In the Senate of the United States,
May 19, 2004.
Resolved, That the bill from the House of Representa-
tives (H.R. 1528) entitled ‘‘An Act to amend the Internal
Revenue Code of 1986 to protect taxpayers and ensure ac-
countability of the Internal Revenue Service.’’, do pass with
the following
AMENDMENT:
Strike out all after the enacting clause and insert:
SECTION 1. SHORT TITLE; ETC.
(a) SHORT TITLE.—This Act may be cited as the ‘‘Tax
Administration Good Government Act’’.
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(b) AMENDMENT OF 1986 CODE.—Except as otherwise
expressly provided, whenever in this Act an amendment or
repeal is expressed in terms of an amendment to, or repeal
of, a section or other provision, the reference shall be consid-
ered to be made to a section or other provision of the Inter-
nal Revenue Code of 1986.
(c) TABLE OF CONTENTS.—The table of contents for
this Act is as follows:
Sec. 1. Short title; etc.
TITLE I—IMPROVEMENTS IN TAX ADMINISTRATION AND TAXPAYER
SAFEGUARDS
Subtitle A—Improvements in Efficiency and Safeguards in Internal Revenue
Service Collection
Sec. 101. Waiver of user fee for installment agreements using automated with-
drawals.
Sec. 102. Authorization for IRS to enter into installment agreements that provide
for partial payment.
Sec. 103. Termination of installment agreements.
Sec. 104. Office of Chief Counsel review of offers-in-compromise.
Sec. 105. Authorization for IRS to require increased electronic filing of returns
prepared by paid return preparers.
Sec. 106. Threshold on tolling of statute of limitations during review by Taxpayer
Advocate Service.
Sec. 107. Increase in penalty for bad checks and money orders.
Sec. 108. Extension of time limit for contesting IRS levy.
Sec. 109. Individuals held harmless on improper levy on individual retirement
plan.
Sec. 110. Authorization for Financial Management Service retention of trans-
action fees from levied amounts.
Sec. 111. Elimination of restriction on offsetting refunds from former residents.
Subtitle B—Processing and Personnel
Sec. 121. Information regarding statute of limitations.
Sec. 122. Annual report on IRS performance measures.
Sec. 123. Disclosure of tax information to facilitate combined employment tax re-
porting.
Sec. 124. Extension of declaratory judgment procedures to non-501(c)(3) tax-ex-
empt organizations.
Sec. 125. Amendment to Treasury auction reforms.
Sec. 126. Revisions relating to termination of employment of IRS employees for
misconduct.
Sec. 127. Expansion of IRS Oversight Board Authority.
Sec. 128. IRS Oversight Board approval of use of critical pay authority.
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Sec. 129. Low-income taxpayer clinics.
Sec. 130. Taxpayer access to financial institutions.
Sec. 131. Enrolled agents.
Sec. 132. Establishment of disaster response team.
Sec. 133. Study of accelerated tax refunds.
Sec. 134. Study on clarifying recordkeeping responsibilities.
Sec. 135. Streamline reporting process for National Taxpayer Advocate.
Sec. 136. IRS Free File program.
Sec. 137. Modification of TIGTA reporting requirements.
Sec. 138. Study of IRS accounts receivable.
Sec. 139. Electronic Commerce Advisory Group.
Sec. 140. Study on modifications to schedules L and M–1.
Sec. 141. Regulation of Federal income tax return preparers and refund anticipa-
tion loan providers.
Sec. 142. Joint task force on offers-in-compromise.
Subtitle C—Other Provisions
Sec. 151. Penalty for failure to report interests in foreign financial accounts.
Sec. 152. Repeal of application of below-market loan rules to amounts paid to
certain continuing care facilities.
Sec. 153. Public support by Indian tribal governments.
Sec. 154. Payroll agents subject to penalty for failure to collect and pay over tax,
or attempt to evade or defeat tax.
TITLE II—REFORM OF PENALTY AND INTEREST
Sec. 201. Individual estimated tax.
Sec. 202. Corporate estimated tax.
Sec. 203. Increase in large corporation threshold for estimated tax payments.
Sec. 204. Abatement of interest.
Sec. 205. Deposits made to suspend running of interest on potential underpay-
ments.
Sec. 206. Freeze of provisions regarding suspension of interest where Secretary
fails to contact taxpayer.
Sec. 207. Clarification of application of Federal tax deposit penalty.
Sec. 208. Frivolous tax returns and submissions.
Sec. 209. Extension of notice requirements with respect to interest and penalty
calculations.
Sec. 210. Expansion of interest netting.
TITLE III—UNITED STATES TAX COURT MODERNIZATION
Subtitle A—Tax Court Procedure
Sec. 301. Jurisdiction of Tax Court over collection due process cases.
Sec. 302. Authority for special trial judges to hear and decide certain employ-
ment status cases.
Sec. 303. Confirmation of authority of Tax Court to apply doctrine of equitable
recoupment.
Sec. 304. Tax Court filing fee in all cases commenced by filing petition.
Sec. 305. Amendments to appoint employees.
Sec. 306. Expanded use of Tax Court practice fee for pro se taxpayers.
Subtitle B—Tax Court Pension and Compensation
Sec. 311. Annuities for survivors of Tax Court judges who are assassinated.
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Sec. 312. Cost-of-living adjustments for Tax Court judicial survivor annuities.
Sec. 313. Life insurance coverage for Tax Court judges.
Sec. 314. Cost of life insurance coverage for Tax Court judges age 65 or over.
Sec. 315. Modification of timing of lump-sum payment of judges’ accrued annual
leave.
Sec. 316. Participation of Tax Court judges in the Thrift Savings Plan.
Sec. 317. Exemption of teaching compensation of retired judges from limitation
on outside earned income.
Sec. 318. General provisions relating to magistrate judges of the Tax Court.
Sec. 319. Annuities to surviving spouses and dependent children of magistrate
judges of the Tax Court.
Sec. 320. Retirement and annuity program.
Sec. 321. Incumbent magistrate judges of the Tax Court.
Sec. 322. Provisions for recall.
Sec. 323. Effective date.
TITLE IV—CONFIDENTIALITY AND DISCLOSURE
Sec. 401. Clarification of definition of church tax inquiry.
Sec. 402. Collection activities with respect to joint return disclosable to either
spouse based on oral request.
Sec. 403. Taxpayer representatives not subject to examination on sole basis of
representation of taxpayers.
Sec. 404. Prohibition of disclosure of taxpayer identification information with re-
spect to disclosure of accepted offers-in-compromise.
Sec. 405. Compliance by contractors with confidentiality safeguards.
Sec. 406. Higher standards for requests for and consents to disclosure.
Sec. 407. Civil damages for unauthorized disclosure or inspection.
Sec. 408. Expansion of disclosure in emergency circumstances.
Sec. 409. Disclosure of taxpayer identity for tax refund purposes.
Sec. 410. Disclosure to State officials of proposed actions related to section 501(c)
organizations.
Sec. 411. Treatment of public records.
Sec. 412. Employee identity disclosures.
Sec. 413. Taxpayer identification number matching.
Sec. 414. Form 8300 disclosures.
Sec. 415. Disclosure to law enforcement agencies regarding terrorist activities.
TITLE V—SIMPLIFICATION
Subtitle A—Uniform Definition of Child
Sec. 501. Uniform definition of child, etc.
Sec. 502. Modifications of definition of head of household.
Sec. 503. Modifications of dependent care credit.
Sec. 504. Modifications of child tax credit.
Sec. 505. Modifications of earned income credit.
Sec. 506. Modifications of deduction for personal exemption for dependents.
Sec. 507. Technical and conforming amendments.
Sec. 508. Effective date.
Subtitle B—Simplification Through Elimination of Inoperative Provisions
Sec. 511. Simplification through elimination of inoperative provisions.
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TITLE VI—REVENUE PROVISIONS
Subtitle A—Provisions Designed to Curtail Tax Shelters
Sec. 601. Penalty for failing to disclose reportable transaction.
Sec. 602. Accuracy-related penalty for listed transactions and other reportable
transactions having a significant tax avoidance purpose.
Sec. 603. Modifications of substantial understatement penalty for nonreportable
transactions.
Sec. 604. Tax shelter exception to confidentiality privileges relating to taxpayer
communications.
Sec. 605. Disclosure of reportable transactions.
Sec. 606. Modifications to penalty for failure to register tax shelters.
Sec. 607. Modification of penalty for failure to maintain lists of investors.
Sec. 608. Modification of actions to enjoin certain conduct related to tax shelters
and reportable transactions.
Sec. 609. Understatement of taxpayer’s liability by income tax return preparer.
Sec. 610. Regulation of individuals practicing before the Department of Treasury.
Sec. 611. Penalty on promoters of tax shelters.
Sec. 612. Statute of limitations for taxable years for which required listed trans-
actions not reported.
Sec. 613. Denial of deduction for interest on underpayments attributable to tax-
motivated transactions.
Sec. 614. Authorization of appropriations for tax law enforcement.
PART II—OTHER CORPORATE GOVERNANCE PROVISIONS
Sec. 621. Affirmation of consolidated return regulation authority.
Sec. 622. Declaration by chief executive officer relating to Federal annual income
tax return of a corporation.
Sec. 623. Denial of deduction for certain fines, penalties, and other amounts.
Sec. 624. Disallowance of deduction for punitive damages.
Sec. 625. Increase in criminal monetary penalty for individuals to the amount
of the tax at issue.
Sec. 626. Doubling of certain penalties, fines, and interest on underpayments re-
lated to certain offshore financial arrangements.
PART III—EXTENSION OF IRS USER FEES
Sec. 631. Extension of IRS user fees.
PART IV—OTHER REVENUE PROVISIONS
Sec. 641. Reporting of taxable mergers and acquisitions.
Sec. 642. Modification of definition of controlled group of corporations.
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TITLE I—IMPROVEMENTS IN TAX
ADMINISTRATION AND TAX-
PAYER SAFEGUARDS
Subtitle A—Improvements in Effi-
ciency and Safeguards in Inter-
nal Revenue Service Collection
SEC. 101. WAIVER OF USER FEE FOR INSTALLMENT AGREE-
MENTS USING AUTOMATED WITHDRAWALS.
(a) IN GENERAL.—Section 6159 (relating to agree-
ments for payment of tax liability in installments) is
amended by redesignating subsection (e) as subsection (f)
and by inserting after subsection (d) the following:
‘‘(e) WAIVER
OF USER FEES
FOR INSTALLMENT
AGREEMENTS USING AUTOMATED WITHDRAWALS.—In the
case of a taxpayer who enters into an installment agreement
in which automated installment payments are agreed to,
the Secretary shall waive the fee (if any) for entering into
the installment agreement.’’.
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply to agreements entered into on or after
the date which is 180 days after the date of the enactment
of this Act.
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SEC. 102. AUTHORIZATION FOR IRS TO ENTER INTO IN-
STALLMENT AGREEMENTS THAT PROVIDE
FOR PARTIAL PAYMENT.
(a) IN GENERAL.—
(1) Section 6159(a) (relating to authorization of
agreements) is amended—
(A) by striking ‘‘satisfy liability for pay-
ment of’’ and inserting ‘‘make payment on’’, and
(B) by inserting ‘‘full or partial’’ after ‘‘fa-
cilitate’’.
(2) Section 6159(c) (relating to Secretary re-
quired to enter into installment agreements in certain
cases) is amended in the matter preceding paragraph
(1) by inserting ‘‘full’’ before ‘‘payment’’.
(b) REQUIREMENT TO REVIEW PARTIAL PAYMENT
AGREEMENTS
EVERY
TWO
YEARS.—Section 6159, as
amended by this Act, is amended by redesignating sub-
sections (d), (e), and (f) as subsections (e), (f), and (g), re-
spectively, and inserting after subsection (c) the following
new subsection:
‘‘(d) SECRETARY REQUIRED TO REVIEW INSTALL-
MENT AGREEMENTS FOR PARTIAL COLLECTION EVERY TWO
YEARS.—In the case of an agreement entered into by the
Secretary under subsection (a) for partial collection of a
tax liability, the Secretary shall review the agreement at
least once every 2 years with the primary purpose of deter-
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mining whether the financial condition of the taxpayer has
significantly changed so as to warrant an increase in the
value of the payments being made.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to agreements entered into on or after
the date of the enactment of this Act.
SEC. 103. TERMINATION OF INSTALLMENT AGREEMENTS.
(a) IN GENERAL.—Section 6159(b)(4) (relating to fail-
ure to pay an installment or any other tax liability when
due or to provide requested financial information) is
amended by striking ‘‘or’’ at the end of subparagraph (B),
by redesignating subparagraph (C) as subparagraph (E),
and by inserting after subparagraph (B) the following:
‘‘(C) to make a Federal tax deposit under
section 6302 at the time such deposit is required
to be made,
‘‘(D) to file a return of tax imposed under
this title by its due date (including extensions),
or’’.
(b) CONFORMING AMENDMENT.—Section 6159(b)(4) is
amended by striking ‘‘FAILURE TO PAY AN INSTALLMENT
OR ANY OTHER TAX LIABILITY WHEN DUE OR TO PROVIDE
REQUESTED
FINANCIAL
INFORMATION’’ and inserting
‘‘FAILURE TO MAKE PAYMENTS OR DEPOSITS OR FILE RE-
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TURNS WHEN DUE OR TO PROVIDE REQUESTED FINANCIAL
INFORMATION’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to failures occurring on or after the date
of the enactment of this Act.
SEC. 104. OFFICE OF CHIEF COUNSEL REVIEW OF OFFERS-
IN-COMPROMISE.
(a) IN GENERAL.—Section 7122(b) (relating to record)
is amended by striking ‘‘Whenever a compromise’’ and all
that follows through ‘‘his delegate’’ and inserting ‘‘If the
Secretary determines that an opinion of the General Coun-
sel for the Department of the Treasury, or the Counsel’s del-
egate, is required with respect to a compromise, there shall
be placed on file in the office of the Secretary such opinion’’.
(b) CONFORMING AMENDMENTS.—Section 7122(b) is
amended by striking the second and third sentences.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to offers-in-compromise submitted or
pending on or after the date of the enactment of this Act.
SEC. 105. AUTHORIZATION FOR IRS TO REQUIRE IN-
CREASED ELECTRONIC FILING OF RETURNS
PREPARED BY PAID RETURN PREPARERS.
(a) IN GENERAL.—Section 6011(e) (relating to regula-
tions requiring returns on magnetic media, etc.) is
amended—
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(1) by striking the second sentence in paragraph
(1), and
(2) by striking ‘‘250’’ in paragraph (2)(A) and
inserting ‘‘5’’.
(b) EFFECTIVE DATE.—The amendments made by this
section shall take effect on the date of the enactment of this
Act.
SEC. 106. THRESHOLD ON TOLLING OF STATUTE OF LIMITA-
TIONS DURING REVIEW BY TAXPAYER ADVO-
CATE SERVICE.
(a) IN GENERAL.—Section 7811(d)(1) (relating to sus-
pension of running of period of limitation) is amended by
inserting after ‘‘such application,’’ the following: ‘‘but only
if the date of such decision is at least 7 days after the date
of the taxpayer’s application’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to applications filed after the date of
the enactment of this Act.
SEC. 107. INCREASE IN PENALTY FOR BAD CHECKS AND
MONEY ORDERS.
(a) IN GENERAL.—Section 6657 (relating to bad
checks) is amended—
(1) by striking ‘‘$750’’ and inserting ‘‘$1,250’’,
and
(2) by striking ‘‘$15’’ and inserting ‘‘$25’’.
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(b) EFFECTIVE DATE.—The amendments made by this
section apply to checks or money orders received after the
date of the enactment of this Act.
SEC. 108. EXTENSION OF TIME LIMIT FOR CONTESTING IRS
LEVY.
(a) EXTENSION OF TIME FOR RETURN OF PROPERTY
SUBJECT TO LEVY.—Subsection (b) of section 6343 (relat-
ing to return of property) is amended by striking ‘‘9
months’’ and inserting ‘‘2 years’’.
(b) PERIOD OF LIMITATION ON SUITS.—Subsection (c)
of section 6532 (relating to suits by persons other than tax-
payers) is amended—
(1) in paragraph (1) by striking ‘‘9 months’’
and inserting ‘‘2 years’’, and
(2) in paragraph (2) by striking ‘‘9-month’’ and
inserting ‘‘2-year’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to—
(1) levies made after the date of the enactment
of this Act, and
(2) levies made on or before such date if the 9-
month period has not expired under section 6343(b)
of the Internal Revenue Code of 1986 (without regard
to this section) as of such date.
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SEC. 109. INDIVIDUALS HELD HARMLESS ON IMPROPER
LEVY ON INDIVIDUAL RETIREMENT PLAN.
(a) IN GENERAL.—Section 6343 (relating to authority
to release levy and return property) is amended by adding
at the end the following new subsection:
‘‘(f) INDIVIDUALS HELD HARMLESS ON WRONGFUL
LEVY, ETC. ON INDIVIDUAL RETIREMENT PLAN.—
‘‘(1) IN GENERAL.—If the Secretary determines
that an individual retirement plan has been levied
upon in a case to which subsection (b) or (d)(2)(A)
applies and an amount is returned to the individual
who is the beneficiary of such plan, the individual
may deposit an amount equal to the sum of—
‘‘(A) the amount of money returned by the
Secretary on account of such levy, and
‘‘(B) interest paid under subsection (c) on
such amount of money,
into an individual retirement plan (other than an en-
dowment contract) to which a rollover from the plan
levied upon is permitted.
‘‘(2) TREATMENT AS ROLLOVER.—The distribu-
tion on account of the levy and any deposit under
paragraph (1) with respect to such distribution shall
be treated for purposes of this title as if such distribu-
tion and deposit were part of a rollover described in
section 408(d)(3)(A)(i); except that—
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‘‘(A) interest paid under subsection (c) shall
be treated as part of such distribution and as not
includible in gross income,
‘‘(B) the 60-day requirement in such section
shall be treated as met if the deposit is made not
later than the 60th day after the day on which
the individual receives an amount under para-
graph (1) from the Secretary, and
‘‘(C) such deposit shall not be taken into ac-
count under section 408(d)(3)(B).
‘‘(3) REFUND, ETC., OF INCOME TAX ON LEVY.—
If any amount is includible in gross income for a tax-
able year by reason of a levy referred to in paragraph
(1) and any portion of such amount is treated as a
rollover under paragraph (2), any tax imposed by
chapter 1 on such portion shall not be assessed, and
if assessed shall be abated, and if collected shall be
credited or refunded as an overpayment made on the
due date for filing the return of tax for such taxable
year.
‘‘(4) 
INTEREST.—Notwithstanding 
subsection
(d), interest shall be allowed under subsection (c) in
a case in which the Secretary makes a determination
described in subsection (d)(2)(A) with respect to a
levy upon an individual retirement plan.’’.
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(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to amounts paid under subsections (b),
(c), and (d)(2)(A) of section 6343 of the Internal Revenue
Code of 1986 after December 31, 2004.
SEC. 110. AUTHORIZATION FOR FINANCIAL MANAGEMENT
SERVICE RETENTION OF TRANSACTION FEES
FROM LEVIED AMOUNTS.
(a) IN GENERAL.—Notwithstanding any other provi-
sion of law, the Financial Management Service may charge
the Internal Revenue Service, and the Internal Revenue
Service may pay the Financial Management Service, a fee
sufficient to cover the full cost of implementing a continuous
levy program under subsection (h) of section 6331 of the
Internal Revenue Code of 1986. Any such fee shall be based
on actual levies made and shall be collected by the Finan-
cial Management Service by the retention of a portion of
amounts collected by levy pursuant to that subsection.
Amounts received by the Financial Management Service as
fees under that subsection shall be deposited into the account
of the Department of the Treasury under section 3711(g)(7)
of title 31, United States Code, and shall be collected and
accounted for in accordance with the provisions of that sec-
tion. The amount credited against the taxpayer’s liability
on account of the continuous levy shall be the amount levied,
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without reduction for the amount paid to the Financial
Management Service as a fee.
(b) EFFECTIVE DATE.—The provisions of this section
shall take effect on the date of the enactment of this Act.
SEC. 111. ELIMINATION OF RESTRICTION ON OFFSETTING
REFUNDS FROM FORMER RESIDENTS.
(a) IN GENERAL.—Section 6402(e) (relating to collec-
tion of past-due, legally enforceable State income tax obliga-
tions) is amended by striking paragraph (2) and by redesig-
nating paragraphs (3), (4), (5), (6), and (7) as paragraphs
(2), (3), (4), (5), and (6), respectively.
(b) CLARIFICATION
OF DISCLOSURE AUTHORITY.—
Section 6103(l)(10) (relating to disclosure of certain infor-
mation to agencies requesting a reduction under subsection
(c), (d), or (e) or section 6402) is amended—
(1) by striking ‘‘, (d), or (e)’’ each place it ap-
pears and inserting ‘‘or (d)’’, and
(2) by striking ‘‘, (d), OR (e)’’ in the heading and
inserting ‘‘OR (d)’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall take effect on the date of the enactment of this
Act.
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Subtitle B—Processing and
Personnel
SEC. 121. INFORMATION REGARDING STATUTE OF LIMITA-
TIONS.
The Secretary of the Treasury or the Secretary’s dele-
gate shall—
(1) as soon as practicable but not later than 180
days after the date of the enactment of this Act, revise
the statement required by section 6227 of the Omni-
bus Taxpayer Bill of Rights (Internal Revenue Serv-
ice Publication No. 1), and
(2) for taxable years beginning after December
31, 2004, revise any instructions booklet accom-
panying a general income tax return form (including
forms 1040, 1040A, 1040EZ, and any similar or suc-
cessor forms relating thereto),
to provide for an explanation of the limitations imposed
by section 6511 of the Internal Revenue Code of 1986 on
credits and refunds, and the consequences under such sec-
tion 6511 of the failure to file a return of tax.
