contained in section 2001(c) as in effect on the date 
of such receipt (or, if greater, the highest rate of tax 
specified in the table applicable under section 2502(a) 
as in effect on the date), and 
‘‘(2) the value of such covered gift or bequest. 
‘‘(b) TAX TO BE PAID BY RECIPIENT.—The tax im-
posed by subsection (a) on any covered gift or bequest shall 
be paid by the person receiving such gift or bequest. 
‘‘(c) EXCEPTION FOR CERTAIN GIFTS.—Subsection (a) 
shall apply only to the extent that the value of covered gifts 
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and bequests received by any person during the calendar 
year exceeds $10,000. 
‘‘(d) TAX REDUCED BY FOREIGN GIFT OR ESTATE 
TAX.—The tax imposed by subsection (a) on any covered 
gift or bequest shall be reduced by the amount of any gift 
or estate tax paid to a foreign country with respect to such 
covered gift or bequest. 
‘‘(e) COVERED GIFT OR BEQUEST.— 
‘‘(1) IN GENERAL.—For purposes of this chapter, 
the term ‘covered gift or bequest’ means— 
‘‘(A) any property acquired by gift directly 
or indirectly from an individual who, at the 
time of such acquisition, is a covered expatriate, 
and 
‘‘(B) any property acquired directly or in-
directly by reason of the death of an individual 
who, immediately before such death, was a cov-
ered expatriate. 
‘‘(2) EXCEPTIONS FOR TRANSFERS OTHERWISE 
SUBJECT TO ESTATE OR GIFT TAX.—Such term shall 
not include— 
‘‘(A) any property shown on a timely filed 
return of tax imposed by chapter 12 which is a 
taxable gift by the covered expatriate, and 
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‘‘(B) any property included in the gross es-
tate of the covered expatriate for purposes of 
chapter 11 and shown on a timely filed return 
of tax imposed by chapter 11 of the estate of the 
covered expatriate. 
‘‘(3) TRANSFERS IN TRUST.— 
‘‘(A) DOMESTIC TRUSTS.—In the case of a 
covered gift or bequest made to a domestic 
trust— 
‘‘(i) subsection (a) shall apply in the 
same manner as if such trust were a United 
States citizen, and 
‘‘(ii) the tax imposed by subsection (a) 
on such gift or bequest shall be paid by such 
trust. 
‘‘(B) FOREIGN TRUSTS.— 
‘‘(i) IN GENERAL.—In the case of a 
covered gift or bequest made to a foreign 
trust, subsection (a) shall apply to any dis-
tribution attributable to such gift or bequest 
from such trust (whether from income or 
corpus) to a United States citizen or resi-
dent in the same manner as if such dis-
tribution were a covered gift or bequest. 
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‘‘(ii) DEDUCTION FOR TAX PAID BY RE-
CIPIENT.—There shall be allowed as a de-
duction under section 164 the amount of tax 
imposed by this section which is paid or ac-
crued by a United States citizen or resident 
by reason of a distribution from a foreign 
trust, but only to the extent such tax is im-
posed on the portion of such distribution 
which is included in the gross income of 
such citizen or resident. 
‘‘(iii) ELECTION TO BE TREATED AS 
DOMESTIC TRUST.—Solely for purposes of 
this section, a foreign trust may elect to be 
treated as a domestic trust. Such an election 
may be revoked with the consent of the Sec-
retary. 
‘‘(f) COVERED EXPATRIATE.—For purposes of this sec-
tion, the term ‘covered expatriate’ has the meaning given 
to such term by section 877A(g)(1).’’. 
(2) CLERICAL AMENDMENT.—The table of chap-
ters for subtitle B is amended by inserting after the 
item relating to chapter 14 the following new item: 
‘‘CHAPTER 15. GIFTS AND BEQUESTS FROM EXPATRIATES.’’. 
