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PART II—MODIFICATIONS TO INSTALLMENT AGREEMENT PROVISIONS
Sec. 13306. Notification of reasons for termination of installment agreements.
Sec. 13307. Administrative review of termination of installment agreement.
PART III—ABATEMENT OF INTEREST AND PENALTIES
Sec. 13311. Expansion of authority to abate interest.
Sec. 13312. Review of IRS failure to abate interest.
Sec. 13313. Extension of interest-free period for payment of tax after notice
and demand.
PART IV—JOINT RETURNS
Sec. 13316. Studies of joint return-related issues.
Sec. 13317. Joint return may be made after separate returns without full pay-
ment of tax.
Sec. 13318. Disclosure of collection activities.
PART V—COLLECTION ACTIVITIES
Sec. 13321. Modifications to lien and levy provisions.
Sec. 13322. Offers-in-compromise.
PART VI—INFORMATION RETURNS
Sec. 13326. Civil damages for fraudulent filing of information returns.
Sec. 13327. Requirement to conduct reasonable investigations of information
returns.
PART VII—AWARDING OF COSTS AND CERTAIN FEES
Sec. 13331. United States must establish that its position in proceeding was
substantially justified.
Sec. 13332. Increased limit on attorney fees.
Sec. 13333. Failure to agree to extension not taken into account.
Sec. 13334. Award of litigation costs permitted in declaratory judgment pro-
ceedings.
Sec. 13335. Effective date.
PART VIII—MODIFICATION TO RECOVERY OF CIVIL DAMAGES FOR
UNAUTHORIZED COLLECTION ACTIONS
Sec. 13336. Increase in limit on recovery of civil damages for unauthorized col-
lection actions.
Sec. 13337. Court discretion to reduce award for litigation costs for failure to
exhaust administrative remedies.
PART IX—MODIFICATIONS TO PENALTY FOR FAILURE TO COLLECT AND
PAY OVER TAX
Sec. 13341. Preliminary notice requirement.
Sec. 13342. Disclosure of certain information where more than 1 person liable
for penalty for failure to collect and pay over tax.
Sec. 13343. Right of contribution where more than 1 person liable for penalty
for failure to collect and pay over tax.
Sec. 13344. Volunteer board members of tax-exempt organizations exempt from
penalty for failure to collect and pay over tax.
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PART X—MODIFICATIONS OF RULES RELATING TO SUMMONSES
Sec. 13346. Enrolled agents included as third-party recordkeepers.
Sec. 13347. Safeguards relating to designated summonses.
Sec. 13348. Annual report to Congress concerning designated summonses.
PART XI—RELIEF FROM RETROACTIVE APPLICATION OF TREASURY
DEPARTMENT REGULATIONS
Sec. 13351. Relief from retroactive application of Treasury Department regula-
tions.
PART XII—MISCELLANEOUS PROVISIONS
Sec. 13356. Report on pilot program for appeal of enforcement actions.
Sec. 13357. Phone number of person providing payee Statements required to
be shown on such Statement.
Sec. 13358. Required notice of certain payments.
Sec. 13359. Unauthorized enticement of information disclosure.
Sec. 13360. Annual reminders to taxpayers with outstanding delinquent ac-
counts.
Sec. 13361. 5-year extension of authority for undercover operations.
Sec. 13362. Disclosure of form 8300 information on cash transactions.
Sec. 13363. Disclosure of returns and return information to designee of tax-
payer.
Sec. 13364. Study of netting of interest on overpayments and liabilities.
Sec. 13365. Credit for expenses of certain TCMP audits.
Sec. 13366. Expenses of detection of underpayments and fraud, etc.
Subtitle D—Additional Technical Corrections
Sec. 13401. Reporting of real estate transactions.
Sec. 13402. Clarification of denial of deduction for stock redemption expenses.
Sec. 13403. Clarification of depreciation class for certain energy property.
Sec. 13404. Clerical amendment to section 404.
Sec. 13405. Treatment of certain veterans’ reemployment rights.
Subtitle E—Tax Information Sharing
Sec. 13501. Disclosure of return information for administration of certain vet-
erans programs.
Subtitle F—Revenue Increases
PART I—PROVISIONS RELATING TO BUSINESSES
Sec. 13601. Tax treatment of certain extraordinary dividends.
Sec. 13602. Registration of confidential corporate tax shelters.
Sec. 13603. Denial of deduction for interest on loans with respect to company-
owned insurance.
Sec. 13604. Termination of suspense accounts for family corporations required
to use accrual method of accounting.
Sec. 13605. Termination of Puerto Rico and possession tax credit.
Sec. 13606. Depreciation under income forecast method.
Sec. 13607. Transfers of excess pension assets.
PART II—LEGAL REFORMS
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Sec. 13611. Repeal of exclusion for punitive damages and for damages not at-
tributable to physical injuries or sickness.
Sec. 13612. Reporting of certain payments made to attorneys.
PART III—TREATMENT OF INDIVIDUALS WHO LOSE UNITED STATES
CITIZENSHIP
Sec. 13616. Revision of income, estate, and gift taxes on individuals who lose
United States citizenship.
Sec. 13617. Information on individuals losing United States citizenship.
Sec. 13618. Report on tax compliance by United States citizens and residents
living abroad.
PART IV—REFORMS RELATING TO ENERGY PROVISIONS
Sec. 13621. Termination of credit for electricity produced from certain renew-
able resources.
Sec. 13622. Exclusion for energy conservation subsidies limited to subsidies
with respect to dwelling units.
PART V—REFORMS RELATING TO NONRECOGNITION PROVISIONS
Sec. 13626. Basis adjustment to property held by corporation where stock in
corporation is replacement property under involuntary conver-
sion rules.
Sec. 13627. Expansion of requirement that involuntarily converted property be
replaced with property acquired from an unrelated person.
Sec. 13628. No rollover or exclusion of gain on sale of principal residence which
is attributable to depreciation deductions.
Sec. 13629. Nonrecognition of gain on sale of principal residence by noncitizens
limited to new residences located in the United States.
PART VI—REFORMS RELATING TO GAMING ACTIVITIES
Sec. 13631. Treatment of Indian gaming activities under unrelated business in-
come tax.
Sec. 13632. Repeal of targeted exemption from tax on unrelated trade or busi-
ness income from gambling in certain States.
Sec. 13633. Extension of withholding to certain gambling winnings.
PART VII—OTHER REFORMS
Sec. 13636. Sunset of low-income housing credit.
Sec. 13637. Repeal of credit for contributions to community development
corporations.
Sec. 13638. Repeal of diesel fuel tax rebate to purchasers of diesel-powered
automobiles and light trucks.
Sec. 13639. Application of failure-to-pay penalty to substitute returns.
Sec. 13640. Repeal of special rule for rental use of vacation homes, etc., for
less than 15 days.
Sec. 13641. Election to cease status as qualified scholarship funding
corporation.
Sec. 13642. Certain amounts derived from foreign corporations treated as
unrelated business taxable income.
PART VIII—EXCISE TAX ON AMOUNTS OF PRIVATE EXCESS BENEFITS
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Sec. 13646. Excise taxes for failure by certain charitable organizations to meet
certain qualification requirements.
Sec. 13647. Reporting of certain excise taxes and other information.
Sec. 13648. Exempt organizations required to provide copy of return.
Sec. 13649. Certain organizations required to disclose nonexempt status.
Sec. 13650. Increase in penalties on exempt organizations for failure to file
complete and timely annual returns.
Sec. 13651. Studies.
Subtitle G—Reform of the Earned Income Tax Credit
Sec. 13701. Repeal of earned income credit for individuals without qualifying
children; modifications to credit phaseout.
Sec. 13702. Modification of adjusted gross income used for phaseout.
Sec. 13703. Earned income tax credit denied to individuals not authorized to
be employed in the United States.
Subtitle H—Increase in Public Debt Limit
Sec. 13801. Increase in public debt limit.
Subtitle I—Coal Industry Retiree Health Equity
Sec. 13901. Repeal of reachback provisions of coal industry health benefit
system.
Subtitle A—Extension of Expiring
Provisions, Etc.
PART I—EXTENSIONS THROUGH DECEMBER 31,
1997
SEC. 13101. WORK OPPORTUNITY TAX CREDIT.
(a) AMOUNT OF CREDIT.—Subsection (a) of section
51 is amended by striking ‘‘40 percent’’ and inserting ‘‘35
percent’’.
(b) MEMBERS OF TARGETED GROUPS.—Subsection
(d) of section 51 is amended to read as follows:
‘‘(d) MEMBERS OF TARGETED GROUPS.—For pur-
poses of this subpart—
‘‘(1) IN GENERAL.—An individual is a member
of a targeted group if such individual is—
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‘‘(A) a qualified AFDC recipient,
‘‘(B) a qualified ex-felon,
‘‘(C) a high-risk youth,
‘‘(D) a vocational rehabilitation referral, or
‘‘(E) a qualified summer youth employee.
‘‘(2) QUALIFIED AFDC RECIPIENT.—
‘‘(A) IN
GENERAL.—The term ‘qualified
AFDC recipient’ means any individual who is
certified by the designated local agency as being
a member of a family receiving assistance under
an AFDC program for at least a 9-month pe-
riod ending during the 9-month period ending
on the hiring date.
‘‘(B) AFDC PROGRAM.—For purposes of
this paragraph, the term ‘AFDC program’
means any program providing aid under a State
plan approved under part A of title IV of the
Social Security Act (relating to aid to families
with dependent children) and any successor of
such program.
‘‘(C) SPECIAL RULES FOR VETERANS.—In
the case of a veteran, subparagraph (A) shall be
applied by substituting ‘12-month’ for ‘9-
month’ the second place it appears.
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‘‘(D) VETERAN.—For purposes of sub-
paragraph (C), the term ‘veteran’ means any
individual who is certified by the designated
local agency as—
‘‘(i)(I) having served on active duty
(other than active duty for training) in the
Armed Forces of the United States for a
period of more than 180 days, or
‘‘(II) having been discharged or re-
leased from active duty in the Armed
Forces of the United States for a service-
connected disability, and
‘‘(ii) not having any day during the
60-day period ending on the hiring date
which was a day of extended active duty in
the Armed Forces of the United States.
For purposes of clause (ii), the term ‘extended
active duty’ means a period of more than 90
days during which the individual was on active
duty (other than active duty for training).
‘‘(3) QUALIFIED EX-FELON.—The term ‘quali-
fied ex-felon’ means any individual who is certified
by the designated local agency—
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‘‘(A) as having been convicted of a felony
under any statute of the United States or any
State,
‘‘(B) as having a hiring date which is not
more than 1 year after the last date on which
such individual was so convicted or was released
from prison, and
‘‘(C) as being a member of a family which
had an income during the 6 months imme-
diately preceding the earlier of the month in
which such income determination occurs or the
month in which the hiring date occurs, which,
on an annual basis, would be 70 percent or less
of the Bureau of Labor Statistics lower living
standard.
Any determination under subparagraph (C) shall be
valid for the 45-day period beginning on the date
such determination is made.
‘‘(4) HIGH-RISK YOUTH.—
‘‘(A) IN
GENERAL.—The term ‘high-risk
youth’ means any individual who is certified by
the designated local agency—
‘‘(i) as having attained age 18 but not
age 25 on the hiring date, and
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‘‘(ii) as having his principal place of
abode within an empowerment zone or en-
terprise community.
‘‘(B) YOUTH MUST CONTINUE TO RESIDE
IN ZONE.—In the case of a high-risk youth, the
term ‘qualified wages’ shall not include wages
paid or incurred for services performed while
such youth’s principal place of abode is outside
an empowerment zone or enterprise community.
‘‘(5) VOCATIONAL
REHABILITATION
REFER-
RAL.—The term ‘vocational rehabilitation referral’
means any individual who is certified by the des-
ignated local agency as—
‘‘(A) having a physical or mental disability
which, for such individual, constitutes or results
in a substantial handicap to employment, and
‘‘(B) having been referred to the employer
upon completion of (or while receiving) rehabili-
tative services pursuant to—
‘‘(i) an individualized written rehabili-
tation plan under a State plan for voca-
tional 
rehabilitation 
services 
approved
under the Rehabilitation Act of 1973, or
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‘‘(ii) a program of vocational rehabili-
tation carried out under chapter 31 of title
38, United States Code.
‘‘(6) QUALIFIED SUMMER YOUTH EMPLOYEE.—
‘‘(A) IN
GENERAL.—The term ‘qualified
summer youth employee’ means any individ-
ual—
‘‘(i) who performs services for the em-
ployer between May 1 and September 15,
‘‘(ii) who is certified by the designated
local agency as having attained age 16 but
not 18 on the hiring date (or if later, on
May 1 of the calendar year involved),
‘‘(iii) who has not been an employee
of the employer during any period prior to
the 90-day period described in subpara-
graph (B)(i), and
‘‘(iv) who is certified by the des-
ignated local agency as having his principal
place of abode within an empowerment
zone or enterprise community.
‘‘(B) SPECIAL RULES FOR DETERMINING
AMOUNT OF CREDIT.—For purposes of applying
this subpart to wages paid or incurred to any
qualified summer youth employee—
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‘‘(i) subsection (b)(2) shall be applied
by substituting ‘any 90-day period between
May 1 and September 15’ for ‘the 1-year
period beginning with the day the individ-
ual begins work for the employer’, and
‘‘(ii) subsection (b)(3) shall be applied
by substituting ‘$3,000’ for ‘$6,000’.
The preceding sentence shall not apply to an in-
dividual who, with respect to the same em-
ployer, is certified as a member of another tar-
geted group after such individual has been a
qualified summer youth employee.
‘‘(C) YOUTH MUST CONTINUE TO RESIDE
IN
ZONE.—Paragraph (4)(B) shall apply for
purposes of this paragraph.
‘‘(7) HIRING
DATE.—The term ‘hiring date’
means the day the individual is hired by the em-
ployer.
‘‘(8) DESIGNATED LOCAL AGENCY.—The term
‘designated local agency’ means a State employment
security agency established in accordance with the
Act of June 6, 1933, as amended (29 U.S.C. 49-
49n).
‘‘(9) SPECIAL RULES FOR CERTIFICATIONS.—
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‘‘(A) IN
GENERAL.—An individual shall
not be treated as a member of a targeted group
unless—
‘‘(i) on or before the day on which
such individual begins work for the em-
ployer, the employer has received a certifi-
cation from a designated local agency that
such individual is a member of a targeted
group, or
‘‘(ii)(I) on or before the day the indi-
vidual is offered employment with the em-
ployer, a pre-screening notice is completed
with respect to such individual, and
‘‘(II) not later than the 14th day after
the individual begins work for the em-
ployer, the employer submits such notice to
the designated local agency as part of a
written request for such a certification
from such agency.