SEC. 122. ANNUAL REPORT ON IRS PERFORMANCE MEAS-
URES.
(a) IN GENERAL.—Section 7803(a) (relating to Com-
missioner of Internal Revenue) is amended by adding at
the end the following new paragraph:
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‘‘(4) ANNUAL
REPORT
ON
IRS
PERFORMANCE
MEASURES.—Not later than December 31 of each cal-
endar year, the Commissioner shall report to Congress
and the Oversight Board on performance goals and
projections for the 5-fiscal-year period beginning with
the fiscal year ending in such calendar year against
which to measure the performance of the Internal
Revenue Service in the areas of the public rating of
the Internal Revenue Service, customer service, com-
pliance, and management initiatives. The report shall
include the long-term performance goal for each meas-
urement and a brief narrative explaining how the
Commissioner plans to meet each goal. For each per-
formance goal, the report shall include comparisons
between the projected performance level and actual
performance level. For each performance measure-
ment, the report shall include a volume projection for
such period. If the Internal Revenue Service fails to
achieve one of its goals, the report shall explain why.
The report shall also include data and a narrative re-
garding the actual and projected level of the workload
and resources of the Internal Revenue Service for such
5-year period.’’.
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(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to reports for fiscal year 2004 and there-
after.
SEC. 123. DISCLOSURE OF TAX INFORMATION TO FACILI-
TATE COMBINED EMPLOYMENT TAX REPORT-
ING.
(a) IN GENERAL.—Paragraph (5) of section 6103(d)
(relating to disclosure to State tax officials and State and
local law enforcement agencies) is amended to read as fol-
lows:
‘‘(5) DISCLOSURE FOR COMBINED EMPLOYMENT
TAX REPORTING.—The Secretary shall disclose tax-
payer identity information and signatures to any
agency, body, or commission of any State for the pur-
pose of carrying out with such agency, body, or com-
mission a combined Federal and State employment
tax reporting program approved by the Secretary.
Subsections (a)(2) and (p)(4) and sections 7213 and
7213A shall not apply with respect to disclosures or
inspections made pursuant to this paragraph.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall take effect on the date of the enact-
ment of this Act.
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SEC. 124. EXTENSION OF DECLARATORY JUDGMENT PROCE-
DURES TO NON-501(c)(3) TAX-EXEMPT ORGA-
NIZATIONS.
(a) IN GENERAL.—Paragraph (1) of section 7428(a)
(relating to creation of remedy) is amended—
(1) in subparagraph (B) by inserting after
‘‘509(a))’’ the following: ‘‘or as a private operating
foundation (as defined in section 4942(j)(3))’’; and
(2) by amending subparagraph (C) to read as
follows:
‘‘(C) with respect to the initial qualification
or continuing qualification of an organization as
an organization described in section 501(c)
(other than paragraph (3)) or 501(d) which is
exempt from tax under section 501(a), or’’.
(b) COURT JURISDICTION.—Subsection (a) of section
7428 is amended in the material following paragraph (2)
by striking ‘‘United States Tax Court, the United States
Claims Court, or the district court of the United States for
the District of Columbia’’ and inserting the following:
‘‘United States Tax Court (in the case of any such deter-
mination or failure) or the United States Claims Court or
the district court of the United States for the District of
Columbia (in the case of a determination or failure with
respect to an issue referred to in subparagraph (A) or (B)
of paragraph (1)),’’.
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(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to pleadings filed with respect to deter-
minations (or requests for determinations) made after De-
cember 31, 2004.
SEC. 125. AMENDMENT TO TREASURY AUCTION REFORMS.
(a) IN GENERAL.—Clause (i) of section 202(c)(4)(B)
of the Government Securities Act Amendments of 1993 (31
U.S.C. 3121 note) is amended by inserting before the semi-
colon ‘‘(or, if earlier, at the time the Secretary releases the
minutes of the meeting in accordance with paragraph (2))’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to meetings held after the date of the
enactment of this Act.
SEC. 126. REVISIONS RELATING TO TERMINATION OF EM-
PLOYMENT OF IRS EMPLOYEES FOR MIS-
CONDUCT.
(a) IN GENERAL.—Subchapter A of chapter 80 (relat-
ing to application of internal revenue laws) is amended by
inserting after section 7804 the following new section:
‘‘SEC. 7804A. TERMINATION OF EMPLOYMENT FOR MIS-
CONDUCT.
‘‘(a) IN GENERAL.—Subject to subsection (c), the Com-
missioner shall terminate the employment of any employee
of the Internal Revenue Service if there is a final adminis-
trative or judicial determination that such employee com-
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mitted any act or omission described under subsection (b)
in the performance of the employee’s official duties. Such
termination shall be a removal for cause on charges of mis-
conduct.
‘‘(b) ACTS OR OMISSIONS.—The acts or omissions de-
scribed under this subsection are—
‘‘(1) willful failure to obtain the required ap-
proval signatures on documents authorizing the sei-
zure of a taxpayer’s home, personal belongings, or
business assets,
‘‘(2) providing a false statement under oath with
respect to a material matter involving a taxpayer or
taxpayer representative,
‘‘(3) with respect to a taxpayer or taxpayer rep-
resentative, the violation of—
‘‘(A) any right under the Constitution of the
United States, or
‘‘(B) any civil right established under—
‘‘(i) title VI or VII of the Civil Rights
Act of 1964,
‘‘(ii) title IX of the Education Amend-
ments of 1972,
‘‘(iii) the Age Discrimination in Em-
ployment Act of 1967,
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‘‘(iv) the Age Discrimination Act of
1975,
‘‘(v) section 501 or 504 of the Rehabili-
tation Act of 1973, or
‘‘(vi) title I of the Americans with Dis-
abilities Act of 1990,
‘‘(4) falsifying or destroying documents to con-
ceal mistakes made by any employee with respect to
a matter involving a taxpayer or taxpayer represent-
ative,
‘‘(5) assault or battery on a taxpayer or tax-
payer representative, but only if there is a criminal
conviction, or a final judgment by a court in a civil
case, with respect to the assault or battery,
‘‘(6) violations of this title, Department of the
Treasury regulations, or policies of the Internal Rev-
enue Service (including the Internal Revenue Man-
ual) for the purpose of retaliating against, or
harassing, a taxpayer or taxpayer representative,
‘‘(7) willful misuse of the provisions of section
6103 for the purpose of concealing information from
a congressional inquiry,
‘‘(8) willful failure to file any return of tax re-
quired under this title on or before the date prescribed
therefor (including any extensions) when a tax is due
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and owing, unless such failure is due to reasonable
cause and not due to willful neglect,
‘‘(9) willful understatement of Federal tax liabil-
ity, unless such understatement is due to reasonable
cause and not due to willful neglect, and
‘‘(10) threatening to audit a taxpayer for the
purpose of extracting personal gain or benefit.
‘‘(c) DETERMINATIONS OF COMMISSIONER.—
‘‘(1) IN GENERAL.—The Commissioner may take
a personnel action other than termination for an act
or omission described under subsection (b).
‘‘(2) DISCRETION.—The exercise of authority
under paragraph (1) shall be at the sole discretion of
the Commissioner and may not be delegated to any
other officer. The Commissioner, in the Commis-
sioner’s sole discretion, may establish a procedure
which will be used to determine whether an indi-
vidual should be referred to the Commissioner for a
determination by the Commissioner under paragraph
(1).
‘‘(3) NO
APPEAL.—Any determination of the
Commissioner under this subsection may not be ap-
pealed in any administrative or judicial proceeding.
‘‘(d) DEFINITION.—For the purposes of the provisions
described in clauses (i), (ii), and (iv) of subsection
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(b)(3)(B), references to a program or activity regarding
Federal financial assistance or an education program or
activity receiving Federal financial assistance shall include
any program or activity conducted by the Internal Revenue
Service for a taxpayer.’’.
(b) CLERICAL AMENDMENT.—The table of sections for
chapter 80 is amended by inserting after the item relating
to section 7804 the following new item:
‘‘Sec. 7804A. Termination of employment for misconduct.’’.
(c) REPEAL OF SUPERSEDED SECTION.—Section 1203
of the Internal Revenue Service Restructuring and Reform
Act of 1998 (Public Law 105–206; 112 Stat. 720) is re-
pealed.
(d) EFFECTIVE DATE.—The amendments made by this
section shall take effect on the date of the enactment of this
Act.
SEC. 127. EXPANSION OF IRS OVERSIGHT BOARD AUTHOR-
ITY.
(a) APPROVAL WITH RESPECT TO SENIOR EXECU-
TIVES.—Section 7802(d)(3)(B) (relating to management) is
amended by inserting ‘‘and approve’’ after ‘‘review’’.
(b) REPORTS.—
(1) BUDGET REQUEST.—Section 7802(d) (relat-
ing to specific responsibilities) is amended—
(A) by inserting ‘‘with detailed analysis’’
after ‘‘budget request’’ in paragraph (4)(B), and
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(B) by inserting ‘‘without any additional
review or comment from the Commissioner, the
Secretary, any other officer or employee of the
Department of the Treasury, or the Office of
Management and Budget’’ before ‘‘to the Presi-
dent’’ in the last sentence thereof.
(2) DATE OF SUBMISSION OF ANNUAL REPORT.—
Section 7802(f)(3)(A) (relating to annual reports) is
amended by striking ‘‘The Oversight Board shall each
year report’’ and insert ‘‘Not later than March 1 of
each calendar year, the Oversight Board shall report’’.
(c) CONTINUITY IN OFFICE.—Section 7802(b)(2) (re-
lating to qualifications and terms) is amended by adding
at the end the following new subparagraph:
‘‘(E) 
CONTINUATION
IN
OFFICE.—Any
member whose term expires shall serve until the
earlier of the date on which the member’s suc-
cessor takes office or the date which is 1 year
after the date of the expiration of the member’s
term.
(d) ACCESS TO HEALTH BENEFITS.—Section 7802(e)
(relating to Board personnel matters) is amended by adding
at the end the following new paragraph:
‘‘(5) MEMBERS ACCESS TO FEHBP.—Each mem-
ber of the Oversight Board who—
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‘‘(A) is described in subsection (b)(1)(A), or
‘‘(B) is described in subsection (b)(1)(D)
and is not otherwise a Federal officer or em-
ployee,
shall be considered an employee solely for purposes of
chapter 89 of title 5, United States Code.’’.
(e) DIRECTOR OF INTERNAL REVENUE SERVICE OVER-
SIGHT BOARD.—Subsection (e) of section 7802, as amended
by subsection (d), is amended by redesignating paragraphs
(3), (4), and (5) as paragraphs (4), (5), and (6), respec-
tively, and by inserting after paragraph (2) the following
new paragraph:
‘‘(3) DIRECTOR.—The Chairperson of the Over-
sight Board shall, without regard to the provisions of
title 5, United Stated Code, governing appointments
in the competitive service, appoint a Director for the
Oversight Board. The Director shall be paid at the
same rate as the highest-rate of basic pay established
for the Senior Executive Service under section 5382
of title 5, United States Code.’’.
(f) EFFECTIVE DATE.—The amendments made by this
section shall take effect on the date of the enactment of this
Act.
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SEC. 128. IRS OVERSIGHT BOARD APPROVAL OF USE OF
CRITICAL PAY AUTHORITY.
(a) IN GENERAL.—Section 7802(d)(3) (relating to
management) is amended by striking ‘‘and’’ at the end of
subparagraph (B), by striking the period at the end of sub-
paragraph (C) and inserting ‘‘; and’’, and by adding at
the end the following new subparagraph:
‘‘(D) review and approve the Commis-
sioner’s use of critical pay authority under sec-
tion 9502 of title 5, United States Code, and
streamlined critical pay authority under section
9503 of such title.’’.
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply to personnel hired after the date of the
enactment of this Act.
SEC. 129. LOW-INCOME TAXPAYER CLINICS.
(a) GRANTS FOR RETURN PREPARATION CLINICS.—
(1) IN GENERAL.—Chapter 77 (relating to mis-
cellaneous provisions) is amended by inserting after
section 7526 the following new section:
‘‘SEC. 7526A. RETURN PREPARATION CLINICS FOR LOW-IN-
COME TAXPAYERS.
‘‘(a) IN GENERAL.—The Secretary may, subject to the
availability of appropriated funds, make grants to provide
matching funds for the development, expansion, or continu-
ation of qualified return preparation clinics.
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‘‘(b) DEFINITIONS.—For purposes of this section—
‘‘(1) QUALIFIED
RETURN
PREPARATION
CLIN-
IC.—
‘‘(A) IN GENERAL.—The term ‘qualified re-
turn preparation clinic’ means a clinic which—
‘‘(i) does not charge more than a nomi-
nal fee for its services (except for reimburse-
ment of actual costs incurred), and
‘‘(ii) operates programs which assist
low-income taxpayers in preparing and fil-
ing their Federal income tax returns, in-
cluding schedules reporting sole proprietor-
ship or farm income.
‘‘(B) ASSISTANCE
TO
LOW-INCOME
TAX-
PAYERS.—A clinic is treated as assisting low-in-
come taxpayers under subparagraph (A)(ii) if at
least 90 percent of the taxpayers assisted by the
clinic have incomes which do not exceed 250 per-
cent of the poverty level, as determined in ac-
cordance with criteria established by the Director
of the Office of Management and Budget.
‘‘(2) CLINIC.—The term ‘clinic’ includes—
‘‘(A) a clinical program at an eligible edu-
cational institution (as defined in section
529(e)(5)) which satisfies the requirements of
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paragraph (1) through student assistance of tax-
payers in return preparation and filing, and
‘‘(B) an organization described in section
501(c) and exempt from tax under section 501(a)
which satisfies the requirements of paragraph
(1).
‘‘(c) SPECIAL RULES AND LIMITATIONS.—
‘‘(1) AGGREGATE LIMITATION.—Unless otherwise
provided by specific appropriation, the Secretary
shall not allocate more than $10,000,000 per year (ex-
clusive of costs of administering the program) to
grants under this section.
‘‘(2) OTHER APPLICABLE RULES.—Rules similar
to the rules under paragraphs (2) through (7) of sec-
tion 7526(c) shall apply with respect to the awarding
of grants to qualified return preparation clinics.’’.
(2) CLERICAL AMENDMENT.—The table of sec-
tions for chapter 77 is amended by inserting after the
item relating to section 7526 the following new item:
‘‘Sec. 7526A. Return preparation clinics for low-income tax-
payers.’’.
(b) GRANTS FOR TAXPAYER REPRESENTATION AND
ASSISTANCE CLINICS.—
(1) INCREASE IN AUTHORIZED GRANTS.—Section
7526(c)(1) (relating to aggregate limitation) is
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amended by striking ‘‘$6,000,000’’ and inserting
‘‘$10,000,000’’.
(2) USE OF GRANTS FOR OVERHEAD EXPENSES
PROHIBITED.—
(A) IN GENERAL.—Section 7526(c) (relating
to special rules and limitations) is amended by
adding at the end the following new paragraph:
‘‘(6) USE OF GRANTS FOR OVERHEAD EXPENSES
PROHIBITED.—No grant made under this section may
be used for the overhead expenses of any clinic or of
any institution sponsoring such clinic.’’.
(B) CONFORMING
AMENDMENTS.—Section
7526(c)(5) is amended—
(i) by inserting ‘‘qualified’’ before
‘‘low-income’’, and
(ii) by striking the last sentence.
(3) PROMOTION OF CLINICS.—Section 7526(c),
as amended by paragraph (2), is amended by adding
at the end the following new paragraph:
‘‘(7) PROMOTION OF CLINICS.—The Secretary is
authorized to promote the benefits of and encourage
the use of low-income taxpayer clinics through the use
of mass communications, referrals, and other means.’’.
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(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to grants made after the date of the en-
actment of this Act.
SEC. 130. TAXPAYER ACCESS TO FINANCIAL INSTITUTIONS.
(a) ESTABLISHMENT OF PROGRAM.—The Secretary is
authorized to award demonstration project grants (includ-
ing multi-year grants) to eligible entities to provide tax
preparation services and assistance in connection with es-
tablishing an account in a federally insured depository in-
stitution for individuals that currently do not have such
an account.
(b) ELIGIBLE ENTITIES.—
(1) IN GENERAL.—An entity is eligible to receive
a grant under this section if such an entity is—
(A) an organization described in section
501(c)(3) of the Internal Revenue Code of 1986
and exempt from tax under section 501(a) of
such Code,
(B) a federally insured depository institu-
tion,
(C) an agency of a State or local govern-
ment,
(D) a community development financial in-
stitution,
(E) an Indian tribal organization,
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(F) an Alaska Native Corporation,
(G) a Native Hawaiian organization,
(H) a labor organization, or
(I) a partnership comprised of 1 or more of
the entities described in the preceding subpara-
graphs.
(2) 
DEFINITIONS.—For 
purposes 
of 
this
section—
(A) FEDERALLY INSURED DEPOSITORY IN-
STITUTION.—The term ‘‘federally insured deposi-
tory institution’’ means any insured depository
institution (as defined in section 3 of the Federal
Deposit Insurance Act (12 U.S.C. 1813)) and
any insured credit union (as defined in section
101 of the Federal Credit Union Act (12 U.S.C.
1752)).
(B) COMMUNITY DEVELOPMENT FINANCIAL
INSTITUTION.—The term ‘‘community develop-
ment financial institution’’ means any organiza-
tion that has been certified as such pursuant to
section 1805.201 of title 12, Code of Federal Reg-
ulations.
(C) ALASKA
NATIVE
CORPORATION.—The
term ‘‘Alaska Native Corporation’’ has the same
meaning as the term ‘‘Native Corporation’’
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under section 3(m) of the Alaska Native Claims
Settlement Act (43 U.S.C. 1602(m)).
(D) NATIVE HAWAIIAN ORGANIZATION.—The
term ‘‘Native Hawaiian organization’’ means
any organization that—
(i) serves and represents the interests of
Native Hawaiians, and
(ii) has as a primary and stated pur-
pose the provision of services to Native Ha-
waiians.
(E) 
LABOR
ORGANIZATION.—The 
term
‘‘labor organization’’ means an organization—
(i) in which employees participate,
(ii) which exists for the purpose, in
whole or in part, of dealing with employers
concerning 
grievances, 
labor 
disputes,
wages, rates of pay, hours of employment,
or conditions of work, and
(iii) which is described in section
501(c)(5).
(c) APPLICATION.—An eligible entity desiring a grant
under this section shall submit an application to the Sec-
retary in such form and containing such information as
the Secretary may require.
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(d) LIMITATION ON ADMINISTRATIVE COSTS.—A re-
cipient of a grant under this section may not use more than
6 percent of the total amount of such grant in any fiscal
year for the administrative costs of carrying out the pro-
grams funded by such grant in such fiscal year.
(e) EVALUATION AND REPORT.—For each fiscal year
in which a grant is awarded under this section, the Sec-
retary shall submit a report to Congress containing a de-
scription of the activities funded, amounts distributed, and
measurable results, as appropriate and available.
(f) AUTHORIZATION OF APPROPRIATIONS.—There is
authorized to be appropriated to the Secretary, for the grant
program described in this section, $10,000,000, or such ad-
ditional amounts as deemed necessary, to remain available
until expended.
(g) REGULATIONS.—The Secretary is authorized to
promulgate regulations to implement and administer the
grant program under this section.
SEC. 131. ENROLLED AGENTS.
(a) IN GENERAL.—Chapter 77 (relating to miscella-
neous provisions) is amended by adding at the end the fol-
lowing new section:
‘‘SEC. 7529. ENROLLED AGENTS.
‘‘(a) IN GENERAL.—The Secretary may prescribe such
regulations as may be necessary to regulate the conduct of
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enrolled agents in regards to their practice before the Inter-
nal Revenue Service.
‘‘(b) USE
OF CREDENTIALS.—Any enrolled agents
properly licensed to practice as required under rules pro-
mulgated under section (a) herein shall be allowed to use
the credentials or designation as ‘enrolled agent’, ‘EA’, or
‘E.A.’.’’.
(b) CLERICAL AMENDMENT.—The table of sections for
chapter 77 is amended by adding at the end the following
new item:
‘‘Sec. 7529. Enrolled agents.’’.
(c) PRIOR REGULATIONS.—The authorization to pre-
scribe regulations under the amendments made by this sec-
tion may not be construed to have any effect on part 10
of title 31, Code of Federal Regulations, or any other related
Federal rule or regulation issued before the date of the en-
actment of this Act.
(d) EFFECTIVE DATE.—The amendments made by this
section shall take effect on the date of the enactment of this
Act.
SEC. 132. ESTABLISHMENT OF DISASTER RESPONSE TEAM.
(a) IN GENERAL.—Section 7803 (relating to Commis-
sioner of Internal Revenue; other officials) is amended by
adding at the end the following new subsection:
‘‘(e) DISASTER RESPONSE TEAM.—
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‘‘(1) RESPONSE TO DISASTERS.—The Secretary
shall—
‘‘(A) establish as a permanent office in the
national office of the Internal Revenue Service a
disaster response team composed of members,
who in addition to their regular responsibilities,
shall assist taxpayers in clarifying and resolving
Federal tax matters associated with or resulting
from any Presidentially declared disaster (as de-
fined in section 1033(h)(3)), and
‘‘(B) respond to requests by such taxpayers
for filing extensions and technical guidance expe-
ditiously.
