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‘‘SEC. 6702. FRIVOLOUS TAX SUBMISSIONS.
‘‘(a) CIVIL
PENALTY
FOR
FRIVOLOUS
TAX
RE-
TURNS.—A person shall pay a penalty of $5,000 if—
‘‘(1) such person files what purports to be a re-
turn of a tax imposed by this title but which—
‘‘(A) does not contain information on which
the substantial correctness of the self-assessment
may be judged, or
‘‘(B) contains information that on its face
indicates that the self-assessment is substantially
incorrect; and
‘‘(2) the conduct referred to in paragraph (1)—
‘‘(A) is based on a position which the Sec-
retary has identified as frivolous under sub-
section (c), or
‘‘(B) reflects a desire to delay or impede the
administration of Federal tax laws.
‘‘(b) CIVIL PENALTY FOR SPECIFIED FRIVOLOUS SUB-
MISSIONS.—
‘‘(1) IMPOSITION OF PENALTY.—Except as pro-
vided in paragraph (3), any person who submits a
specified frivolous submission shall pay a penalty of
$5,000.
‘‘(2) SPECIFIED
FRIVOLOUS
SUBMISSION.—For
purposes of this section—
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‘‘(A) SPECIFIED FRIVOLOUS SUBMISSION.—
The term ‘specified frivolous submission’ means
a specified submission if any portion of such
submission—
‘‘(i) is based on a position which the
Secretary has identified as frivolous under
subsection (c), or
‘‘(ii) reflects a desire to delay or im-
pede the administration of Federal tax
laws.
‘‘(B) SPECIFIED
SUBMISSION.—The term
‘specified submission’ means—
‘‘(i) a request for a hearing under—
‘‘(I) section 6320 (relating to no-
tice and opportunity for hearing upon
filing of notice of lien), or
‘‘(II) section 6330 (relating to no-
tice and opportunity for hearing before
levy), and
‘‘(ii) an application under—
‘‘(I) section 6159 (relating to
agreements for payment of tax liability
in installments),
‘‘(II) section 7122 (relating to
compromises), or
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‘‘(III) section 7811 (relating to
taxpayer assistance orders).
‘‘(3) OPPORTUNITY
TO
WITHDRAW
SUBMIS-
SION.—If the Secretary provides a person with notice
that a submission is a specified frivolous submission
and such person withdraws such submission within
30 days after such notice, the penalty imposed under
paragraph (1) shall not apply with respect to such
submission.
‘‘(c) LISTING OF FRIVOLOUS POSITIONS.—The Sec-
retary shall prescribe (and periodically revise) a list of posi-
tions which the Secretary has identified as being frivolous
for purposes of this subsection. The Secretary shall not in-
clude in such list any position that the Secretary deter-
mines 
meets 
the 
requirement 
of 
section
6662(d)(2)(B)(ii)(II).
‘‘(d) REDUCTION OF PENALTY.—The Secretary may
reduce the amount of any penalty imposed under this sec-
tion if the Secretary determines that such reduction would
promote compliance with and administration of the Federal
tax laws.
‘‘(e) PENALTIES
IN
ADDITION
TO
OTHER
PEN-
ALTIES.—The penalties imposed by this section shall be in
addition to any other penalty provided by law.’’.
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(b) TREATMENT OF FRIVOLOUS REQUESTS FOR HEAR-
INGS BEFORE LEVY.—
(1) FRIVOLOUS REQUESTS DISREGARDED.—Sec-
tion 6330 (relating to notice and opportunity for
hearing before levy) is amended by adding at the end
the following new subsection:
‘‘(g) FRIVOLOUS REQUESTS FOR HEARING, ETC.—
Notwithstanding any other provision of this section, if the
Secretary determines that any portion of a request for a
hearing under this section or section 6320 meets the require-
ment of clause (i) or (ii) of section 6702(b)(2)(A), then the
Secretary may treat such portion as if it were never sub-
mitted and such portion shall not be subject to any further
administrative or judicial review.’’.
(2) PRECLUSION
FROM
RAISING
FRIVOLOUS
ISSUES
AT
HEARING.—Section 
6330(c)(4) 
is
amended—
(A) by striking ‘‘(A)’’ and inserting
‘‘(A)(i)’’;
(B) by striking ‘‘(B)’’ and inserting ‘‘(ii)’’;
(C) by striking the period at the end of the
first sentence and inserting ‘‘; or’’; and
(D) by inserting after subparagraph (A)(ii)
(as so redesignated) the following:
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‘‘(B) the issue meets the requirement of
clause (i) or (ii) of section 6702(b)(2)(A).’’.
(3) 
STATEMENT
OF
GROUNDS.—Section
6330(b)(1) is amended by striking ‘‘under subsection
(a)(3)(B)’’ and inserting ‘‘in writing under subsection
(a)(3)(B) and states the grounds for the requested
hearing’’.
(c) TREATMENT OF FRIVOLOUS REQUESTS FOR HEAR-
INGS UPON FILING OF NOTICE OF LIEN.—Section 6320 is
amended—
(1) in subsection (b)(1), by striking ‘‘under sub-
section (a)(3)(B)’’ and inserting ‘‘in writing under
subsection (a)(3)(B) and states the grounds for the re-
quested hearing’’, and
(2) in subsection (c), by striking ‘‘and (e)’’ and
inserting ‘‘(e), and (g)’’.
(d) TREATMENT OF FRIVOLOUS APPLICATIONS FOR
OFFERS-IN-COMPROMISE
AND
INSTALLMENT
AGREE-
MENTS.—Section 7122 is amended by adding at the end
the following new subsection:
‘‘(e) 
FRIVOLOUS
SUBMISSIONS, 
ETC.—Notwith-
standing any other provision of this section, if the Secretary
determines that any portion of an application for an offer-
in-compromise or installment agreement submitted under
this section or section 6159 meets the requirement of clause
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(i) or (ii) of section 6702(b)(2)(A), then the Secretary may
treat such portion as if it were never submitted and such
portion shall not be subject to any further administrative
or judicial review.’’.
(e) CLERICAL AMENDMENT.—The table of sections for
part I of subchapter B of chapter 68 is amended by striking
the item relating to section 6702 and inserting the following
new item:
‘‘Sec. 6702. Frivolous tax submissions.’’.
(f) EFFECTIVE DATE.—The amendments made by this
section shall apply to submissions made and issues raised
after the date on which the Secretary first prescribes a list
under section 6702(c) of the Internal Revenue Code of 1986,
as amended by subsection (a).
SEC. 5503. INCREASE IN CERTAIN CRIMINAL PENALTIES.
(a) IN GENERAL.—Section 7206 (relating to fraud and
false statements) is amended—
(1) by striking ‘‘Any person who—’’ and insert-
ing ‘‘(a) IN GENERAL.—Any person who—’’, and
(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
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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.’’.
(b) INCREASE IN PENALTIES.—
(1) ATTEMPT TO EVADE OR DEFEAT TAX.—Sec-
tion 7201 is amended—
(A) by striking ‘‘$100,000’’ and inserting
‘‘$500,000’’,
(B) by striking ‘‘$500,000’’ and inserting
‘‘$1,000,000’’, and
(C) by striking ‘‘5 years’’ and inserting ‘‘10
years’’.
(2) WILLFUL FAILURE TO FILE RETURN, SUPPLY
INFORMATION, 
OR
PAY
TAX.—Section 
7203 
is
amended—
(A) in the first sentence—
(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
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(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) ‘$500,000 ($1,000,000’ for ‘$25,000
($100,000’, and
‘‘(C) ‘10 years’ for ‘1 year’.
‘‘(2) FAILURE DESCRIBED.—A failure described
in this paragraph is a failure to make a return de-
scribed in subsection (a) for a period of 3 or more
consecutive taxable years and the aggregated tax li-
ability for such period is at least $100,000.’’.
(3) FRAUD
AND
FALSE
STATEMENTS.—Section
7206(a) (as redesignated by subsection (a)) is
amended—
(A) by striking ‘‘$100,000’’ and inserting
‘‘$500,000’’,
(B) by striking ‘‘$500,000’’ and inserting
‘‘$1,000,000’’, and
(C) by striking ‘‘3 years’’ and inserting ‘‘5
years’’.
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(c) 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. 5504. 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
taxpayer—
(A) the determination as to whether any in-
terest or applicable penalty is to be imposed with
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.
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(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
(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 not signed a closing agreement
pursuant to the Voluntary Offshore Compli-
ance Initiative established by the Depart-
ment of the Treasury under Revenue Proce-
dure 2003-11 or voluntarily disclosed its
participation in such arrangement by noti-
fying the Internal Revenue Service of such
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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 trade or business of the tax-
payer.
(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.