For purposes of this paragraph, the term ‘pre-
screening notice’ means a document (in such
form as the Secretary shall prescribe) which is
signed by the employer and the individual under
penalties of perjury and which contains infor-
mation provided by the individual on the basis
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of which the employer believes that the individ-
ual is a member of a targeted group.
‘‘(B) INCORRECT CERTIFICATIONS.—If—
‘‘(i) an individual has been certified
by a designated local agency as a member
of a targeted group, and
‘‘(ii) such certification is incorrect be-
cause it was based on false information
provided by such individual,
the certification shall be revoked and wages
paid by the employer after the date on which
notice of revocation is received by the employer
shall not be treated as qualified wages.
‘‘(C) EXPLANATION
OF
DENIAL
OF
RE-
QUEST.—If a designated local agency denies a
request for certification of membership in a tar-
geted group, such agency shall provide to the
person making such request a written expla-
nation of the reasons for such denial.’’
(c) MINIMUM EMPLOYMENT PERIOD.—Paragraph
(3) of section 51(i) is amended to read as follows:
‘‘(3) INDIVIDUALS NOT MEETING MINIMUM EM-
PLOYMENT PERIOD.—No wages shall be taken into
account under subsection (a) with respect to any in-
dividual unless such individual either—
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(3) The table of subparts for such part IV is
amended by striking ‘‘targeted jobs credit’’ and in-
serting ‘‘work opportunity credit’’.
(g) BUSINESS AWARENESS PROGRAM.—The Sec-
retary of Labor shall implement a program to encourage
small businesses to use the services of local agencies to
identify individuals who qualify to be certified as members
of targeted groups (as defined in section 51 of the Internal
Revenue Code of 1986, as amended by this section). Such
Secretary, and the heads of other Federal agencies, shall
make every effort to encourage small businesses to benefit
from the credit allowable under such section by simplifying
procedures to the extent possible.
(h) TECHNICAL AMENDMENTS.—
(1) Paragraph (1) of section 51(c) is amended
by striking ‘‘, subsection (d)(8)(D),’’.
(2) Paragraph (3) of section 51(i) is amended
by striking ‘‘(d)(12)’’ each place it appears and in-
serting ‘‘(d)(6)’’.
(i) EFFECTIVE DATE.—The amendments made by
this section shall apply to individuals who begin work for
the employer after December 31, 1995.
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SEC. 13102. EMPLOYER-PROVIDED EDUCATIONAL ASSIST-
ANCE PROGRAMS.
(a) EXTENSION.—Subsection (d) of section 127 (re-
lating to educational assistance programs) is amended by
striking ‘‘December 31, 1994’’ and inserting ‘‘December
31, 1997’’.
(b) LIMITATION TO EDUCATION BELOW GRADUATE
LEVEL.—The last sentence of section 127(c)(1) is amend-
ed by inserting before the period ‘‘or at the graduate
level’’.
(c) EFFECTIVE DATES.—
(1) EXTENSION.—The amendment made by
subsection (a) shall apply to taxable years beginning
after December 31, 1994.
(2) LIMITATION.—The amendment made by
subsection (b) shall apply to taxable years beginning
after December 31, 1995.
SEC. 13103. RESEARCH CREDIT.
(a) IN GENERAL.—Subsection (h) of section 41 (re-
lating to credit for research activities) is amended—
(1) by striking ‘‘June 30, 1995’’ each place it
appears and inserting ‘‘December 31, 1997’’, and
(2) by striking ‘‘July 1, 1995’’ each place it ap-
pears and inserting ‘‘January 1, 1998’’.
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(b) BASE AMOUNT FOR START-UP COMPANIES.—
Clause (i) of section 41(c)(3)(B) (relating to start-up com-
panies) is amended to read as follows:
‘‘(i) TAXPAYERS TO WHICH SUBPARA-
GRAPH APPLIES.—The fixed-base percent-
age shall be determined under this sub-
paragraph if—
‘‘(I) the first taxable year in
which a taxpayer had both gross re-
ceipts and qualified research expenses
begins after December 31, 1983, or
‘‘(II) there are fewer than 3 tax-
able years beginning after December
31, 1983, and before January 1,
1989, in which the taxpayer had both
gross receipts and qualified research
expenses.’’
(c) ELECTION
OF
ALTERNATIVE
INCREMENTAL
CREDIT.—Subsection (c) of section 41 is amended by re-
designating paragraphs (4) and (5) as paragraphs (5) and
(6), respectively, and by inserting after paragraph (3) the
following new paragraph:
‘‘(4) ELECTION
OF
ALTERNATIVE
INCREMEN-
TAL CREDIT.—
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‘‘(A) IN GENERAL.—At the election of the
taxpayer, the credit determined under sub-
section (a)(1) shall be equal to the sum of—
‘‘(i) 1.65 percent of so much of the
qualified research expenses for the taxable
year as exceeds 1 percent of the average
described in subsection (c)(1)(B) but does
not exceed 1.5 percent of such average,
‘‘(ii) 2.2 percent of so much of such
expenses as exceeds 1.5 percent of such av-
erage but does not exceed 2 percent of
such average, and
‘‘(iii) 2.75 percent of so much of such
expenses as exceeds 2 percent of such aver-
age.
‘‘(B) ELECTION.—An election under this
paragraph may be made only for the first tax-
able year of the taxpayer beginning after June
30, 1995. Such an election shall apply to the
taxable year for which made and all succeeding
taxable years unless revoked with the consent of
the Secretary.’’
(d) INCREASED CREDIT FOR CONTRACT RESEARCH
EXPENSES WITH RESPECT TO CERTAIN RESEARCH CON-
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SORTIA.—Paragraph (3) of section 41(b) is amended by
adding at the end the following new subparagraph:
‘‘(C) AMOUNTS
PAID
TO
CERTAIN
RE-
SEARCH CONSORTIA.—
‘‘(i) IN GENERAL.—Subparagraph (A)
shall be applied by substituting ‘75 per-
cent’ for ‘65 percent’ with respect to
amounts paid or incurred by the taxpayer
to a qualified research consortium for
qualified research.
‘‘(ii) QUALIFIED RESEARCH CONSOR-
TIUM.—The term ‘qualified research con-
sortium’ means any organization described
in subsection (e)(6)(B) if—
‘‘(I) at least 15 unrelated tax-
payers paid (during the calendar year
in which the taxable year of the tax-
payer begins) amounts to such organi-
zation for qualified research,
‘‘(II) no 3 persons paid during
such calendar year more than 50 per-
cent of the total amounts paid during
such calendar year for qualified re-
search, and
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‘‘(III) 
no 
person 
contributed
more than 20 percent of such total
amounts.
For purposes of subclause (I), all persons
treated as a single employer under sub-
section (a) or (b) of section 52 shall be
treated as related taxpayers.’’
(e) CONFORMING AMENDMENT.—Subparagraph (D)
of section 28(b)(1) is amended by striking ‘‘June 30,
1995’’ and inserting ‘‘December 31, 1997’’.
(f) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall apply to taxable years ending after June 30,
1995.
(2) SUBSECTIONS (c) AND (d).—The amend-
ments made by subsections (c) and (d) shall apply
to taxable years beginning after June 30, 1995.
SEC. 13104. CONTRIBUTIONS OF STOCK TO PRIVATE FOUN-
DATIONS.
(a) IN GENERAL.—Subparagraph (D) of section
170(e)(5) is amended by striking ‘‘December 31, 1994’’
and inserting ‘‘December 31, 1997’’.
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(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to contributions made after De-
cember 31, 1994.
SEC. 13105. CREDIT FOR CLINICAL TESTING EXPENSES.
(a) IN GENERAL.—Subsection (e) of section 28 is
amended by striking ‘‘December 31, 1994’’ and inserting
‘‘December 31, 1997’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years ending after De-
cember 31, 1994.
PART II—PERMANENT EXTENSION OF FUTA EX-
EMPTION FOR ALIEN AGRICULTURAL WORK-
ERS
SEC. 13106. FUTA EXEMPTION FOR ALIEN AGRICULTURAL
WORKERS.
(a) IN GENERAL.—Subparagraph (B) of section
3306(c)(1) (defining employment) is amended by striking
‘‘before January 1, 1995,’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to services performed after De-
cember 31, 1994.
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PART III—COMMERCIAL AVIATION FUEL
SEC. 13111. DELAY OF SCHEDULED INCREASE IN TAX ON
FUEL USED IN COMMERCIAL AVIATION.
(a) 
2-YEAR
DELAY.—Sections 
4092(b)(2),
6421(f)(2)(B), and 6427(l)(4)(B) are each amended by
striking ‘‘September 30, 1995’’ and inserting ‘‘September
30, 1997’’.
(b) CONFORMING AMENDMENT.—Section 13245 of
the Omnibus Budget Reconciliation Act of 1993 is hereby
repealed.
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
this section shall take effect on September 30, 1995.
(2) CROSS REFERENCE.—
For refund of tax paid on commercial aviation
fuel before the date of the enactment of this Act, see
section 6427(l) of the Internal Revenue Code of 1986.
(d) FLOOR STOCKS TAX.—
(1) IMPOSITION OF TAX.—In the case of com-
mercial aviation fuel which is held by any person on
October 1, 1997, there is hereby imposed a floor
stocks tax equal to 4.3 cents per gallon.
(2) LIABILITY FOR TAX AND METHOD OF PAY-
MENT.—
(A) LIABILITY FOR TAX.—A person hold-
ing aviation fuel on October 1, 1997, to which
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the tax imposed by paragraph (1) applies shall
be liable for such tax.
(B) METHOD OF PAYMENT.—The tax im-
posed by paragraph (1) shall be paid in such
manner as the Secretary shall prescribe.
(C) TIME
FOR
PAYMENT.—The tax im-
posed by paragraph (1) shall be paid on or be-
fore April 30, 1998.
(3) DEFINITIONS.—For purposes of this sub-
section—
(A) HELD
BY
A
PERSON.—Aviation fuel
shall be considered as ‘‘held by a person’’ if
title thereto has passed to such person (whether
or not delivery to the person has been made).
(B) COMMERCIAL
AVIATION
FUEL.—The
term ‘‘commercial aviation fuel’’ means aviation
fuel (as defined in section 4093 of such Code)
which is held on October 1, 1997, for sale or
use in commercial aviation (as defined in sec-
tion 4092(b) of such Code).
(C) SECRETARY.—The term ‘‘Secretary’’
means the Secretary of the Treasury or his del-
egate.
(4) EXCEPTION FOR EXEMPT USES.—The tax
imposed by paragraph (1) shall not apply to aviation
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(I) IN
GENERAL.—All persons
treated as a controlled group shall be
treated as 1 person.
(II) CONTROLLED
GROUP.—The
term ‘‘controlled group’’ has the
meaning given to such term by sub-
section (a) of section 1563 of such
Code; except that for such purposes
the phrase ‘‘more than 50 percent’’
shall be substituted for the phrase ‘‘at
least 80 percent’’ each place it ap-
pears in such subsection.
(ii) 
NONINCORPORATED
PERSONS
UNDER COMMON CONTROL.—Under regula-
tions prescribed by the Secretary, prin-
ciples similar to the principles of clause (i)
shall apply to a group of persons under
common control where 1 or more of such
persons is not a corporation.
(6) OTHER LAWS APPLICABLE.—All provisions
of law, including penalties, applicable with respect to
the taxes imposed by section 4091 of such Code
shall, insofar as applicable and not inconsistent with
the provisions of this subsection, apply with respect
to the floor stock taxes imposed by paragraph (1) to
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the same extent as if such taxes were imposed by
such section 4091.
(f) STUDY.—The Secretary of the Treasury or his
delegate shall, in consultation with the Secretary of Trans-
portation, conduct a study of the Federal excise tax bur-
dens on each of the various modes of transportation and
the benefits provided to each such mode from revenues
derived from such excise taxes. The results of such study
shall be submitted not later than June 30, 1996, to the
Committee on Ways and Means of the House of Rep-
resentatives and the Committee on Finance of the Senate.
PART IV—EXTENSION OF AIRPORT AND AIRWAY
TRUST FUND EXCISE TAXES
SEC. 13116. EXTENSION OF AIRPORT AND AIRWAY TRUST
FUND EXCISE TAXES.
(a) FUEL TAX.—
(1) Subparagraph (A) of section 4091(b)(3) is
amended by striking ‘‘January 1, 1996’’ and insert-
ing ‘‘October 1, 1996’’.
(2) Paragraph (2) of section 4081(d), as
amended by section 14721 of this Act, is amended
by striking ‘‘January 1, 1996’’ and inserting ‘‘Octo-
ber 1, 1996’’.
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(b) TICKET TAXES.—Sections 4261(g) and 4271(d)
are each amended by striking ‘‘January 1, 1996’’ and in-
serting ‘‘October 1, 1996’’.
(c) TRANSFER
TO AIRPORT
AND AIRWAY TRUST
FUND.—
(1) Subsection (b) of section 9502 is amended
by striking ‘‘January 1, 1996’’ each place it appears
and inserting ‘‘October 1, 1996’’.
(2) Paragraph (3) of section 9502(f) is amend-
ed by striking ‘‘December 31, 1995’’ and inserting
‘‘September 30, 1996’’.
Subtitle B—Medical Savings
Accounts
SEC. 13201. MEDICAL SAVINGS ACCOUNTS.
(a) IN GENERAL.—Part VII of subchapter B of chap-
ter 1 (relating to additional itemized deductions for indi-
viduals) is amended by redesignating section 220 as sec-
tion 221 and by inserting after section 219 the following
new section:
‘‘SEC. 220. MEDICAL SAVINGS ACCOUNTS.
‘‘(a) DEDUCTION ALLOWED.—In the case of an indi-
vidual who is an eligible individual for any month during
the taxable year, there shall be allowed as a deduction for
the taxable year an amount equal to the aggregate amount
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paid in cash during such taxable year by such individual
to a medical savings account of such individual.
‘‘(b) LIMITATIONS.—
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this subsection, the amount allowable as a
deduction under subsection (a) to an individual for
the taxable year shall not exceed the lesser of—
‘‘(A) $2,500, or
‘‘(B) the deductible under the catastrophic
health plan covering such individual.
