‘‘(ii) a person who is not a United 
States person but who elects to be treated 
as a United States person for purposes of 
paragraph (1) and meets such require-
ments as the Secretary may provide to en-
sure that the payor will meet the require-
ments of paragraph (1), and 
‘‘(B) the covered expatriate— 
‘‘(i) notifies the payor of his status as 
a covered expatriate, and 
‘‘(ii) makes an irrevocable waiver of 
any right to claim any reduction under any 
treaty with the United States in with-
holding on such item. 
‘‘(4) DEFERRED
COMPENSATION
ITEM.—For 
purposes of this subsection, the term ‘deferred com-
pensation item’ means— 
‘‘(A) any interest in a plan or arrangement 
described in section 219(g)(5), 
‘‘(B) any interest in a foreign pension plan 
or similar retirement arrangement or program, 
‘‘(C) any item of deferred compensation, 
and 
‘‘(D) any property, or right to property, 
which the individual is entitled to receive in
connection with the performance of services to 
the extent not previously taken into account 
under section 83 or in accordance with section 
83. 
‘‘(5) EXCEPTION.—Paragraphs (1) and (2) 
shall not apply to any deferred compensation item 
which is attributable to services performed outside 
the United States while the covered expatriate was 
not a citizen or resident of the United States. 
‘‘(6) SPECIAL RULES.— 
‘‘(A) 
APPLICATION
OF
WITHHOLDING 
RULES.—Rules similar to the rules of sub-
chapter B of chapter 3 shall apply for purposes 
of this subsection. 
‘‘(B) APPLICATION
OF
TAX.—Any item 
subject to the withholding tax imposed under 
paragraph (1) shall be subject to tax under sec-
tion 871. 
‘‘(C) COORDINATION WITH OTHER WITH-
HOLDING REQUIREMENTS.—Any item subject to 
withholding under paragraph (1) shall not be 
subject to withholding under section 1441 or 
chapter 24. 
‘‘(e) TREATMENT OF SPECIFIED TAX DEFERRED AC-
COUNTS.—
‘‘(1) ACCOUNT TREATED AS DISTRIBUTED.—In 
the case of any interest in a specified tax deferred 
account held by a covered expatriate on the day be-
fore the expatriation date— 
‘‘(A) the covered expatriate shall be treat-
ed as receiving a distribution of his entire inter-
est in such account on the day before the expa-
triation date, 
‘‘(B) no early distribution tax shall apply 
by reason of such treatment, and 
‘‘(C) appropriate adjustments shall be 
made to subsequent distributions from the ac-
count to reflect such treatment. 
‘‘(2) SPECIFIED
TAX
DEFERRED
ACCOUNT.— 
For purposes of paragraph (1), the term ‘specified 
tax deferred account’ means an individual retirement 
plan (as defined in section 7701(a)(37)) other than 
any arrangement described in subsection (k) or (p) 
of section 408, a qualified tuition program (as de-
fined in section 529), a Coverdell education savings 
account (as defined in section 530), a health savings 
account (as defined in section 223), and an Archer 
MSA (as defined in section 220). 
‘‘(f) SPECIAL RULES FOR NONGRANTOR TRUSTS.—
‘‘(1) IN GENERAL.—In the case of a distribu-
tion (directly or indirectly) of any property from a 
nongrantor trust to a covered expatriate— 
‘‘(A) the trustee shall deduct and withhold 
from such distribution an amount equal to 30 
percent of the taxable portion of the distribu-
tion, and 
‘‘(B) if the fair market value of such prop-
erty exceeds its adjusted basis in the hands of 
the trust, gain shall be recognized to the trust 
as if such property were sold to the expatriate 
at its fair market value. 
‘‘(2) TAXABLE PORTION.—For purposes of this 
subsection, the term ‘taxable portion’ means, with 
respect to any distribution, that portion of the dis-
tribution which would be includible in the gross in-
come of the covered expatriate if such expatriate 
continued to be subject to tax as a citizen or resi-
dent of the United States. 
‘‘(3) NONGRANTOR
TRUST.—For purposes of 
this subsection, the term ‘nongrantor trust’ means 
the portion of any trust that the individual is not 
considered the owner of under subpart E of part I 
of subchapter J. The determination under the pre-
ceding sentence shall be made immediately before 
the expatriation date. 
‘‘(4) SPECIAL
RULES
RELATING
TO
WITH-
HOLDING.—For purposes of this subsection— 
‘‘(A) rules similar to the rules of sub-
section (d)(6) shall apply, and 
‘‘(B) the covered expatriate shall be treat-
ed as having waived any right to claim any re-
duction under any treaty with the United 
States in withholding on any distribution to 
which paragraph (1)(A) applies. 