(c) DEFINITION OF TERMINATION OF UNITED STATES 
CITIZENSHIP.— 
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(1) IN GENERAL.—Section 7701(a) is amended 
by adding at the end the following new paragraph: 
‘‘(50) TERMINATION OF UNITED STATES CITIZEN-
SHIP.— 
‘‘(A) IN GENERAL.—An individual shall not 
cease to be treated as a United States citizen be-
fore the date on which the individual’s citizen-
ship is treated as relinquished under section 
877A(g)(4). 
‘‘(B) DUAL
CITIZENS.—Under regulations 
prescribed by the Secretary, subparagraph (A) 
shall not apply to an individual who became at 
birth a citizen of the United States and a citizen 
of another country.’’. 
(2) CONFORMING AMENDMENTS.— 
(A) Paragraph (1) of section 877(e) is 
amended to read as follows: 
‘‘(1) IN GENERAL.—Any long-term resident of 
the United States who ceases to be a lawful perma-
nent resident of the United States (within the mean-
ing of section 7701(b)(6)) shall be treated for purposes 
of this section and sections 2107, 2501, and 6039G in 
the same manner as if such resident were a citizen of 
the United States who lost United States citizenship 
on the date of such cessation or commencement.’’. 
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(B) Paragraph (6) of section 7701(b) is 
amended by adding at the end the following flush 
sentence: 
‘‘An individual shall cease to be treated as a lawful 
permanent resident of the United States if such indi-
vidual commences to be treated as a resident of a for-
eign country under the provisions of a tax treaty be-
tween the United States and the foreign country, does 
not waive the benefits of such treaty applicable to 
residents of the foreign country, and notifies the Sec-
retary of the commencement of such treatment.’’. 
(C) Section 7701 is amended by striking 
subsection (n) and by redesignating subsections 
(o) and (p) as subsections (n) and (o), respec-
tively. 
(d) INFORMATION
RETURNS.—Section 6039G is 
amended— 
(1) by inserting ‘‘or 877A’’ after ‘‘section 877(b)’’ 
in subsection (a), and 
(2) by inserting ‘‘or 877A’’ after ‘‘section 
877(a)’’ in subsection (d). 
(e) 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.’’. 
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(f) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as provided in this 
subsection, the amendments made by this section shall 
apply to expatriates (as defined in section 877A(g) of 
the Internal Revenue Code of 1986, as added by this 
section) whose expatriation date (as so defined) is on 
or after the date of the enactment of this Act. 
(2) GIFTS AND BEQUESTS.—Chapter 15 of the 
Internal Revenue Code of 1986 (as added by sub-
section (b)) shall apply to covered gifts and bequests 
(as defined in section 2801 of such Code, as so added) 
received on or after the date of the enactment of this 
Act, regardless of when the transferor expatriated. 
SEC. 6. REPEAL OF SUSPENSION OF CERTAIN PENALTIES 
AND INTEREST. 
(a) IN GENERAL.—Section 6404 is amended by strik-
ing subsection (g) and by redesignating subsection (h) as 
subsection (g). 
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to notices provided by the Secretary 
of the Treasury, or his delegate, after the date which is 6 
months after the date of the enactment of the Small Busi-
ness and Work Opportunity Tax Act of 2007. 
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SEC. 7. INCREASE IN INFORMATION RETURN PENALTIES. 
(a) FAILURE TO FILE CORRECT INFORMATION RE-
TURNS.— 
(1) IN GENERAL.—Subsections (a)(1), (b)(1)(A), 
and (b)(2)(A) of section 6721 are each amended by 
striking ‘‘$50’’ and inserting ‘‘$100’’. 
(2) AGGREGATE
ANNUAL
LIMITATION.—Sub-
sections (a)(1), (d)(1)(A), and (e)(3)(A) of section 
6721 are each amended by striking ‘‘$250,000’’ and 
inserting ‘‘$600,000’’. 
(b) REDUCTION WHERE CORRECTION WITHIN 30 
DAYS.— 
(1) IN GENERAL.—Subparagraph (A) of section 
6721(b)(1) is amended by striking ‘‘$15’’ and insert-
ing ‘‘$25’’. 