If the catastrophic health plan covering such individ-
ual provides coverage for any other eligible individ-
ual who is the spouse or any dependent (as defined
in section 152) of the taxpayer, subparagraph (A)
shall be applied by substituting ‘$5,000’ for
‘$2,500’. The preceding sentence shall not apply if
the spouse or any dependent (as so defined) of such
individual is covered under any other catastrophic
health plan.
‘‘(2) SPECIAL
RULE
FOR
MARRIED
INDIVID-
UALS.—
‘‘(A) IN GENERAL.—This subsection shall
be applied separately for each married individ-
ual.
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‘‘(B) SPECIAL RULE.—If individuals who
are married to each other are covered under the
same 
catastrophic 
health 
plan, 
then 
the
amounts applicable under subparagraphs (A)
and (B) of paragraph (1) shall be divided equal-
ly between them unless they agree on a dif-
ferent division.
‘‘(3) COORDINATION WITH EXCLUSION FOR EM-
PLOYER CONTRIBUTIONS.—No deduction shall be al-
lowed under this section for any amount paid for
any taxable year to a medical savings account of an
individual if—
‘‘(A) any amount is paid to any medical
savings account of such individual which is ex-
cludable from gross income under section
106(b) for such year, or
‘‘(B) in a case described in paragraph (2),
any amount is paid to any medical savings ac-
count of either spouse which is so excludable for
such year.
‘‘(4) PRORATION OF LIMITATION.—
‘‘(A) IN GENERAL.—The limitation under
paragraph (1) shall be the sum of the monthly
limitations for months during the taxable year
that the individual is an eligible individual if—
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‘‘(i) such individual is not an eligible
individual for all months of the taxable
year,
‘‘(ii) the deductible under the cata-
strophic health plan covering such individ-
ual is not the same throughout such tax-
able year, or
‘‘(iii) such limitation is determined
using the next to the last sentence of para-
graph (1) for some but not all months dur-
ing such taxable year.
‘‘(B) MONTHLY LIMITATION.—The month-
ly limitation for any month shall be an amount
equal to 1⁄12 of the limitation which would (but
for this paragraph and paragraph (3)) be deter-
mined under paragraph (1) if the facts and cir-
cumstances as of the first day of such month
that such individual is covered under a cata-
strophic health plan were true for the entire
taxable year.
‘‘(5) DENIAL
OF
DEDUCTION
TO
DEPEND-
ENTS.—No deduction shall be allowed under this
section to any individual with respect to whom a de-
duction under section 151 is allowable to another
taxpayer for a taxable year beginning in the cal-
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endar year in which such individual’s taxable year
begins.
‘‘(c) DEFINITIONS.—For purposes of this section—
‘‘(1) ELIGIBLE INDIVIDUAL.—
‘‘(A) IN GENERAL.—The term ‘eligible in-
dividual’ means, with respect to any month, any
individual—
‘‘(i) who is covered under a cata-
strophic health plan at any time during
such month, and
‘‘(ii) who is not, while covered under
a catastrophic health plan, covered under
any health plan—
‘‘(I) which is not a catastrophic
health plan, and
‘‘(II) which provides coverage for
any benefit which is covered under the
catastrophic health plan.
‘‘(B) 
CERTAIN
COVERAGE
DIS-
REGARDED.—Subparagraph (A)(ii) shall be ap-
plied without regard to—
‘‘(i) coverage for any benefit provided
by permitted insurance, and
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‘‘(ii) coverage (whether through insur-
ance or otherwise) for accidents, dental
care, vision care, or long-term care.
‘‘(2) CATASTROPHIC HEALTH PLAN.—The term
‘catastrophic health plan’ means any health plan
which provides no compensation for an individual’s
expenses covered by the plan for any calendar year
to the extent such expenses for such calendar year
do not exceed $1,500 ($3,000 if the catastrophic
health plan covering the taxpayer provides coverage
for more than 1 individual) or such higher amounts
as may be specified by the plan.
‘‘(3) PERMITTED INSURANCE.—The term ‘per-
mitted insurance’ means—
‘‘(A) Medicare supplemental insurance,
‘‘(B) insurance if substantially all of the
coverage provided under such insurance relates
to—
‘‘(i) liabilities incurred under workers’
compensation laws,
‘‘(ii) tort liabilities,
‘‘(iii) liabilities relating to ownership
or use of property,
‘‘(iv) credit insurance, or
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‘‘(v) such other similar liabilities as
the Secretary may specify by regulations,
‘‘(C) insurance for a specified disease or
illness, and
‘‘(D) insurance paying a fixed amount per
day (or other period) of hospitalization.
‘‘(d) MEDICAL SAVINGS ACCOUNT.—For purposes of
this section—
‘‘(1) MEDICAL SAVINGS ACCOUNT.—The term
‘medical savings account’ means a trust created or
organized in the United States exclusively for the
purpose of paying the qualified medical expenses of
the account holder, but only if the written governing
instrument creating the trust meets the following re-
quirements:
‘‘(A) Except in the case of a rollover con-
tribution described in subsection (f)(4), no con-
tribution will be accepted unless it is in cash.
‘‘(B) The trustee is a bank (as defined in
section 408(n)), an insurance company (as de-
fined in section 816), or another person who
demonstrates to the satisfaction of the Sec-
retary that the manner in which such person
will administer the trust will be consistent with
the requirements of this section.
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‘‘(C) No part of the trust assets will be in-
vested in life insurance contracts.
‘‘(D) The assets of the trust will not be
commingled with other property except in a
common trust fund or common investment
fund.
‘‘(E) The interest of an individual in the
balance in his account is nonforfeitable.
‘‘(2) QUALIFIED MEDICAL EXPENSES.—
‘‘(A) IN
GENERAL.—The term ‘qualified
medical expenses’ means, with respect to an ac-
count holder, amounts paid by such holder—
‘‘(i) for medical care (as defined in
section 213(d)) for such individual, the
spouse of such individual, and any depend-
ent (as defined in section 152) of such in-
dividual, but only to the extent such
amounts are not compensated for by insur-
ance or otherwise, or
‘‘(ii) for long-term care insurance for
such individual, spouse, or dependent.
‘‘(B) HEALTH
INSURANCE
MAY
NOT
BE
PURCHASED
FROM
ACCOUNT.—Subparagraph
(A)(i) shall not apply to any payment for insur-
ance.
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‘‘(3) ACCOUNT
HOLDER.—The term ‘account
holder’ means the individual on whose behalf the
medical savings account was established.
‘‘(4) CERTAIN RULES TO APPLY.—Rules similar
to the following rules shall apply for purposes of this
section:
‘‘(A) Section 219(d)(2) (relating to no de-
duction for rollovers).
‘‘(B) Section 219(f)(3) (relating to time
when contributions deemed made).
‘‘(C) Except as provided in section 106(b),
section 219(f)(5) (relating to employer pay-
ments).
‘‘(D) Section 408(g) (relating to commu-
nity property laws).
‘‘(E) Section 408(h) (relating to custodial
accounts).
‘‘(e) TAX TREATMENT OF ACCOUNTS.—
‘‘(1) ACCOUNT TAXED AS GRANTOR TRUST.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), the account holder of a med-
ical savings account shall be treated for pur-
poses of this title as the owner of such account
and shall be subject to tax thereon in accord-
ance with subpart E of part I of subchapter J
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of this chapter (relating to grantors and others
treated as substantial owners).
‘‘(B) TREATMENT OF CAPITAL LOSSES.—
With respect to assets held in a medical savings
account, any capital loss for a taxable year
from the sale or exchange of such an asset shall
be allowed only to the extent of capital gains
from such assets for such taxable year. Any
capital loss which is disallowed under the pre-
ceding sentence shall be treated as a capital
loss from the sale or exchange of such an asset
in the next taxable year. For purposes of this
subparagraph, all medical savings accounts of
the account holder shall be treated as 1 ac-
count.
‘‘(2) ACCOUNT ASSETS TREATED AS DISTRIB-
UTED IN THE CASE OF PROHIBITED TRANSACTIONS
OR ACCOUNT PLEDGED AS SECURITY FOR LOAN.—
Rules similar to the rules of paragraphs (2) and (4)
of section 408(e) shall apply to medical savings ac-
counts, and any amount treated as distributed under
such rules shall be treated as not used to pay quali-
fied medical expenses.
‘‘(3) TREATMENT OF ACCOUNT AFTER DEATH
OF ACCOUNT HOLDER.—
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‘‘(A) IN GENERAL.—A trust shall not con-
stitute a medical savings account unless the
written governing instrument provides that, if
the account holder dies while there is a balance
in the account, the entire balance of the ac-
count holder will be distributed within 5 years
after the death of the account holder.
‘‘(B) EXCEPTION
WHERE
SPOUSE
BE-
COMES ACCOUNT HOLDER.—Subparagraph (A)
shall not apply if the account is payable to (or
for the benefit of) the surviving spouse of the
decedent.
‘‘(f) TAX TREATMENT OF DISTRIBUTIONS.—
‘‘(1) INCLUSION OF AMOUNTS NOT USED FOR
QUALIFIED MEDICAL EXPENSES.—
‘‘(A) IN GENERAL.—No amount shall be
included in the gross income of the account
holder by reason of a payment or distribution
from a medical savings account which is used
exclusively to pay the qualified medical expenses
of the account holder. Any amount paid or dis-
tributed from a medical savings account which
is not so used shall be included in the gross in-
come of such holder to the extent such amount
does not exceed the excess of—
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‘‘(i) the aggregate contributions to
such account which were allowed as a de-
duction under this section or which were
excluded under section 106(b), over
‘‘(ii) the aggregate prior payments or
distributions from such account which were
includible in gross income under this para-
graph.
‘‘(B) SPECIAL
RULES.—For purposes of
subparagraph (A)—
‘‘(i) all medical savings accounts of
the account holder shall be treated as 1 ac-
count,
‘‘(ii) all payments and distributions
during any taxable year shall be treated as
1 distribution, and
‘‘(iii) any distribution of property
shall be taken into account at its fair mar-
ket value on the date of the distribution.
‘‘(2) PENALTY FOR DISTRIBUTIONS NOT USED
FOR QUALIFIED MEDICAL EXPENSES.—
‘‘(A) IN GENERAL.—The tax imposed by
this chapter for any taxable year in which there
is a payment or distribution from a medical
savings account which is not used exclusively to
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pay the qualified medical expenses of the ac-
count holder shall be increased by 10 percent of
the amount of such payment or distribution
which is includible in gross income under para-
graph (1).
‘‘(B) 
EXCEPTIONS.—Subparagraph 
(A)
shall not apply if the payment or distribution is
made on or after the date the account holder—
‘‘(i) attains age 591⁄2,
‘‘(ii) becomes disabled within the
meaning of section 72(m)(7), or
‘‘(iii) dies.
‘‘(3) WITHDRAWAL
OF
EXCESS
CONTRIBU-
TIONS.—Paragraph (1) shall not apply to the dis-
tribution of any contribution paid during a taxable
year to a medical savings account if—
‘‘(A) such distribution is received on or be-
fore the day prescribed by law (including exten-
sions of time) for filing such individual’s return
for such taxable year,
‘‘(B) no deduction is allowed under this
section with respect to such contribution, and
‘‘(C) such distribution is accompanied by
the amount of net income attributable to such
contribution.
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In the case of such a distribution, for purposes of
section 61, any net income described in subpara-
graph (C) shall be deemed to have been earned and
receivable in the taxable year in which such con-
tribution is made.
‘‘(4) ROLLOVERS.—Paragraph (1) shall not
apply to any amount paid or distributed out of a
medical savings account to the account holder if the
entire amount received (including money and any
other property) is paid into another medical savings
account for the benefit of such holder not later than
the 60th day after the day on which he received the
payment or distribution.
‘‘(5) COORDINATION WITH MEDICAL EXPENSE
DEDUCTION.—For purposes of section 213, any pay-
ment or distribution out of a medical savings ac-
count for qualified medical expenses shall not be
treated as an expense paid for medical care to the
extent of the amount of such payment or distribu-
tion which is excludable from gross income solely by
reason of paragraph (1)(A).
‘‘(g) COST-OF-LIVING ADJUSTMENT.—
‘‘(1) IN GENERAL.—In the case of any taxable
year beginning in a calendar year after 1996, each
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dollar amount in subsection (b)(1) or in subsection
(c)(2) shall be increased by an amount equal to—
‘‘(A) such dollar amount, multiplied by
‘‘(B) the medical care cost adjustment for
such calendar year.
If any increase under the preceding sentence is not
a multiple of $50, such increase shall be rounded to
the nearest multiple of $50.
‘‘(2) MEDICAL CARE COST ADJUSTMENT.—For
purposes of paragraph (1), the medical care cost ad-
justment for any calendar year is the percentage (if
any) by which—
‘‘(A) the medical care component of the
Consumer Price Index (as defined in section
1(f)(5)) for August of the preceding calendar
year, exceeds
‘‘(B) such component for August of 1995.
‘‘(h) REPORTS.—The trustee of a medical savings ac-
count shall make such reports regarding such account to
the Secretary and to the account holder with respect to
contributions, distributions, and such other matters as the
Secretary may require under regulations. The reports re-
quired by this subsection shall be filed at such time and
in such manner and furnished to such individuals at such
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time and in such manner as may be required by those reg-
ulations.’’
(b) DEDUCTION ALLOWED WHETHER OR NOT INDI-
VIDUAL ITEMIZES OTHER DEDUCTIONS.—Subsection (a)
of section 62 is amended by inserting after paragraph (15)
the following new paragraph:
‘‘(16) MEDICAL SAVINGS ACCOUNTS.—The de-
duction allowed by section 220.’’
(c) EXCLUSIONS FOR EMPLOYER CONTRIBUTIONS TO
MEDICAL SAVINGS ACCOUNTS.—
(1) EXCLUSION FROM INCOME TAX.—The text
of section 106 (relating to contributions by employer
to accident and health plans) is amended to read as
follows:
‘‘(a) GENERAL RULE.—Gross income of an employee
does not include employer-provided coverage under an ac-
cident or health plan.
‘‘(b) CONTRIBUTIONS
TO MEDICAL SAVINGS AC-
COUNTS.—
‘‘(1) IN GENERAL.—In the case of an employee
who is an eligible individual, gross income does not
include amounts contributed by such employee’s em-
ployer to any medical savings account of such em-
ployee.