‘‘(2) 
PERSONNEL
OF
DISASTER
RESPONSE
TEAM.—The disaster response team shall be composed
of—
‘‘(A) personnel from the Office of the Tax-
payer Advocate, and
‘‘(B) personnel from the national office of
the Internal Revenue Service with expertise in
individual, corporate, and small business tax
matters.
‘‘(3) COORDINATION WITH FEMA.—The disaster
response team shall operate in coordination with the
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Director of the Federal Emergency Management
Agency.
‘‘(4) TOLL-FREE
TELEPHONE
NUMBER.—The
Commissioner of Internal Revenue shall establish and
maintain a toll-free telephone number for taxpayers
to use to receive assistance from the disaster response
team.
‘‘(5) INTERNET WEBPAGE SITE.—The Commis-
sioner of Internal Revenue shall establish and main-
tain a site on the Internet webpage of the Internal
Revenue Service for information for taxpayers de-
scribed in paragraph (1)(A).’’.
(b) FEMA.—The Director of the Federal Emergency
Management Agency shall work in coordination with the
disaster response team established under section 7803(e) of
the Internal Revenue Code of 1986 to provide timely assist-
ance to disaster victims described in such section,
including—
(1) informing the disaster response team regard-
ing any tax-related problems or issues arising in con-
nection with the disaster,
(2) providing the toll-free telephone number es-
tablished and maintained by the Internal Revenue
Service for the disaster victims in all materials pro-
vided to such victims, and
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(3) providing the information described in sec-
tion 7803(e)(5) of such Code on the Internet webpage
of the Federal Emergency Management Agency or
through a link on such webpage to the Internet
webpage site of the Internal Revenue Service described
in such section.
(c) EFFECTIVE DATE.—The amendment made by this
section shall take effect on the date of the enactment of this
Act.
SEC. 133. STUDY OF ACCELERATED TAX REFUNDS.
(a) STUDY.—The Secretary of the Treasury shall study
the implementation of an accelerated refund program for
taxpayers who—
(1) maintain the same filing characteristics from
year to year, and
(2) elect the direct deposit option for any refund
under the program.
(b) REPORT.—Not later than the date which is 1 year
after the date of the enactment of this Act, the Secretary
of the Treasury shall transmit a report of the study de-
scribed in subsection (a), including recommendations, to the
Committee on Finance of the Senate and the Committee on
Ways and Means of the House of Representatives.
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SEC. 134. STUDY ON CLARIFYING RECORDKEEPING RE-
SPONSIBILITIES.
(a) STUDY.—The Secretary of the Treasury shall
study—
(1) the scope of the records required to be main-
tained by taxpayers under section 6001 of the Inter-
nal Revenue Code of 1986,
(2) the utility of requiring taxpayers to main-
tain all records indefinitely,
(3) such requirement given the necessity to up-
grade technological storage for outdated records,
(4) the number of negotiated records retention
agreements requested by taxpayers and the number
entered into by the Internal Revenue Service, and
(5) proposals regarding taxpayer record-keeping.
(b) REPORT.—Not later than the date which is 1 year
after the date of the enactment of this Act, the Secretary
of the Treasury shall transmit a report of the study de-
scribed in subsection (a), including recommendations, to the
Committee on Finance of the Senate and the Committee on
Ways and Means of the House of Representatives.
SEC. 135. STREAMLINE REPORTING PROCESS FOR NA-
TIONAL TAXPAYER ADVOCATE.
(a) ONE ANNUAL REPORT.—Subparagraph (B) of sec-
tion 7803(c)(2) (relating to functions of Office) is
amended—
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(1) by striking all matter preceding subclause (I)
of clause (ii) and inserting the following:
‘‘(B) ANNUAL REPORT.—
‘‘(i) IN GENERAL.—Not later than De-
cember 31 of each calendar year, the Na-
tional Taxpayer Advocate shall report to the
Committee of Ways and Means of the House
of Representatives and the Committee on
Finance of the Senate on the objectives of
the Office of the Taxpayer of Advocate for
the fiscal year beginning in such calendar
year and the activities of such Office during
the fiscal year ending during such calendar
year. Any such report shall contain full and
substantive analysis, in addition to statis-
tical information, and shall—’’,
(2) by striking ‘‘clause (ii)’’ in clause (iv) and
inserting ‘‘clause (i)’’, and
(3) by redesignating clauses (iii) and (iv) as
clauses (ii) and (iii), respectively.
(b) ADDITIONAL
REPORTS.—Section 7803(c)(2)(C)
(relating to other responsibilities) is amended by striking
‘‘and’’ at the end of clause (iii), by striking the period at
the end of clause (iv) and inserting ‘‘; and’’, and by adding
at the end the following new clause:
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‘‘(v) at the discretion of the National
Taxpayer Advocate, report at any time to
the Committee of Ways and Means of the
House of Representatives and the Committee
on Finance of the Senate on significant
issues affecting taxpayer rights.’’.
(c) EFFECTIVE DATES.—
(1) ANNUAL REPORTS.—The amendments made
by subsection (a) shall apply to reports in calendar
year 2005 and thereafter.
(2) ADDITIONAL
REPORTS.—The amendments
made by subsection (b) shall take effect on the date of
the enactment of this Act.
SEC. 136. IRS FREE FILE PROGRAM.
(a) IN GENERAL.—The Commissioner of Internal Rev-
enue shall require that a taxpayer must provide an affirma-
tive consent before such taxpayer may be solicited with re-
spect to any product or service by an entity participating
in the Internal Revenue Service Free File program. Any
request for such consent must be prominently displayed and
clearly written, in large print, on any material relating
to such program.
(b) EFFECTIVE DATE.—This section shall take effect
with respect to returns filed after December 31, 2004.
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SEC. 137. MODIFICATION OF TIGTA REPORTING REQUIRE-
MENTS.
(a) IN GENERAL.—Paragraph (1) of section 7803(d)
(relating to additional duties of the Treasury Inspector
General for Tax Administration) is amended—
(1) by striking ‘‘ANNUAL’’ in the heading and in-
serting ‘‘BIENNIAL’’,
(2) by inserting ‘‘every 2 years (beginning in
2004)’’ after ‘‘one of the semiannual reports’’ in the
matter preceding subparagraph (A),
(3) by striking clause (ii) of subparagraph (A),
(4) by redesignating clauses (iii), (iv), and (v) of
subparagraph (A) as clauses (ii), (iii), and (iv) of
subparagraph (A), respectively,
(5) by striking subparagraph (B),
(6) by striking ‘‘and’’ at the end of subpara-
graph (F),
(7) by redesignating subparagraphs (C), (D),
(E), and (F) as subparagraphs (B), (C), (D), and
(E), respectively, and
(8) by striking subparagraph (G) and inserting
the following new subparagraphs:
‘‘(F) the number of employee misconduct
and taxpayer abuse allegations received by the
Internal Revenue Service or the Inspector Gen-
eral during the period from taxpayers, Internal
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Revenue Service employees, and other sources;
and
‘‘(G) with respect to allegations of serious
employee misconduct—
‘‘(i) a summary of the status of such
allegations; and
‘‘(ii) a summary of the disposition of
such allegations, including the outcome of
any Department of Justice action and any
monies paid as a settlement of such allega-
tions.’’.
(b) CONFORMING AMENDMENTS.—Section 7803(d) is
amended by striking paragraph (2) and by redesignating
paragraph (3) as paragraph (2).
(c) EFFECTIVE DATE.—The amendments made by this
section shall take effect on the date of the enactment of this
Act.
SEC. 138. STUDY OF IRS ACCOUNTS RECEIVABLE.
(a) STUDY.—The Secretary of the Treasury shall con-
duct a study of the provisions of the Internal Revenue Code
of 1986, and the application of such provisions, regarding
collection procedures to determine if impediments exist to
the efficient and timely collection of tax debts. Such study
shall include an examination of the accounts receivable in-
ventory of the Internal Revenue Service.
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(b) REPORT.—Not later than 1 year after the date of
the enactment of this Act, the Secretary of the Treasury
shall submit a report to the Committee on Ways and Means
of the House of Representatives and the Committee on Fi-
nance of the Senate, including the findings of the study de-
scribed in subsection (a) and such legislative or administra-
tive recommendations as the Secretary deems appropriate
to increase the efficient and timely collection of tax debts.
SEC. 139. ELECTRONIC COMMERCE ADVISORY GROUP.
(a) IN GENERAL.—Section 2001(b)(2) of the Internal
Revenue Service Restructuring and Reform Act of 1998 is
amended by inserting ‘‘, and at least 2 representatives from
the consumer advocate community’’ after ‘‘industry’’.
(b) APPLICATION OF AMENDMENT.—The initial ap-
pointments in accordance with the amendment made by
this section shall be made not later than the date which
is 180 days after the date of the enactment of this Act.
SEC. 140. STUDY ON MODIFICATIONS TO SCHEDULES L AND
M–1.
(a) IN GENERAL.—Not later than 6 months after the
date of the enactment of this Act, the Secretary of the Treas-
ury shall report to the Committee on Finance of the Senate
and the Committee on Ways and Means of the House of
Representatives on proposals to modify tax schedules L and
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M–1 of Form 1120 to require the disclosure of additional
information, such as the items described in subsection (b).
(b) ITEMS OF DISCLOSURE.—The items described in
this subsection is as follows:
(1) The parent company names and identifica-
tion numbers for both tax and book purposes.
(2) An asset reconciliation of consolidated book
assets on the public financial disclosures with the con-
solidated tax return.
(3) Worldwide net income from public financial
disclosures.
(4) The components of tax expense presently re-
corded in financial statement tax footnotes.
(5) The reconciliation of the book income of enti-
ties included in the consolidated financial statement
with book income included in the consolidated tax re-
turn.
(6) The adjustment for book income from domes-
tic and foreign entities excluded from financial re-
porting but included for tax reconciliation.
(7) The book income of United States entities in-
cluded in the United States consolidated return.
(8) Taxable income due to actual or deemed divi-
dends from foreign subsidiaries.
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(9) A reconciliation which should reflect pretax
book income of United States consolidated tax group
plus taxable deemed or actual foreign repatriations.
(10) The differences in the reporting of income
and expense between book and tax reporting, includ-
ing specific reporting on pension expense, stock op-
tions, and the amortization of goodwill.
(11) Other reconciliation items in a consistent
manner among all entities.
(c) PUBLIC AVAILABILITY OF SPECIFIED INFORMA-
TION.—Not later than 1 year after the date of the enactment
of this Act, the Securities and Exchange Commission and
the Commissioner of Internal Revenue shall each report to
the Committee on Finance of the Senate and the Committee
on Ways and Means of the House of Representatives on pro-
posals to expand the public availability and clarity of in-
formation relating to book and tax differences and Federal
tax liability with respect to corporations.
SEC. 141. REGULATION OF FEDERAL INCOME TAX RETURN
PREPARERS, REFUND ANTICIPATION LOAN
PROVIDERS, AND PAYROLL AGENTS.
(a) IN GENERAL.—Chapter 77 (relating to miscella-
neous provisions), as amended by this Act, is amended by
adding at the end the following new section:
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‘‘SEC. 7530. FEDERAL INCOME TAX RETURN PREPARERS, RE-
FUND ANTICIPATION LOAN PROVIDERS, AND
PAYROLL AGENTS.
‘‘(a) REGISTRATION.—
‘‘(1) IN GENERAL.—The Secretary shall prescribe
such regulations as may be necessary—
‘‘(A) to require the registration of Federal
income tax return preparers, refund anticipation
loan providers, and payroll agents with the Sec-
retary or the designee of the Secretary,
‘‘(B) to prohibit the payment of a refund of
tax to a Federal income tax return preparer or
refund anticipation loan provider that is the re-
sult of a tax return which is prepared by such
preparer or provider which does not include the
preparer’s or provider’s registration number, and
‘‘(C) to require the posting of a resonable
bond by each registered payroll agent.
‘‘(2) NO DISCIPLINARY ACTION.—The regulations
under paragraph (1) shall require that an applicant
for registration must not have demonstrated any con-
duct that would warrant disciplinary action under
part 10 of title 31, Code of Federal Regulations.
‘‘(3) BURDEN
OF
REGISTRATION.—In promul-
gating the regulations under paragraph (1), the Sec-
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retary shall minimize the burden and cost on the reg-
istrant.
‘‘(b) EXAMINATION.—In promulgating the regulations
under subsection (a)—
‘‘(1) IN GENERAL.—The Secretary shall develop
a series of examinations designed to test the technical
knowledge and competency of each applicant for reg-
istration to prepare Federal tax returns, including an
examination testing knowledge of individual income
tax return preparation, including the earned income
tax credit under section 32.
‘‘(2) INITIAL EXAMINATION.—The Secretary shall
require that each applicant for registration pass an
initial examination testing the applicant’s technical
knowledge and competency to prepare individual and
business Federal income tax returns.
‘‘(c) RULES OF CONDUCT.—All registrants shall be
subject to rules of conduct that are consistent with the rules
that govern any federally authorized tax practitioner with-
in the meaning of section 7525(a)(3)(A).
‘‘(d) DISCLOSURE OF INFORMATION.—The Secretary
shall provide guidance on the manner and timing of disclo-
sure to taxpayers of information relating to fees and inter-
est rates imposed in connection with loans made to tax-
payers by refund anticipation loan providers.
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‘‘(e) ANNUAL RENEWAL OF REGISTRATION.—
‘‘(1) IN GENERAL.—The regulations under sub-
section (a) shall require an annual renewal of reg-
istration and shall set forth the manner in which a
registered Federal income tax return preparer, refund
anticipation loan provider, or payroll agent must
renew such registration.
‘‘(2) ANNUAL EXAMINATIONS.—As part of the an-
nual registration, such regulations shall require that
each registrant pass an annual refresher examination
(including tax law updates).
‘‘(f) FEES.—
‘‘(1) IN GENERAL.—The Secretary may require
the payment of reasonable fees for registration and for
renewal of registration under the regulations promul-
gated under subsection (a).
‘‘(2) PURPOSE OF FEES.—Any fees described in
paragraph (1) shall be available without fiscal year
limitation to the Secretary for the purpose of reim-
bursement of the costs of administering the require-
ments of the regulations.
‘‘(g) FEDERAL INCOME TAX RETURN PREPARER.—For
purposes of this section—
‘‘(1) IN GENERAL.—The term ‘Federal income
tax return preparer’ means any individual who is an
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income tax return preparer (within the meaning of
section 7701(a)(36)) who prepares not less than 5 re-
turns of tax imposed by subtitle A or claims for re-
funds of tax imposed by subtitle A per taxable year.
‘‘(2) EXCEPTION.—Such term shall not include a
federally authorized tax practitioner (as defined in
section 7525(a)(3)(A).
‘‘(h) REFUND ANTICIPATION LOAN PROVIDER.—For
purposes of this section, the term ‘refund anticipation loan
provider’ means a person who makes a loan of money or
of any other thing of value to a taxpayer in connection with
the taxpayer’s anticipated receipt of a Federal tax refund.’’.
(b) PROHIBITION.—
(1) IN
GENERAL.—Section 6695 (relating to
other assessable penalties with respect to the prepara-
tion of income tax returns for other persons) is
amended by adding at the end the following new sub-
section:
‘‘(h) ACTIONS ON A TAXPAYER’S BEHALF BY A NON-
REGISTERED PERSON.—Any person not registered pursu-
ant to the regulations promulgated by the Secretary under
section 7530 who—
‘‘(1) prepares a tax return for another taxpayer,
or
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‘‘(2) provides a loan of money or of any other
thing of value to a taxpayer in connection with the
taxpayer’s anticipated receipt of a Federal tax re-
fund,
shall be subject to a $500 penalty for each incident of non-
compliance.’’.
(2) USE OF PENALTIES.—There is authorized to
be appropriated and is appropriated to the Secretary
of the Treasury for each fiscal year for the adminis-
tration of the requirements of the regulations promul-
gated under section 7530 of the Internal Revenue
Code of 1986 an amount equal to the penalties im-
posed under section 6695(h) of such Code for the pre-
ceding fiscal year.
(c) COORDINATION WITH SECTION 6060(a).—The Sec-
retary of the Treasury shall coordinate the registration re-
quired under the regulations promulgated under section
7530 of the Internal Revenue Code of 1986 with the return
requirements of section 6060 of such Code.
(d) PUBLIC AWARENESS CAMPAIGN.—
(1) IN GENERAL.—The Secretary of the Treasury
shall conduct a public information and consumer
education campaign, utilizing paid advertising, to in-
form the public of the requirements that Federal in-
come tax return preparers (as defined in section
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7530(g) of the Internal Revenue Code of 1986) must
sign the return prepared for a fee and display notice
of their registration under the regulations promul-
gated under section 7530 of such Code.
(2) PUBLIC LIST.—The Secretary of the Treasury
shall maintain a public list (in print and electronic
media, including Internet-based) of Federal income
tax return preparers (as so defined) who are so reg-
istered and whose registration has been revoked.
(3) NOTIFICATION.—The Secretary of the Treas-
ury shall notify any taxpayer if such taxpayer’s re-
turn was prepared by such an unregistered Federal
income tax return preparer .
(e) ADDITIONAL FUNDS AVAILABLE FOR COMPLIANCE
ACTIVITIES.—The Secretary of the Treasury may use any
specifically appropriated funds for earned income tax credit
compliance to improve and expand enforcement of Federal
income tax preparers under the regulations promulgated
under section 7530 of the Internal Revenue Code of 1986.
(f) CLERICAL AMENDMENT.—The table of sections for
chapter 77, as amended by this Act, is amended by adding
at the end the following new item:
‘‘Sec. 7530. Federal income tax return preparers and refund antici-
pation loan providers.’’.
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(g) EFFECTIVE DATE.—The amendments made by this
section shall take effect on the date of the enactment of this
Act.
SEC. 142. JOINT TASK FORCE ON OFFERS-IN-COMPROMISE.
(a) IN GENERAL.—The Secretary of the Treasury shall
establish a joint task force—
(1) to review the Internal Revenue Service’s de-
terminations with respect to offers which raise equi-
table, public policy, or economic hardship grounds for
compromise of a tax liability under section 7122 of
the Internal Revenue Code of 1986,
(2) to review the extent to which the Internal
Revenue Service has used its authority to resolve long-
standing cases by forgoing penalties and interest
which have accumulated as a result of delay in deter-
mining the taxpayer’s liability,
(3) to provide recommendations as to whether the
Internal Revenue Service’s evaluation of offers-in-
compromise should include—
(A) the taxpayer’s compliance history,
(B) errors by the Internal Revenue Service
with respect to the underlying tax,
(C) wrongful acts by a third party which
gave rise to the liability, and
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(D) whether the taxpayer has made pay-
ments on the liability, and
(4) to annually report to the Committee on Fi-
nance of the Senate and the Committee on Ways and
Means of the House of Representatives (beginning in
2005) regarding such review and recommendations.
(b) MEMBERS OF JOINT TASK FORCE.—The member-
ship of the joint task force under subsection (a) shall consist
of 1 representative each from the Department of the Treas-
ury, the Internal Revenue Service Oversight Board, the Of-
fice of the Chief Counsel for the Internal Revenue Service,
the Office of the Taxpayer Advocate, the Office of Appeals,
and the division of the Internal Revenue Service charged
with operating the offer-in-compromise program.
(c) REPORT OF NATIONAL TAXPAYER ADVOCATE.—
(1) 
IN
GENERAL.—Clause 
(i) 
of 
section
7803(c)(2)(B) (relating to annual reports), as amend-
ed by this Act, is amended by striking ‘‘and’’ at the
end of subclause (X), by redesignating subclause (XI)
as subclause (XII), and by inserting after subclause
(X) the following new subclause:
‘‘(XI) include a list of the factors
taxpayers have raised to support their
claims for offers-in-compromise relief,
the number of such offers submitted,
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accepted, and rejected, the number of
such offers appealed, the period during
which review of such offers have re-
mained pending, and the efforts the In-
ternal Revenue Service has made to
correctly identify such offers, including
the training of employees in identi-
fying and evaluating such offers.’’.
(2) EFFECTIVE DATE.—The amendment made by
paragraph (1) shall apply to reports in calendar year
2005 and thereafter.
Subtitle C—Other Provisions
SEC. 151. PENALTY FOR FAILURE TO REPORT INTERESTS IN
FOREIGN FINANCIAL ACCOUNTS.
(a) IN GENERAL.—Section 5321(a)(5) of title 31,
United States Code, is amended to read as follows:
‘‘(5) FOREIGN FINANCIAL AGENCY TRANSACTION
VIOLATION.—
‘‘(A) PENALTY
AUTHORIZED.—The Sec-
retary of the Treasury may impose a civil money
penalty on any person who violates, or causes
any violation of, any provision of section 5314.
‘‘(B) AMOUNT OF PENALTY.—
‘‘(i) IN GENERAL.—Except as provided
in subparagraph (C), the amount of any
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civil penalty imposed under subparagraph
(A) shall not exceed $5,000.
‘‘(ii) 
REASONABLE
CAUSE
EXCEP-
TION.—No penalty shall be imposed under
subparagraph (A) with respect to any viola-
tion if—
‘‘(I) such violation was due to
reasonable cause, and
‘‘(II) the amount of the trans-
action or the balance in the account at
the time of the transaction was prop-
erly reported.
‘‘(C) WILLFUL VIOLATIONS.—In the case of
any person willfully violating, or willfully caus-
ing any violation of, any provision of section
5314—
‘‘(i) the maximum penalty under sub-
paragraph (B)(i) shall be increased to the
greater of—
‘‘(I) $25,000, or
‘‘(II) the amount (not exceeding
$100,000) determined under subpara-
graph (D), and
‘‘(ii) subparagraph (B)(ii) shall not
apply.
