723
or’’, and by inserting after paragraph (21)
the following new paragraph:
‘‘(22) any payment made to or for the benefit
of an employee if at the time of such payment it is
reasonable to believe that the employee will be able
to exclude such payment from income under section
106(b).’’
(ii) Subsection (a) of section 209 of
the Social Security Act is amended by
striking ‘‘or’’ at the end of paragraph (17),
by striking the period at the end of para-
graph (18) and inserting ‘‘; or’’, and by in-
serting after paragraph (18) the following
new paragraph:
‘‘(19) any payment made to or for the benefit
of an employee if at the time of such payment it is
reasonable to believe that the employee will be able
to exclude such payment from income under section
106(b) of the Internal Revenue Code of 1986.’’
(B) RAILROAD
RETIREMENT
TAX.—Sub-
section (e) of section 3231 is amended by add-
ing at the end the following new paragraph:
‘‘(10) MEDICAL SAVINGS ACCOUNT CONTRIBU-
TIONS.—The term ‘compensation’ shall not include
any payment made to or for the benefit of an em-
724
ployee if at the time of such payment it is reason-
able to believe that the employee will be able to ex-
clude such payment from income under section
106(b).’’
(C) UNEMPLOYMENT TAX.—Subsection (b)
of section 3306 is amended by striking ‘‘or’’ at
the end of paragraph (15), by striking the pe-
riod at the end of paragraph (16) and inserting
‘‘; or’’, and by inserting after paragraph (16)
the following new paragraph:
‘‘(17) any payment made to or for the benefit
of an employee if at the time of such payment it is
reasonable to believe that the employee will be able
to exclude such payment from income under section
106(b).’’
(D) WITHHOLDING
TAX.—Subsection (a)
of section 3401 is amended by striking ‘‘or’’ at
the end of paragraph (19), by striking the pe-
riod at the end of paragraph (20) and inserting
‘‘; or’’, and by inserting after paragraph (20)
the following new paragraph:
‘‘(21) any payment made to or for the benefit
of an employee if at the time of such payment it is
reasonable to believe that the employee will be able
725
to exclude such payment from income under section
106(b).’’
(d) MEDICAL SAVINGS ACCOUNT CONTRIBUTIONS
NOT AVAILABLE UNDER CAFETERIA PLANS.—Subsection
(f) of section 125 is amended by inserting ‘‘106(b),’’ be-
fore ‘‘117’’.
(e) TAX ON PROHIBITED TRANSACTIONS.—Section
4975 (relating to tax on prohibited transactions) is
amended—
(1) by adding at the end of subsection (c) the
following new paragraph:
‘‘(4) SPECIAL RULE FOR MEDICAL SAVINGS AC-
COUNTS.—An individual for whose benefit a medical
savings account (within the meaning of section
220(d)) is established shall be exempt from the tax
imposed by this section with respect to any trans-
action concerning such account (which would other-
wise be taxable under this section) if, with respect
to such transaction, the account ceases to be a medi-
cal savings account by reason of the application of
section 220(e)(2) to such account.’’, and
(2) by inserting ‘‘or a medical savings account
described in section 220(d)’’ in subsection (e)(1)
after ‘‘described in section 408(a)’’.
726
(f) FAILURE TO PROVIDE REPORTS ON MEDICAL
SAVINGS ACCOUNTS.—Section 6693 (relating to failure to
provide reports on individual retirement accounts or annu-
ities) is amended—
(1) by inserting ‘‘OR ON MEDICAL SAVINGS
ACCOUNTS’’ after ‘‘ANNUITIES’’ in the heading of
such section, and
(2) by adding at the end of subsection (a) the
following: ‘‘The person required by section 220(h) to
file a report regarding a medical savings account at
the time and in the manner required by such section
shall pay a penalty of $50 for each failure to so file
unless it is shown that such failure is due to reason-
able cause.’’
(g) CLERICAL AMENDMENTS.—
(1) The table of sections for part VII of sub-
chapter B of chapter 1 is amended by striking the
last item and inserting the following:
‘‘Sec. 220. Medical savings accounts.
‘‘Sec. 221. Cross reference.’’
(2) The table of sections for subchapter B of
chapter 68 is amended by inserting ‘‘or on medical
savings accounts’’ after ‘‘annuities’’ in the item re-
lating to section 6693.
727
(h) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
Subtitle C—Pickle-Johnson
Taxpayer Bill of Rights 2
PART I—TAXPAYER ADVOCATE
SEC. 13301. ESTABLISHMENT OF POSITION OF TAXPAYER
ADVOCATE 
WITHIN 
INTERNAL 
REVENUE
SERVICE.
(a) GENERAL RULE.—Section 7802 (relating to
Commissioner of Internal Revenue; Assistant Commis-
sioner (Employee Plans and Exempt Organizations)) is
amended by adding at the end the following new sub-
section:
‘‘(d) OFFICE OF TAXPAYER ADVOCATE.—
‘‘(1) IN GENERAL.—There is established in the
Internal Revenue Service an office to be known as
the ‘Office of the Taxpayer Advocate’. Such office
shall be under the supervision and direction of an of-
ficial to be known as the ‘Taxpayer Advocate’ who
shall be appointed by and report directly to the
Commissioner of Internal Revenue. The Taxpayer
Advocate shall be entitled to compensation at the
same rate as the highest level official reporting di-
780
tember 13, 1995, in taxable years ending after such
date.
(2) SUBSECTION (b).—The amendment made
by subsection (b) shall take effect as if included in
the amendment made by section 613 of the Tax Re-
form Act of 1986.
SEC. 13403. CLARIFICATION OF DEPRECIATION CLASS FOR
CERTAIN ENERGY PROPERTY.
(a) IN GENERAL.—Subparagraph (B) of section
168(e)(3) (relating to 5-year property) is amended by add-
ing at the end the following flush sentence:
‘‘Nothing in any provision of law shall be con-
strued to treat property as not being described
in clause (vi)(I) (or the corresponding provi-
sions of prior law) by reason of being public
utility property (within the meaning of section
48(a)(3)).’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect as if included in the
amendments made by section 11813 of the Revenue Rec-
onciliation Act of 1990.
SEC. 13404. CLERICAL AMENDMENT TO SECTION 404.
(a) IN GENERAL.—Paragraph (1) of section 404(j)
is amended by striking ‘‘(10)’’ and inserting ‘‘(9)’’.