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‘‘(2) COORDINATION WITH DEDUCTION LIMITA-
TION.—The amount excluded from the gross income
of an employee under this subsection for any taxable
year shall not exceed the limitation under section
220(b)(1) (determined without regard to this sub-
section) which is applicable to such employee for
such taxable year.’’
‘‘(3) NO CONSTRUCTIVE RECEIPT.—No amount
shall be included in the gross income of any em-
ployee solely because the employee may choose be-
tween the contributions referred to in paragraph (1)
and employer contributions to another health plan of
the employer.
‘‘(4) SPECIAL RULE FOR DEDUCTION OF EM-
PLOYER CONTRIBUTIONS.—Any employer contribu-
tion to a medical savings account, if otherwise allow-
able as a deduction under this chapter, shall be al-
lowed only for the taxable year in which paid.
‘‘(5) DEFINITIONS.—For purposes of this sub-
section, the terms ‘eligible individual’ and ‘medical
savings account’ have the respective meanings given
to such terms by section 220.’’
(2) EXCLUSION FROM EMPLOYMENT TAXES.—
(A) SOCIAL SECURITY TAXES.—
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(i) Subsection (a) of section 3121 is
amended by striking ‘‘or’’ at the end of
paragraph (20), by striking the period at
the end of paragraph (21) and inserting ‘‘;
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.’’
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(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-
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
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‘‘; 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
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-
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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)’’.
(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.’’
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(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.
(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
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Commissioner of Internal Revenue. The Taxpayer
Advocate shall be entitled to compensation at the
same rate as the highest level official reporting di-
rectly to the Deputy Commissioner of the Internal
Revenue Service.
‘‘(2) FUNCTIONS OF OFFICE.—
‘‘(A) IN GENERAL.—It shall be the func-
tion of the Office of Taxpayer Advocate to—
‘‘(i) assist taxpayers in resolving prob-
lems with the Internal Revenue Service,
‘‘(ii) identify areas in which taxpayers
have problems in dealings with the Internal
Revenue Service,
‘‘(iii) to the extent possible, propose
changes in the administrative practices of
the Internal Revenue Service to mitigate
problems identified under clause (ii), and
‘‘(iv) 
identify 
potential 
legislative
changes which may be appropriate to miti-
gate such problems.
‘‘(B) ANNUAL REPORTS.—
‘‘(i) OBJECTIVES.—Not later than
June 30 of each calendar year after 1995,
the Taxpayer Advocate shall report to the
Committee on Ways and Means of the
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House of Representatives and the Commit-
tee on Finance of the Senate on the objec-
tives of the Taxpayer Advocate for the fis-
cal year beginning in such calendar year.
Any such report shall contain full and sub-
stantive analysis, in addition to statistical
information.
‘‘(ii) ACTIVITIES.—Not later than De-
cember 31 of each calendar year after
1995, the Taxpayer Advocate shall report
to the Committee on Ways and Means of
the House of Representatives and the
Committee on Finance of the Senate on
the activities of the Taxpayer Advocate
during the fiscal year ending during such
calendar year. Any such report shall con-
tain full and substantive analysis, in addi-
tion to statistical information, and shall—
‘‘(I) identify the initiatives the
Taxpayer Advocate has taken on im-
proving taxpayer services and Internal
Revenue Service responsiveness,
‘‘(II) contain recommendations
received from individuals with the au-
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thority to issue Taxpayer Assistance
Orders under section 7811,
‘‘(III) contain a summary of at
least 20 of the most serious problems
encountered by taxpayers, including a
description of the nature of such prob-
lems,
‘‘(IV) contain an inventory of the
items described in subclauses (I), (II),
and (III) for which action has been
taken and the result of such action,
‘‘(V) contain an inventory of the
items described in subclauses (I), (II),
and (III) for which action remains to
be completed and the period during
which each item has remained on such
inventory,
‘‘(VI) contain an inventory of the
items described in subclauses (II) and
(III) for which no action has been
taken, the period during which each
item has remained on such inventory,
the reasons for the inaction, and iden-
tify any Internal Revenue Service offi-
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cial who is responsible for such inac-
tion,
‘‘(VII) identify any Taxpayer As-
sistance Order which was not honored
by the Internal Revenue Service in a
timely manner, as specified under sec-
tion 7811(b),
‘‘(VIII) contain recommendations
for such administrative and legislative
action as may be appropriate to re-
solve problems encountered by tax-
payers,
‘‘(IX) describe the extent to
which regional problem resolution offi-
cers participate in the selection and
evaluation of local problem resolution
officers, and
‘‘(X) include such other informa-
tion as the Taxpayer Advocate may
deem advisable.
‘‘(iii) REPORT TO BE SUBMITTED DI-
RECTLY.—Each report required under this
subparagraph shall be provided directly to
the Committees referred to in clauses (i)
and (ii) without any prior review or com-
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ment from the Commissioner, the Sec-
retary of the Treasury, any other officer
or employee of the Department of the
Treasury, or the Office of Management
and Budget.
‘‘(3) RESPONSIBILITIES
OF
COMMISSIONER.—
The Commissioner of Internal Revenue shall estab-
lish procedures requiring a formal response to all
recommendations submitted to the Commissioner
by the Taxpayer Advocate within 3 months after
submission to the Commissioner.’’
(b) CONFORMING AMENDMENTS.—
(1) Section 7811 (relating to Taxpayer Assist-
ance Orders) is amended—
(A) by striking ‘‘the Office of Ombuds-
man’’ in subsection (a) and inserting ‘‘the Of-
fice of the Taxpayer Advocate’’, and
(B) by striking ‘‘Ombudsman’’ each place
it appears (including in the headings of sub-
sections (e) and (f)) and inserting ‘‘Taxpayer
Advocate’’.
(2) The heading for section 7802 is amended to
read as follows:
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‘‘SEC. 7802. COMMISSIONER OF INTERNAL REVENUE; AS-
SISTANT COMMISSIONERS; TAXPAYER ADVO-
CATE.’’
(3) The table of sections for subchapter A of
chapter 80 is amended by striking the item relating
to section 7802 and inserting the following new
item:
‘‘Sec. 7802. Commissioner of Internal Revenue; Assistant Com-
missioners; Taxpayer Advocate.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date of the enactment
of this Act.
SEC. 13302. EXPANSION OF AUTHORITY TO ISSUE TAX-
PAYER ASSISTANCE ORDERS.
(a) TERMS OF ORDERS.—Subsection (b) of section
7811 (relating to terms of Taxpayer Assistance Orders)
is amended—
(1) by inserting ‘‘within a specified time pe-
riod’’ after ‘‘the Secretary’’, and
(2) by inserting ‘‘take any action as permitted
by law,’’ after ‘‘cease any action,’’.
(b) LIMITATION ON AUTHORITY TO MODIFY OR RE-
SCIND.—Section 7811(c) (relating to authority to modify
or rescind) is amended to read as follows:
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‘‘(c) AUTHORITY TO MODIFY
OR RESCIND.—Any
Taxpayer Assistance Order issued by the Taxpayer Advo-
cate under this section may be modified or rescinded—
‘‘(1) only by the Taxpayer Advocate, the Com-
missioner of Internal Revenue, the Deputy Commis-
sioner of Internal Revenue, or a regional problem
resolution officer, and
‘‘(2) only if a written explanation of the reasons
for the modification or rescission is provided to the
Taxpayer Advocate.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date of the enactment
of this Act.
PART II—MODIFICATIONS TO INSTALLMENT
AGREEMENT PROVISIONS
SEC. 13306. NOTIFICATION OF REASONS FOR TERMINATION
OF INSTALLMENT AGREEMENTS.
(a) TERMINATIONS.—Subsection (b) of section 6159
(relating to extent to which agreements remain in effect)
is amended by adding at the end the following new para-
graph:
‘‘(5) NOTICE REQUIREMENTS.—The Secretary
may not take any action under paragraph (2), (3),
or (4) unless—
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‘‘(A) a notice of such action is provided to
the taxpayer not later than the day 30 days be-
fore the date of such action, and
‘‘(B) such notice includes an explanation
why the Secretary intends to take such action.
The preceding sentence shall not apply in any case
in which the Secretary believes that collection of any
tax to which an agreement under this section relates
is in jeopardy.’’
(b) CONFORMING AMENDMENT.—Paragraph (3) of
section 6159(b) is amended to read as follows:
‘‘(3) SUBSEQUENT CHANGE IN FINANCIAL CON-
DITIONS.—If the Secretary makes a determination
that the financial condition of a taxpayer with whom
the Secretary has entered into an agreement under
subsection (a) has significantly changed, the Sec-
retary may alter, modify, or terminate such agree-
ment.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date 6 months after
the date of the enactment of this Act.
SEC. 13307. ADMINISTRATIVE REVIEW OF TERMINATION OF
INSTALLMENT AGREEMENT.
(a) GENERAL RULE.—Section 6159 (relating to
agreements for payment of tax liability in installments)
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is amended by adding at the end the following new sub-
section:
‘‘(c) ADMINISTRATIVE REVIEW.—The Secretary shall
establish procedures for an independent administrative re-
view of terminations of installment agreements under this
section for taxpayers who request such a review.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect on January 1, 1996.
PART III—ABATEMENT OF INTEREST AND
PENALTIES
SEC. 13311. EXPANSION OF AUTHORITY TO ABATE INTER-
EST.
(a) GENERAL RULE.—Paragraph (1) of section
6404(e) (relating to abatement of interest in certain cases)
is amended—
(1) by inserting ‘‘unreasonable’’ before ‘‘error’’
each place it appears in subparagraphs (A) and (B),
and
(2) by striking ‘‘in performing a ministerial
act’’ each place it appears and inserting ‘‘in per-
forming a ministerial or managerial act’’.
(b) CLERICAL AMENDMENT.—The subsection head-
ing for subsection (e) of section 6404 is amended—
(1) by striking ‘‘ASSESSMENTS’’ and inserting
‘‘ABATEMENT’’, and
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(2) by inserting ‘‘UNREASONABLE’’ before ‘‘ER-
RORS’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to interest accruing with respect
to deficiencies or payments for taxable years beginning
after the date of the enactment of this Act.
SEC. 13312. REVIEW OF IRS FAILURE TO ABATE INTEREST.
(a) IN GENERAL.—Section 6404 is amended by add-
ing at the end the following new subsection:
‘‘(g) REVIEW OF DENIAL OF REQUEST FOR ABATE-
MENT OF INTEREST.—The Tax Court shall have jurisdic-
tion over any action brought by a taxpayer who meets the
requirements referred to in section 7430(c)(4)(A)(iii) to
determine whether the Secretary’s failure to abate interest
under this section was an abuse of discretion if such action
is brought within 6 months after the date of the Sec-
retary’s final determination not to abate such interest.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to requests for abatement after the
date of the enactment of this Act.
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SEC. 13313. EXTENSION OF INTEREST-FREE PERIOD FOR
PAYMENT OF TAX AFTER NOTICE AND DE-
MAND.
(a) GENERAL RULE.—Paragraph (3) of section
6601(e) (relating to payments made within 10 days after
notice and demand) is amended to read as follows:
‘‘(3) PAYMENTS MADE WITHIN SPECIFIED PE-
RIOD AFTER NOTICE AND DEMAND.—If notice and
demand is made for payment of any amount and if
such amount is paid within 21 calendar days (10
business days if the amount for which such notice
and demand is made equals or exceeds $100,000)
after the date of such notice and demand, interest
under this section on the amount so paid shall not
be imposed for the period after the date of such no-
tice and demand.’’
(b) CONFORMING AMENDMENTS.—
(1) Subparagraph (A) of section 6601(e)(2) is
amended by striking ‘‘10 days from the date of no-
tice and demand therefor’’ and inserting ‘‘21 cal-
endar days from the date of notice and demand
therefor (10 business days if the amount for which
such notice and demand is made equals or exceeds
$100,000)’’.
(2) Paragraph (3) of section 6651(a) is amend-
ed by striking ‘‘10 days of the date of the notice and
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demand therefor’’ and inserting ‘‘21 calendar days
from the date of notice and demand therefor (10
business days if the amount for which such notice
and demand is made equals or exceeds $100,000)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply in the case of any notice and de-
mand given after June 30, 1996.
PART IV—JOINT RETURNS
SEC. 13316. STUDIES OF JOINT RETURN-RELATED ISSUES.
The Secretary of the Treasury or his delegate and
the Comptroller General of the United States shall each
conduct separate studies of—
(1) the effects of changing the liability for tax
on a joint return from being joint and several to
being proportionate to the tax attributable to each
spouse,
(2) the effects of providing that, if a divorce de-
cree allocates liability for tax on a joint return filed
before the divorce, the Secretary may collect such li-
ability only in accordance with the decree,
(3) whether those provisions of the Internal
Revenue Code of 1986 intended to provide relief to
innocent spouses provide meaningful relief in all
cases where such relief is appropriate, and
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(4) the effect of providing that community in-
come (as defined in section 66(d) of such Code)
which, in accordance with the rules contained in sec-
tion 879(a) of such Code, would be treated as the
income of one spouse is exempt from a levy for fail-
ure to pay any tax imposed by subtitle A by the
other spouse for a taxable year ending before their
marriage.
The reports of such studies shall be submitted to the Com-
mittee on Ways and Means of the House of Representa-
tives and the Committee on Finance of the Senate within
6 months after the date of the enactment of this Act.
SEC. 13317. JOINT RETURN MAY BE MADE AFTER SEPA-
RATE RETURNS WITHOUT FULL PAYMENT OF
TAX.
(a) GENERAL RULE.—Paragraph (2) of section
6013(b) (relating to limitations on filing of joint return
after filing separate returns) is amended by striking sub-
paragraph (A) and redesignating the following subpara-
graphs accordingly.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to taxable years beginning after
the date of the enactment of this Act.
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SEC. 13318. DISCLOSURE OF COLLECTION ACTIVITIES.
Subsection (e) of section 6103 (relating to disclosure
to persons having material interest) is amended by adding
at the end the following new paragraph:
‘‘(8) DISCLOSURE OF COLLECTION ACTIVITIES
WITH
RESPECT
TO
JOINT
RETURN.—If any defi-
ciency of tax with respect to a joint return is as-
sessed and the individuals filing such return are no
longer married or no longer reside in the same
household, upon request in writing by either of such
individuals, the Secretary shall disclose in writing to
the individual making the request whether the Sec-
retary has attempted to collect such deficiency from
such other individual, the general nature of such col-
lection activities, and the amount collected.’’