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‘‘(D) AMOUNT.—The amount determined
under this subparagraph is—
‘‘(i) in the case of a violation involving
a transaction, the amount of the trans-
action, or
‘‘(ii) in the case of a violation involv-
ing a failure to report the existence of an
account or any identifying information re-
quired to be provided with respect to an ac-
count, the balance in the account at the
time of the violation.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to violations occurring after the date of
the enactment of this Act.
SEC. 152. REPEAL OF APPLICATION OF BELOW-MARKET
LOAN RULES TO AMOUNTS PAID TO CERTAIN
CONTINUING CARE FACILITIES.
(a) IN GENERAL.—Section 7872(c)(1) (relating to
below-market loans to which section applies) is amended—
(1) by striking subparagraph (F), and
(2) by striking ‘‘(C), or (F)’’ in subparagraph
(E) and inserting ‘‘or (C)’’.
(b) FULL EXCEPTION.—Section 7872(g) (relating to
exception for certain loans to qualified continuing care fa-
cilities) is amended—
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(1) by striking ‘‘made by a lender to a qualified
continuing care facility pursuant to a continuing
care contract’’ in paragraph (1) and inserting ‘‘owed
by a facility which on the last day of such year is
a qualified continuing care facility, if such loan was
made pursuant to a continuing care contract and’’,
(2) by striking ‘‘increased personal care services
or’’ in paragraph (3)(C),
(3) by adding at the end of paragraph (3) the
following new flush sentence:
‘‘The Secretary shall issue guidance which limits such
term to contracts which provide to an individual or
individual’s spouse only facilities, care, and services
described in this paragraph which are customarily of-
fered by continuing care facilities.’’,
(4) by inserting ‘‘independent living unit’’ after
‘‘all of the’’ in paragraph (4)(A)(ii),
(5) by striking paragraphs (2) and (5),
(6) by redesignating paragraphs (3) and (4) as
paragraphs (2) and (3), respectively, and
(7) by striking ‘‘CERTAIN’’ in the heading there-
of.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to calendar years beginning after 2004.
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SEC. 153. PUBLIC SUPPORT BY INDIAN TRIBAL GOVERN-
MENTS.
(a) IN GENERAL.—Section 7871(a) (relating to Indian
tribal governments treated as States for certain purposes)
is amended by striking ‘‘and’’ at the end of subparagraph
(C) of paragraph (6), by striking the period at the end of
subparagraph (B) of paragraph (7) and inserting ‘‘; and’’,
and by adding at the end the following new paragraph:
‘‘(8) for purposes of—
‘‘(A) determining support of an organiza-
tion described in section 170(b)(1)(A)(vi), and
‘‘(B) determining whether an organization
is described in paragraph (1) or (2) of section
509(a) for purposes of section 509(a)(3).’’.
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply with respect to—
(1) support received before, on, or after the date
of the enactment of this Act, and
(2) the determination of the status of any orga-
nization with respect to any taxable year beginning
after such date of enactment.
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SEC. 154. PAYROLL AGENTS SUBJECT TO PENALTY FOR
FAILURE TO COLLECT AND PAY OVER TAX, OR
ATTEMPT TO EVADE OR DEFEAT TAX.
(a) IN GENERAL.—Section 6672(a) is amended by in-
serting ‘‘, including any payroll agent,’’ after ‘‘Any per-
son’’.
(b) PENALTY NOT SUBJECT TO DISCHARGE IN BANK-
RUPTCY.—Section 6672(a) is amended by adding at the end
the following new sentence: ‘‘Notwithstanding any other
provision of law, no penalty imposed under this section
may be discharged in bankruptcy.’’.
(c) CONSTRUCTION.—The amendment made by sub-
section (a) shall not be construed to create any inference
with respect to the interpretation of section 6672 of the In-
ternal Revenue Code of 1986 as such section was in effect
on the day before the date of the enactment of this Act.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to failures occurring after the date of
the enactment of this Act.
TITLE II—REFORM OF PENALTY
AND INTEREST
SEC. 201. INDIVIDUAL ESTIMATED TAX.
(a) INCREASE IN EXCEPTION FOR INDIVIDUALS OWING
SMALL AMOUNT OF TAX.—Section 6654(e)(1) (relating to
exception where tax is small amount) is amended by strik-
ing ‘‘$1,000’’ and inserting ‘‘$2,000’’.
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(b) COMPUTATION OF ADDITION TO TAX.—Subsections
(a) and (b) of section 6654 (relating to failure by individual
to pay estimated taxes) are amended to read as follows:
‘‘(a) ADDITION TO THE TAX.—
‘‘(1) IN GENERAL.—Except as otherwise provided
in this section, in the case of any underpayment of
estimated tax by an individual for a taxable year,
there shall be added to the tax under chapters 1 and
2 for the taxable year the amount determined under
paragraph (2) for each day of underpayment.
‘‘(2) AMOUNT.—The amount of the addition to
tax for any day shall be the product of the under-
payment rate established under subsection (b)(2) mul-
tiplied by the amount of the underpayment.
‘‘(b) AMOUNT
OF UNDERPAYMENT; UNDERPAYMENT
RATE.—For purposes of subsection (a)—
‘‘(1) AMOUNT.—The amount of the under-
payment on any day shall be the excess of—
‘‘(A) the sum of the required installments
for the taxable year the due dates for which are
on or before such day, over
‘‘(B) the sum of the amounts (if any) of es-
timated tax payments made on or before such
day on such required installments.
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‘‘(2) 
DETERMINATION
OF
UNDERPAYMENT
RATE.—
‘‘(A) IN GENERAL.—The underpayment rate
with respect to any day in an installment under-
payment period shall be the underpayment rate
established under section 6621 for the first day
of the calendar quarter in which such install-
ment underpayment period begins.
‘‘(B) INSTALLMENT
UNDERPAYMENT
PE-
RIOD.—For purposes of subparagraph (A), the
term ‘installment underpayment period’ means
the period beginning on the day after the due
date for a required installment and ending on
the due date for the subsequent required install-
ment (or in the case of the 4th required install-
ment, the 15th day of the 4th month following
the close of a taxable year).
‘‘(C) DAILY
RATE.—The rate determined
under subparagraph (A) shall be applied on a
daily basis and shall be based on the assumption
of 365 days in a calendar year.
‘‘(3) TERMINATION OF ESTIMATED TAX UNDER-
PAYMENT.—No day after the end of the installment
underpayment period for the 4th required installment
specified in paragraph (2)(B) for a taxable year shall
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be treated as a day of underpayment with respect to
such taxable year.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to estimated tax payments made for tax-
able years beginning after December 31, 2004.
SEC. 202. CORPORATE ESTIMATED TAX.
(a) INCREASE IN SMALL TAX AMOUNT EXCEPTION.—
Section 6655(f) (relating to exception where tax is small
amount) is amended by striking ‘‘$500’’ and inserting
‘‘$1,000’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2004.
SEC. 203. INCREASE IN LARGE CORPORATION THRESHOLD
FOR ESTIMATED TAX PAYMENTS.
(a) IN GENERAL.—Section 6655(g)(2) (defining large
corporation) is amended—
(1) by striking ‘‘$1,000,000’’ in subparagraph
(A) and inserting ‘‘the applicable amount’’,
(2) by striking ‘‘the $1,000,000 amount specified
in subparagraph (A)’’ in subparagraph (B)(ii) and
inserting ‘‘the applicable amount’’,
(3) by redesignating subparagraph (B) as sub-
paragraph (C), and
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(4) by inserting after subparagraph (A) the fol-
lowing new subparagraph:
‘‘(B) APPLICABLE AMOUNT.—For purposes
of this paragraph, the applicable amount is
$1,000,000 increased (but not above $1,500,000)
by $50,000 for each taxable year beginning after
2004.’’.
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2004.
SEC. 204. ABATEMENT OF INTEREST.
(a) ABATEMENT OF INTEREST FOR PERIODS ATTRIB-
UTABLE TO ANY UNREASONABLE IRS ERROR OR DELAY.—
Section 6404(e)(1) is amended—
(1) by striking ‘‘in performing a ministerial or
managerial act’’ in subparagraphs (A) and (B),
(2) by striking ‘‘deficiency’’ in subparagraph (A)
and inserting ‘‘underpayment of any tax, addition to
tax, or penalty imposed by this title’’, and
(3) by striking ‘‘tax described in section
6212(a)’’ in subparagraph (B) and inserting ‘‘tax,
addition to tax, or penalty imposed by this title’’.
(b) ABATEMENT OF INTEREST TO EXTENT INTEREST
IS ATTRIBUTABLE TO TAXPAYER RELIANCE ON WRITTEN
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STATEMENTS OF THE IRS.—Subsection (f) of section 6404
is amended—
(1) in the subsection heading, by striking ‘‘PEN-
ALTY OR ADDITION’’ and inserting ‘‘INTEREST, PEN-
ALTY, OR ADDITION’’; and
(2) in paragraph (1) and in subparagraph (B)
of paragraph (2), by striking ‘‘penalty or addition’’
and inserting ‘‘interest, penalty, or addition’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply with respect to interest accruing on or
after the date of the enactment of this Act.
SEC. 205. DEPOSITS MADE TO SUSPEND RUNNING OF IN-
TEREST ON POTENTIAL UNDERPAYMENTS.
(a) IN GENERAL.—Subchapter A of chapter 67 (relat-
ing to interest on underpayments) is amended by adding
at the end the following new section:
‘‘SEC. 6603. DEPOSITS MADE TO SUSPEND RUNNING OF IN-
TEREST ON POTENTIAL UNDERPAYMENTS,
ETC.
‘‘(a) AUTHORITY TO MAKE DEPOSITS OTHER THAN
AS PAYMENT OF TAX.—A taxpayer may make a cash de-
posit with the Secretary which may be used by the Sec-
retary to pay any tax imposed under subtitle A or B or
chapter 41, 42, 43, or 44 which has not been assessed at
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the time of the deposit. Such a deposit shall be made in
such manner as the Secretary shall prescribe.
‘‘(b) NO INTEREST IMPOSED.—To the extent that such
deposit is used by the Secretary to pay tax, for purposes
of section 6601 (relating to interest on underpayments), the
tax shall be treated as paid when the deposit is made.
‘‘(c) RETURN OF DEPOSIT.—Except in a case where
the Secretary determines that collection of tax is in jeop-
ardy, the Secretary shall return to the taxpayer any
amount of the deposit (to the extent not used for a payment
of tax) which the taxpayer requests in writing.
‘‘(d) PAYMENT OF INTEREST.—
‘‘(1) IN GENERAL.—For purposes of section 6611
(relating to interest on overpayments), a deposit
which is returned to a taxpayer shall be treated as a
payment of tax for any period to the extent (and only
to the extent) attributable to a disputable tax for such
period. Under regulations prescribed by the Secretary,
rules similar to the rules of section 6611(b)(2) shall
apply.
‘‘(2) DISPUTABLE TAX.—
‘‘(A) IN
GENERAL.—For purposes of this
section, the term ‘disputable tax’ means the
amount of tax specified at the time of the deposit
as the taxpayer’s reasonable estimate of the max-
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imum amount of any tax attributable to disput-
able items.
‘‘(B) SAFE HARBOR BASED ON 30-DAY LET-
TER.—In the case of a taxpayer who has been
issued a 30-day letter, the maximum amount of
tax under subparagraph (A) shall not be less
than the amount of the proposed deficiency speci-
fied in such letter.
‘‘(3) OTHER
DEFINITIONS.—For purposes of
paragraph (2)—
‘‘(A) DISPUTABLE ITEM.—The term ‘disput-
able item’ means any item of income, gain, loss,
deduction, or credit if the taxpayer—
‘‘(i) has a reasonable basis for its
treatment of such item, and
‘‘(ii) reasonably believes that the Sec-
retary also has a reasonable basis for dis-
allowing the taxpayer’s treatment of such
item.
‘‘(B) 30-DAY
LETTER.—The term ‘30-day
letter’ means the first letter of proposed defi-
ciency which allows the taxpayer an opportunity
for administrative review in the Internal Rev-
enue Service Office of Appeals.
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‘‘(4) RATE OF INTEREST.—The rate of interest
allowable under this subsection shall be the Federal
short-term rate determined under section 6621(b),
compounded daily.
‘‘(e) USE OF DEPOSITS.—
‘‘(1) PAYMENT
OF
TAX.—Except as otherwise
provided by the taxpayer, deposits shall be treated as
used for the payment of tax in the order deposited.
‘‘(2) RETURNS OF DEPOSITS.—Deposits shall be
treated as returned to the taxpayer on a last-in, first-
out basis.’’.
(b) CLERICAL AMENDMENT.—The table of sections for
subchapter A of chapter 67 is amended by adding at the
end the following new item:
‘‘Sec. 6603. Deposits made to suspend running of interest on poten-
tial underpayments, etc.’’.
(c) EFFECTIVE DATE.—
(1) IN
GENERAL.—The amendments made by
this section shall apply to deposits made after the
date which is 1 year after the date of the enactment
of this Act.
(2) COORDINATION WITH DEPOSITS MADE UNDER
REVENUE
PROCEDURE
84–58.—In the case of an
amount held by the Secretary of the Treasury or the
Secretary’s delegate on the date which is 1 year after
the date of the enactment of this Act as a deposit in
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the nature of a cash bond deposit pursuant to Rev-
enue Procedure 84–58, the date that the taxpayer
identifies such amount as a deposit made pursuant to
section 6603 of the Internal Revenue Code (as added
by this Act) shall be treated as the date such amount
is deposited for purposes of such section 6603.
SEC. 206. FREEZE OF PROVISIONS REGARDING SUSPEN-
SION OF INTEREST WHERE SECRETARY FAILS
TO CONTACT TAXPAYER.
(a) IN GENERAL.—Section 6404(g) (relating to sus-
pension of interest and certain penalties where Secretary
fails to contact taxpayer) is amended by striking ‘‘1-year
period (18-month period in the case of taxable years begin-
ning before January 1, 2004)’’ both places it appears and
inserting ‘‘18-month period’’.
(b) EXCEPTION FOR GROSS MISSTATEMENT.—Section
6404(g)(2) (relating to exceptions) is amended by striking
‘‘or’’ at the end of subparagraph (C), by redesignating sub-
paragraph (D) as subparagraph (E), and by inserting after
subparagraph (C) the following new subparagraph:
‘‘(D) any interest, penalty, addition to tax,
or additional amount with respect to any gross
misstatement; or’’.
(c) EXCEPTION FOR REPORTABLE AND LISTED TRANS-
ACTIONS.—Section 6404(g)(2) (relating to exceptions), as
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amended by subsection (b), is amended by striking ‘‘or’’ at
the end of subparagraph (D), by redesignating subpara-
graph (E) as subparagraph (F), and by inserting after sub-
paragraph (D) the following new subparagraph:
‘‘(E) any interest, penalty, addition to tax,
or additional amount with respect to any report-
able transaction or listed transaction (as defined
in 6707A(c)); or’’.
(d) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section shall
apply to taxable years beginning after December 31,
2003.
(2) EXCEPTION
FOR
REPORTABLE
OR
LISTED
TRANSACTIONS.—The amendments made by sub-
section (c) shall apply with respect to interest accru-
ing after May 5, 2004.
SEC. 207. CLARIFICATION OF APPLICATION OF FEDERAL
TAX DEPOSIT PENALTY.
Nothing in section 6656 of the Internal Revenue Code
of 1986 shall be construed to permit the percentage specified
in subsection (b)(1)(A)(iii) thereof to apply other than in
a case where the failure is for more than 15 days.
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SEC. 208. FRIVOLOUS TAX RETURNS AND SUBMISSIONS.
(a) CIVIL PENALTIES.—Section 6702 is amended to
read as follows:
‘‘SEC. 6702. FRIVOLOUS TAX SUBMISSIONS.
‘‘(a) CIVIL
PENALTY
FOR
FRIVOLOUS
TAX
RE-
TURNS.—A person shall pay a penalty of $5,000 if—
‘‘(1) such person files what purports to be a re-
turn of a tax imposed by this title but which—
‘‘(A) does not contain information on which
the substantial correctness of the self-assessment
may be judged, or
‘‘(B) contains information that on its face
indicates that the self-assessment is substantially
incorrect; and
‘‘(2) the conduct referred to in paragraph (1)—
‘‘(A) is based on a position which the Sec-
retary has identified as frivolous under sub-
section (c), or
‘‘(B) reflects a desire to delay or impede the
administration of Federal tax laws.
‘‘(b) CIVIL PENALTY FOR SPECIFIED FRIVOLOUS SUB-
MISSIONS.—
‘‘(1) IMPOSITION OF PENALTY.—Except as pro-
vided in paragraph (3), any person who submits a
specified frivolous submission shall pay a penalty of
$5,000.
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‘‘(2) SPECIFIED
FRIVOLOUS
SUBMISSION.—For
purposes of this section—
‘‘(A) SPECIFIED FRIVOLOUS SUBMISSION.—
The term ‘specified frivolous submission’ means
a specified submission if any portion of such
submission—
‘‘(i) is based on a position which the
Secretary has identified as frivolous under
subsection (c), or
‘‘(ii) reflects a desire to delay or im-
pede the administration of Federal tax
laws.
‘‘(B) SPECIFIED
SUBMISSION.—The term
‘specified submission’ means—
‘‘(i) a request for a hearing under—
‘‘(I) section 6320 (relating to no-
tice and opportunity for hearing upon
filing of notice of lien), or
‘‘(II) section 6330 (relating to no-
tice and opportunity for hearing before
levy), and
‘‘(ii) an application under—
‘‘(I) section 6159 (relating to
agreements for payment of tax liability
in installments),
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‘‘(II) section 7122 (relating to
compromises), or
‘‘(III) section 7811 (relating to
taxpayer assistance orders).
‘‘(3) OPPORTUNITY
TO
WITHDRAW
SUBMIS-
SION.—If the Secretary provides a person with notice
that a submission is a specified frivolous submission
and such person withdraws such submission within
30 days after such notice, the penalty imposed under
paragraph (1) shall not apply with respect to such
submission.
‘‘(c) LISTING OF FRIVOLOUS POSITIONS.—The Sec-
retary shall prescribe (and periodically revise) a list of posi-
tions which the Secretary has identified as being frivolous
for purposes of this subsection. The Secretary shall not in-
clude in such list any position that the Secretary deter-
mines 
meets 
the 
requirement 
of 
section
6662(d)(2)(B)(ii)(II).
‘‘(d) REDUCTION OF PENALTY.—The Secretary may
reduce the amount of any penalty imposed under this sec-
tion if the Secretary determines that such reduction would
promote compliance with and administration of the Federal
tax laws.
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‘‘(e) PENALTIES
IN
ADDITION
TO
OTHER
PEN-
ALTIES.—The penalties imposed by this section shall be in
addition to any other penalty provided by law.’’.
(b) TREATMENT OF FRIVOLOUS REQUESTS FOR HEAR-
INGS BEFORE LEVY.—
(1) FRIVOLOUS REQUESTS DISREGARDED.—Sec-
tion 6330 (relating to notice and opportunity for
hearing before levy) is amended by adding at the end
the following new subsection:
‘‘(g) FRIVOLOUS REQUESTS FOR HEARING, ETC.—Not-
withstanding any other provision of this section, if the Sec-
retary determines that any portion of a request for a hear-
ing under this section or section 6320 meets the requirement
of clause (i) or (ii) of section 6702(b)(2)(A), then the Sec-
retary may treat such portion as if it were never submitted
and such portion shall not be subject to any further admin-
istrative or judicial review.’’.
(2) PRECLUSION
FROM
RAISING
FRIVOLOUS
ISSUES
AT
HEARING.—Section 
6330(c)(4) 
is
amended—
(A) by striking ‘‘(A)’’ and inserting
‘‘(A)(i)’’;
(B) by striking ‘‘(B)’’ and inserting ‘‘(ii)’’;
(C) by striking the period at the end of the
first sentence and inserting ‘‘; or’’; and
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(D) by inserting after subparagraph (A)(ii)
(as so redesignated) the following:
‘‘(B) the issue meets the requirement of
clause (i) or (ii) of section 6702(b)(2)(A).’’.
(3) 
STATEMENT
OF
GROUNDS.—Section
6330(b)(1) is amended by striking ‘‘under subsection
(a)(3)(B)’’ and inserting ‘‘in writing under subsection
(a)(3)(B) and states the grounds for the requested
hearing’’.
(c) TREATMENT OF FRIVOLOUS REQUESTS FOR HEAR-
INGS UPON FILING OF NOTICE OF LIEN.—Section 6320 is
amended—
(1) in subsection (b)(1), by striking ‘‘under sub-
section (a)(3)(B)’’ and inserting ‘‘in writing under
subsection (a)(3)(B) and states the grounds for the re-
quested hearing’’, and
(2) in subsection (c), by striking ‘‘and (e)’’ and
inserting ‘‘(e), and (g)’’.
(d) TREATMENT OF FRIVOLOUS APPLICATIONS FOR
OFFERS-IN-COMPROMISE
AND
INSTALLMENT
AGREE-
MENTS.—Section 7122 is amended by adding at the end
the following new subsection:
‘‘(e) 
FRIVOLOUS
SUBMISSIONS, 
ETC.—Notwith-
standing any other provision of this section, if the Secretary
determines that any portion of an application for an offer-
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in-compromise or installment agreement submitted under
this section or section 6159 meets the requirement of clause
(i) or (ii) of section 6702(b)(2)(A), then the Secretary may
treat such portion as if it were never submitted and such
portion shall not be subject to any further administrative
or judicial review.’’.