(2) AGGREGATE
ANNUAL
LIMITATION.—Sub-
sections (b)(1)(B) and (d)(1)(B) of section 6721 are 
each amended by striking ‘‘$75,000’’ and inserting 
‘‘$200,000’’. 
(c) REDUCTION WHERE CORRECTION ON OR BEFORE 
AUGUST 1.— 
(1) IN GENERAL.—Subparagraph (A) of section 
6721(b)(2) is amended by striking ‘‘$30’’ and insert-
ing ‘‘$60’’. 
(2) AGGREGATE
ANNUAL
LIMITATION.—Sub-
sections (b)(2)(B) and (d)(1)(C) of section 6721 are 
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each amended by striking ‘‘$150,000’’ and inserting 
‘‘$400,000’’. 
(d) AGGREGATE ANNUAL LIMITATIONS FOR PERSONS 
WITH GROSS RECEIPTS OF NOT MORE THAN $5,000,000.— 
Paragraph (1) of section 6721(d) is amended— 
(1) by striking ‘‘$100,000’’ in subparagraph (A) 
and inserting ‘‘$250,000’’, 
(2) by striking ‘‘$25,000’’ in subparagraph (B) 
and inserting ‘‘$75,000’’, and 
(3) by striking ‘‘$50,000’’ in subparagraph (C) 
and inserting ‘‘$150,000’’. 
(e) PENALTY IN CASE OF INTENTIONAL DISREGARD.— 
Paragraph (2) of section 6721(e) is amended by striking 
‘‘$100’’ and inserting ‘‘$250’’. 
(f) FAILURE TO FURNISH CORRECT PAYEE STATE-
MENTS.— 
(1) IN GENERAL.—Subsection (a) of section 6722 
is amended by striking ‘‘$50’’ and inserting ‘‘$100’’. 
(2) AGGREGATE
ANNUAL
LIMITATION.—Sub-
sections (a) and (c)(2)(A) of section 6722 are each 
amended by striking ‘‘$100,000’’ and inserting 
‘‘$600,000’’. 
(3) PENALTY
IN
CASE
OF
INTENTIONAL
DIS-
REGARD.—Paragraph (1) of section 6722(c) is 
amended by striking ‘‘$100’’ and inserting ‘‘$250’’. 
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(g) FAILURE TO COMPLY WITH OTHER INFORMATION 
REPORTING REQUIREMENTS.—Section 6723 is amended— 
(1) by striking ‘‘$50’’ and inserting ‘‘$100’’, and 
(2) by striking ‘‘$100,000’’ and inserting 
‘‘$600,000’’. 
(h) EFFECTIVE DATE.—The amendments made by this 
section shall apply with respect to information returns re-
quired to be filed on or after January 1, 2008. 
SEC. 8. TIME FOR PAYMENT OF CORPORATE ESTIMATED 
TAXES. 
Subparagraph (B) of section 401(1) of the Tax In-
crease Prevention and Reconciliation Act of 2005 is amend-
ed by striking ‘‘114.50 percent’’ and inserting ‘‘114.75 per-
cent’’. 
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Union Calendar No. 182 
110TH CONGRESS 
1ST SESSION 
H. R. 3056 
[Report No. 110–281] 
A BILL 
To amend the Internal Revenue Code of 1986 to 
repeal the authority of the Internal Revenue 
Service to use private debt collection companies, 
to delay implementation of withholding taxes on 
government contractors, to revise the tax rules 
on expatriation, and for other purposes. 
JULY 31, 2007 
Reported with an amendment, committed to the Com-
mittee of the Whole House on the State of the Union, 
and ordered to be printed 
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Jkt 059200
PO 00000
Frm 00032
Fmt 6651
Sfmt 6651
E:\BILLS\H3056.RH
H3056
pwalker on PROD1PC71 with BILLS