PART V—COLLECTION ACTIVITIES
SEC. 13321. MODIFICATIONS TO LIEN AND LEVY PROVI-
SIONS.
(a) WITHDRAWAL OF CERTAIN NOTICES.—Section
6323 (relating to validity and priority against certain per-
sons) is amended by adding at the end the following new
subsection:
‘‘(j) WITHDRAWAL
OF NOTICE
IN CERTAIN CIR-
CUMSTANCES.—
‘‘(1) IN GENERAL.—The Secretary may with-
draw a notice of a lien filed under this section and
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this chapter shall be applied as if the withdrawn no-
tice had not been filed, if the Secretary determines
that—
‘‘(A) the filing of such notice was pre-
mature or otherwise not in accordance with ad-
ministrative procedures of the Secretary,
‘‘(B) the taxpayer has entered into an
agreement under section 6159 to satisfy the tax
liability for which the lien was imposed by
means of installment payments, unless such
agreement provides otherwise,
‘‘(C) the withdrawal of such notice will fa-
cilitate the collection of the tax liability, or
‘‘(D) with the consent of the taxpayer or
the Taxpayer Advocate, the withdrawal of such
notice would be in the best interests of the tax-
payer (as determined by the Taxpayer Advo-
cate) and the United States.
Any such withdrawal shall be made by filing notice
at the same office as the withdrawn notice. A copy
of such notice of withdrawal shall be provided to the
taxpayer.
‘‘(2) NOTICE
TO
CREDIT
AGENCIES, ETC.—
Upon written request by the taxpayer with respect
to whom a notice of a lien was withdrawn under
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paragraph (1), the Secretary shall promptly make
reasonable efforts to notify credit reporting agencies,
and any financial institution or creditor whose name
and address is specified in such request, of the with-
drawal of such notice. Any such request shall be in
such form as the Secretary may prescribe.’’
(b) RETURN
OF LEVIED PROPERTY
IN CERTAIN
CASES.—Section 6343 (relating to authority to release
levy and return property) is amended by adding at the
end the following new subsection:
‘‘(d) RETURN OF PROPERTY IN CERTAIN CASES.—
If—
‘‘(1) any property has been levied upon, and
‘‘(2) the Secretary determines that—
‘‘(A) the levy on such property was pre-
mature or otherwise not in accordance with ad-
ministrative procedures of the Secretary,
‘‘(B) the taxpayer has entered into an
agreement under section 6159 to satisfy the tax
liability for which the levy was imposed by
means of installment payments, unless such
agreement provides otherwise,
‘‘(C) the return of such property will facili-
tate the collection of the tax liability, or
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‘‘(D) with the consent of the taxpayer or
the Taxpayer Advocate, the return of such
property would be in the best interests of the
taxpayer (as determined by the Taxpayer Advo-
cate) and the United States,
the provisions of subsection (b) shall apply in the same
manner as if such property had been wrongly levied upon,
except that no interest shall be allowed under subsection
(c).’’
(c) MODIFICATIONS IN CERTAIN LEVY EXEMPTION
AMOUNTS.—
(1) FUEL, ETC.—Paragraph (2) of section
6334(a) (relating to fuel, provisions, furniture, and
personal effects exempt from levy) is amended—
(A) by striking ‘‘If the taxpayer is the
head of a family, so’’ and inserting ‘‘So’’,
(B) by striking ‘‘his household’’ and insert-
ing ‘‘the taxpayer’s household’’, and
(C) by striking ‘‘$1,650 ($1,550 in the
case of levies issued during 1989)’’ and insert-
ing ‘‘$2,500’’.
(2) INFLATION
ADJUSTMENT.—Section 6334
(relating to property exempt from levy) is amended
by adding at the end the following new subsection:
‘‘(f) INFLATION ADJUSTMENT.—
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‘‘(1) IN GENERAL.—In the case of any calendar
year beginning after 1996, each dollar amount re-
ferred to in paragraphs (2) and (3) of subsection (a)
shall be increased by an amount equal to—
‘‘(A) such dollar amount, multiplied by
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for such calendar
year, by substituting ‘calendar year 1995’ for
‘calendar year 1992’ in subparagraph (B)
thereof.
‘‘(2) ROUNDING.—If any dollar amount after
being increased under paragraph (1) is not a mul-
tiple of $10, such dollar amount shall be rounded to
the nearest multiple of $10.’’
(3) TECHNICAL AMENDMENT.—Paragraph (3)
of section 6334(a) is amended by striking ‘‘($1,050
in the case of levies issued during 1989)’’.
(d) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall take effect on the date of the enactment of this
Act.
(2) 
EXEMPT
AMOUNTS.—The 
amendments
made by subsection (c) shall take effect with respect
to levies issued after December 31, 1995.
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SEC. 13322. OFFERS-IN-COMPROMISE.
(a) REVIEW REQUIREMENTS.—Subsection (b) of sec-
tion 7122 (relating to records) is amended by striking
‘‘$500.’’ and inserting ‘‘$100,000. However, such com-
promise shall be subject to continuing quality review by
the Secretary.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall take effect on the date of the enactment
of this Act.
PART VI—INFORMATION RETURNS
SEC. 13326. CIVIL DAMAGES FOR FRAUDULENT FILING OF
INFORMATION RETURNS.
(a) GENERAL RULE.—Subchapter B of chapter 76
(relating to proceedings by taxpayers and third parties)
is amended by redesignating section 7434 as section 7435
and by inserting after section 7433 the following new
section:
‘‘SEC. 7434. CIVIL DAMAGES FOR FRAUDULENT FILING OF
INFORMATION RETURNS.
‘‘(a) IN GENERAL.—If any person willfully files a
fraudulent information return with respect to payments
purported to be made to any other person, such other per-
son may bring a civil action for damages against the per-
son so filing such return.
‘‘(b) DAMAGES.—In any action brought under sub-
section (a), upon a finding of liability on the part of the
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defendant, the defendant shall be liable to the plaintiff in
an amount equal to the greater of $5,000 or the sum of—
‘‘(1) any actual damages sustained by the plain-
tiff as a proximate result of the filing of the fraudu-
lent information return (including any costs attrib-
utable to resolving deficiencies asserted as a result
of such filing),
‘‘(2) the costs of the action, and
‘‘(3) in the court’s discretion, reasonable attor-
neys fees.
‘‘(c) PERIOD
FOR
BRINGING
ACTION.—Notwith-
standing any other provision of law, an action to enforce
the liability created under this section may be brought
without regard to the amount in controversy and may be
brought only within the later of—
‘‘(1) 6 years after the date of the filing of the
fraudulent information return, or
‘‘(2) 1 year after the date such fraudulent in-
formation return would have been discovered by ex-
ercise of reasonable care.
‘‘(d) COPY OF COMPLAINT FILED WITH IRS.—Any
person bringing an action under subsection (a) shall pro-
vide a copy of the complaint to the Internal Revenue Serv-
ice upon the filing of such complaint with the court.
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‘‘(e) FINDING
OF COURT TO INCLUDE CORRECT
AMOUNT OF PAYMENT.—The decision of the court award-
ing damages in an action brought under subsection (a)
shall include a finding of the correct amount which should
have been reported in the information return.
‘‘(f) INFORMATION RETURN.—For purposes of this
section, the term ‘information return’ means any state-
ment described in section 6724(d)(1)(A).’’
(b) CLERICAL AMENDMENT.—The table of sections
for subchapter B of chapter 76 is amended by striking
the item relating to section 7434 and inserting the
following:
‘‘Sec. 7434. Civil damages for fraudulent filing of information re-
turns.
‘‘Sec. 7435. Cross references.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to fraudulent information returns
filed after the date of the enactment of this Act.
SEC. 13327. REQUIREMENT TO CONDUCT REASONABLE IN-
VESTIGATIONS OF INFORMATION RETURNS.
(a) GENERAL RULE.—Section 6201 (relating to as-
sessment authority) is amended by redesignating sub-
section (d) as subsection (e) and by inserting after sub-
section (c) the following new subsection:
‘‘(d) REQUIRED REASONABLE VERIFICATION OF IN-
FORMATION RETURNS.—In any court proceeding, if a tax-
payer asserts a reasonable dispute with respect to any
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item of income reported on an information return filed
with the Secretary under subpart B or C of part III of
subchapter A of chapter 61 by a third party and the tax-
payer has fully cooperated with the Secretary (including
providing, within a reasonable period of time, access to
and inspection of all witnesses, information, and docu-
ments within the control of the taxpayer as reasonably re-
quested by the Secretary), the Secretary shall have the
burden of producing reasonable and probative information
concerning such deficiency in addition to such information
return.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect on the date of the enact-
ment of this Act.
PART VII—AWARDING OF COSTS AND CERTAIN
FEES
SEC. 13331. UNITED STATES MUST ESTABLISH THAT ITS PO-
SITION IN PROCEEDING WAS SUBSTANTIALLY
JUSTIFIED.
(a) GENERAL RULE.—Subparagraph (A) of section
7430(c)(4) (defining prevailing party) is amended by
striking clause (i) and by redesignating clauses (ii) and
(iii) as clauses (i) and (ii), respectively.
(b) BURDEN OF PROOF ON UNITED STATES.—Para-
graph (4) of section 7430(c) is amended by redesignating
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subparagraph (B) as subparagraph (C) and by inserting
after subparagraph (A) the following new subparagraph:
‘‘(B) EXCEPTION IF UNITED STATES ES-
TABLISHES THAT ITS POSITION WAS SUBSTAN-
TIALLY JUSTIFIED.—
‘‘(i) GENERAL RULE.—A party shall
not be treated as the prevailing party in a
proceeding to which subsection (a) applies
if the United States establishes that the
position of the United States in the pro-
ceeding was substantially justified.
‘‘(ii) PRESUMPTION OF NO JUSTIFICA-
TION
IF
INTERNAL
REVENUE
SERVICE
DIDN’T
FOLLOW
CERTAIN
PUBLISHED
GUIDANCE.—For purposes of clause (i),
the position of the United States shall be
presumed not to be substantially justified
if the Internal Revenue Service did not fol-
low its applicable published guidance in the
administrative proceeding. Such presump-
tion may be rebutted.
‘‘(iii) APPLICABLE PUBLISHED GUID-
ANCE.—For purposes of clause (ii), the
term 
‘applicable 
published 
guidance’
means—
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‘‘(I) regulations, revenue rulings,
revenue procedures, information re-
leases, notices, and announcements,
and
‘‘(II) any of the following which
are issued to the taxpayer: private let-
ter rulings, technical advice memo-
randa, and determination letters.’’
(c) CONFORMING AMENDMENTS.—
(1) Subparagraph (B) of section 7430(c)(2) is
amended by striking ‘‘paragraph (4)(B)’’ and insert-
ing ‘‘paragraph (4)(C)’’.
(2) Subparagraph (C) of section 7430(c)(4), as
redesignated by subsection (b), is amended by strik-
ing ‘‘subparagraph (A)’’ and inserting ‘‘this para-
graph’’.
(3) Sections 6404(g) and 6656(c)(1), as amend-
ed by this title, are each amended by striking ‘‘sec-
tion 7430(c)(4)(A)(iii)’’ and inserting ‘‘section
7430(c)(4)(A)(ii)’’.
SEC. 13332. INCREASED LIMIT ON ATTORNEY FEES.
Paragraph (1) of section 7430(c) (defining reason-
able litigation costs) is amended—
(1) by striking ‘‘$75’’ in clause (iii) of subpara-
graph (B) and inserting ‘‘$110’’,
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(2) by striking ‘‘an increase in the cost of living
or’’ in clause (iii) of subparagraph (B), and
(3) by adding after clause (iii) the following:
‘‘In the case of any calendar year beginning after
1996, the dollar amount referred to in clause (iii)
shall be increased by an amount equal to such dollar
amount multiplied by the cost-of-living adjustment
determined under section 1(f)(3) for such calendar
year, by substituting ‘calendar year 1995’ for ‘cal-
endar year 1992’ in subparagraph (B) thereof. If
any dollar amount after being increased under the
preceding sentence is not a multiple of $10, such
dollar amount shall be rounded to the nearest mul-
tiple of $10.’’
SEC. 13333. FAILURE TO AGREE TO EXTENSION NOT TAKEN
INTO ACCOUNT.
Paragraph (1) of section 7430(b) (relating to require-
ment that administrative remedies be exhausted) is
amended by adding at the end the following new sentence:
‘‘Any failure to agree to an extension of the time for the
assessment of any tax shall not be taken into account for
purposes of determining whether the prevailing party
meets the requirements of the preceding sentence.’’
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SEC. 13334. AWARD OF LITIGATION COSTS PERMITTED IN
DECLARATORY JUDGMENT PROCEEDINGS.
Subsection (b) of section 7430 is amended by striking
paragraph (3) and by redesignating paragraph (4) as
paragraph (3).
SEC. 13335. EFFECTIVE DATE.
The amendments made by this part shall apply in the
case of proceedings commenced after the date of the enact-
ment of this Act.
PART VIII—MODIFICATION TO RECOVERY OF
CIVIL DAMAGES FOR UNAUTHORIZED COL-
LECTION ACTIONS
SEC. 13336. INCREASE IN LIMIT ON RECOVERY OF CIVIL
DAMAGES FOR UNAUTHORIZED COLLECTION
ACTIONS.
(a) GENERAL RULE.—Subsection (b) of section 7433
(relating to damages) is amended by striking ‘‘$100,000’’
and inserting ‘‘$1,000,000’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to actions by officers or employ-
ees of the Internal Revenue Service after the date of the
enactment of this Act.
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SEC. 13337. COURT DISCRETION TO REDUCE AWARD FOR
LITIGATION COSTS FOR FAILURE TO EX-
HAUST ADMINISTRATIVE REMEDIES.
(a) GENERAL RULE.—Paragraph (1) of section
7433(d) (relating to civil damages for certain unauthor-
ized collection actions) is amended to read as follows:
‘‘(1) AWARD FOR DAMAGES MAY BE REDUCED
IF ADMINISTRATIVE REMEDIES NOT EXHAUSTED.—
The amount of damages awarded under subsection
(b) may be reduced if the court determines that the
plaintiff has not exhausted the administrative rem-
edies available to such plaintiff within the Internal
Revenue Service.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply in the case of proceedings com-
menced after the date of the enactment of this Act.
PART IX—MODIFICATIONS TO PENALTY FOR
FAILURE TO COLLECT AND PAY OVER TAX
SEC. 13341. PRELIMINARY NOTICE REQUIREMENT.