(e) CLERICAL AMENDMENT.—The table of sections for
part I of subchapter B of chapter 68 is amended by striking
the item relating to section 6702 and inserting the following
new item:
‘‘Sec. 6702. Frivolous tax submissions.’’.
(f) EFFECTIVE DATE.—The amendments made by this
section shall apply to submissions made and issues raised
after the date on which the Secretary first prescribes a list
under section 6702(c) of the Internal Revenue Code of 1986,
as amended by subsection (a).
SEC. 209. EXTENSION OF NOTICE REQUIREMENTS WITH RE-
SPECT TO INTEREST AND PENALTY CALCULA-
TIONS.
Sections 3306(c) and 3308(c) of the Internal Revenue
Service Restructuring and Reform Act of 1998 are each
amended by inserting ‘‘and during the period beginning on
the date of the enactment of the Tax Administration Good
Government Act, and ending before July 1, 2006,’’ after
‘‘July 1, 2003,’’.
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SEC. 210. EXPANSION OF INTEREST NETTING.
(a) IN GENERAL.—Subsection (d) of section 6621 (re-
lating to elimination of interest on overlapping periods of
tax overpayments and underpayments) is amended by add-
ing at the end the following: ‘‘Solely for purposes of the pre-
ceding sentence, section 6611(e) shall not apply.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to interest accrued after December 31,
2010.
TITLE III—UNITED STATES TAX
COURT MODERNIZATION
Subtitle A—Tax Court Procedure
SEC. 301. JURISDICTION OF TAX COURT OVER COLLECTION
DUE PROCESS CASES.
(a) IN GENERAL.—Paragraph (1) of section 6330(d)
(relating to proceeding after hearing) is amended to read
as follows:
‘‘(1) JUDICIAL
REVIEW
OF
DETERMINATION.—
The person may, within 30 days of a determination
under this section, appeal such determination to the
Tax Court (and the Tax Court shall have jurisdiction
with respect to such matter).’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to determinations made after the date
which is 60 days after the date of the enactment of this
Act.
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SEC. 302. AUTHORITY FOR SPECIAL TRIAL JUDGES TO
HEAR AND DECIDE CERTAIN EMPLOYMENT
STATUS CASES.
(a) IN GENERAL.—Section 7443A(b) (relating to pro-
ceedings which may be assigned to special trial judges) is
amended by striking ‘‘and’’ at the end of paragraph (4),
by redesignating paragraph (5) as paragraph (6), and by
inserting after paragraph (4) the following new paragraph:
‘‘(5) any proceeding under section 7436(c), and’’.
(b) CONFORMING AMENDMENT.—Section 7443A(c) is
amended by striking ‘‘or (4)’’ and inserting ‘‘(4), or (5)’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to any proceeding under section 7436(c)
of the Internal Revenue Code of 1986 with respect to which
a decision has not become final (as determined under sec-
tion 7481 of such Code) before the date of the enactment
of this Act.
SEC. 303. CONFIRMATION OF AUTHORITY OF TAX COURT TO
APPLY 
DOCTRINE 
OF 
EQUITABLE
RECOUPMENT.
(a) CONFIRMATION OF AUTHORITY OF TAX COURT TO
APPLY DOCTRINE OF EQUITABLE RECOUPMENT.—Section
6214(b) (relating to jurisdiction over other years and quar-
ters) is amended by adding at the end the following new
sentence: ‘‘Notwithstanding the preceding sentence, the Tax
Court may apply the doctrine of equitable recoupment to
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the same extent that it is available in civil tax cases before
the district courts of the United States and the United
States Court of Federal Claims.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to any action or proceeding in the
United States Tax Court with respect to which a decision
has not become final (as determined under section 7481 of
the Internal Revenue Code of 1986) as of the date of the
enactment of this Act.
SEC. 304. TAX COURT FILING FEE IN ALL CASES COM-
MENCED BY FILING PETITION.
(a) IN GENERAL.—Section 7451 (relating to fee for fil-
ing a Tax Court petition) is amended by striking all that
follows ‘‘petition’’ and inserting a period.
(b) EFFECTIVE DATE.—The amendment made by this
section shall take effect on the date of the enactment of this
Act.
SEC. 305. AMENDMENTS TO APPOINT EMPLOYEES.
(a) IN GENERAL.—Subsection (a) of section 7471 (re-
lating to Tax Court employees) is amended to read as fol-
lows:
‘‘(a) APPOINTMENT AND COMPENSATION.—
‘‘(1) CLERK.—The Tax Court may appoint a
clerk without regard to the provisions of title 5,
United States Code, governing appointments in the
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competitive service. The clerk shall serve at the pleas-
ure of the Tax Court.
‘‘(2) LAW CLERKS AND SECRETARIES.—
‘‘(A) IN GENERAL.—The judges and special
trial judges of the Tax Court may appoint law
clerks and secretaries, in such numbers as the
Tax Court may approve, without regard to the
provisions of title 5, United States Code, gov-
erning appointments in the competitive service.
Any such law clerk or secretary shall serve at the
pleasure of the appointing judge.
‘‘(B) EXEMPTION
FROM
FEDERAL
LEAVE
PROVISIONS.—A law clerk appointed under this
subsection shall be exempt from the provisions of
subchapter I of chapter 63 of title 5, United
States Code. Any unused sick leave or annual
leave standing to the employee’s credit as of the
effective date of this subsection shall remain
credited to the employee and shall be available to
the employee upon separation from the Federal
Government.
‘‘(3) OTHER EMPLOYEES.—The Tax Court may
appoint necessary employees without regard to the
provisions of title 5, United States Code, governing
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appointments in the competitive service. Such em-
ployees shall be subject to removal by the Tax Court.
‘‘(4) PAY.—The Tax Court may fix and adjust
the compensation for the clerk and other employees of
the Tax Court without regard to the provisions of
chapter 51, subchapter III of chapter 53, or section
5373 of title 5, United States Code. To the maximum
extent feasible, the Tax Court shall compensate em-
ployees at rates consistent with those for employees
holding comparable positions in the judicial branch.
‘‘(5) PROGRAMS.—The Tax Court may establish
programs for employee evaluations, incentive awards,
flexible work schedules, premium pay, and resolution
of employee grievances.
‘‘(6) DISCRIMINATION
PROHIBITED.—The Tax
Court shall—
‘‘(A) prohibit discrimination on the basis of
race, color, religion, age, sex, national origin, po-
litical affiliation, marital status, or handi-
capping condition; and
‘‘(B) promulgate procedures for resolving
complaints of discrimination by employees and
applicants for employment.
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‘‘(7) EXPERTS
AND
CONSULTANTS.—The Tax
Court may procure the services of experts and consult-
ants under section 3109 of title 5, United States Code.
‘‘(8) RIGHTS TO CERTAIN APPEALS RESERVED.—
Notwithstanding any other provision of law, an indi-
vidual who is an employee of the Tax Court on the
day before the effective date of this subsection and
who, as of that day, was entitled to—
‘‘(A) appeal a reduction in grade or re-
moval to the Merit Systems Protection Board
under chapter 43 of title 5, United States Code,
‘‘(B) appeal an adverse action to the Merit
Systems Protection Board under chapter 75 of
title 5, United States Code,
‘‘(C) appeal a prohibited personnel practice
described under section 2302(b) of title 5, United
States Code, to the Merit Systems Protection
Board under chapter 77 of that title,
‘‘(D) make an allegation of a prohibited
personnel 
practice 
described 
under 
section
2302(b) of title 5, United States Code, with the
Office of Special Counsel under chapter 12 of
that title for action in accordance with that
chapter, or
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‘‘(E) file an appeal with the Equal Employ-
ment Opportunity Commission under part 1614
of title 29 of the Code of Federal Regulations,
shall be entitled to file such appeal or make such an
allegation so long as the individual remains an em-
ployee of the Tax Court.
‘‘(9) COMPETITIVE
STATUS.—Notwithstanding
any other provision of law, any employee of the Tax
Court who has completed at least 1 year of continuous
service under a non-temporary appointment with the
Tax Court acquires a competitive status for appoint-
ment to any position in the competitive service for
which the employee possesses the required qualifica-
tions.
‘‘(10) MERIT SYSTEM PRINCIPLES; PROHIBITED
PERSONNEL
PRACTICES; AND
PREFERENCE
ELIGI-
BLES.—Any personnel management system of the Tax
Court shall—
‘‘(A) include the principles set forth in sec-
tion 2301(b) of title 5, United States Code;
‘‘(B) prohibit personnel practices prohibited
under section 2302(b) of title 5, United States
Code; and
‘‘(C) in the case of any individual who
would be a preference eligible in the executive
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branch, the Tax Court will provide preference for
that individual in a manner and to an extent
consistent with preference accorded to preference
eligibles in the executive branch.’’.
(b) EFFECTIVE DATE.—The amendments made by this
section shall take effect on the date the United States Tax
Court adopts a personnel management system after the date
of the enactment of this Act.
SEC. 306. EXPANDED USE OF TAX COURT PRACTICE FEE
FOR PRO SE TAXPAYERS.
(a) IN GENERAL.—Section 7475(b) (relating to use of
fees) is amended by inserting before the period at the end
‘‘and to provide services to pro se taxpayers’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall take effect on the date of the enactment of this
Act.
Subtitle B—Tax Court Pension and
Compensation
SEC. 311. ANNUITIES FOR SURVIVORS OF TAX COURT
JUDGES WHO ARE ASSASSINATED.
(a) ELIGIBILITY IN CASE OF DEATH BY ASSASSINA-
TION.—Subsection (h) of section 7448 (relating to annuities
to surviving spouses and dependent children of judges) is
amended to read as follows:
‘‘(h) ENTITLEMENT TO ANNUITY.—
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‘‘(1) IN GENERAL.—
‘‘(A) ANNUITY TO SURVIVING SPOUSE.—If a
judge described in paragraph (2) is survived by
a surviving spouse but not by a dependent child,
there shall be paid to such surviving spouse an
annuity beginning with the day of the death of
the judge or following the surviving spouse’s at-
tainment of the age of 50 years, whichever is the
later, in an amount computed as provided in
subsection (m).
‘‘(B) ANNUITY TO CHILD.—If such a judge
is survived by a surviving spouse and a depend-
ent child or children, there shall be paid to such
surviving spouse an immediate annuity in an
amount computed as provided in subsection (m),
and there shall also be paid to or on behalf of
each such child an immediate annuity equal to
the lesser of—
‘‘(i) 10 percent of the average annual
salary of such judge (determined in accord-
ance with subsection (m)), or
‘‘(ii) 20 percent of such average annual
salary, divided by the number of such chil-
dren.
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‘‘(C) ANNUITY
TO
SURVIVING
DEPENDENT
CHILDREN.—If such a judge leaves no surviving
spouse but leaves a surviving dependent child or
children, there shall be paid to or on behalf of
each such child an immediate annuity equal to
the lesser of—
‘‘(i) 20 percent of the average annual
salary of such judge (determined in accord-
ance with subsection (m)), or
‘‘(ii) 40 percent of such average annual
salary, divided by the number of such chil-
dren.
‘‘(2) COVERED JUDGES.—Paragraph (1) applies
to any judge electing under subsection (b)—
‘‘(A) who dies while a judge after having
rendered at least 5 years of civilian service com-
puted as prescribed in subsection (n), for the last
5 years of which the salary deductions provided
for by subsection (c)(1) or the deposits required
by subsection (d) have actually been made or the
salary deductions required by the civil service re-
tirement laws have actually been made, or
‘‘(B) who dies by assassination after having
rendered less than 5 years of civilian service
computed as prescribed in subsection (n) if, for
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the period of such service, the salary deductions
provided for by subsection (c)(1) or the deposits
required by subsection (d) have actually been
made.
‘‘(3) TERMINATION OF ANNUITY.—
‘‘(A) IN
THE
CASE
OF
A
SURVIVING
SPOUSE.—The annuity payable to a surviving
spouse under this subsection shall be terminable
upon such surviving spouse’s death or such sur-
viving spouse’s remarriage before attaining age
55.
‘‘(B) IN THE CASE OF A CHILD.—The annu-
ity payable to a child under this subsection shall
be terminable upon (i) the child attaining the
age of 18 years, (ii) the child’s marriage, or (iii)
the child’s death, whichever first occurs, except
that if such child is incapable of self-support by
reason of mental or physical disability the
child’s annuity shall be terminable only upon
death, marriage, or recovery from such dis-
ability.
‘‘(C) IN THE CASE OF A DEPENDENT CHILD
AFTER DEATH OF SURVIVING SPOUSE.—In case
of the death of a surviving spouse of a judge
leaving a dependent child or children of the
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judge surviving such spouse, the annuity of such
child or children shall be recomputed and paid
as provided in paragraph (1)(C).
‘‘(D) RECOMPUTATION.—In any case in
which the annuity of a dependent child is termi-
nated under this subsection, the annuities of any
remaining dependent child or children, based
upon the service of the same judge, shall be re-
computed and paid as though the child whose
annuity was so terminated had not survived
such judge.
‘‘(4) 
SPECIAL
RULE
FOR
ASSASSINATED
JUDGES.—In the case of a survivor or survivors of a
judge described in paragraph (2)(B), there shall be
deducted from the annuities otherwise payable under
this section an amount equal to—
‘‘(A) the amount of salary deductions pro-
vided for by subsection (c)(1) that would have
been made if such deductions had been made for
5 years of civilian service computed as pre-
scribed in subsection (n) before the judge’s death,
reduced by
‘‘(B) the amount of such salary deductions
that were actually made before the date of the
judge’s death.’’.
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(b) DEFINITION OF ASSASSINATION.—Section 7448(a)
(relating to definitions) is amended by adding at the end
the following new paragraph:
‘‘(8) The terms ‘assassinated’ and ‘assassination’
mean the killing of a judge that is motivated by the
performance by that judge of his or her official du-
ties.’’.
(c) DETERMINATION OF ASSASSINATION.—Subsection
(i) of section 7448 is amended—
(1) by striking the subsection heading and in-
serting the following:
‘‘(i) DETERMINATIONS BY CHIEF JUDGE.—
‘‘(1) DEPENDENCY AND DISABILITY.—’’,
(2) by moving the text 2 ems to the right, and
(3) by adding at the end the following new para-
graph:
‘‘(2) ASSASSINATION.—The chief judge shall de-
termine whether the killing of a judge was an assas-
sination, subject to review only by the Tax Court. The
head of any Federal agency that investigates the kill-
ing of a judge shall provide information to the chief
judge that would assist the chief judge in making such
a determination.’’.
(d) COMPUTATION OF ANNUITIES.—Subsection (m) of
section 7448 is amended—
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(1) by striking the subsection heading and in-
serting the following:
‘‘(m) COMPUTATION OF ANNUITIES.—
‘‘(1) IN GENERAL.—’’,
(2) by moving the text 2 ems to the right, and
(3) by adding at the end the following new para-
graph:
‘‘(2) ASSASSINATED JUDGES.—In the case of a
judge who is assassinated and who has served less
than 3 years, the annuity of the surviving spouse of
such judge shall be based upon the average annual
salary received by such judge for judicial service.’’.
(e) OTHER BENEFITS.—Section 7448 is amended by
adding at the end the following:
‘‘(u) OTHER BENEFITS.—In the case of a judge who
is assassinated, an annuity shall be paid under this section
notwithstanding a survivor’s eligibility for or receipt of
benefits under chapter 81 of title 5, United States Code,
except that the annuity for which a surviving spouse is eli-
gible under this section shall be reduced to the extent that
the total benefits paid under this section and chapter 81
of that title for any year would exceed the current salary
for that year of the office of the judge.’’.
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SEC. 312. COST-OF-LIVING ADJUSTMENTS FOR TAX COURT
JUDICIAL SURVIVOR ANNUITIES.
(a) IN GENERAL.—Subsection (s) of section 7448 (re-
lating to annuities to surviving spouses and dependent chil-
dren of judges) is amended to read as follows:
‘‘(s) INCREASES IN SURVIVOR ANNUITIES.—Each time
that an increase is made under section 8340(b) of title 5,
United States Code, in annuities payable under subchapter
III of chapter 83 of that title, each annuity payable from
the survivors annuity fund under this section shall be in-
creased at the same time by the same percentage by which
annuities are increased under such section 8340(b).’’.
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply with respect to increases made under
section 8340(b) of title 5, United States Code, in annuities
payable under subchapter III of chapter 83 of that title,
taking effect after the date of the enactment of this Act.
SEC. 313. LIFE INSURANCE COVERAGE FOR TAX COURT
JUDGES.
(a) IN GENERAL.—Section 7447 (relating to retire-
ment of judges) is amended by adding at the end the fol-
lowing new subsection:
‘‘(j) LIFE INSURANCE COVERAGE.—For purposes
of chapter 87 of title 5, United States Code (relating
to life insurance), any individual who is serving as
a judge of the Tax Court or who is retired under this
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section is deemed to be an employee who is continuing
in active employment.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to any individual serving as a judge
of the United States Tax Court or to any retired judge of
the United States Tax Court on the date of the enactment
of this Act.
SEC. 314. COST OF LIFE INSURANCE COVERAGE FOR TAX
COURT JUDGES AGE 65 OR OVER.
Section 7472 (relating to expenditures) is amended by
inserting after the first sentence the following new sentence:
‘‘Notwithstanding any other provision of law, the Tax
Court is authorized to pay on behalf of its judges, age 65
or over, any increase in the cost of Federal Employees’
Group Life Insurance imposed after April 24, 1999, includ-
ing any expenses generated by such payments, as authorized
by the chief judge in a manner consistent with such pay-
ments authorized by the Judicial Conference of the United
States pursuant to section 604(a)(5) of title 28, United
States Code.’’.
SEC. 315. MODIFICATION OF TIMING OF LUMP-SUM PAY-
MENT OF JUDGES’ ACCRUED ANNUAL LEAVE.
(a) IN GENERAL.—Section 7443 (relating to member-
ship of the Tax Court) is amended by adding at the end
the following new subsection:
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‘‘(h) LUMP-SUM PAYMENT OF JUDGES’ ACCRUED AN-
NUAL LEAVE.—Notwithstanding the provisions of sections
5551 and 6301 of title 5, United States Code, when an indi-
vidual subject to the leave system provided in chapter 63
of that title is appointed by the President to be a judge
of the Tax Court, the individual shall be entitled to receive,
upon appointment to the Tax Court, a lump-sum payment
from the Tax Court of the accumulated and accrued current
annual leave standing to the individual’s credit as certified
by the agency from which the individual resigned.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to any judge of the United States Tax
Court who has an outstanding leave balance on the date
of the enactment of this Act and to any individual ap-
pointed by the President to serve as a judge of the United
States Tax Court after such date.
SEC. 316. PARTICIPATION OF TAX COURT JUDGES IN THE
THRIFT SAVINGS PLAN.
(a) IN GENERAL.—Section 7447 (relating to retire-
ment of judges), as amended by this Act, is amended by
adding at the end the following new subsection:
‘‘(k) THRIFT SAVINGS PLAN.—
‘‘(1) ELECTION TO CONTRIBUTE.—
‘‘(A) IN
GENERAL.—A judge of the Tax
Court may elect to contribute to the Thrift Sav-
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ings Fund established by section 8437 of title 5,
United States Code.
‘‘(B) PERIOD
OF
ELECTION.—An election
may be made under this paragraph only during
a period provided under section 8432(b) of title
5, United States Code, for individuals subject to
chapter 84 of such title.
‘‘(2) APPLICABILITY OF TITLE 5 PROVISIONS.—
Except as otherwise provided in this subsection, the
provisions of subchapters III and VII of chapter 84
of title 5, United States Code, shall apply with re-
spect to a judge who makes an election under para-
graph (1).
‘‘(3) SPECIAL RULES.—
‘‘(A) AMOUNT CONTRIBUTED.—The amount
contributed by a judge to the Thrift Savings
Fund in any pay period shall not exceed the
maximum percentage of such judge’s basic pay
for such period as allowable under section 8440f
of title 5, United States Code. Basic pay does not
include any retired pay paid pursuant to this
section.
‘‘(B) CONTRIBUTIONS
FOR
BENEFIT
OF
JUDGE.—No contributions may be made for the
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benefit of a judge under section 8432(c) of title
5, United States Code.
‘‘(C) APPLICABILITY OF SECTION 8433(b) OF
TITLE 5 WHETHER OR NOT JUDGE RETIRES.—
Section 8433(b) of title 5, United States Code,
applies with respect to a judge who makes an
election under paragraph (1) and who either—
‘‘(i) retires under subsection (b), or
‘‘(ii) ceases to serve as a judge of the
Tax Court but does not retire under sub-
section (b).
Retirement under subsection (b) is a separation
from service for purposes of subchapters III and
VII of chapter 84 of that title.
‘‘(D) APPLICABILITY OF SECTION 8351(b)(5)
OF
TITLE
5.—The 
provisions 
of 
section
8351(b)(5) of title 5, United States Code, shall
apply with respect to a judge who makes an elec-
tion under paragraph (1).
‘‘(E) EXCEPTION.—Notwithstanding sub-
paragraph (C), if any judge retires under this
section, or resigns without having met the age
and service requirements set forth under sub-
section (b)(2), and such judge’s nonforfeitable ac-
count balance is less than an amount that the
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Executive Director of the Office of Personnel
Management prescribes by regulation, the Execu-
tive Director shall pay the nonforfeitable account
balance to the participant in a single payment.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall take effect on the date of the enactment of this
Act, except that United States Tax Court judges may only
begin to participate in the Thrift Savings Plan at the next
open season beginning after such date.
