H. R. 2337—24
TITLE XIII—REVENUE OFFSETS
Subtitle A—Application of Failure-to-Pay
Penalty to Substitute Returns
SEC. 1301. APPLICATION OF FAILURE-TO-PAY PENALTY TO SUB-
STITUTE RETURNS.
(a) GENERAL RULE.—Section 6651 (relating to failure to file
tax return or to pay tax) is amended by adding at the end the
following new subsection:
‘‘(g) TREATMENT OF RETURNS PREPARED BY SECRETARY UNDER
SECTION 6020(b).—In the case of any return made by the Secretary
under section 6020(b)—
‘‘(1) such return shall be disregarded for purposes of deter-
mining the amount of the addition under paragraph (1) of
subsection (a), but
‘‘(2) such return shall be treated as the return filed by
the taxpayer for purposes of determining the amount of the
addition under paragraphs (2) and (3) of subsection (a).’’.
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall apply in the case of any return the due date for which
(determined without regard to extensions) is after the date of the
enactment of this Act.
Subtitle B—Exicse Taxes on Amounts of
Private Excess Benefits
SEC. 1311. EXCISE TAXES FOR FAILURE BY CERTAIN CHARITABLE
ORGANIZATIONS TO MEET CERTAIN QUALIFICATION
REQUIREMENTS.
(a) IN GENERAL.—Chapter 42 (relating to private foundations
and certain other tax-exempt organizations) is amended by
redesignating subchapter D as subchapter E and by inserting after
subchapter C the following new subchapter:
‘‘Subchapter D—Failure by Certain Charitable
Organizations To Meet Certain Qualification Requirements
‘‘Sec. 4958. Taxes on excess benefit transactions.
‘‘SEC. 4958. TAXES ON EXCESS BENEFIT TRANSACTIONS.
‘‘(a) INITIAL TAXES.—
‘‘(1) ON
THE
DISQUALIFIED
PERSON.—There is hereby
imposed on each excess benefit transaction a tax equal to
25 percent of the excess benefit. The tax imposed by this
paragraph shall be paid by any disqualified person referred
to in subsection (f)(1) with respect to such transaction.
‘‘(2) ON THE MANAGEMENT.—In any case in which a tax
is imposed by paragraph (1), there is hereby imposed on the
participation of any organization manager in the excess benefit
transaction, knowing that it is such a transaction, a tax equal
to 10 percent of the excess benefit, unless such participation
is not willful and is due to reasonable cause. The tax imposed
H. R. 2337—25
by this paragraph shall be paid by any organization manager
who participated in the excess benefit transaction.
‘‘(b) ADDITIONAL TAX ON THE DISQUALIFIED PERSON.—In any
case in which an initial tax is imposed by subsection (a)(1) on
an excess benefit transaction and the excess benefit involved in
such transaction is not corrected within the taxable period, there
is hereby imposed a tax equal to 200 percent of the excess benefit
involved. The tax imposed by this subsection shall be paid by
any disqualified person referred to in subsection (f)(1) with respect
to such transaction.
‘‘(c) EXCESS BENEFIT TRANSACTION; EXCESS BENEFIT.—For pur-
poses of this section—
‘‘(1) EXCESS BENEFIT TRANSACTION.—
‘‘(A) IN GENERAL.—The term ‘excess benefit transaction’
means any transaction in which an economic benefit is
provided by an applicable tax-exempt organization directly
or indirectly to or for the use of any disqualified person
if the value of the economic benefit provided exceeds the
value of the consideration (including the performance of
services) received for providing such benefit. For purposes
of the preceding sentence, an economic benefit shall not
be treated as consideration for the performance of services
unless such organization clearly indicated its intent to so
treat such benefit.
‘‘(B) EXCESS BENEFIT.—The term ‘excess benefit’ means
the excess referred to in subparagraph (A).
‘‘(2) AUTHORITY
TO
INCLUDE
CERTAIN
OTHER
PRIVATE
INUREMENT.—To the extent provided in regulations prescribed
by the Secretary, the term ‘excess benefit transaction’ includes
any transaction in which the amount of any economic benefit
provided to or for the use of a disqualified person is determined
in whole or in part by the revenues of 1 or more activities
of the organization but only if such transaction results in
inurement not permitted under paragraph (3) or (4) of section
501(c), as the case may be. In the case of any such transaction,
the excess benefit shall be the amount of the inurement not
so permitted.