(a) IN GENERAL.—Section 6672 (relating to failure
to collect and pay over tax, or attempt to evade or defeat
tax) is amended by redesignating subsection (b) as sub-
section (c) and by inserting after subsection (a) the follow-
ing new subsection:
‘‘(b) PRELIMINARY NOTICE REQUIREMENT.—
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‘‘(1) IN
GENERAL.—No penalty shall be im-
posed under subsection (a) unless the Secretary noti-
fies the taxpayer in writing by mail to an address as
determined under section 6212(b) that the taxpayer
shall be subject to an assessment of such penalty.
‘‘(2) TIMING OF NOTICE.—The mailing of the
notice described in paragraph (1) shall precede any
notice and demand of any penalty under subsection
(a) by at least 60 days.
‘‘(3) STATUTE
OF
LIMITATIONS.—If a notice
described in paragraph (1) with respect to any pen-
alty is mailed before the expiration of the period
provided by section 6501 for the assessment of such
penalty (determined without regard to this para-
graph), the period provided by such section for the
assessment of such penalty shall not expire before
the later of—
‘‘(A) the date 90 days after the date on
which such notice was mailed, or
‘‘(B) if there is a timely protest of the pro-
posed assessment, the date 30 days after the
Secretary makes a final administrative deter-
mination with respect to such protest.
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‘‘(4) EXCEPTION
FOR
JEOPARDY.—This sub-
section shall not apply if the Secretary finds that the
collection of the penalty is in jeopardy.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to proposed assessments made
after June 30, 1996.
SEC. 
13342. 
DISCLOSURE 
OF 
CERTAIN 
INFORMATION
WHERE MORE THAN 1 PERSON LIABLE FOR
PENALTY FOR FAILURE TO COLLECT AND
PAY OVER TAX.
(a) IN GENERAL.—Subsection (e) of section 6103
(relating to disclosure to persons having material interest),
as amended by section 13318, is amended by adding at
the end the following new paragraph:
‘‘(9) DISCLOSURE
OF
CERTAIN
INFORMATION
WHERE MORE THAN 1 PERSON SUBJECT TO PEN-
ALTY UNDER SECTION 6672.—If the Secretary deter-
mines that a person is liable for a penalty under sec-
tion 6672(a) with respect to any failure, upon re-
quest in writing of such person, the Secretary shall
disclose in writing to such person—
‘‘(A) the name of any other person whom
the Secretary has determined to be liable for
such penalty with respect to such failure, and
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‘‘(B) whether the Secretary has attempted
to collect such penalty from such other person,
the general nature of such collection activities,
and the amount collected.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect on the date of the enact-
ment of this Act.
SEC. 13343. RIGHT OF CONTRIBUTION WHERE MORE THAN
1 PERSON LIABLE FOR PENALTY FOR FAIL-
URE TO COLLECT AND PAY OVER TAX.
(a) IN GENERAL.—Section 6672 (relating to failure
to collect and pay over tax, or attempt to evade or defeat
tax) is amended by adding at the end the following new
subsection:
‘‘(d) RIGHT OF CONTRIBUTION WHERE MORE THAN
1 PERSON LIABLE FOR PENALTY.—If more than 1 person
is liable for the penalty under subsection (a) with respect
to any tax, each person who paid such penalty shall be
entitled to recover from other persons who are liable for
such penalty an amount equal to the excess of the amount
paid by such person over such person’s proportionate
share of the penalty. Any claim for such a recovery may
be made only in a proceeding which is separate from, and
is not joined with—
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‘‘(1) an action for collection of such penalty
brought by the United States, or
‘‘(2) a proceeding in which the United States
files a counterclaim or third-party complaint for the
collection of such penalty.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to penalties assessed after the
date of the enactment of this Act.
SEC. 13344. VOLUNTEER BOARD MEMBERS OF TAX-EXEMPT
ORGANIZATIONS EXEMPT FROM PENALTY
FOR FAILURE TO COLLECT AND PAY OVER
TAX.
(a) IN GENERAL.—Section 6672 is amended by add-
ing at the end the following new subsection:
‘‘(e) EXCEPTION FOR VOLUNTARY BOARD MEMBERS
OF TAX-EXEMPT ORGANIZATIONS.—No penalty shall be
imposed by subsection (a) on any unpaid, volunteer mem-
ber of any board of trustees or directors of an organization
exempt from tax under subtitle A if such member—
‘‘(1) is solely serving in an honorary capacity,
‘‘(2) does not participate in the day-to-day or
financial operations of the organization, and
‘‘(3) does not have actual knowledge of the fail-
ure on which such penalty is imposed.
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The preceding sentence shall not apply if it results in no
person being liable for the penalty imposed by subsection
(a).’’
(b) PUBLIC INFORMATION REQUIREMENTS.—
(1) IN GENERAL.—The Secretary of the Treas-
ury or the Secretary’s delegate (hereafter in this
subsection referred to as the ‘‘Secretary’’) shall take
such actions as may be appropriate to ensure that
employees are aware of their responsibilities under
the Federal tax depository system, the circumstances
under which employees may be liable for the penalty
imposed by section 6672 of the Internal Revenue
Code of 1986, and the responsibility to promptly re-
port to the Internal Revenue Service any failure re-
ferred to in subsection (a) of such section 6672.
Such actions shall include—
(A) printing of a warning on deposit cou-
pon booklets and the appropriate tax returns
that certain employees may be liable for the
penalty imposed by such section 6672, and
(B) the development of a special informa-
tion packet.
(2) DEVELOPMENT
OF
EXPLANATORY
MATE-
RIALS.—The Secretary shall develop materials ex-
plaining the circumstances under which board mem-
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bers of tax-exempt organizations (including vol-
untary and honorary members) may be subject to
penalty under section 6672 of such Code. Such ma-
terials shall be made available to tax-exempt organi-
zations.
(3) IRS INSTRUCTIONS.—The Secretary shall
clarify the instructions to Internal Revenue Service
employees on the application of the penalty under
section 6672 of such Code with regard to voluntary
members of boards of trustees or directors of tax-
exempt organizations.
PART X—MODIFICATIONS OF RULES RELATING
TO SUMMONSES
SEC. 13346. ENROLLED AGENTS INCLUDED AS THIRD-
PARTY RECORDKEEPERS.
(a) IN GENERAL.—Paragraph (3) of section 7609(a)
(relating to third-party recordkeeper defined) is amended
by striking ‘‘and’’ at the end of subparagraph (G), by
striking the period at the end of subparagraph (H) and
inserting ‘‘; and’’, and by adding at the end the following
the subparagraph:
‘‘(I) any enrolled agent.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to summonses issued after the
date of the enactment of this Act.
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SEC. 13347. SAFEGUARDS RELATING TO DESIGNATED SUM-
MONSES.
(a) STANDARD OF REVIEW.—Subparagraph (A) of
section 6503(j)(2) (defining designated summons) is
amended by redesignating clauses (i) and (ii) as clauses
(ii) and (iii), respectively, and by inserting before clause
(ii) (as so redesignated) the following new clause:
‘‘(i) the issuance of such summons is
preceded by a review of such issuance by
the regional counsel of the Office of Chief
Counsel for the region in which the exam-
ination of the corporation is being con-
ducted,’’.
(b) LIMITATION
ON
PERSONS
TO
WHOM
DES-
IGNATED SUMMONS MAY BE ISSUED.—Paragraph (1) of
section 6503(j) is amended by striking ‘‘with respect to
any return of tax by a corporation’’ and inserting ‘‘to a
corporation (or to any other person to whom the corpora-
tion has transferred records) with respect to any return
of tax by such corporation for a taxable year (or other
period) for which such corporation is being examined
under the coordinated examination program (or any suc-
cessor program) of the Internal Revenue Service’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to summonses issued after the date
of the enactment of this Act.
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SEC. 13348. ANNUAL REPORT TO CONGRESS CONCERNING
DESIGNATED SUMMONSES.
Not later than December 31 of each calendar year
after 1995, the Secretary of the Treasury or his delegate
shall report to the Committee on Ways and Means of the
House of Representatives and the Committee on Finance
of the Senate on the number of designated summonses (as
defined in section 6503(j) of the Internal Revenue Code
of 1986) which were issued during the preceding 12
months.
PART XI—RELIEF FROM RETROACTIVE APPLICA-
TION OF TREASURY DEPARTMENT REGULA-
TIONS
SEC. 13351. RELIEF FROM RETROACTIVE APPLICATION OF
TREASURY DEPARTMENT REGULATIONS.
(a) IN GENERAL.—Subsection (b) of section 7805
(relating to rules and regulations) is amended to read as
follows:
‘‘(b) RETROACTIVITY OF REGULATIONS.—
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this subsection, no temporary, proposed, or
final regulation relating to the internal revenue laws
shall apply to any taxable period ending before the
earliest of the following dates:
‘‘(A) The date on which such regulation is
filed with the Federal Register.
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‘‘(B) In the case of any final regulation,
the date on which any proposed or temporary
regulation to which such final regulation relates
was filed with the Federal Register.
‘‘(C) The date on which any notice sub-
stantially describing the expected contents of
any temporary, proposed, or final regulation is
issued to the public.
‘‘(2) EXCEPTION FOR PROMPTLY ISSUED REGU-
LATIONS.—Paragraph (1) shall not apply to regula-
tions filed or issued within 12 months of the date of
the enactment of the statutory provision to which
the regulation relates.
‘‘(3) PREVENTION OF ABUSE.—The Secretary
may provide that any regulation may take effect or
apply retroactively to prevent abuse.
‘‘(4) 
CORRECTION
OF
PROCEDURAL
DE-
FECTS.—The Secretary may provide that any regu-
lation may apply retroactively to correct a proce-
dural defect in the issuance of any prior regulation.
‘‘(5) INTERNAL REGULATIONS.—The limitation
of paragraph (1) shall not apply to any regulation
relating to internal Treasury Department policies,
practices, or procedures.
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‘‘(6) CONGRESSIONAL
AUTHORIZATION.—The
limitation of paragraph (1) may be superseded by a
legislative grant from Congress authorizing the Sec-
retary to prescribe the effective date with respect to
any regulation.
‘‘(7) ELECTION TO APPLY RETROACTIVELY.—
Paragraph (1) shall not apply to any regulation
which the taxpayer elects to apply before the dates
specified in paragraph (1) but only if such election
applies to all regulations which were issued with
such regulation under the statutory provision to
which such regulation relates.
‘‘(8) APPLICATION
TO
RULINGS.—The Sec-
retary may prescribe the extent, if any, to which any
ruling (including any judicial decision or any admin-
istrative determination other than by regulation) re-
lating to the internal revenue laws shall be applied
without retroactive effect.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply with respect to regulations
which relate to statutory provisions enacted on or after
the date of the enactment of this Act.
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PART XII—MISCELLANEOUS PROVISIONS
SEC. 13356. REPORT ON PILOT PROGRAM FOR APPEAL OF
ENFORCEMENT ACTIONS.
Not later than March 1, 1996, the Secretary of the
Treasury or his delegate shall submit to the Committee
on Ways and Means of the House of Representatives and
the Committee on Finance of the Senate a report on the
pilot program for appeals of enforcement actions (includ-
ing lien, levy, and seizure actions) to the Appeals Division
of the Internal Revenue Service, together with such rec-
ommendations as he may deem advisable.
SEC. 13357. PHONE NUMBER OF PERSON PROVIDING PAYEE
STATEMENTS REQUIRED TO BE SHOWN ON
SUCH STATEMENT.
(a) GENERAL RULE.—The following provisions are
each amended by striking ‘‘name and address’’ and insert-
ing ‘‘name, address, and phone number of the information
contact’’:
(1) Section 6041(d)(1).
(2) Section 6041A(e)(1).
(3) Section 6042(c)(1).
(4) Section 6044(e)(1).
(5) Section 6045(b)(1).
(6) Section 6049(c)(1)(A).
(7) Section 6050B(b)(1).
(8) Section 6050H(d)(1).
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(9) Section 6050I(e)(1).
(10) Section 6050J(e).
(11) Section 6050K(b)(1).
(12) Section 6050N(b)(1).
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall apply to statements required to be fur-
nished after December 31, 1996 (determined without
regard to any extension).
SEC. 13358. REQUIRED NOTICE OF CERTAIN PAYMENTS.
If any payment is received by the Secretary of the
Treasury or his delegate from any taxpayer and the Sec-
retary cannot associate such payment with such taxpayer,
the Secretary shall make reasonable efforts to notify the
taxpayer of such inability within 60 days after the re-
ceipt of such payment.
SEC. 13359. UNAUTHORIZED ENTICEMENT OF INFORMA-
TION DISCLOSURE.
(a) IN GENERAL.—Subchapter B of chapter 76 (re-
lating to proceedings by taxpayers and third parties), as
amended by section 13316(a), is amended by redesignat-
ing section 7435 as section 7436 and by inserting after
section 7434 the following new section:
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‘‘SEC. 7435. CIVIL DAMAGES FOR UNAUTHORIZED ENTICE-
MENT OF INFORMATION DISCLOSURE.
‘‘(a) IN GENERAL.—If any officer or employee of the
United States intentionally compromises the determina-
tion or collection of any tax due from an attorney, certified
public accountant, or enrolled agent representing a tax-
payer in exchange for information conveyed by the tax-
payer to the attorney, certified public accountant, or en-
rolled agent for purposes of obtaining advice concerning
the taxpayer’s tax liability, such taxpayer may bring a civil
action for damages against the United States in a district
court of the United States. Such civil action shall be the
exclusive remedy for recovering damages resulting from
such actions.
‘‘(b) DAMAGES.—In any action brought under sub-
section (a), upon a finding of liability on the part of the
defendant, the defendant shall be liable to the plaintiff in
an amount equal to the lesser of $500,000 or the sum
of—
‘‘(1) actual, direct economic damages sustained
by the plaintiff as a proximate result of the informa-
tion disclosure, and
‘‘(2) the costs of the action.
Damages shall not include the taxpayer’s liability for any
civil or criminal penalties, or other losses attributable to
incarceration or the imposition of other criminal sanctions.
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‘‘(c) PAYMENT AUTHORITY.—Claims pursuant to
this section shall be payable out of funds appropriated
under section 1304 of title 31, United States Code.
‘‘(d) PERIOD
FOR BRINGING ACTION.—Notwith-
standing any other provision of law, an action to enforce
liability created under this section may be brought without
regard to the amount in controversy and may be brought
only within 2 years after the date the actions creating such
liability would have been discovered by exercise of reason-
able care.