SEC. 317. EXEMPTION OF TEACHING COMPENSATION OF RE-
TIRED JUDGES FROM LIMITATION ON OUT-
SIDE EARNED INCOME.
(a) IN GENERAL.—Section 7447 (relating to retire-
ment of judges), as amended by this Act, is amended by
adding at the end the following new subsection:
‘‘(l) 
TEACHING
COMPENSATION
OF
RETIRED
JUDGES.—For purposes of the limitation under section
501(a) of the Ethics in Government Act of 1978 (5 U.S.C.
App.), any compensation for teaching approved under sec-
tion 502(a)(5) of such Act shall not be treated as outside
earned income when received by a judge of the Tax Court
who has retired under subsection (b) for teaching performed
during any calendar year for which such a judge has met
the requirements of subsection (c), as certified by the chief
judge of the Tax Court.’’.
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(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to any individual serving as a retired
judge of the United States Tax Court on or after the date
of the enactment of this Act.
SEC. 318. GENERAL PROVISIONS RELATING TO MAG-
ISTRATE JUDGES OF THE TAX COURT.
(a) TITLE OF SPECIAL TRIAL JUDGE CHANGED TO
MAGISTRATE JUDGE OF THE TAX COURT.—The heading of
section 7443A is amended to read as follows:
‘‘SEC. 7443A. MAGISTRATE JUDGES OF THE TAX COURT.’’.
(b) APPOINTMENT, TENURE, AND REMOVAL.—Sub-
section (a) of section 7443A is amended to read as follows:
‘‘(a) APPOINTMENT, TENURE, AND REMOVAL.—
‘‘(1) APPOINTMENT.—The chief judge may, from
time to time, appoint and reappoint magistrate
judges of the Tax Court for a term of 8 years. The
magistrate judges of the Tax Court shall proceed
under such rules as may be promulgated by the Tax
Court.
‘‘(2) REMOVAL.—Removal of a magistrate judge
of the Tax Court during the term for which he or she
is appointed shall be only for incompetency, mis-
conduct, neglect of duty, or physical or mental dis-
ability, but the office of a magistrate judge of the Tax
Court shall be terminated if the judges of the Tax
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Court determine that the services performed by the
magistrate judge of the Tax Court are no longer need-
ed. Removal shall not occur unless a majority of all
the judges of the Tax Court concur in the order of re-
moval. Before any order of removal shall be entered,
a full specification of the charges shall be furnished
to the magistrate judge of the Tax Court, and he or
she shall be accorded by the judges of the Tax Court
an opportunity to be heard on the charges.’’.
(c) SALARY.—Section 7443A(d) (relating to salary) is
amended by striking ‘‘90’’ and inserting ‘‘92’’.
(d) EXEMPTION
FROM
FEDERAL
LEAVE
PROVI-
SIONS.—Section 7443A is amended by adding at the end
the following new subsection:
‘‘(f) EXEMPTION
FROM
FEDERAL
LEAVE
PROVI-
SIONS.—
‘‘(1) IN GENERAL.—A magistrate judge of the
Tax Court appointed under this section shall be ex-
empt from the provisions of subchapter I of chapter
63 of title 5, United States Code.
‘‘(2) TREATMENT OF UNUSED LEAVE.—
‘‘(A) AFTER
SERVICE
AS
MAGISTRATE
JUDGE.—If an individual who is exempted
under paragraph (1) from the subchapter re-
ferred to in such paragraph was previously sub-
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ject to such subchapter and, without a break in
service, again becomes subject to such subchapter
on completion of the individual’s service as a
magistrate judge, the unused annual leave and
sick leave standing to the individual’s credit
when such individual was exempted from this
subchapter is deemed to have remained to the in-
dividual’s credit.
‘‘(B) COMPUTATION OF ANNUITY.—In com-
puting an annuity under section 8339 of title 5,
United States Code, the total service of an indi-
vidual specified in subparagraph (A) who retires
on an immediate annuity or dies leaving a sur-
vivor or survivors entitled to an annuity in-
cludes, without regard to the limitations imposed
by subsection (f) of such section 8339, the days
of unused sick leave standing to the individual’s
credit when such individual was exempted from
subchapter I of chapter 63 of title 5, United
States Code, except that these days will not be
counted in determining average pay or annuity
eligibility.
‘‘(C) LUMP SUM PAYMENT.—Any accumu-
lated and current accrued annual leave or vaca-
tion balances credited to a magistrate judge as of
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the date of the enactment of this subsection shall
be paid in a lump sum at the time of separation
from service pursuant to the provisions and re-
strictions set forth in section 5551 of title 5,
United States Code, and related provisions re-
ferred to in such section.’’.
(e) CONFORMING AMENDMENTS.—
(1) The heading of subsection (b) of section
7443A is amended by striking ‘‘SPECIAL TRIAL
JUDGES’’ and inserting ‘‘MAGISTRATE JUDGES
OF
THE TAX COURT’’.
(2) Section 7443A(b) is amended by striking
‘‘special trial judges of the court’’ and inserting
‘‘magistrate judges of the Tax Court’’.
(3) Subsections (c) and (d) of section 7443A are
amended by striking ‘‘special trial judge’’ and insert-
ing ‘‘magistrate judge of the Tax Court’’ each place
it appears.
(4) Section 7443A(e) is amended by striking
‘‘special trial judges’’ and inserting ‘‘magistrate
judges of the Tax Court’’.
(5) Section 7456(a) is amended by striking ‘‘spe-
cial trial judge’’ each place it appears and inserting
‘‘magistrate judge’’.
(6) Subsection (c) of section 7471 is amended—
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(A) by striking the subsection heading and
inserting ‘‘MAGISTRATE JUDGES
OF
THE TAX
COURT.—’’, and
(B) by striking ‘‘special trial judges’’ and
inserting ‘‘magistrate judges’’.
SEC. 319. ANNUITIES TO SURVIVING SPOUSES AND DE-
PENDENT 
CHILDREN 
OF 
MAGISTRATE
JUDGES OF THE TAX COURT.
(a) DEFINITIONS.—Section 7448(a) (relating to defini-
tions), as amended by this Act, is amended by redesignating
paragraphs (5), (6), (7), and (8) as paragraphs (7), (8),
(9), and (10), respectively, and by inserting after para-
graph (4) the following new paragraphs:
‘‘(5) The term ‘magistrate judge’ means a judi-
cial officer appointed pursuant to section 7443A, in-
cluding any individual receiving an annuity under
section 7443B, or chapters 83 or 84, as the case may
be, of title 5, United States Code, whether or not per-
forming judicial duties under section 7443C.
‘‘(6) The term ‘magistrate judge’s salary’ means
the salary of a magistrate judge received under sec-
tion 7443A(d), any amount received as an annuity
under section 7443B, or chapters 83 or 84, as the case
may be, of title 5, United States Code, and compensa-
tion received under section 7443C.’’.
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(b) ELECTION.—Subsection (b) of section 7448 (relat-
ing to annuities to surviving spouses and dependent chil-
dren of judges) is amended—
(1) by striking the subsection heading and in-
serting the following:
‘‘(b) ELECTION.—
‘‘(1) JUDGES.—’’,
(2) by moving the text 2 ems to the right, and
(3) by adding at the end the following new para-
graph:
‘‘(2) MAGISTRATE
JUDGES.—Any magistrate
judge may by written election filed with the chief
judge bring himself or herself within the purview of
this section. Such election shall be filed not later than
the later of 6 months after—
‘‘(A) 6 months after the date of the enact-
ment of this paragraph,
‘‘(B) the date the judge takes office, or
‘‘(C) the date the judge marries.’’.
(c) CONFORMING AMENDMENTS.—
(1) The heading of section 7448 is amended by
inserting ‘‘AND
MAGISTRATE
JUDGES’’ after
‘‘JUDGES’’.
(2) The item relating to section 7448 in the table
of sections for part I of subchapter C of chapter 76
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is amended by inserting ‘‘and magistrate judges’’
after ‘‘judges’’.
(3) Subsections (c)(1), (d), (f), (g), (h), (j), (m),
(n), and (u) of section 7448, as amended by this Act,
are each amended—
(A) by inserting ‘‘or magistrate judge’’ after
‘‘judge’’ each place it appears other than in the
phrase ‘‘chief judge’’, and
(B) by inserting ‘‘or magistrate judge’s’’
after ‘‘judge’s’’ each place it appears.
(4) Section 7448(c) is amended—
(A) in paragraph (1), by striking ‘‘Tax
Court judges’’ and inserting ‘‘Tax Court judicial
officers’’,
(B) in paragraph (2)—
(i) in subparagraph (A), by inserting
‘‘and section 7443A(d)’’ after ‘‘(a)(4)’’, and
(ii) in subparagraph (B), by striking
‘‘subsection (a)(4)’’ and inserting ‘‘sub-
sections (a)(4) and (a)(6)’’.
(5) Section 7448(g) is amended by inserting ‘‘or
section 7443B’’ after ‘‘section 7447’’ each place it ap-
pears, and by inserting ‘‘or an annuity’’ after ‘‘re-
tired pay’’.
(6) Section 7448(j)(1) is amended—
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(A) in subparagraph (A), by striking ‘‘serv-
ice or retired’’ and inserting ‘‘service, retired’’,
and by inserting ‘‘, or receiving any annuity
under section 7443B or chapters 83 or 84 of title
5, United States Code,’’ after ‘‘section 7447’’,
and
(B) in the last sentence, by striking ‘‘sub-
sections (a)(6) and (7)’’ and inserting ‘‘para-
graphs (8) and (9) of subsection (a)’’.
(7) Section 7448(m)(1), as amended by this Act,
is amended—
(A) by inserting ‘‘or any annuity under sec-
tion 7443B or chapters 83 or 84 of title 5,
United States Code’’ after ‘‘7447(d)’’, and
(B) by inserting ‘‘or 7443B(m)(1)(B) after
‘‘7447(f)(4)’’.
(8) Section 7448(n) is amended by inserting ‘‘his
years of service pursuant to any appointment under
section 7443A,’’ after ‘‘of the Tax Court,’’.
(9) Section 3121(b)(5)(E) is amended by insert-
ing ‘‘or magistrate judge’’ before ‘‘of the United States
Tax Court’’.
(10) Section 210(a)(5)(E) of the Social Security
Act is amended by inserting ‘‘or magistrate judge’’ be-
fore ‘‘of the United States Tax Court’’.
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SEC. 320. RETIREMENT AND ANNUITY PROGRAM.
(a) RETIREMENT AND ANNUITY PROGRAM.—Part I of
subchapter C of chapter 76 is amended by inserting after
section 7443A the following new section:
‘‘SEC. 7443B. RETIREMENT FOR MAGISTRATE JUDGES OF
THE TAX COURT.
‘‘(a) RETIREMENT BASED ON YEARS OF SERVICE.—
A magistrate judge of the Tax Court to whom this section
applies and who retires from office after attaining the age
of 65 years and serving at least 14 years, whether continu-
ously or otherwise, as such magistrate judge shall, subject
to subsection (f), be entitled to receive, during the remainder
of the magistrate judge’s lifetime, an annuity equal to the
salary being received at the time the magistrate judge leaves
office.
‘‘(b) RETIREMENT UPON FAILURE
OF REAPPOINT-
MENT.—A magistrate judge of the Tax Court to whom this
section applies who is not reappointed following the expira-
tion of the term of office of such magistrate judge, and who
retires upon the completion of the term shall, subject to sub-
section (f), be entitled to receive, upon attaining the age
of 65 years and during the remainder of such magistrate
judge’s lifetime, an annuity equal to that portion of the sal-
ary being received at the time the magistrate judge leaves
office which the aggregate number of years of service, not
to exceed 14, bears to 14, if—
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‘‘(1) such magistrate judge has served at least 1
full term as a magistrate judge, and
‘‘(2) not earlier than 9 months before the date on
which the term of office of such magistrate judge ex-
pires, and not later than 6 months before such date,
such magistrate judge notified the chief judge of the
Tax Court in writing that such magistrate judge was
willing to accept reappointment to the position in
which such magistrate judge was serving.
‘‘(c) SERVICE OF AT LEAST 8 YEARS.—A magistrate
judge of the Tax Court to whom this section applies and
who retires after serving at least 8 years, whether continu-
ously or otherwise, as such a magistrate judge shall, subject
to subsection (f), be entitled to receive, upon attaining the
age of 65 years and during the remainder of the magistrate
judge’s lifetime, an annuity equal to that portion of the sal-
ary being received at the time the magistrate judge leaves
office which the aggregate number of years of service, not
to exceed 14, bears to 14. Such annuity shall be reduced
by 1⁄6 of 1 percent for each full month such magistrate judge
was under the age of 65 at the time the magistrate judge
left office, except that such reduction shall not exceed 20
percent.
‘‘(d) RETIREMENT
FOR DISABILITY.—A magistrate
judge of the Tax Court to whom this section applies, who
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has served at least 5 years, whether continuously or other-
wise, as such a magistrate judge, and who retires or is re-
moved from office upon the sole ground of mental or phys-
ical disability shall, subject to subsection (f), be entitled to
receive, during the remainder of the magistrate judge’s life-
time, an annuity equal to 40 percent of the salary being
received at the time of retirement or removal or, in the case
of a magistrate judge who has served for at least 10 years,
an amount equal to that proportion of the salary being re-
ceived at the time of retirement or removal which the aggre-
gate number of years of service, not to exceed 14, bears to
14.
‘‘(e) COST-OF-LIVING ADJUSTMENTS.—A magistrate
judge of the Tax Court who is entitled to an annuity under
this section is also entitled to a cost-of-living adjustment
in such annuity, calculated and payable in the same man-
ner as adjustments under section 8340(b) of title 5, United
States Code, except that any such annuity, as increased
under this subsection, may not exceed the salary then pay-
able for the position from which the magistrate judge retired
or was removed.
‘‘(f) ELECTION; ANNUITY IN LIEU OF OTHER ANNU-
ITIES.—
‘‘(1) IN GENERAL.—A magistrate judge of the
Tax Court shall be entitled to an annuity under this
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section if the magistrate judge elects an annuity
under this section by notifying the chief judge of the
Tax Court not later than the later of—
‘‘(A) 5 years after the magistrate judge of
the Tax Court begins judicial service, or
‘‘(B) 5 years after the date of the enactment
of this subsection.
Such notice shall be given in accordance with proce-
dures prescribed by the Tax Court.
‘‘(2) ANNUITY IN LIEU OF OTHER ANNUITY.—A
magistrate judge who elects to receive an annuity
under this section shall not be entitled to receive—
‘‘(A) any annuity to which such magistrate
judge would otherwise have been entitled under
subchapter III of chapter 83, or under chapter
84 (except for subchapters III and VII), of title
5, United States Code, for service performed as
a magistrate or otherwise,
‘‘(B) an annuity or salary in senior status
or retirement under section 371 or 372 of title
28, United States Code,
‘‘(C) retired pay under section 7447, or
‘‘(D) retired pay under section 7296 of title
38, United States Code.
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‘‘(3) COORDINATION
WITH
TITLE
5.—A mag-
istrate judge of the Tax Court who elects to receive an
annuity under this section—
‘‘(A) shall not be subject to deductions and
contributions otherwise required by section
8334(a) of title 5, United States Code,
‘‘(B) shall be excluded from the operation of
chapter 84 (other than subchapters III and VII)
of such title 5, and
‘‘(C) is entitled to a lump-sum credit under
section 8342(a) or 8424 of such title 5, as the
case may be.
‘‘(g) CALCULATION OF SERVICE.—For purposes of cal-
culating an annuity under this section—
‘‘(1) service as a magistrate judge of the Tax
Court to whom this section applies may be credited,
and
‘‘(2) each month of service shall be credited as
1⁄12 of a year, and the fractional part of any month
shall not be credited.
‘‘(h) COVERED POSITIONS AND SERVICE.—This section
applies to any magistrate judge of the Tax Court or special
trial judge of the Tax Court appointed under this sub-
chapter, but only with respect to service as such a mag-
istrate judge or special trial judge after a date not earlier
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than 91⁄2 years before the date of the enactment of this sub-
section.
‘‘(i) PAYMENTS PURSUANT TO COURT ORDER.—
‘‘(1) IN GENERAL.—Payments under this section
which would otherwise be made to a magistrate judge
of the Tax Court based upon his or her service shall
be paid (in whole or in part) by the chief judge of the
Tax Court to another person if and to the extent ex-
pressly provided for in the terms of any court decree
of divorce, annulment, or legal separation, or the
terms of any court order or court-approved property
settlement agreement incident to any court decree of
divorce, annulment, or legal separation. Any payment
under this paragraph to a person bars recovery by
any other person.
‘‘(2) REQUIREMENTS FOR PAYMENT.—Paragraph
(1) shall apply only to payments made by the chief
judge of the Tax Court after the date of receipt by the
chief judge of written notice of such decree, order, or
agreement, and such additional information as the
chief judge may prescribe.
‘‘(3) COURT DEFINED.—For purposes of this sub-
section, the term ‘court’ means any court of any
State, the District of Columbia, the Commonwealth of
Puerto Rico, Guam, the Northern Mariana Islands, or
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the Virgin Islands, and any Indian tribal court or
courts of Indian offense.
‘‘(j) DEDUCTIONS, CONTRIBUTIONS, AND DEPOSITS.—
‘‘(1) DEDUCTIONS.—Beginning with the next
pay period after the chief judge of the Tax Court re-
ceives a notice under subsection (f) that a magistrate
judge of the Tax Court has elected an annuity under
this section, the chief judge shall deduct and withhold
1 percent of the salary of such magistrate judge.
Amounts shall be so deducted and withheld in a man-
ner determined by the chief judge. Amounts deducted
and withheld under this subsection shall be deposited
in the Treasury of the United States to the credit of
the Tax Court Judicial Officers’ Retirement Fund.
Deductions under this subsection from the salary of a
magistrate judge shall terminate upon the retirement
of the magistrate judge or upon completion of 14
years of service for which contributions under this
section have been made, whether continuously or oth-
erwise, as calculated under subsection (g), whichever
occurs first.
‘‘(2) CONSENT TO DEDUCTIONS; DISCHARGE OF
CLAIMS.—Each magistrate judge of the Tax Court
who makes an election under subsection (f) shall be
deemed to consent and agree to the deductions from
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salary which are made under paragraph (1). Pay-
ment of such salary less such deductions (and any de-
ductions made under section 7448) is a full and com-
plete discharge and acquittance of all claims and de-
mands for all services rendered by such magistrate
judge during the period covered by such payment, ex-
cept the right to those benefits to which the magistrate
judge is entitled under this section (and section 7448).
‘‘(k) DEPOSITS
FOR PRIOR SERVICE.—Each mag-
istrate judge of the Tax Court who makes an election under
subsection (f) may deposit, for service performed before such
election for which contributions may be made under this
section, an amount equal to 1 percent of the salary received
for that service. Credit for any period covered by that serv-
ice may not be allowed for purposes of an annuity under
this section until a deposit under this subsection has been
made for that period.
‘‘(l) 
INDIVIDUAL
RETIREMENT
RECORDS.—The
amounts deducted and withheld under subsection (j), and
the amounts deposited under subsection (k), shall be credited
to individual accounts in the name of each magistrate judge
of the Tax Court from whom such amounts are received,
for credit to the Tax Court Judicial Officers’ Retirement
Fund.
‘‘(m) ANNUITIES AFFECTED IN CERTAIN CASES.—
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‘‘(1) 1-YEAR FORFEITURE FOR FAILURE TO PER-
FORM JUDICIAL DUTIES.—Subject to paragraph (3),
any magistrate judge of the Tax Court who retires
under this section and who fails to perform judicial
duties required of such individual by section 7443C
shall forfeit all rights to an annuity under this sec-
tion for a 1-year period which begins on the 1st day
on which such individual fails to perform such duties.
‘‘(2) PERMANENT FORFEITURE OF RETIRED PAY
WHERE
CERTAIN
NON-GOVERNMENT
SERVICES
PER-
FORMED.—Subject to paragraph (3), any magistrate
judge of the Tax Court who retires under this section
and who thereafter performs (or supervises or directs
the performance of) legal or accounting services in the
field of Federal taxation for the individual’s client,
the individual’s employer, or any of such employer’s
clients, shall forfeit all rights to an annuity under
this section for all periods beginning on or after the
first day on which the individual performs (or super-
vises or directs the performance of) such services. The
preceding sentence shall not apply to any civil office
or employment under the Government of the United
States.
‘‘(3) FORFEITURES NOT TO APPLY WHERE INDI-
VIDUAL ELECTS TO FREEZE AMOUNT OF ANNUITY.—
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‘‘(A) IN GENERAL.—If a magistrate judge of
the Tax Court makes an election under this
paragraph—
‘‘(i) paragraphs (1) and (2) (and sec-
tion 7443C) shall not apply to such mag-
istrate judge beginning on the date such
election takes effect, and
‘‘(ii) the annuity payable under this
section to such magistrate judge, for periods
beginning on or after the date such election
takes effect, shall be equal to the annuity to
which such magistrate judge is entitled on
the day before such effective date.
‘‘(B) ELECTION REQUIREMENTS.—An elec-
tion under subparagraph (A)—
‘‘(i) may be made by a magistrate
judge of the Tax Court eligible for retire-
ment under this section, and
‘‘(ii) shall be filed with the chief judge
of the Tax Court.
Such an election, once it takes effect, shall be ir-
revocable.
‘‘(C) EFFECTIVE DATE OF ELECTION.—Any
election under subparagraph (A) shall take effect
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on the first day of the first month following the
month in which the election is made.
