I 
115TH CONGRESS 
1ST SESSION H. R. 4189 
To reduce the disadvantages of individual retirement arrangements with re-
spect to employer-sponsored retirement plans by helping taxpayers comply 
with laws affecting individual retirement arrangements, by providing for 
reduced penalties under the Internal Revenue Code of 1986 for certain 
self-corrections with respect to such laws, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
OCTOBER 31, 2017 
Mr. KELLY of Pennsylvania introduced the following bill; which was referred 
to the Committee on Ways and Means 
A BILL 
To reduce the disadvantages of individual retirement ar-
rangements with respect to employer-sponsored retire-
ment plans by helping taxpayers comply with laws affect-
ing individual retirement arrangements, by providing for 
reduced penalties under the Internal Revenue Code of 
1986 for certain self-corrections with respect to such 
laws, and for other purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘IRA Preservation Act 
of 2017’’. 
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SEC. 2. EDUCATION AND OUTREACH. 
(a) INFORMATION MADE AVAILABLE.—The Sec-
retary shall make available to the public the following in-
formation: 
(1) An overview of the laws and regulations re-
lated to individual retirement arrangements, includ-
ing— 
(A) limits on contributions; 
(B) limits on deductions for contributions; 
(C) rollovers; 
(D) minimum required distributions; 
(E) non-exempt prohibited transactions; 
and 
(F) tax consequences for early distribu-
tions. 
(2) Examples of common errors by taxpayers 
with respect to the laws and regulations described in 
paragraph (1) and instructions on how to avoid such 
errors. 
(b) TARGETED ADVANCE NOTICES.—Based on the 
information on common errors identified under subsection 
(a)(2), the Secretary shall identify critical failure points 
and cause notices to be issued to individual taxpayers in 
advance of their reaching such critical failure points, with 
advice on how to avoid such failures. 
(c) SOFT NOTICE PROGRAM.— 
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(1) IN GENERAL.—The Secretary shall, at such 
time as the Secretary considers appropriate, cause a 
notice under this subsection to be issued to a tax-
payer if the Secretary detects a material inconsist-
ency between or among any tax returns or reports 
filed under the Internal Revenue Code of 1986, in-
cluding an individual tax return and a third-party 
information return, that could represent tax liability 
incurred by the taxpayer because of— 
(A) an excess contribution to an individual 
retirement arrangement as described in section 
4973 of the Internal Revenue Code of 1986; 
(B) an excess accumulation in an indi-
vidual retirement arrangement as described in 
section 4974 of such Code; or 
(C) any other error associated with an in-
dividual retirement arrangement that the Sec-
retary has the capability to detect automatically 
because of inconsistencies in returns filed or re-
ports made under such Code. 
(2) EXCEPTIONS.—The Secretary is not re-
quired to issue a notice under paragraph (1) with re-
spect to an individual retirement arrangement in any 
case in which the Secretary— 
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(A) intends to initiate an audit of the indi-
vidual retirement arrangement; 
(B) has reason to believe there is no out-
standing tax liability attributable to an excess 
contribution, excess accumulation, or other 
error described in subparagraph (A), (B), or 
(C) of paragraph (1); or 
(C) has other good cause consistent with 
the purposes of this Act. 
(3) CONTENT.—A notice issued under para-
graph (1) to a taxpayer with respect to an individual 
retirement arrangement shall include— 
(A) an explanation of taxes that could be 
owed, as of the date of the notice, because of 
an excess contribution, excess accumulation, or 
other error described in subparagraph (A), (B), 
or (C) of paragraph (1), including, if applicable, 
an explanation of the reduced rates of tax avail-
able under section 4973(i) or 4974(e), as the 
case may be, of the Internal Revenue Code of 
1986 for voluntary correction of an excess con-
tribution or excess accumulation described in 
subparagraph (A) or (B) of paragraph (1) if 
voluntary correction is made within the correc-
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tion window applicable under section 4973(i) or 
4974(e), as the case may be, of such Code; 
(B) a statement that any failure to remit 
any taxes owed may result in an audit; 
(C) in the case of an excess contribution or 
excess accumulation described in subparagraph 
(A) or (B) of paragraph (1), an explanation of 
taxes that could be owed because of such excess 
contribution or excess accumulation, if vol-
untary correction is not made within the correc-
tion window applicable under section 4973(i) or 
4974(e), as the case may be, of the Internal 
Revenue Code of 1986; and 
(D) a copy of the applicable form to be 
used by the taxpayer to remit taxes owed with 
respect to the individual retirement arrange-
ment because of the potential excess contribu-
tion, excess accumulation, or other error de-
scribed in the notice. 
(4) COORDINATION
WITH
SELF-CORRECTION 
PROCEDURES.—A notice issued under this para-
graph may not be considered as initiating an audit 
or otherwise demanding payment for purposes of 
section 4973(i) or 4974(e) of the Internal Revenue 
Code of 1986. 
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SEC. 3. REDUCTION OF EXCISE TAXES FOR VOLUNTARY 
CORRECTION OF COMMON IRA ERRORS. 
(a) REDUCTION IN EXCISE TAX ON EXCESS CON-
TRIBUTIONS.—Section 4973 of the Internal Revenue Code 
of 1986 is amended by adding at the end the following 
new subsection: 
‘‘(i) REDUCTION OF TAX IN CERTAIN CASES.— 
‘‘(1) REDUCTION.—In the case of a taxpayer 
who— 
‘‘(A) corrects, during the correction win-
dow, an excess contribution that was made to 
an individual retirement arrangement and that 
resulted in imposition of a tax under paragraph 
(1) or (3) of subsection (a), and 
‘‘(B) submits a return, during the correc-
tion window, reflecting such tax (as modified by 
this subsection), 
the first and second sentences of subsection (a) shall 
be applied by substituting ‘3 percent’ for ‘6 percent’ 
each place it appears. 
‘‘(2) CORRECTION
WINDOW
DEFINED.—For 
purposes of this subsection, the term ‘correction win-
dow’ means the period beginning on the date on 
which the tax under subsection (a) is imposed with 
respect to an excess contribution, and ending on the 
earlier of— 
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‘‘(A) the date on which the Secretary initi-
ates an audit, or otherwise demands payment, 
with respect to the excess contribution, or 
‘‘(B) the last day of the second tax year 
that begins after the end of the tax year in 
which the tax under subsection (a) is im-
posed.’’. 
(b) REDUCTION IN EXCISE TAX ON FAILURES TO 
TAKE REQUIRED MINIMUM DISTRIBUTIONS.— 
(1) IN GENERAL.—Section 4974 of the Internal 
Revenue Code of 1986 is amended by adding at the 
end the following new subsection: 
‘‘(e) REDUCTION OF TAX IN CERTAIN CASES.— 
‘‘(1) REDUCTION.—In the case of a taxpayer 
who— 
‘‘(A) corrects, during the correction win-
dow, a shortfall of distributions from an indi-
vidual retirement arrangement that resulted in 
imposition of a tax under subsection (a), and 
‘‘(B) submits a return, during the correc-
tion window, reflecting such tax (as modified by 
this subsection), 
the first sentence of subsection (a) shall be applied 
by substituting ‘5 percent’ for ‘50 percent’. 
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‘‘(2) CORRECTION
WINDOW
DEFINED.—For 
purposes of this subsection, the term ‘correction win-
dow’ means the period of time beginning on the date 
on which the tax under subsection (a) is imposed 
with respect to a shortfall of distributions from an 
individual retirement arrangement, and ending on 
the earlier of— 
‘‘(A) the date on which the Secretary initi-
ates an audit, or otherwise demands payment, 
with respect to the shortfall of distributions, or 
‘‘(B) the last day of the second tax year 
that begins after the end of the tax year in 
which the tax under subsection (a) is im-
posed.’’. 
(2) 
COORDINATION
WITH
WAIVER
PROVI-
SIONS.— 
(A) IN GENERAL.—Subsection (d) of sec-
tion 4974 of the Internal Revenue Code of 1986 
is amended— 
(i) by redesignating paragraphs (1) 
and (2) as subparagraphs (A) and (B), re-
spectively; 
(ii) by striking ‘‘If the taxpayer’’ and 
inserting: 
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‘‘(1) WAIVER.—Subject to paragraph (2), if the 
taxpayer’’; and 
(iii) by adding at the end the fol-
lowing: 
‘‘(2) EXCEPTION.—The Secretary may not 
waive the tax imposed by subsection (a) with respect 
to an individual retirement arrangement.’’. 
(B) AUTHORITY
TO
COMPROMISE.—The 
amendments made by subparagraph (A) shall 
not limit the authority of the Secretary of the 
Treasury under section 7121 or any other pro-
vision of the Internal Revenue Code of 1986 to 
compromise the amount of any tax due under 
section 4974 of such Code, except that, in de-
termining the amount of any such compromise, 
the Secretary may take into account the avail-
ability, under section 4974(e) of such Code, of 
voluntary correction during the correction win-
dow (as defined in section 4974(e)(2) of such 
Code). 
SEC. 4. HARMONIZATION OF TREATMENT OF IRAS WITH 
EMPLOYER PLANS. 
(a) ELIMINATION OF ADDITIONAL TAX ON CERTAIN 
DISTRIBUTIONS.—Subparagraph (A) of section 72(t)(2) 
of the Internal Revenue Code of 1986 is amended— 
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(1) by striking ‘‘or’’ at the end of clause (vii); 
(2) by striking the period at the end of clause 
(viii) and inserting ‘‘, or’’; and 
(3) by adding at the end the following new 
clause: 
‘‘(ix) attributable to withdrawal of in-
terest or other income earned on excess 
contributions to an individual retirement 
arrangement.’’. 
(b) REPEAL OF TAX DISQUALIFICATION PENALTY.— 
(1) IN GENERAL.—Paragraph (2) of subsection 
(e) of section 408 of the Internal Revenue Code of 
1986 is repealed. 
(2) CONFORMING AMENDMENTS.— 
(A) Section 408(e)(1) of such Code is 
amended by striking ‘‘(2) or’’. 
(B) Sections 220(e)(2), 223(e)(2), and 
530(e) of such Code are amended by striking 
‘‘paragraphs (2) and (4) of section 408(e)’’ 
each place it appears and inserting ‘‘paragraph 
(4) of section 408(e)’’. 
(C) Section 4975(c)(3) of such Code is 
amended by striking ‘‘the account ceases to be 
an individual retirement account by reason of 
the application of section 408(e)(2)(A) or if’’. 
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(c) STATUTE OF LIMITATIONS.—Subsection (l) of 
section 6501 of the Internal Revenue Code of 1986 is 
amended— 
(1) in paragraph (1), by inserting ‘‘(other than 
for individual retirement arrangements)’’ after ‘‘sec-
tion 4975’’; and 
(2) by adding at the end the following new 
paragraph: 
‘‘(4) 
INDIVIDUAL
RETIREMENT
ARRANGE-
MENTS.—For purposes of any tax imposed by sec-
tion 4973, 4974, or 4975 in connection with an indi-
vidual retirement arrangement, the return referred 
to in this section shall be the income tax return filed 
by the person on whom the tax under such section 
is imposed for the year in which the act (or failure 
to act) giving rise to such liability for such tax oc-
curred. In the case of a person who is not required 
to file an income tax return for the year in which 
the act (or failure to act) giving rise to such liability 
for such tax occurred— 
‘‘(A) the return referred to in this section 
shall be the income tax return that such person 
would have been required to file but for the fact 
that such person was not required to file such 
return, and 
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‘‘(B) the 3-year period referred to in sub-
section (a) with respect to the return shall be 
deemed to begin on the date by which the re-
turn would have been required to be filed (ex-
cluding any extension thereof).’’. 