‘‘(d) SPECIAL RULES.—For purposes of this section—
‘‘(1) JOINT AND SEVERAL LIABILITY.—If more than 1 person
is liable for any tax imposed by subsection (a) or subsection
(b), all such persons shall be jointly and severally liable for
such tax.
‘‘(2) LIMIT FOR MANAGEMENT.—With respect to any 1 excess
benefit transaction, the maximum amount of the tax imposed
by subsection (a)(2) shall not exceed $10,000.
‘‘(e) APPLICABLE TAX-EXEMPT ORGANIZATION.—For purposes of
this subchapter, the term ‘applicable tax-exempt organization’
means—
‘‘(1) any organization which (without regard to any excess
benefit) would be described in paragraph (3) or (4) of section
501(c) and exempt from tax under section 501(a), and
‘‘(2) any organization which was described in paragraph
(1) at any time during the 5-year period ending on the date
of the transaction.
Such term shall not include a private foundation (as defined in
section 509(a)).
‘‘(f) OTHER DEFINITIONS.—For purposes of this section—
H. R. 2337—26
‘‘(1) DISQUALIFIED PERSON.—The term ‘disqualified person’
means, with respect to any transaction—
‘‘(A) any person who was, at any time during the
5-year period ending on the date of such transaction, in
a position to exercise substantial influence over the affairs
of the organization,
‘‘(B) a member of the family of an individual described
in subparagraph (A), and
‘‘(C) a 35-percent controlled entity.
‘‘(2) ORGANIZATION MANAGER.—The term ‘organization man-
ager’ means, with respect to any applicable tax-exempt
organization, any officer, director, or trustee of such organiza-
tion (or any individual having powers or responsibilities similar
to those of officers, directors, or trustees of the organization).
‘‘(3) 35-PERCENT CONTROLLED ENTITY.—
‘‘(A) IN
GENERAL.—The term ‘35-percent controlled
entity’ means—
‘‘(i) a corporation in which persons described in
subparagraph (A) or (B) of paragraph (1) own more
than 35 percent of the total combined voting power,
‘‘(ii) a partnership in which such persons own more
than 35 percent of the profits interest, and
‘‘(iii) a trust or estate in which such persons own
more than 35 percent of the beneficial interest.
‘‘(B) CONSTRUCTIVE OWNERSHIP RULES.—Rules similar
to the rules of paragraphs (3) and (4) of section 4946(a)
shall apply for purposes of this paragraph.
‘‘(4) FAMILY
MEMBERS.—The members of an individual’s
family shall be determined under section 4946(d); except that
such members also shall include the brothers and sisters
(whether by the whole or half blood) of the individual and
their spouses.
‘‘(5) TAXABLE PERIOD.—The term ‘taxable period’ means,
with respect to any excess benefit transaction, the period begin-
ning with the date on which the transaction occurs and ending
on the earliest of—
‘‘(A) the date of mailing a notice of deficiency under
section 6212 with respect to the tax imposed by subsection
(a)(1), or
‘‘(B) the date on which the tax imposed by subsection
(a)(1) is assessed.
‘‘(6) CORRECTION.—The terms ‘correction’ and ‘correct’
mean, with respect to any excess benefit transaction, undoing
the excess benefit to the extent possible, and taking any addi-
tional measures necessary to place the organization in a finan-
cial position not worse than that in which it would be if the
disqualified person were dealing under the highest fiduciary
standards.’’.
(b) APPLICATION OF PRIVATE INUREMENT RULE TO TAX-EXEMPT
ORGANIZATIONS DESCRIBED IN SECTION 501(c)(4).—
(1) IN GENERAL.—Paragraph (4) of section 501(c) is amend-
ed by inserting ‘‘(A)’’ after ‘‘(4)’’ and by adding at the end
the following:
‘‘(B) Subparagraph (A) shall not apply to an entity unless
no part of the net earnings of such entity inures to the benefit
of any private shareholder or individual.’’.