‘‘(4) ACCEPTING
OTHER
EMPLOYMENT.—Any
magistrate judge of the Tax Court who retires under
this section and thereafter accepts compensation for
civil office or employment under the United States
Government (other than for the performance of func-
tions as a magistrate judge of the Tax Court under
section 7443C) shall forfeit all rights to an annuity
under this section for the period for which such com-
pensation is received. For purposes of this paragraph,
the term ‘compensation’ includes retired pay or sal-
ary received in retired status.
‘‘(n) LUMP-SUM PAYMENTS.—
‘‘(1) ELIGIBILITY.—
‘‘(A) IN GENERAL.—Subject to paragraph
(2), an individual who serves as a magistrate
judge of the Tax Court and—
‘‘(i) who leaves office and is not re-
appointed as a magistrate judge of the Tax
Court for at least 31 consecutive days,
‘‘(ii) who files an application with the
chief judge of the Tax Court for payment of
a lump-sum credit,
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‘‘(iii) is not serving as a magistrate
judge of the Tax Court at the time of filing
of the application, and
‘‘(iv) will not become eligible to receive
an annuity under this section within 31
days after filing the application,
is entitled to be paid the lump-sum credit. Pay-
ment of the lump-sum credit voids all rights to
an annuity under this section based on the serv-
ice on which the lump-sum credit is based, until
that individual resumes office as a magistrate
judge of the Tax Court.
‘‘(B) PAYMENT TO SURVIVORS.—Lump-sum
benefits authorized by subparagraphs (C), (D),
and (E) of this paragraph shall be paid to the
person or persons surviving the magistrate judge
of the Tax Court and alive on the date title to
the payment arises, in the order of precedence set
forth in subsection (o) of section 376 of title 28,
United States Code, and in accordance with the
last 2 sentences of paragraph (1) of that sub-
section. For purposes of the preceding sentence,
the term ‘judicial official’ as used in subsection
(o) of such section 376 shall be deemed to mean
‘magistrate judge of the Tax Court’ and the
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terms ‘Administrative Office of the United States
Courts’ and ‘Director of the Administrative Of-
fice of the United States Courts’ shall be deemed
to mean ‘chief judge of the Tax Court’.
‘‘(C) PAYMENT UPON DEATH OF JUDGE BE-
FORE
RECEIPT
OF
ANNUITY.—If a magistrate
judge of the Tax Court dies before receiving an
annuity under this section, the lump-sum credit
shall be paid.
‘‘(D) PAYMENT OF ANNUITY REMAINDER.—
If all annuity rights under this section based on
the service of a deceased magistrate judge of the
Tax Court terminate before the total annuity
paid equals the lump-sum credit, the difference
shall be paid.
‘‘(E) PAYMENT
UPON
DEATH
OF
JUDGE
DURING RECEIPT OF ANNUITY.—If a magistrate
judge of the Tax Court who is receiving an an-
nuity under this section dies, any accrued annu-
ity benefits remaining unpaid shall be paid.
‘‘(F) PAYMENT
UPON
TERMINATION.—Any
accrued annuity benefits remaining unpaid on
the termination, except by death, of the annuity
of a magistrate judge of the Tax Court shall be
paid to that individual.
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‘‘(G) PAYMENT
UPON
ACCEPTING
OTHER
EMPLOYMENT.—Subject to paragraph (2), a
magistrate judge of the Tax Court who forfeits
rights to an annuity under subsection (m)(4) be-
fore the total annuity paid equals the lump-sum
credit shall be entitled to be paid the difference
if the magistrate judge of the Tax Court files an
application with the chief judge of the Tax Court
for payment of that difference. A payment under
this subparagraph voids all rights to an annuity
on which the payment is based.
‘‘(2) SPOUSES AND FORMER SPOUSES.—
‘‘(A) IN GENERAL.—Payment of the lump-
sum credit under paragraph (1)(A) or a pay-
ment under paragraph (1)(G)—
‘‘(i) may be made only if any current
spouse and any former spouse of the mag-
istrate judge of the Tax Court are notified
of the magistrate judge’s application, and
‘‘(ii) shall be subject to the terms of a
court decree of divorce, annulment, or legal
separation, or any court or court approved
property settlement agreement incident to
such decree, if—
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‘‘(I) the decree, order, or agree-
ment expressly relates to any portion
of the lump-sum credit or other pay-
ment involved, and
‘‘(II) payment of the lump-sum
credit or other payment would extin-
guish entitlement of the magistrate
judge’s spouse or former spouse to any
portion of an annuity under subsection
(i).
‘‘(B) 
NOTIFICATION.—Notification 
of 
a
spouse or former spouse under this paragraph
shall be made in accordance with such proce-
dures as the chief judge of the Tax Court shall
prescribe. The chief judge may provide under
such procedures that subparagraph (A)(i) may
be waived with respect to a spouse or former
spouse if the magistrate judge establishes to the
satisfaction of the chief judge that the where-
abouts of such spouse or former spouse cannot be
determined.
‘‘(C) RESOLUTION
OF
OR
MORE
OR-
DERS.—The chief judge shall prescribe proce-
dures under which this paragraph shall be ap-
plied in any case in which the chief judge re-
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ceives 2 or more orders or decrees described in
subparagraph (A).
‘‘(3) DEFINITION.—For purposes of this sub-
section, the term ‘lump-sum credit’ means the
unrefunded amount consisting of—
‘‘(A) retirement deductions made under this
section from the salary of a magistrate judge of
the Tax Court,
‘‘(B) amounts deposited under subsection
(k) by a magistrate judge of the Tax Court cov-
ering earlier service, and
‘‘(C) interest on the deductions and deposits
which, for any calendar year, shall be equal to
the overall average yield to the Tax Court Judi-
cial Officers’ Retirement Fund during the pre-
ceding fiscal year from all obligations purchased
by the Secretary during such fiscal year under
subsection (o); but does not include interest—
‘‘(i) if the service covered thereby ag-
gregates 1 year or less, or
‘‘(ii) for the fractional part of a month
in the total service.
‘‘(o) TAX COURT JUDICIAL OFFICERS’ RETIREMENT
FUND.—
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‘‘(1) ESTABLISHMENT.—There is established in
the Treasury a fund which shall be known as the ‘Tax
Court Judicial Officers’ Retirement Fund’. Amounts
in the Fund are authorized to be appropriated for the
payment of annuities, refunds, and other payments
under this section.
‘‘(2) INVESTMENT
OF
FUND.—The Secretary
shall invest, in interest bearing securities of the
United States, such currently available portions of the
Tax Court Judicial Officers’ Retirement Fund as are
not immediately required for payments from the
Fund. The income derived from these investments con-
stitutes a part of the Fund.
‘‘(3) UNFUNDED LIABILITY.—
‘‘(A) IN GENERAL.—There are authorized to
be appropriated to the Tax Court Judicial Offi-
cers’ Retirement Fund amounts required to re-
duce to zero the unfunded liability of the Fund.
‘‘(B) UNFUNDED LIABILITY.—For purposes
of subparagraph (A), the term ‘unfunded liabil-
ity’ means the estimated excess, determined on
an annual basis in accordance with the provi-
sions of section 9503 of title 31, United States
Code, of the present value of all benefits payable
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from the Tax Court Judicial Officers’ Retirement
Fund over the sum of—
‘‘(i) the present value of deductions to
be withheld under this section from the fu-
ture basic pay of magistrate judges of the
Tax Court, plus
‘‘(ii) the balance in the Fund as of the
date the unfunded liability is determined.
‘‘(p) PARTICIPATION IN THRIFT SAVINGS PLAN.—
‘‘(1) ELECTION TO CONTRIBUTE.—
‘‘(A) IN GENERAL.—A magistrate judge of
the Tax Court who elects to receive an annuity
under this section or under section 321 of the
Tax Administration Good Government Act may
elect to contribute an amount of such individ-
ual’s basic pay to the Thrift Savings Fund estab-
lished by section 8437 of title 5, United States
Code.
‘‘(B) PERIOD
OF
ELECTION.—An election
may be made under this paragraph only during
a period provided under section 8432(b) of title
5, United States Code, for individuals subject to
chapter 84 of such title.
‘‘(2) APPLICABILITY OF TITLE 5 PROVISIONS.—
Except as otherwise provided in this subsection, the
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provisions of subchapters III and VII of chapter 84
of title 5, United States Code, shall apply with re-
spect to a magistrate judge who makes an election
under paragraph (1).
‘‘(3) SPECIAL RULES.—
‘‘(A) AMOUNT CONTRIBUTED.—The amount
contributed by a magistrate judge to the Thrift
Savings Fund in any pay period shall not ex-
ceed the maximum percentage of such judge’s
basic pay for such pay period as allowable under
section 8440f of title 5, United States Code.
‘‘(B) CONTRIBUTIONS
FOR
BENEFIT
OF
JUDGE.—No contributions may be made for the
benefit of a magistrate judge under section
8432(c) of title 5, United States Code.
‘‘(C) APPLICABILITY OF SECTION 8433(b) OF
TITLE
5.—Section 8433(b) of title 5, United
States Code, applies with respect to a magistrate
judge who makes an election under paragraph
(1) and—
‘‘(i) who retires entitled to an imme-
diate annuity under this section (including
a disability annuity under subsection (d) of
this section) or section 321 of the Tax Ad-
ministration Good Government Act,
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‘‘(ii) who retires before attaining age
65 but is entitled, upon attaining age 65, to
an annuity under this section or section
321 of the Tax Administration Good Gov-
ernment Act, or
‘‘(iii) who retires before becoming enti-
tled to an immediate annuity, or an annu-
ity upon attaining age 65, under this sec-
tion or section 321 of the Tax Administra-
tion Good Government Act.
‘‘(D) SEPARATION
FROM
SERVICE.—With
respect to a magistrate judge to whom this sub-
section applies, retirement under this section or
section 321 of the Tax Administration Good
Government Act is a separation from service for
purposes of subchapters III and VII of chapter
84 of title 5, United States Code.
‘‘(4) DEFINITIONS.—For purposes of this sub-
section, the terms ‘retirement’ and ‘retire’ include re-
moval from office under section 7443A(a)(2) on the
sole ground of mental or physical disability.
‘‘(5) OFFSET.—In the case of a magistrate judge
who receives a distribution from the Thrift Savings
Fund and who later receives an annuity under this
section, that annuity shall be offset by an amount
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equal to the amount which represents the Govern-
ment’s contribution to that person’s Thrift Savings
Account, without regard to earnings attributable to
that amount. Where such an offset would exceed 50
percent of the annuity to be received in the first year,
the offset may be divided equally over the first 2 years
in which that person receives the annuity.
‘‘(6) EXCEPTION.—Notwithstanding clauses (i)
and (ii) of paragraph (3)(C), if any magistrate judge
retires under circumstances making such magistrate
judge eligible to make an election under subsection (b)
of section 8433 of title 5, United States Code, and
such magistrate judge’s nonforfeitable account balance
is less than an amount that the Executive Director of
the Office of Personnel Management prescribes by reg-
ulation, the Executive Director shall pay the non-
forfeitable account balance to the participant in a
single payment.’’.
(b) CONFORMING AMENDMENT.—The table of section
for part I of subchapter C of chapter 76 is amended by
inserting after the item relating to section 7443A the fol-
lowing new item:
‘‘Sec. 7443B. Retirement for magistrate judges of the Tax Court.’’.
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SEC. 321. INCUMBENT MAGISTRATE JUDGES OF THE TAX
COURT.
(a) RETIREMENT ANNUITY UNDER TITLE 5 AND SEC-
TION 7443B OF THE INTERNAL REVENUE CODE OF 1986.—
A magistrate judge of the United States Tax Court in active
service on the date of the enactment of this Act shall, subject
to subsection (b), be entitled, in lieu of the annuity other-
wise provided under the amendments made by this title,
to—
(1) an annuity under subchapter III of chapter
83, or under chapter 84 (except for subchapters III
and VII), of title 5, United States Code, as the case
may be, for creditable service before the date on which
service would begin to be credited for purposes of
paragraph (2), and
(2) an annuity calculated under subsection (b)
or (c) and subsection (g) of section 7443B of the In-
ternal Revenue Code of 1986, as added by this Act,
for any service as a magistrate judge of the United
States Tax Court or special trial judge of the United
States Tax Court but only with respect to service as
such a magistrate judge or special trial judge after a
date not earlier than 91⁄2 years prior to the date of
the enactment of this Act (as specified in the election
pursuant to subsection (b)) for which deductions and
deposits are made under subsections (j) and (k) of
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such section 7443B, as applicable, without regard to
the minimum number of years of service as such a
magistrate judge of the United States Tax Court, ex-
cept that—
(A) in the case of a magistrate judge who
retired with less than 8 years of service, the an-
nuity under subsection (c) of such section 7443B
shall be equal to that proportion of the salary
being received at the time the magistrate judge
leaves office which the years of service bears to
14, subject to a reduction in accordance with
subsection (c) of such section 7443B if the mag-
istrate judge is under age 65 at the time he or
she leaves office, and
(B) the aggregate amount of the annuity
initially payable on retirement under this sub-
section may not exceed the rate of pay for the
magistrate judge which is in effect on the day be-
fore the retirement becomes effective.
(b) FILING OF NOTICE OF ELECTION.—A magistrate
judge of the United States Tax Court shall be entitled to
an annuity under this section only if the magistrate judge
files a notice of that election with the chief judge of the
United States Tax Court specifying the date on which serv-
ice would begin to be credited under section 7443B of the
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Internal Revenue Code of 1986, as added by this Act, in
lieu of chapter 83 or chapter 84 of title 5, United States
Code. Such notice shall be filed in accordance with such
procedures as the chief judge of the United States Tax Court
shall prescribe.
(c) LUMP-SUM CREDIT UNDER TITLE 5.—A mag-
istrate judge of the United States Tax Court who makes
an election under subsection (b) shall be entitled to a lump-
sum credit under section 8342 or 8424 of title 5, United
States Code, as the case may be, for any service which is
covered under section 7443B of the Internal Revenue Code
of 1986, as added by this Act, pursuant to that election,
and with respect to which any contributions were made by
the magistrate judge under the applicable provisions of title
5, United States Code.
(d) RECALL.—With respect to any magistrate judge of
the United States Tax Court receiving an annuity under
this section who is recalled to serve under section 7443C
of the Internal Revenue Code of 1986, as added by this
Act—
(1) the amount of compensation which such re-
called magistrate judge receives under such section
7443C shall be calculated on the basis of the annuity
received under this section, and
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(2) such recalled magistrate judge of the United
States Tax Court may serve as a reemployed annu-
itant to the extent otherwise permitted under title 5,
United States Code.
Section 7443B(m)(4) of the Internal Revenue Code of 1986,
as added by this Act, shall not apply with respect to service
as a reemployed annuitant described in paragraph (2).
SEC. 322. PROVISIONS FOR RECALL.
(a) IN GENERAL.—Part I of subchapter C of chapter
76, as amended by this Act, is amended by inserting after
section 7443B the following new section:
‘‘SEC. 7443C. RECALL OF MAGISTRATE JUDGES OF THE TAX
COURT.
‘‘(a) 
RECALLING
OF
RETIRED
MAGISTRATE
JUDGES.—Any individual who has retired pursuant to sec-
tion 7443B or the applicable provisions of title 5, United
States Code, upon reaching the age and service require-
ments established therein, may at or after retirement be
called upon by the chief judge of the Tax Court to perform
such judicial duties with the Tax Court as may be requested
of such individual for any period or periods specified by
the chief judge; except that in the case of any such
individual—
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‘‘(1) the aggregate of such periods in any 1 cal-
endar year shall not (without such individual’s con-
sent) exceed 90 calendar days, and
‘‘(2) such individual shall be relieved of per-
forming such duties during any period in which ill-
ness or disability precludes the performance of such
duties.
Any act, or failure to act, by an individual performing ju-
dicial duties pursuant to this subsection shall have the same
force and effect as if it were the act (or failure to act) of
a magistrate judge of the Tax Court.
‘‘(b) COMPENSATION.—For the year in which a period
of recall occurs, the magistrate judge shall receive, in addi-
tion to the annuity provided under the provisions of section
7443B or under the applicable provisions of title 5, United
States Code, an amount equal to the difference between that
annuity and the current salary of the office to which the
magistrate judge is recalled. The annuity of the magistrate
judge who completes that period of service, who is not re-
called in a subsequent year, and who retired under section
7443B, shall be equal to the salary in effect at the end of
the year in which the period of recall occurred for the office
from which such individual retired.
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‘‘(c) RULEMAKING AUTHORITY.—The provisions of this
section may be implemented under such rules as may be
promulgated by the Tax Court.’’.
(b) CONFORMING AMENDMENT.—The table of sections
for part I of subchapter C of chapter 76, as amended by
this Act, is amended by inserting after the item relating
to section 7443B the following new item:
‘‘Sec. 7443C. Recall of magistrate judges of the Tax Court.’’.
SEC. 323. EFFECTIVE DATE.
Except as otherwise provided, the amendments made
by this subtitle shall take effect on the date of the enactment
of this Act.
TITLE IV—CONFIDENTIALITY
AND DISCLOSURE
SEC. 401. CLARIFICATION OF DEFINITION OF CHURCH TAX
INQUIRY.
(a) IN GENERAL.—Subsection (i) of section 7611 (re-
lating to section not to apply to criminal investigations,
etc.) is amended by striking ‘‘or’’ at the end of paragraph
(4), by striking the period at the end of paragraph (5) and
inserting ‘‘, or’’, and by inserting after paragraph (5) the
following:
‘‘(6) information provided by the Secretary re-
lated to the standards for exemption from tax under
this title and the requirements under this title relat-
ing to unrelated business taxable income.’’.
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(b) EFFECTIVE DATE.—The amendments made by this
section shall take effect on the date of the enactment of this
Act.
SEC. 402. COLLECTION ACTIVITIES WITH RESPECT TO
JOINT RETURN DISCLOSABLE TO EITHER
SPOUSE BASED ON ORAL REQUEST.
(a) IN GENERAL.—Paragraph (8) of section 6103(e)
(relating to disclosure of collection activities with respect
to joint return) is amended by striking ‘‘in writing’’ the
first place it appears.
(b) ELIMINATION
OF REPORTING REQUIREMENT.—
Section 7803(d)(1) (relating to annual reporting), as
amended by this Act, is amended by striking subparagraph
(B) and by redesignating subparagraphs (C), (D), (E), (F),
(G), and (H) as subparagraphs (B), (C), (D), (E), (F), and
(G), respectively.
(c) EFFECTIVE DATES.—
(1) SUBSECTION (a).—The amendment made by
subsection (a) shall apply to requests made after the
date of the enactment of this Act.
(2) SUBSECTION (b).—The amendments made by
subsection (b) shall apply to reports made after the
date of the enactment of this Act.
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SEC. 403. TAXPAYER REPRESENTATIVES NOT SUBJECT TO
EXAMINATION ON SOLE BASIS OF REPRESEN-
TATION OF TAXPAYERS.
(a) IN GENERAL.—Paragraph (1) of section 6103(h)
(relating to disclosure to certain Federal officers and em-
ployees for purposes of tax administration, etc.) is
amended—
(1) by striking ‘‘TREASURY.—Returns and re-
turn information’’ and inserting ‘‘TREASURY.—
‘‘(A) IN GENERAL.—Returns and return in-
formation’’, and
(2) by adding at the end the following new sub-
paragraph:
‘‘(B) TAXPAYER
REPRESENTATIVES.—Not-
withstanding subparagraph (A), the return or
return information of the representative of a tax-
payer whose return is being examined by an offi-
cer or employee of the Department of the Treas-
ury shall not be open to inspection by such offi-
cer or employee on the sole basis of the represent-
ative’s relationship to the taxpayer unless a su-
pervisor of such officer or employee has approved
the inspection of the return or return informa-
tion of such representative on a basis other than
by reason of such relationship.’’.
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(b) EFFECTIVE DATE.—The amendments made by this
section shall take effect after the date of the enactment of
this Act.
SEC. 404. PROHIBITION OF DISCLOSURE OF TAXPAYER
IDENTIFICATION 
INFORMATION 
WITH 
RE-
SPECT TO DISCLOSURE OF ACCEPTED OF-
FERS-IN-COMPROMISE.
(a) IN GENERAL.—Paragraph (1) of section 6103(k)
(relating to disclosure of certain returns and return infor-
mation for tax administrative purposes) is amended by in-
serting ‘‘(other than the taxpayer’s TIN)’’ after ‘‘Return in-
formation’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to disclosures made after the date of the
enactment of this Act.
SEC. 405. COMPLIANCE BY CONTRACTORS WITH CONFIDEN-
TIALITY SAFEGUARDS.
(a) IN GENERAL.—Section 6103(p) (relating to State
law requirements) is amended by adding at the end the fol-
lowing new paragraph:
‘‘(9) DISCLOSURE TO CONTRACTORS AND OTHER
AGENTS.—Notwithstanding any other provision of
this section, no return or return information shall be
disclosed to any contractor or other agent of a Fed-
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eral, State, or local agency unless such agency, to the
satisfaction of the Secretary—
‘‘(A) has requirements in effect which re-
quire each such contractor or other agent which
would have access to returns or return informa-
tion to provide safeguards (within the meaning
of paragraph (4)) to protect the confidentiality
of such returns or return information,
‘‘(B) agrees to conduct an on-site review
every 3 years (mid-point review in the case of
contracts or agreements of less than 1 year in
duration) of each contractor or other agent to de-
termine compliance with such requirements,
‘‘(C) submits the findings of the most recent
review conducted under subparagraph (B) to the
Secretary as part of the report required by para-
graph (4)(E), and
‘‘(D) certifies to the Secretary for the most
recent annual period that such contractor or
other agent is in compliance with all such re-
quirements.