‘‘(e) MANDATORY STAY.—Upon a certification by the
Commissioner or the Commissioner’s delegate that there
is an ongoing investigation or prosecution of the taxpayer,
the district court before which an action under this section
is pending, shall stay all proceedings with respect to such
action pending the conclusion of the investigation or
prosecution.
‘‘(f) CRIME-FRAUD
EXCEPTION.—Subsection (a)
shall not apply to information conveyed to an attorney,
certified public accountant, or enrolled agent for the pur-
pose of perpetrating a fraud or crime.’’
(b) CLERICAL AMENDMENT.—The table of sections
for subchapter B of chapter 76, as amended by section
13316(b), is amended by striking the item relating to sec-
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tion 7435 and by adding at the end the following new
items:
‘‘Sec. 7435. Civil damages for unauthorized enticement of infor-
mation disclosure.
‘‘Sec. 7436. Cross references.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to actions after the date of the
enactment of this Act.
SEC. 13360. ANNUAL REMINDERS TO TAXPAYERS WITH OUT-
STANDING DELINQUENT ACCOUNTS.
(a) IN GENERAL.—Chapter 77 (relating to mis-
cellaneous provisions) is amended by adding at the end
the following new section:
‘‘SEC. 7524. ANNUAL NOTICE OF TAX DELINQUENCY.
‘‘Not less often than annually, the Secretary shall
send a written notice to each taxpayer who has a tax delin-
quent account of the amount of the tax delinquency as
of the date of the notice.’’
(b) CLERICAL AMENDMENT.—The table of sections
for chapter 77 is amended by adding at the end the follow-
ing new item:
‘‘Sec. 7524. Annual notice of tax delinquency.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to calendar years after 1995.
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SEC. 13361. 5-YEAR EXTENSION OF AUTHORITY FOR UNDER-
COVER OPERATIONS.
(a) IN GENERAL.—Paragraph (3) of section 7601(c)
of the Anti-Drug Abuse Act of 1988 is amended by strik-
ing all that follows ‘‘this Act’’ and inserting a period.
(b) RESTORATION OF AUTHORITY FOR 5 YEARS.—
Subsection (c) of section 7608 is amended by adding at
the end the following new paragraph:
‘‘(6) APPLICATION
OF
SECTION.—The provi-
sions of this subsection—
‘‘(A) shall apply after November 17, 1988,
and before January 1, 1990, and
‘‘(B) shall apply after the date of the en-
actment of this paragraph and before January
1, 2001.
All amounts expended pursuant to this subsection
during the period described in subparagraph (B)
shall be recovered to the extent possible, and depos-
ited in the Treasury of the United States as mis-
cellaneous receipts, before January 1, 2001.’’
(c) ENHANCED OVERSIGHT.—
(1) ADDITIONAL
INFORMATION
REQUIRED
IN
REPORTS TO CONGRESS.—Subparagraph (B) of sec-
tion 7608(c)(4) is amended—
(A) by striking ‘‘preceding the period’’ in
clause (ii),
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(B) by striking ‘‘and’’ at the end of clause
(ii), and
(C) by striking clause (iii) and inserting
the following:
‘‘(iii) the number, by programs, of un-
dercover investigative operations closed in
the 1-year period for which such report is
submitted, and
‘‘(iv) the following information with
respect to each undercover investigative op-
eration pending as of the end of the 1-year
period for which such report is submitted
or closed during such 1-year period—
‘‘(I) the date the operation began
and the date of the certification re-
ferred to in the last sentence of para-
graph (1),
‘‘(II) 
the 
total 
expenditures
under the operation and the amount
and use of the proceeds from the op-
eration,
‘‘(III) a detailed description of
the operation including the potential
violation 
being 
investigated 
and
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whether the operation is being con-
ducted under grand jury auspices, and
‘‘(IV) the results of the operation
including the results of criminal pro-
ceedings.’’
(2) AUDITS REQUIRED WITHOUT REGARD TO
AMOUNTS INVOLVED.—Subparagraph (C) of section
7608(c)(5) is amended to read as follows:
‘‘(C) UNDERCOVER INVESTIGATIVE OPER-
ATION.—The term ‘undercover investigative op-
eration’ means any undercover investigative op-
eration of the Service; except that, for purposes
of subparagraphs (A) and (C) of paragraph (4),
such term only includes an operation which is
exempt from section 3302 or 9102 of title 31,
United States Code.’’
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall take effect on the date of the
enactment of this Act.
SEC. 13362. DISCLOSURE OF FORM 8300 INFORMATION ON
CASH TRANSACTIONS.
(a) IN GENERAL.—Subsection (l) of section 6103 (re-
lating to disclosure of returns and return information for
purposes other than tax administration) is amended by
adding at the end the following new paragraph:
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‘‘(15) DISCLOSURE OF RETURNS FILED UNDER
SECTION 6050I.—The Secretary may, upon written
request, disclose to officers and employees of—
‘‘(A) any Federal agency,
‘‘(B) any agency of a State or local govern-
ment, or
‘‘(C) any agency of the government of a
foreign country,
information contained on returns filed under section
6050I. Any such disclosure shall be made on the
same basis, and subject to the same conditions, as
apply to disclosures of information on reports filed
under section 5313 of title 31, United States Code;
except that no disclosure under this paragraph shall
be made for purposes of the administration of any
tax law.’’
(b) CONFORMING AMENDMENTS.—
(1) Subsection (i) of section 6103 is amended
by striking paragraph (8).
(2) Subparagraph (A) of section 6103(p)(3) is
amended—
(A) by striking ‘‘(7)(A)(ii), or (8)’’ and in-
serting ‘‘or (7)(A)(ii)’’, and
(B) by striking ‘‘or (14)’’ and inserting
‘‘(14), or (15)’’.
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(3) The material preceding subparagraph (A) of
section 6103(p)(4) is amended—
(A) by striking ‘‘(5), or (8)’’ and inserting
‘‘or (5)’’,
(B) by striking ‘‘(i)(3)(B)(i), or (8)’’ and
inserting ‘‘(i)(3)(B)(i),’’, and
(C) by striking ‘‘or (12)’’ and inserting
‘‘(12), or (15)’’.
(4) Clause (ii) of section 6103(p)(4)(F) is
amended—
(A) by striking ‘‘(5), or (8)’’ and inserting
‘‘or (5)’’, and
(B) by striking ‘‘or (14)’’ and inserting
‘‘(14), or (15)’’.
(5) Paragraph (2) of section 7213(a) is amend-
ed by striking ‘‘or (12)’’ and inserting ‘‘(12), or
(15)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date of the enactment
of this Act.
SEC. 13363. DISCLOSURE OF RETURNS AND RETURN INFOR-
MATION TO DESIGNEE OF TAXPAYER.
Subsection (c) of section 6103 (relating to disclosure
of returns and return information to designee of taxpayer)
is amended by striking ‘‘written request for or consent to
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such disclosure’’ and inserting ‘‘request for or consent to
such disclosure’’.
SEC. 13364. STUDY OF NETTING OF INTEREST ON OVERPAY-
MENTS AND LIABILITIES.
(a) IN GENERAL.—The Secretary of the Treasury or
his delegate shall—
(1) conduct a study of the manner in which the
Internal Revenue Service has implemented the net-
ting of interest on overpayments and underpayments
and of the policy and administrative implications of
global netting, and
(2) before submitting the report of such study,
hold a public hearing to receive comments on the
matters included in such study.
(b) REPORT.—The report of such study shall be sub-
mitted not later than 6 months after the date of the enact-
ment of this Act to the Committee on Ways and Means
of the House of Representatives and the Committee on
Finance of the Senate.
SEC. 13365. CREDIT FOR EXPENSES OF CERTAIN TCMP AU-
DITS.
(a) IN GENERAL.—Subchapter B of chapter 65 is
amended by adding at the end the following new section:
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‘‘SEC. 6428. CREDIT FOR EXPENSES OF 1994 TCMP AUDITS.
‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in-
dividual, there shall be allowed as a credit against the tax
imposed by subtitle A an amount equal to the qualified
TCMP expenses paid or incurred by the taxpayer during
the taxable year.
‘‘(b) LIMITATION.—The amount of the credit allowed
by subsection (a) shall not exceed $3,000 with respect to
an audit.
‘‘(c) QUALIFIED TCMP EXPENSES.—For purposes
of this section, the term ‘qualified TCMP expenses’ means
amounts which would (but for subsection (d)) be allowed
as a deduction under section 162 or 212(3) in connection
with an audit under the Taxpayer Compliance Measure-
ment Program of the taxpayer’s return of tax imposed by
chapter 1 for any taxable year beginning during 1994.
Such term shall not include any expense in connection
with an audit of an estate, trust, partnership, or S cor-
poration.
‘‘(d) DENIAL OF DOUBLE BENEFIT.—No deduction
shall be allowed under chapter 1 for any amount for which
a credit is allowed under this section.
‘‘(e) CREDIT TREATED AS SUBPART C CREDIT.—For
purposes of this title, the credit allowed under subsection
(a) shall be treated as a credit allowed under subpart C
of part IV of subchapter A of chapter 1.’’
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(b) TECHNICAL AMENDMENTS.—
(1) Paragraph (2) of section 1324(b) of title
31, United States Code, is amended by inserting be-
fore the period ‘‘, or from section 6428 of such
Code’’.
(2) The table of sections for such subchapter B
is amended by adding at the end the following new
item:
‘‘Sec. 6428. Credit for expenses of 1994 TCMP audits.’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to amounts paid or incurred after
December 31, 1994, in taxable years ending after such
date.
SEC. 13366. EXPENSES OF DETECTION OF UNDERPAYMENTS
AND FRAUD, ETC.
(a) IN GENERAL.—Section 7623 (relating to ex-
penses of deduction and punishment of frauds) is amended
to read as follows:
‘‘SEC. 7623. EXPENSES OF DETECTION OF UNDERPAYMENTS
AND FRAUD, ETC.
‘‘The Secretary, under regulations prescribed by the
Secretary, is authorized to pay such sums as he deem nec-
essary for—
‘‘(1) detecting underpayments of tax, and
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‘‘(2) detecting and bringing to trial and punish-
ment persons guilty of violating the internal revenue
laws or conniving at the same,
in cases where such expenses are not otherwise provided
for by law. Any amount payable under the preceding sen-
tence shall be paid from the proceeds of amounts (other
than interest) collected by reason of the information pro-
vided, and any amount so collected shall be available for
such payments.’’.
(b) CLERICAL AMENDMENT.—The table of sections
for subchapter B of chapter 78 is amended by striking
the item relating to section 7623 and inserting the follow-
ing new item:
‘‘Sec. 7623. Expenses of detection of underpayments and fraud,
etc.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date which is 6 months
after the enactment of this Act.
(d) REPORT.—The Secretary of the Treasury or his
delegate shall submit an annual report to the Committee
on Ways and Means of the House of Representatives and
the Committee on Finance of the Senate on the payments
under section 7623 of the Internal Revenue Code of 1986
during the year and on the amounts collected for which
such payments were made.
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Subtitle D—Additional Technical
Corrections
SEC. 13401. REPORTING OF REAL ESTATE TRANSACTIONS.
(a) IN GENERAL.—Paragraph (3) of section 6045(e)
(relating to prohibition of separate charge for filing re-
turn) is amended by adding at the end the following new
sentence: ‘‘Nothing in this paragraph shall be construed
to prohibit the real estate reporting person from taking
into account its cost of complying with such requirement
in establishing its charge (other than a separate charge
for complying with such requirement) to any customer for
performing services in the case of a real estate trans-
action.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect as if included in section
1015(e)(2)(A) of the Technical and Miscellaneous Reve-
nue Act of 1988.
SEC. 13402. CLARIFICATION OF DENIAL OF DEDUCTION
FOR STOCK REDEMPTION EXPENSES.
(a) IN GENERAL.—Paragraph (1) of section 162(k)
is amended by striking ‘‘the redemption of its stock’’ and
inserting ‘‘the reacquisition of its stock or of the stock
of 
any 
related 
person 
(as 
defined 
in 
section
465(b)(3)(C))’’.
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(b) CERTAIN DEDUCTIONS PERMITTED.—Subpara-
graph (A) of section 162(k)(2) is amended by striking
‘‘or’’ at the end of clause (i), by redesignating clause (ii)
as clause (iii), and by inserting after clause (i) the follow-
ing new clause:
‘‘(ii) deduction for amounts which are
properly allocable to indebtedness and am-
ortized over the term of such indebtedness,
or’’.
(c) CLERICAL AMENDMENT.—The subsection head-
ing for subsection (k) of section 162 is amended by strik-
ing ‘‘REDEMPTION’’ and inserting ‘‘REACQUISITION’’.
(d) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall apply to amounts paid or incurred after Sep-
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.
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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)’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect as if included in the
amendments made by section 713(d)(4)(A) of the Deficit
Reduction Act of 1984.
SEC. 13405. TREATMENT OF CERTAIN VETERANS’ REEM-
PLOYMENT RIGHTS.
(a) IN GENERAL.—Section 414 is amended by adding
at the end the following new subsection:
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‘‘(u) SPECIAL RULES RELATING TO VETERANS’ RE-
EMPLOYMENT RIGHTS.—
‘‘(1) TREATMENT OF CERTAIN CONTRIBUTIONS
MADE
PURSUANT
TO
VETERANS’ REEMPLOYMENT
RIGHTS.—If any contribution is made by an em-
ployer or an employee under an individual account
plan with respect to an employee, or by an employee
to a defined benefit pension plan that provides for
employee contributions, and such contribution is re-
quired by reason of such employee’s rights under
chapter 43 of title 38, United States Code, resulting
from qualified military service, then—
‘‘(A) such contribution shall not be subject
to any otherwise applicable limitation contained
in section 402(g), 402(h), 403(b), 404(a),
404(h), 408, 415, or 457, and shall not be
taken into account in applying such limitations
to other contributions or benefits under such
plan or any other plan, with respect to the year
in which the contribution is made,
‘‘(B) such contribution shall be subject to
the limitations referred to in subparagraph (A)
with respect to the year to which the contribu-
tion relates (in accordance with rules prescribed
by the Secretary), and
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‘‘(C) such plan shall not be treated as fail-
ing to meet the requirements of section
401(a)(4), 
401(a)(26), 
401(k)(3), 
401(m),
403(b)(12), 408(k)(3), 408(k)(6), 410(b), or
416 by reason of the making of such contribu-
tion.