SEC. 5. INDIVIDUAL RETIREMENT ARRANGEMENT DE-
FINED. 
(a) IN GENERAL.—For purposes of this Act, the term 
‘‘individual retirement arrangement’’ means an individual 
retirement account, an individual retirement annuity, and 
a Roth IRA described in sections 408(a), 408(b), and 
408A, respectively, of the Internal Revenue Code of 1986. 
(b) INTERNAL REVENUE CODE.—Section 408 of the 
Internal Revenue Code of 1986 is amended— 
(1) by redesignating subsection (r) as sub-
section (s); and 
(2) by inserting after subsection (q) the fol-
lowing new subsection: 
‘‘(r) INDIVIDUAL RETIREMENT ARRANGEMENT DE-
FINED.—For purposes of this section and sections 72(t), 
4973, 4974, and 6501(l), the term ‘individual retirement 
arrangement’ means an individual retirement account de-
scribed in section 408(a), an individual retirement annuity 
described in section 408(b), and a Roth IRA described in 
section 408A.’’. 
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SEC. 6. EFFECTIVE DATE. 
(a) IN GENERAL.—Subject to subsections (b) and (c), 
this Act and the amendments made by this Act shall take 
effect on the date of the enactment of this Act. 
(b) TRANSITION PROVISIONS.— 
(1) REQUESTS FOR WAIVERS.— 
(A) IN
GENERAL.—Notwithstanding the 
amendments to section 4974(d) of the Internal 
Revenue Code of 1986 made by section 3(b)(2) 
of this Act, a taxpayer may, at any time before 
or during the transition period, file a written 
request for a waiver under section 4974(d) of 
such Code, as in effect on the day before the 
date of the enactment of this Act. The Sec-
retary of the Treasury shall consider any such 
request as if the amendments made by section 
3(b)(2) had not been made. 
(B) TRANSITION PERIOD DEFINED.—For 
purposes of this paragraph, the term ‘‘transi-
tion period’’ means the period beginning on the 
date of the enactment of this Act and ending on 
the date that is 1 year after such date of enact-
ment. 
(2) APPLICABILITY TO CERTAIN PRIOR ACTS.— 
(A) IN GENERAL.—Except as provided in 
paragraph (1), the amendments made by this 
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Act shall apply to any determination of or af-
fecting liability for taxes, interest, or penalties 
that is made on or after the date of the enact-
ment of this Act, even if the conduct upon 
which the determination is based occurred be-
fore such date of enactment. 
(B) CALCULATION
OF
CORRECTION
WIN-
DOW IN CERTAIN CASES.—In the case of an 
error that would have been eligible for correc-
tion under section 4973(i) or 4974(e) of the In-
ternal Revenue Code of 1986 if tax had not 
been imposed under 4973(a) or 4974(a), as the 
case may be, of such Code before the date of 
the enactment of this Act, the correction win-
dow referred to in sections 4973(i) and 4974(e) 
of such Code shall be the period beginning on 
the date on which such tax was imposed and 
ending on the earlier of— 
(i) the date on which the Secretary of 
the Treasury initiates an audit or other-
wise demands payment with respect to the 
conduct described in section 4973(a) or 
4974(a), as the case may be, of such Code; 
or 
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(ii) the last day of the second tax year 
that begins after the tax year in which the 
date of the enactment of this Act occurs. 
(c) IMPLEMENTATION.—Section 2 shall be imple-
mented as soon as reasonably practicable after the enact-
ment of this Act but in no case later than the date that 
is 1 year after the date of the enactment of this Act. 
Æ 
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