H. R. 2337—27
(2) SPECIAL RULE FOR CERTAIN COOPERATIVES.—In the case
of an organization operating on a cooperative basis which,
before the date of the enactment of this Act, was determined
by the Secretary of the Treasury or his delegate, to be described
in section 501(c)(4) of the Internal Revenue Code of 1986 and
exempt from tax under section 501(a) of such Code, the alloca-
tion or return of net margins or capital to the members of
such organization in accordance with its incorporating statute
and bylaws shall not be treated for purposes of such Code
as the inurement of the net earnings of such organization
to the benefit of any private shareholder or individual. The
preceding sentence shall apply only if such statute and bylaws
are substantially as such statute and bylaws were in existence
on the date of the enactment of this Act.
(c) TECHNICAL AND CONFORMING AMENDMENTS.—
(1) Subsection (e) of section 4955 is amended—
(A) by striking ‘‘SECTION 4945’’ in the heading and
inserting ‘‘SECTIONS 4945 AND 4958’’, and
(B) by inserting before the period ‘‘or an excess benefit
for purposes of section 4958’’.
(2) Subsections (a), (b), and (c) of section 4963 are each
amended by inserting ‘‘4958,’’ after ‘‘4955,’’.
(3) Subsection (e) of section 6213 is amended by inserting
‘‘4958 (relating to private excess benefit),’’ before ‘‘4971’’.
(4) Paragraphs (2) and (3) of section 7422(g) are each
amended by inserting ‘‘4958,’’ after ‘‘4955,’’.
(5) Subsection (b) of section 7454 is amended by inserting
‘‘or whether an organization manager (as defined in section
4958(f)(2)) has ‘knowingly’ participated in an excess benefit
transaction (as defined in section 4958(c)),’’ after ‘‘section
4912(b),’’.
(6) The table of subchapters for chapter 42 is amended
by striking the last item and inserting the following:
‘‘SUBCHAPTER D. Failure by certain charitable organizations to meet certain quali-
fication requirements.
‘‘SUBCHAPTER E. Abatement of first and second tier taxes in certain cases.’’.
(d) EFFECTIVE DATES.—
(1) IN GENERAL.—The amendments made by this section
(other than subsection (b)) shall apply to excess benefit trans-
actions occurring on or after September 14, 1995.
(2) BINDING CONTRACTS.—The amendments referred to in
paragraph (1) shall not apply to any benefit arising from a
transaction pursuant to any written contract which was binding
on September 13, 1995, and at all times thereafter before
such transaction occurred.
(3) APPLICATION
OF
PRIVATE
INUREMENT
RULE
TO
TAX-
EXEMPT ORGANIZATIONS DESCRIBED IN SECTION 501(c)(4).—
(A) IN GENERAL.—The amendment made by subsection
(b) shall apply to inurement occurring on or after Septem-
ber 14, 1995.
(B) BINDING
CONTRACTS.—The amendment made by
subsection (b) shall not apply to any inurement occurring
before January 1, 1997, pursuant to a written contract
which was binding on September 13, 1995, and at all
times thereafter before such inurement occurred.
H. R. 2337—28
SEC. 1312. REPORTING OF CERTAIN EXCISE TAXES AND OTHER
INFORMATION.
(a) REPORTING
BY
ORGANIZATIONS
DESCRIBED
IN
SECTION
501(c)(3).—Subsection (b) of section 6033 (relating to certain
organizations described in section 501(c)(3)) is amended by striking
‘‘and’’ at the end of paragraph (9), by redesignating paragraph
(10) as paragraph (14), and by inserting after paragraph (9) the
following new paragraphs:
‘‘(10) the respective amounts (if any) of the taxes paid
by the organization during the taxable year under the following
provisions:
‘‘(A) section 4911 (relating to tax on excess expendi-
tures to influence legislation),
‘‘(B) section 4912 (relating to tax on disqualifying lobby-
ing expenditures of certain organizations), and
‘‘(C) section 4955 (relating to taxes on political expendi-
tures of section 501(c)(3) organizations),
‘‘(11) the respective amounts (if any) of the taxes paid
by the organization, or any disqualified person with respect
to such organization, during the taxable year under section
4958 (relating to taxes on private excess benefit from certain
charitable organizations),
‘‘(12) such information as the Secretary may require with
respect to any excess benefit transaction (as defined in section
4958),
‘‘(13) such information with respect to disqualified persons
as the Secretary may prescribe, and’’.
(b) ORGANIZATIONS DESCRIBED IN SECTION 501(c)(4).—Section
6033 is amended by redesignating subsection (f) as subsection (g)
and by inserting after subsection (e) the following new subsection:
‘‘(f) CERTAIN ORGANIZATIONS DESCRIBED IN SECTION 501(c)(4).—
Every organization described in section 501(c)(4) which is subject
to the requirements of subsection (a) shall include on the return
required under subsection (a) the information referred to in para-
graphs (11), (12) and (13) of subsection (b) with respect to such
organization.’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to returns for taxable years beginning after the date
of the enactment of this Act.
SEC. 1313. EXEMPT ORGANIZATIONS REQUIRED TO PROVIDE COPY OF
RETURN.
(a) REQUIREMENT TO PROVIDE COPY.—
(1) Subparagraph (A) of section 6104(e)(1) (relating to pub-
lic inspection of annual returns) is amended to read as follows:
‘‘(A) IN GENERAL.—During the 3-year period beginning
on the filing date—
‘‘(i) a copy of the annual return filed under section
6033 (relating to returns by exempt organizations) by
any organization to which this paragraph applies shall
be made available by such organization for inspection
during regular business hours by any individual at
the principal office of such organization and, if such
organization regularly maintains 1 or more regional
or district offices having 3 or more employees, at each
such regional or district office, and
H. R. 2337—29
‘‘(ii) upon request of an individual made at such
principal office or such a regional or district office,
a copy of such annual return shall be provided to
such individual without charge other than a reasonable
fee for any reproduction and mailing costs.
The request described in clause (ii) must be made in person
or in writing. If the request under clause (ii) is made
in person, such copy shall be provided immediately and,
if made in writing, shall be provided within 30 days.’’.
(2) Clause (ii) of section 6104(e)(2)(A) is amended by insert-
ing before the period at the end the following: ‘‘(and, upon
request of an individual made at such principal office or such
a regional or district office, a copy of the material requested
to be available for inspection under this subparagraph shall
be provided (in accordance with the last sentence of paragraph
(1)(A)) to such individual without charge other than reasonable
fee for any reproduction and mailing costs)’’.
(3) Subsection (e) of section 6104 is amended by adding
at the end the following new paragraph:
‘‘(3) LIMITATION.—Paragraph (1)(A)(ii) (and the correspond-
ing provision of paragraph (2)) shall not apply to any request
if, in accordance with regulations promulgated by the Secretary,
the organization has made the requested documents widely
available, or, the Secretary determines, upon application by
an organization, that such request is part of a harassment
campaign and that compliance with such request is not in
the public interest.’’.
(b) INCREASE IN PENALTY FOR WILLFUL FAILURE TO ALLOW
PUBLIC INSPECTION OF CERTAIN RETURNS, ETC.—Section 6685 is
amended by striking ‘‘$1,000’’ and inserting ‘‘$5,000’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to requests made on or after the 60th day after the
Secretary of the Treasury first issues the regulations referred to
section 6104(e)(3) of the Internal Revenue Code of 1986 (as added
by subsection (a)(3)).
SEC. 1314. INCREASE IN PENALTIES ON EXEMPT ORGANIZATIONS FOR
FAILURE TO FILE COMPLETE AND TIMELY ANNUAL
RETURNS.
(a) IN GENERAL.—Subparagraph (A) of section 6652(c)(1) (relat-
ing to annual returns under section 6033) is amended by striking
‘‘$10’’ and inserting ‘‘$20’’ and by striking ‘‘$5,000’’ and inserting
‘‘$10,000’’.
(b) LARGER
PENALTY
ON
ORGANIZATIONS
HAVING
GROSS
RECEIPTS IN EXCESS OF $1,000,000.—Subparagraph (A) of section
6652(c)(1) is amended by adding at the end the following new
sentence: ‘‘In the case of an organization having gross receipts
exceeding $1,000,000 for any year, with respect to the return
required under section 6033 for such year, the first sentence of
this subparagraph shall be applied by substituting ‘$100’ for ‘$20’
and, in lieu of applying the second sentence of this subparagraph,
the maximum penalty under this subparagraph shall not exceed
$50,000.’’.
H. R. 2337—30
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to returns for taxable years ending on or after the
date of the enactment of this Act.
Speaker of the House of Representatives.
Vice President of the United States and
President of the Senate.