‘‘(g) DEFINITIONS AND SPECIAL RULES RELATING 
TO EXPATRIATION.—For purposes of this section— 
‘‘(1) COVERED EXPATRIATE.— 
‘‘(A) IN GENERAL.—The term ‘covered ex-
patriate’ means an expatriate who meets the re-
quirements of subparagraph (A), (B), or (C) of 
section 877(a)(2). 
‘‘(B) EXCEPTIONS.—An individual shall 
not be treated as meeting the requirements of 
subparagraph (A) or (B) of section 877(a)(2) 
if— 
‘‘(i) the individual— 
‘‘(I) became at birth a citizen of 
the United States and a citizen of an-
other country and, as of the expatria-
tion date, continues to be a citizen of, 
and is taxed as a resident of, such 
other country, and 
‘‘(II) has been a resident of the 
United States (as defined in section 
7701(b)(1)(A)(ii)) for not more than 
10 taxable years during the 15-tax-
able year period ending with the tax-
able year during which the expatria-
tion date occurs, or 
‘‘(ii)(I) the individual’s relinquishment 
of United States citizenship occurs before 
such individual attains age 181⁄2, and 
‘‘(II) the individual has been a resi-
dent of the United States (as so defined) 
for not more than 10 taxable years before 
the date of relinquishment. 
‘‘(C) COVERED
EXPATRIATES
ALSO
SUB-
JECT TO TAX AS CITIZENS OR RESIDENTS.—In 
the case of any covered expatriate who is sub-
ject to tax as a citizen or resident of the United 
States for any period beginning after the expa-
triation date, such individual shall not be treat-
ed as a covered expatriate during such period
for purposes of subsections (d)(1) and (f) and 
section 2801. 
‘‘(2) 
EXPATRIATE.—The 
term 
‘expatriate’ 
means— 
‘‘(A) any United States citizen who relin-
quishes his citizenship, and 
‘‘(B) any long-term resident of the United 
States who ceases to be a lawful permanent 
resident of the United States (within the mean-
ing of section 7701(b)(6)). 
‘‘(3) EXPATRIATION
DATE.—The term ‘expa-
triation date’ means— 
‘‘(A) the date an individual relinquishes 
United States citizenship, or 
‘‘(B) in the case of a long-term resident of 
the United States, the date on which the indi-
vidual ceases to be a lawful permanent resident 
of the United States (within the meaning of 
section 7701(b)(6)). 
‘‘(4) RELINQUISHMENT
OF
CITIZENSHIP.—A 
citizen shall be treated as relinquishing his United 
States citizenship on the earliest of— 
‘‘(A) the date the individual renounces his 
United States nationality before a diplomatic or 
consular officer of the United States pursuant
to paragraph (5) of section 349(a) of the Immi-
gration 
and 
Nationality 
Act 
(8 
U.S.C. 
1481(a)(5)), 
‘‘(B) the date the individual furnishes to 
the United States Department of State a signed 
statement 
of 
voluntary 
relinquishment 
of 
United States nationality confirming the per-
formance of an act of expatriation specified in 
paragraph (1), (2), (3), or (4) of section 349(a) 
of the Immigration and Nationality Act (8 
U.S.C. 1481(a)(1)–(4)), 
‘‘(C) the date the United States Depart-
ment of State issues to the individual a certifi-
cate of loss of nationality, or 
‘‘(D) the date a court of the United States 
cancels a naturalized citizen’s certificate of nat-
uralization. 
Subparagraph (A) or (B) shall not apply to any indi-
vidual unless the renunciation or voluntary relin-
quishment is subsequently approved by the issuance 
to the individual of a certificate of loss of nationality 
by the United States Department of State. 
‘‘(5) LONG-TERM RESIDENT.—The term ‘long- 
term resident’ has the meaning given to such term 
by section 877(e)(2).
‘‘(6) EARLY
DISTRIBUTION
TAX.—The term 
‘early distribution tax’ means any increase in tax im-
posed under section 72(t), 220(e)(4), 223(f)(4), 
409A(a)(1)(B), 529(c)(6), or 530(d)(4). 
‘‘(h) OTHER RULES.— 
‘‘(1) TERMINATION OF DEFERRALS, ETC.—In 
the case of any covered expatriate, notwithstanding 
any other provision of this title— 
‘‘(A) any time period for acquiring prop-
erty which would result in the reduction in the 
amount of gain recognized with respect to prop-
erty disposed of by the taxpayer shall terminate 
on the day before the expatriation date, and 
‘‘(B) any extension of time for payment of 
tax shall cease to apply on the day before the 
expatriation date and the unpaid portion of 
such tax shall be due and payable at the time 
and in the manner prescribed by the Secretary. 