For purposes of the preceding sentence, any elective
deferral or employee contribution made under para-
graph (2) shall be treated as required by reason of
the employee’s rights under such chapter.
‘‘(2) REEMPLOYMENT RIGHTS WITH RESPECT
TO ELECTIVE DEFERRALS.—
‘‘(A) IN GENERAL.—For purposes of this
subchapter and subchapter E, if an employee is
entitled to the benefits of chapter 43 of title 38,
United States Code, with respect to any plan
which provides for elective deferrals, the em-
ployer sponsoring the plan shall be treated as
meeting the requirements of such chapter 43
with respect to such elective deferrals only if
such employer—
‘‘(i) permits such employee to make
additional elective deferrals under such
plan (in the amount determined under sub-
paragraph (B) or such lesser amount as is
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elected by the employee) during the period
which begins on the date of the reemploy-
ment of such employee with such employer
and has the same length as the lesser of—
‘‘(I) the product of 3 and the pe-
riod of qualified military service which
resulted in such rights, and
‘‘(II) 5 years, and
‘‘(ii) makes a matching contribution
with respect to any additional elective de-
ferral made pursuant to clause (i) which
would have been required had such defer-
ral actually been made during the period of
such qualified military service.
‘‘(B) AMOUNT OF MAKEUP REQUIRED.—
The amount determined under this subpara-
graph with respect to any plan is the maximum
amount of the elective deferrals that the indi-
vidual would have been permitted to make
under the plan in accordance with the limita-
tions referred to in paragraph (1)(A) during his
period of qualified military service if he had
continued to be employed by the employer dur-
ing such period and received compensation as
determined under paragraph (7). Proper adjust-
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ment shall be made to the amount determined
under the preceding sentence for any elective
deferrals actually made during the period of
such qualified military service.
‘‘(C) ELECTIVE DEFERRAL.—For purposes
of this paragraph, the term ‘elective deferral’
has the meaning given such term by section
402(g)(3); except that such term shall include
any deferral of compensation under an eligible
deferred compensation plan (as defined in sec-
tion 457(b)).
‘‘(D) AFTER-TAX
EMPLOYEE
CONTRIBU-
TIONS.—References in subparagraphs (A) and
(B) to elective deferrals shall be treated as in-
cluding references to other employee contribu-
tions.
‘‘(3) CERTAIN
RETROACTIVE
ADJUSTMENTS
NOT REQUIRED.—For purposes of this subchapter
and subchapter E, no provision of chapter 43 of title
38, United States Code, shall be construed as re-
quiring—
‘‘(A) any crediting of earnings to an em-
ployee with respect to any contribution before
such contribution is actually made, or
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‘‘(B) any allocation of any forfeiture with
respect to the period of qualified military serv-
ice.
‘‘(4) LOAN
REPAYMENT
SUSPENSIONS
PER-
MITTED.—If any plan suspends the obligation to
repay any loan made to an employee from such plan
for any part of any period during which such em-
ployee is performing qualified military service, such
suspension shall not be taken into account for pur-
poses of section 72(p), 401(a), or 4975(d)(1).
‘‘(5) QUALIFIED MILITARY SERVICE.—For pur-
poses of this subsection, the term ‘qualified military
service’ means any service in the uniformed services
(as defined in chapter 43 of title 38, United States
Code) by any individual if such individual is entitled
to reemployment rights under such chapter with re-
spect to such service.
‘‘(6) INDIVIDUAL
ACCOUNT
PLAN.—For pur-
poses of this subsection, the term ‘individual account
plan’ means any defined contribution plan, any tax-
sheltered annuity plan under section 403(b), and
any eligible deferred compensation plan (as defined
in section 457(b)).
‘‘(7) COMPENSATION.—For purposes of section
415(c)(3), an employee who is in qualified military
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service shall be treated as receiving compensation
from the employer during such period of qualified
military service equal to—
‘‘(A) the compensation the employee would
have received during such period if the em-
ployee were not in qualified military service, de-
termined based on the rate of pay the employee
would have received from the employer but for
absence during the period of qualified military
service, or
‘‘(B) if the compensation of the employee
was not based on a fixed rate, the employee’s
average compensation from the employer during
the 12-month period immediately preceding the
qualified military service (or, if shorter, the pe-
riod of employment immediately preceding the
qualified military service).
‘‘(8) REQUIREMENTS FOR QUALIFIED RETIRE-
MENT PLAN.—For purposes of this subchapter and
subchapter E, an employer sponsoring a plan shall
be treated as meeting the requirements of chapter
43 of title 38, United States Code, only if each of
the following requirements is met:
‘‘(A) An individual reemployed under such
chapter is treated with respect to such plan as
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not having incurred a break in service with the
employer maintaining the plan by reason of
such individual’s period of qualified military
service.
‘‘(B) Each period of qualified military
service served by an individual is, upon reem-
ployment under such chapter, deemed with re-
spect to such plan to constitute service with the
employer maintaining the plan for the purpose
of determining the nonforfeitability of the indi-
vidual’s accrued benefits under such plan and
for the purpose of determining the accrual of
benefits under such plan.
‘‘(C) An individual reemployed under such
chapter is entitled to accrued benefits that are
contingent on the making of, or derived from,
employee contributions or elective deferrals only
to the extent the individual makes payment to
the plan with respect to such contributions or
deferrals. No such payment may exceed the
amount the individual would have been per-
mitted or required to contribute had the indi-
vidual remained continuously employed by the
employer throughout the period of qualified
military service. Any payment to such plan shall
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be made during the period beginning with the
date of reemployment and whose duration is 3
times the period of the qualified military service
(but not greater than 5 years).
‘‘(9) REFERENCES.—For purposes of this sec-
tion, any reference to chapter 43 of title 38, United
States Code, shall be treated as a reference to such
chapter as in effect on December 12, 1994 (without
regard to any subsequent amendment).’’
(b) EFFECTIVE DATE.—The amendments made by
this section shall be effective as of December 12, 1994.
Subtitle E—Tax Information
Sharing
SEC. 13501. DISCLOSURE OF RETURN INFORMATION FOR
ADMINISTRATION OF CERTAIN VETERANS
PROGRAMS.
(a) GENERAL RULE.—Subparagraph (D) of section
6103(l)(7) (relating to disclosure of return information to
Federal, State, and local agencies administering certain
programs) is amended by striking ‘‘Clause (viii) shall not
apply after September 30, 1998.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect on the date of the enact-
ment of this Act.
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Subtitle F—Revenue Increases
PART I—PROVISIONS RELATING TO BUSINESSES
SEC. 13601. TAX TREATMENT OF CERTAIN EXTRAORDINARY
DIVIDENDS.
(a) TREATMENT OF EXTRAORDINARY DIVIDENDS IN
EXCESS OF BASIS.—Paragraph (2) of section 1059(a) (re-
lating to corporate shareholder’s basis in stock reduced by
nontaxed portion of extraordinary dividends) is amended
to read as follows:
‘‘(2) AMOUNTS IN EXCESS OF BASIS.—If the
nontaxed portion of such dividends exceeds such
basis, such excess shall be treated as gain from the
sale or exchange of such stock for the taxable year
in which the extraordinary dividend is received.’’
(b) TREATMENT OF REDEMPTIONS WHERE OPTIONS
INVOLVED.—Paragraph (1) of section 1059(e) (relating to
treatment of partial liquidations and non-pro rata redemp-
tions) is amended to read as follows:
‘‘(1) TREATMENT
OF
PARTIAL
LIQUIDATIONS
AND CERTAIN REDEMPTIONS.—Except as otherwise
provided in regulations—
‘‘(A) REDEMPTIONS.—In the case of any
redemption of stock—
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‘‘(i) which is part of a partial liquida-
tion (within the meaning of section 302(e))
of the redeeming corporation,
‘‘(ii) which is not pro rata as to all
shareholders, or
‘‘(iii) which would not have been
treated (in whole or in part) as a dividend
if any options had not been taken into ac-
count under section 318(a)(4),
any amount treated as a dividend with respect
to such redemption shall be treated as an ex-
traordinary dividend to which paragraphs (1)
and (2) of subsection (a) apply without regard
to the period the taxpayer held such stock. In
the case of a redemption described in clause
(iii), only the basis in the stock redeemed shall
be taken into account under subsection (a).
‘‘(B) REORGANIZATIONS, 
ETC.—An ex-
change described in section 356(a)(1) which is
treated as a dividend under section 356(a)(2)
shall be treated as a redemption of stock for
purposes of applying subparagraph (A).’’
(c) EFFECTIVE DATES.—
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(1) IN GENERAL.—The amendments made by
this section shall apply to distributions after May 3,
1995.
(2) 
TRANSITION
RULE.—The 
amendments
made by this section shall not apply to any distribu-
tion made pursuant to the terms of—
(A) a written binding contract in effect on
May 3, 1995, and at all times thereafter before
such distribution, or
(B) a tender offer outstanding on May 3,
1995.
(3) CERTAIN
DIVIDENDS
NOT
PURSUANT
TO
CERTAIN
REDEMPTIONS.—In determining whether
the amendment made by subsection (a) applies to
any extraordinary dividend other than a dividend
treated as an extraordinary dividend under section
1059(e)(1) of the Internal Revenue Code of 1986
(as amended by this Act), paragraphs (1) and (2)
shall be applied by substituting ‘‘September 13,
1995’’ for ‘‘May 3, 1995’’.
SEC. 13602. REGISTRATION OF CONFIDENTIAL CORPORATE
TAX SHELTERS.
(a) IN GENERAL.—Section 6111 (relating to registra-
tion of tax shelters) is amended by redesignating sub-
sections (d) and (e) as subsections (e) and (f), respectively,
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and by inserting after subsection (c) the following new
subsection:
‘‘(d) 
CERTAIN
CONFIDENTIAL
ARRANGEMENTS
TREATED AS TAX SHELTERS.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the term ‘tax shelter’ includes any entity, plan,
arrangement, or transaction—
‘‘(A) a significant purpose of which is the
avoidance or evasion of Federal income tax for
a participant which is a corporation,
‘‘(B) which is offered to any potential par-
ticipant under conditions of confidentiality, and
‘‘(C) for which the tax shelter organizers
may receive fees in excess of $100,000 in the
aggregate.
‘‘(2) CONDITIONS OF CONFIDENTIALITY.—For
purposes of paragraph (1)(C), an offer is under con-
ditions of confidentiality if—
‘‘(A) the potential participant to whom the
offer is made (or any other person acting on be-
half of such participant) has an understanding
or agreement with or for the benefit of any pro-
moter of the tax shelter that such participant
(or other person) will limit disclosure of the tax
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shelter or any significant tax features of the tax
shelter, or
‘‘(B) any promoter of the tax shelter—
‘‘(i) claims, knows, or has reason to
know,
‘‘(ii) knows or has reason to know
that any other person (other than the po-
tential participant) claims, or
‘‘(iii) causes another person to claim,
that the tax shelter (or any aspect thereof) is
proprietary to any person other than the poten-
tial participant or is otherwise protected from
disclosure to or use by others.
For purposes of this subsection, the term ‘promoter’
means any person who participates in the organiza-
tion, management, or sale of the tax shelter.
‘‘(3) PERSONS
OTHER
THAN
ORGANIZER
RE-
QUIRED TO REGISTER IN CERTAIN CASES.—
‘‘(A) IN GENERAL.—If—
‘‘(i) the requirements of subsection (a)
are not met with respect to any tax shelter
(as defined in paragraph (1)) by any tax
shelter organizer, and
‘‘(ii) no tax shelter organizer is a
United States person,
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18, 1995, with respect to a life insurance policy cov-
ering only the life of the individual who was insured
under such policy on such date. Any increase on or
after such date in the amount of such indebtedness
shall be treated as indebtedness incurred after such
date.
‘‘(3) APPLICABLE PERCENTAGE.—For purposes
of paragraph (1), the applicable percentage shall be
determined in accordance with the following table:
‘‘In the case of periods
The applicable
in calendar year:
percentage is:
1996 .......................................................................... 20 percent
1997 .......................................................................... 40 percent
1998 .......................................................................... 60 percent
1999 .......................................................................... 80 percent.’’
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
this section shall apply to interest paid or accrued
after December 31, 1995.
(2) EXCEPTION.—The amendments made by
this section shall not apply to contracts purchased
on or before June 20, 1986.
(d) 4-YEAR SPREAD OF INCOME INCLUSION ON SUR-
RENDER, ETC. OF CONTRACTS.—
(1) IN GENERAL.—In the case of indebtedness
with respect to any life insurance policy described in
paragraph (4) of section 264(a) of the Internal Rev-
enue Code of 1986, if—
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States who lost United States citizenship on the date
of such cessation or commencement.
‘‘(2) LONG-TERM RESIDENT.—For purposes of
this subsection, the term ‘long-term resident’ means
any individual (other than a citizen of the United
States) who is a lawful permanent resident of the
United States in at least 8 taxable years during the
period of 15 taxable years ending with the taxable
year during which the event described in subpara-
graph (A) or (B) of paragraph (1) occurs. For pur-
poses of the preceding sentence, an individual shall
not be treated as a lawful permanent resident for
any taxable year if such individual is treated as a
resident of a foreign country for the taxable year
under the provisions of a tax treaty between the
United States and the foreign country and does not
waive the benefits of such treaty applicable to resi-
dents of the foreign country.
‘‘(3) SPECIAL RULES.—
‘‘(A) EXCEPTIONS NOT TO APPLY.—Sub-
section (c) shall not apply to an individual who
is treated as provided in paragraph (1).
‘‘(B) STEP-UP IN BASIS.—Solely for pur-
poses of determining any tax imposed by reason
of this subsection, property which was held by
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the long-term resident on the date the individ-
ual first became a resident of the United States
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.
‘‘(4) AUTHORITY TO EXEMPT INDIVIDUALS.—
This subsection shall not apply to an individual who
is described in a category of individuals prescribed
by regulation by the Secretary.
‘‘(5) REGULATIONS.—The Secretary shall pre-
scribe such regulations as may be appropriate to
carry out this subsection, including regulations pro-
viding for the application of this subsection in cases
where an alien individual becomes a resident of the
United States during the 10-year period after being
treated as provided in paragraph (1).’’
(2) CONFORMING AMENDMENTS.—
(A) Section 2107 is amended by striking
subsection (d), by redesignating subsection (e)
as subsection (d), and by inserting after sub-
section (d) (as so redesignated) the following
new subsection: