tax is imposed on the portion of such dis-
tribution which is included in the gross in-
come 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 elec-
tion may be revoked with the consent of 
the Secretary. 
‘‘(f) COVERED EXPATRIATE.—For purposes of this 
section, the term ‘covered expatriate’ has the meaning 
given to such term by section 877A(g)(1).’’. 
(2) CLERICAL
AMENDMENT.—The table of 
chapters 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.— 
(1) IN GENERAL.—Section 7701(a) is amended 
by adding at the end the following new paragraph: 
‘‘(50) TERMINATION OF UNITED STATES CITI-
ZENSHIP.— 
‘‘(A) IN
GENERAL.—An individual shall 
not cease to be treated as a United States cit-
izen before the date on which the individual’s 
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citizenship is treated as relinquished under sec-
tion 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 cit-
izen 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 pur-
poses 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 com-
mencement.’’. 
(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 in-
dividual commences to be treated as a resident of a 
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foreign country under the provisions of a tax treaty 
between 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 
Secretary 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 amended by inserting after the item relating to section 
877 the following new item: 
‘‘Sec. 877A. Tax responsibilities of expatriation.’’. 
(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 
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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 enact-
ment of this Act, regardless of when the transferor 
expatriated. 
SEC. 405. 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 
subsection (a) shall apply to notices provided by the Sec-
retary of the Treasury, or his delegate, after the date 
which is 6 months after the date of the enactment of the 
Small Business and Work Opportunity Tax Act of 2007. 
SEC. 406. 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’’. 
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(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 
each amended by striking ‘‘$150,000’’ and inserting 
‘‘$400,000’’. 
(d) AGGREGATE ANNUAL LIMITATIONS FOR PER-
SONS WITH GROSS RECEIPTS
OF NOT MORE THAN 
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