‘‘(2) STEP-UP IN BASIS.—Solely for purposes of 
determining any tax imposed by reason of subsection 
(a), property which was held by an individual on the 
date the individual first became a resident of the 
United States (within the meaning of section 
7701(b)) shall be treated as having a basis on such 
date of not less than the fair market value of such
property on such date. The preceding sentence shall 
not apply if the individual elects not to have such 
sentence apply. Such an election, once made, shall 
be irrevocable. 
‘‘(3) COORDINATION
WITH
SECTION 684.—If 
the expatriation of any individual would result in the 
recognition of gain under section 684, this section 
shall be applied after the application of section 684. 
‘‘(i) REGULATIONS.—The Secretary shall prescribe 
such regulations as may be necessary or appropriate to 
carry out the purposes of this section.’’. 
(b) TAX ON GIFTS AND BEQUESTS RECEIVED BY 
UNITED STATES CITIZENS AND RESIDENTS FROM EXPA-
TRIATES.— 
(1) IN GENERAL.—Subtitle B (relating to estate 
and gift taxes) is amended by inserting after chapter 
14 the following new chapter: 
‘‘CHAPTER 15—GIFTS AND BEQUESTS 
FROM EXPATRIATES 
‘‘Sec. 2801. Imposition of tax. 
‘‘SEC. 2801. IMPOSITION OF TAX. 
‘‘(a) IN GENERAL.—If, during any calendar year, any 
United States citizen or resident receives any covered gift 
or bequest, there is hereby imposed a tax equal to the 
product of—
‘‘(1) the highest rate of tax specified in the 
table contained in section 2001(c) as in effect on the 
date of such receipt (or, if greater, the highest rate 
of tax specified in the table applicable under section 
2502(a) as in effect on the date), and 
‘‘(2) the value of such covered gift or bequest. 
‘‘(b) TAX TO BE PAID BY RECIPIENT.—The tax im-
posed by subsection (a) on any covered gift or bequest 
shall be paid by the person receiving such gift or bequest. 
‘‘(c) EXCEPTION FOR CERTAIN GIFTS.—Subsection 
(a) shall apply only to the extent that the value of covered 
gifts and bequests received by any person during the cal-
endar year exceeds $10,000. 
‘‘(d) TAX REDUCED BY FOREIGN GIFT OR ESTATE 
TAX.—The tax imposed by subsection (a) on any covered 
gift or bequest shall be reduced by the amount of any gift 
or estate tax paid to a foreign country with respect to such 
covered gift or bequest. 
‘‘(e) COVERED GIFT OR BEQUEST.— 
‘‘(1) IN GENERAL.—For purposes of this chap-
ter, the term ‘covered gift or bequest’ means— 
‘‘(A) any property acquired by gift directly 
or indirectly from an individual who, at the 
time of such acquisition, is a covered expatriate, 
and
‘‘(B) any property acquired directly or in-
directly by reason of the death of an individual 
who, immediately before such death, was a cov-
ered expatriate. 
‘‘(2) EXCEPTIONS FOR TRANSFERS OTHERWISE 
SUBJECT TO ESTATE OR GIFT TAX.—Such term shall 
not include— 
‘‘(A) any property shown on a timely filed 
return of tax imposed by chapter 12 which is a 
taxable gift by the covered expatriate, and 
‘‘(B) any property included in the gross es-
tate of the covered expatriate for purposes of 
chapter 11 and shown on a timely filed return 
of tax imposed by chapter 11 of the estate of 
the covered expatriate. 
‘‘(3) TRANSFERS IN TRUST.— 
‘‘(A) DOMESTIC TRUSTS.—In the case of a 
covered gift or bequest made to a domestic 
trust— 
‘‘(i) subsection (a) shall apply in the 
same manner as if such trust were a 
United States citizen, and 
‘‘(ii) the tax imposed by subsection (a) 
on such gift or bequest shall be paid by 
such trust.
‘‘(B) FOREIGN TRUSTS.— 
‘‘(i) IN GENERAL.—In the case of a 
covered gift or bequest made to a foreign 
trust, subsection (a) shall apply to any dis-
tribution attributable to such gift or be-
quest from such trust (whether from in-
come or corpus) to a United States citizen 
or resident in the same manner as if such 
distribution were a covered gift or bequest. 
‘‘(ii) DEDUCTION FOR TAX PAID BY 
RECIPIENT.—There shall be allowed as a 
deduction under section 164 the amount of 
tax imposed by this section which is paid 
or accrued by a United States citizen or 
resident by reason of a distribution from a 
foreign trust, but only to the extent such 
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 
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 
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 
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. 6. 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. 7. 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’’. 
(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 
$5,000,000.—Paragraph (1) of section 6721(d) is amend-
ed— 
(1) by striking ‘‘$100,000’’ in subparagraph 
(A) and inserting ‘‘$250,000’’, 
(2) by striking ‘‘$25,000’’ in subparagraph (B) 
and inserting ‘‘$75,000’’, and