The certification required by subparagraph (D) shall
include the name and address of each contractor and
other agent, a description of the contract or agreement
with such contractor or other agent, and the duration
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of such contract or agreement. The requirements of
this paragraph shall not apply to disclosures pursu-
ant to subsection (n) for purposes of Federal tax ad-
ministration.’’.
(b) CONFORMING AMENDMENT.—Subparagraph (B) of
section 6103(p)(8) is amended by inserting ‘‘or paragraph
(9)’’ after ‘‘subparagraph (A)’’.
(c) EFFECTIVE DATE.—
(1) IN
GENERAL.—The amendments made by
this section shall apply to disclosures made after the
date of the enactment of this Act.
(2) CERTIFICATIONS.—The first certification
under section 6103(p)(9)(D) of the Internal Revenue
Code of 1986, as added by subsection (a), shall be
made with respect to the portion of calendar year
2004 following the date of the enactment of this Act.
SEC. 406. HIGHER STANDARDS FOR REQUESTS FOR AND
CONSENTS TO DISCLOSURE.
(a) IN GENERAL.—Subsection (c) of section 6103 (re-
lating to disclosure of returns and return information to
designee of taxpayer) is amended—
(1) by striking ‘‘TAXPAYER.—The Secretary’’
and inserting ‘‘TAXPAYER.—
‘‘(1) IN GENERAL.—The Secretary’’, and
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(2) by adding at the end the following new para-
graphs:
‘‘(2) RESTRICTIONS ON PERSONS OBTAINING IN-
FORMATION.—The return of any taxpayer, or return
information with respect to such taxpayer, disclosed
to a person or persons under paragraph (1) for a
purpose specified in writing, electronically, or orally
may be disclosed or used by such person or persons
only for the purpose of, and to the extent necessary
in, accomplishing the purpose for disclosure specified
and shall not be disclosed or used for any other pur-
pose.
‘‘(3) REQUIREMENTS FOR FORM PRESCRIBED BY
SECRETARY.—For purposes of this subsection, the Sec-
retary shall prescribe a form for written requests and
consents which shall—
‘‘(A) contain a warning, prominently dis-
played, informing the taxpayer that the form
should not be signed unless it is completed,
‘‘(B) state that if the taxpayer believes there
is an attempt to coerce him to sign an incom-
plete or blank form, the taxpayer should report
the matter to the Treasury Inspector General for
Tax Administration, and
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‘‘(C) contain the address and telephone
number of the Treasury Inspector General for
Tax Administration.
‘‘(4) CROSS REFERENCE.—
‘‘For provision providing for civil damages for vio-
lation of paragraph (2), see section 7431(i).’’.
(b) CIVIL DAMAGES.—Section 7431 (relating to civil
damages for unauthorized inspection or disclosure of re-
turns and return information) is amended by adding at
the end the following new subsection:
‘‘(i) DISCLOSURE OR USE OF RETURNS AND RETURN
INFORMATION OBTAINED UNDER SUBSECTION 6103(c).—
Disclosure or use of returns or return information obtained
under section 6103(c) other than for the purpose of, and
to the extent necessary in, accomplishing the purpose for
disclosure specified in writing, electronically, or orally,
shall be treated as a violation of section 6103(a).’’.
(c) REPORT.—Not later than 18 months after the date
of the enactment of this Act, the Secretary of the Treasury
shall submit a report to the Congress on compliance with
the designation and certification requirements applicable to
requests for or consent to disclosure of returns and return
information under section 6103(c) of the Internal Revenue
Code of 1986, as amended by subsection (a). Such report
shall—
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(1) evaluate (on the basis of random sampling)
whether—
(A) the amendment made by subsection (a)
is achieving the purposes of this section;
(B) requesters and submitters for such dis-
closure are continuing to evade the purposes of
this section and, if so, how; and
(C) the sanctions for violations of such re-
quirements are adequate; and
(2) include such recommendations that the Sec-
retary of the Treasury considers necessary or appro-
priate to better achieve the purposes of this section.
(d) SUNSET
OF
EXISTING
CONSENTS.—Notwith-
standing any other provision of law, any request for or con-
sent to disclose any return or return information under sec-
tion 6103(c) of the Internal Revenue Code of 1986 made
before the date of the enactment of this Act shall remain
in effect until the earlier of the date such request or consent
is otherwise terminated or the date which is 3 years after
such date of enactment.
(e) EFFECTIVE DATE.—The amendments made by this
section shall apply to requests and consents made after the
date which is 3 months after the date of the enactment of
this Act.
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SEC. 407. CIVIL DAMAGES FOR UNAUTHORIZED DISCLO-
SURE OR INSPECTION.
(a) NOTICE TO TAXPAYER.—Subsection (e) of section
7431 (relating to notification of unlawful inspection and
disclosure) is amended by adding at the end the following:
‘‘The Secretary shall also notify such taxpayer if the Inter-
nal Revenue Service or, upon notice to the Secretary by
a Federal or State agency, if such Federal or State agency,
proposes an administrative determination as to discipli-
nary or adverse action against an employee arising from
the employee’s unauthorized inspection or disclosure of the
taxpayer’s return or return information. The notice de-
scribed in this subsection shall include the date of the in-
spection or disclosure and the rights of the taxpayer under
such administrative determination.’’.
(b) EXHAUSTION OF ADMINISTRATIVE REMEDIES RE-
QUIRED.—Section 7431, as amended by this Act, is amend-
ed by adding at the end the following new subsection:
‘‘(j) EXHAUSTION OF ADMINISTRATIVE REMEDIES RE-
QUIRED.—A judgment for damages shall not be awarded
under subsection (c) unless the court determines that the
plaintiff has exhausted the administrative remedies avail-
able to such plaintiff.’’.
(c) PAYMENT AUTHORITY CLARIFIED.—
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(1) IN GENERAL.—Section 7431, as amended by
subsection (b), is amended by adding at the end the
following new subsection:
‘‘(k) PAYMENT AUTHORITY.—Claims pursuant to this
section shall be payable out of funds appropriated under
section 1304 of title 31, United States Code.’’.
(2) ANNUAL REPORTS OF PAYMENTS.—The Sec-
retary of the Treasury shall annually report to the
Committee of Finance of the Senate and the Com-
mittee on Ways and Means of the House of Represent-
atives regarding payments made from the United
States Judgment Fund under section 7431(k) of the
Internal Revenue Code of 1986.
(d) BURDEN OF PROOF FOR GOOD FAITH EXCEPTION
RESTS WITH INDIVIDUAL MAKING INSPECTION OR DISCLO-
SURE.—Section 7431(b) (relating to exceptions) is amended
by adding at the end the following new flush sentence:
‘‘In any proceeding involving the issue of the existence of
good faith, the burden of proof with respect to such issue
shall be on the individual who made the inspection or dis-
closure.’’.
(e) REPORTS.—Subsection (p) of section 6103 (relat-
ing to procedure and recordkeeping), as amended by this
Act, is amended by adding at the end the following new
paragraph:
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‘‘(10) REPORT ON WILLFUL UNAUTHORIZED DIS-
CLOSURE AND INSPECTION.—As part of the report re-
quired by paragraph (3)(C) for each calendar year,
the Secretary shall furnish information regarding the
willful unauthorized disclosure and inspection of re-
turns and return information, including the number,
status, and results of—
‘‘(A) administrative investigations,
‘‘(B) civil lawsuits brought under section
7431 (including the amounts for which such law-
suits were settled and the amounts of damages
awarded), and
‘‘(C) criminal prosecutions.’’.
(f) EFFECTIVE DATES.—
(1) NOTICE.—The amendment made by sub-
section (a) shall apply to determinations made after
the date which is 180 days after the date of the enact-
ment of this Act.
(2) EXHAUSTION OF REMEDIES AND BURDEN OF
PROOF.—The amendments made by subsections (b)
and (d) shall apply to inspections and disclosures oc-
curring on and after the date which is 180 days after
the date of the enactment of this Act.
(3) PAYMENT
AUTHORITY.—The amendment
made by subsection (c)(1) shall take effect on the date
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which is 180 days after the date of the enactment of
this Act.
(4) REPORTS.—The amendment made by sub-
section (e) shall apply to calendar years ending after
the date which is 180 days after the date of the enact-
ment of this Act.
SEC. 408. EXPANSION OF DISCLOSURE IN EMERGENCY CIR-
CUMSTANCES.
(a) IN GENERAL.—Section 6103(i)(3)(B)(i) (relating
to danger of death or physical injury) is amended by strik-
ing ‘‘or State law enforcement agency’’ and inserting ‘‘,
State, or local law enforcement agency’’.
(b) CONFORMING AMENDMENTS.—Section 6103(p)(4)
is amended—
(1) by striking ‘‘(i)(3)(B)(i) or (7)(A)(ii)’’ and
inserting ‘‘(i)(7)(A)(ii)’’, and
(2) by striking ‘‘, (i)(3)(B)(i),’’.
(c) EFFECTIVE DATE.—The amendment made by this
section shall take effect on the date of the enactment of this
Act.
SEC. 409. DISCLOSURE OF TAXPAYER IDENTITY FOR TAX
REFUND PURPOSES.
(a) IN GENERAL.—Section 6103(m)(1) (relating to tax
refunds) is amended by striking ‘‘taxpayer identity infor-
mation to the press and other media’’ and by inserting ‘‘a
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person’s name and the city, State, and zip code of the per-
son’s mailing address to the press, other media, and through
any other means of mass communication,’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall take effect on the date of the enactment of this
Act.
SEC. 410. DISCLOSURE TO STATE OFFICIALS OF PROPOSED
ACTIONS RELATED TO SECTION 501(c) ORGA-
NIZATIONS.
(a) IN GENERAL.—Subsection (c) of section 6104 is
amended by striking paragraph (2) and inserting the fol-
lowing new paragraphs:
‘‘(2) DISCLOSURE
OF
PROPOSED
ACTIONS
RE-
LATED TO CHARITABLE ORGANIZATIONS.—
‘‘(A) SPECIFIC NOTIFICATIONS.—In the case
of an organization to which paragraph (1) ap-
plies, the Secretary may disclose to the appro-
priate State officer—
‘‘(i) a notice of proposed refusal to rec-
ognize such organization as an organization
described in section 501(c)(3) or a notice of
proposed revocation of such organization’s
recognition as an organization exempt from
taxation,
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‘‘(ii) the issuance of a letter of pro-
posed deficiency of tax imposed under sec-
tion 507 or chapter 41 or 42, and
‘‘(iii) the names, addresses, and tax-
payer identification numbers of organiza-
tions which have applied for recognition as
organizations described in section 501(c)(3).
‘‘(B) ADDITIONAL
DISCLOSURES.—Returns
and return information of organizations with re-
spect to which information is disclosed under
subparagraph (A) may be made available for in-
spection by or disclosed to an appropriate State
officer.
‘‘(C) PROCEDURES FOR DISCLOSURE.—In-
formation may be inspected or disclosed under
subparagraph (A) or (B) only—
‘‘(i) upon written request by an appro-
priate State officer, and
‘‘(ii) for the purpose of, and only to the
extent necessary in, the administration of
State laws regulating such organizations.
Such information may only be inspected by or
disclosed to representatives of the appropriate
State officer designated as the individuals who
are to inspect or to receive the returns or return
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information under this paragraph on behalf of
such officer. Such representatives shall not in-
clude any contractor or agent.
‘‘(D) DISCLOSURES
OTHER
THAN
BY
RE-
QUEST.—The Secretary may make available for
inspection or disclose returns and return infor-
mation of an organization to which paragraph
(1) applies to an appropriate State officer of
any State if the Secretary determines that such
inspection or disclosure may facilitate the resolu-
tion of Federal or State issues relating to the
tax-exempt status of such organization.
‘‘(3) DISCLOSURE WITH RESPECT TO CERTAIN
OTHER EXEMPT ORGANIZATIONS.—Upon written re-
quest by an appropriate State officer, the Secretary
may make available for inspection or disclosure re-
turns and return information of an organization de-
scribed in paragraph (2), (4), (6), (7), (8), (10), or
(13) of section 501(c) for the purpose of, and to the
extent necessary in, the administration of State laws
regulating the solicitation or administration of the
charitable funds or charitable assets of such organiza-
tions. Such information may be inspected only by or
disclosed only to representatives of the appropriate
State officer designated as the individuals who are to
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inspect or to receive the returns or return information
under this paragraph on behalf of such officer. Such
representatives shall not include any contractor or
agent.
‘‘(4) USE IN CIVIL JUDICIAL AND ADMINISTRA-
TIVE
PROCEEDINGS.—Returns and return informa-
tion disclosed pursuant to this subsection may be dis-
closed in civil administrative and civil judicial pro-
ceedings pertaining to the enforcement of State laws
regulating such organizations in a manner prescribed
by the Secretary similar to that for tax administra-
tion proceedings under section 6103(h)(4).
‘‘(5) NO DISCLOSURE IF IMPAIRMENT.—Returns
and return information shall not be disclosed under
this subsection, or in any proceeding described in
paragraph (4), to the extent that the Secretary deter-
mines that such disclosure would seriously impair
Federal tax administration.
‘‘(6) 
DEFINITIONS.—For 
purposes 
of 
this
subsection—
‘‘(A) RETURN
AND
RETURN
INFORMA-
TION.—The terms ‘return’ and ‘return informa-
tion’ have the respective meanings given to such
terms by section 6103(b).
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‘‘(B) APPROPRIATE
STATE
OFFICER.—The
term ‘appropriate State officer’ means—
‘‘(i) the State attorney general,
‘‘(ii) in the case of an organization to
which paragraph (1) applies, any other
State official charged with overseeing orga-
nizations of the type described in section
501(c)(3), and
‘‘(iii) in the case of an organization to
which paragraph (3) applies, the head of an
agency designated by the State attorney
general as having primary responsibility
for overseeing the solicitation of funds for
charitable purposes.’’.
(b) CONFORMING AMENDMENTS.—
(1) Subsection (a) of section 6103 is amended—
(A) by inserting ‘‘or any appropriate State
officer who has or had access to returns or return
information under section 6104(c)’’ after ‘‘this
section’’ in paragraph (2), and
(B) by striking ‘‘or subsection (n)’’ in para-
graph (3) and inserting ‘‘subsection (n), or sec-
tion 6104(c)’’.
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(2) Subparagraph (A) of section 6103(p)(3) is
amended by inserting ‘‘and section 6104(c)’’ after
‘‘section’’ in the first sentence.
(3) Paragraph (4) of section 6103(p), as amend-
ed by section 202(b)(2)(B) of the Trade Act of 2002
(Public Law 107–210; 116 Stat. 961), is amended by
striking ‘‘or (17)’’ after ‘‘any other person described
in subsection (l)(16)’’ each place it appears and in-
serting ‘‘or (18) or any appropriate State officer (as
defined in section 6104(c))’’.
(4) The heading for paragraph (1) of section
6104(c) is amended by inserting ‘‘FOR CHARITABLE
ORGANIZATIONS’’.
(5) Paragraph (2) of section 7213(a) is amended
by inserting ‘‘or under section 6104(c)’’ after ‘‘6103’’.
(6) Paragraph (2) of section 7213A(a) is amend-
ed by inserting ‘‘or 6104(c)’’ after ‘‘6103’’.
(7) Paragraph (2) of section 7431(a) is amended
by inserting ‘‘(including any disclosure in violation
of section 6104(c))’’ after ‘‘6103’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall take effect on the date of the enactment of this
Act but shall not apply to requests made before such date.
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SEC. 411. TREATMENT OF PUBLIC RECORDS.
(a) IN GENERAL.—Section 6103(b) (relating to defini-
tions) is amended by adding at the end the following new
paragraph:
‘‘(12) TREATMENT
OF
PUBLIC
RECORDS.—Re-
turns and return information shall not be subject to
subsection (a) if disclosed—
‘‘(A) in the course of any judicial or admin-
istrative proceeding or pursuant to tax adminis-
tration activities, and
‘‘(B) properly made part of the public
record.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall take effect before, on, and after the date of the
enactment of this Act.
SEC. 412. EMPLOYEE IDENTITY DISCLOSURES.
(a) IN GENERAL.—Section 6103 (confidentiality and
disclosure of returns and return information) is amended
by redesignating subsection (q) as subsection (r) and by in-
serting after subsection (p) the following new subsection:
‘‘(q) EMPLOYEE IDENTITY DISCLOSURES.—Nothing in
this section may be construed to prohibit agents of the De-
partment of the Treasury from identifying themselves, their
organizational affiliation, and the nature of an investiga-
tion when contacting third parties in writing or in per-
son.’’.
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(b) CONSTRUCTION.—The amendments made by this
section shall not be construed to create any inference with
respect to the interpretation of any provision of law as such
provision was in effect on the day before the date of enact-
ment of this Act.
(c) EFFECTIVE DATE.—The amendments made by this
section shall take effect on the date of the enactment of this
Act.
SEC. 413. TAXPAYER IDENTIFICATION NUMBER MATCHING.
(a) IN GENERAL.—Section 6103(k) (relating to disclo-
sure of certain returns and return information for tax ad-
ministration purposes) is amended by adding at the end
the following new paragraph:
‘‘(10) TIN MATCHING.—The Secretary may dis-
close to any person required to provide a TIN (as de-
fined in section 7701(a)(41)) to the Secretary whether
such information matches records maintained by the
Secretary.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall take effect on the date of the enactment of this
Act.
SEC. 414. FORM 8300 DISCLOSURES.
(a) IN GENERAL.—Section 6103(p)(4) (relating to
safeguards) is amended by striking ‘‘(15),’’ both places it
appears.
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(b) EFFECTIVE DATE.—The amendment made by this
section shall take effect on the date of the enactment of this
Act.
SEC. 415. DISCLOSURE TO LAW ENFORCEMENT AGENCIES
REGARDING TERRORIST ACTIVITIES.
(a) IN GENERAL.—Section 6103(i)(7)(A) (relating to
disclosure to law enforcement agencies) is amended by add-
ing at the end the following new clause:
‘‘(v) TAXPAYER
IDENTITY.—For pur-
poses of this subparagraph, a taxpayer’s
identity shall not be treated as taxpayer re-
turn information.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall take effect on the date of the enactment of this
Act.
TITLE V—SIMPLIFICATION
Subtitle A—Uniform Definition of
Child
SEC. 501. UNIFORM DEFINITION OF CHILD, ETC.
Section 152 is amended to read as follows:
‘‘SEC. 152. DEPENDENT DEFINED.
‘‘(a) IN GENERAL.—For purposes of this subtitle, the
term ‘dependent’ means—
‘‘(1) a qualifying child, or
‘‘(2) a qualifying relative.
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‘‘(b) EXCEPTIONS.—For purposes of this section—
‘‘(1) DEPENDENTS
INELIGIBLE.—If an indi-
vidual is a dependent of a taxpayer for any taxable
year of such taxpayer beginning in a calendar year,
such individual shall be treated as having no depend-
ents for any taxable year of such individual begin-
ning in such calendar year.
‘‘(2) MARRIED
DEPENDENTS.—An individual
shall not be treated as a dependent of a taxpayer
under subsection (a) if such individual has made a
joint return with the individual’s spouse under sec-
tion 6013 for the taxable year beginning in the cal-
endar year in which the taxable year of the taxpayer
begins.
‘‘(3) CITIZENS OR NATIONALS OF OTHER COUN-
TRIES.—
‘‘(A) IN GENERAL.—The term ‘dependent’
does not include an individual who is not a cit-
izen or national of the United States unless such
individual is a resident of the United States or
a country contiguous to the United States.
‘‘(B) EXCEPTION FOR ADOPTED CHILD.—
Subparagraph (A) shall not exclude any child of
a taxpayer (within the meaning of subsection
(f)(1)(B)) from the definition of ‘dependent’ if—
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‘‘(i) for the taxable year of the tax-
payer, the child has the same principal
place of abode as the taxpayer and is a
member of the taxpayer’s household, and
‘‘(ii) the taxpayer is a citizen or na-
tional of the United States.
‘‘(c) QUALIFYING
CHILD.—For purposes of this
section—
‘‘(1) IN GENERAL.—The term ‘qualifying child’
means, with respect to any taxpayer for any taxable
year, an individual—
‘‘(A) who bears a relationship to the tax-
payer described in paragraph (2),
‘‘(B) who has the same principal place of
abode as the taxpayer for more than one-half of
such taxable year,
‘‘(C) who meets the age requirements of
paragraph (3), and
‘‘(D) who has not provided over one-half of
such individual’s own support for the calendar
year in which the taxable year of the taxpayer
begins.
‘‘(2) RELATIONSHIP.—For purposes of para-
graph (1)(A), an individual bears a relationship to
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the taxpayer described in this paragraph if such indi-
vidual is—
‘‘(A) a child of the taxpayer or a descendant
of such a child, or
‘‘(B) a brother, sister, stepbrother, or step-
sister of the taxpayer or a descendant of any
such relative.
‘‘(3) AGE REQUIREMENTS.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (1)(C), an individual meets the require-
ments of this paragraph if such individual—
‘‘(i) has not attained the age of 19 as
of the close of the calendar year in which
the taxable year of the taxpayer begins, or
‘‘(ii) is a student who has not attained
the age of 24 as of the close of such calendar
year.
‘‘(B) SPECIAL
RULE
FOR
DISABLED.—In
the case of an individual who is permanently
and totally disabled (as defined in section
22(e)(3)) at any time during such calendar year,
the requirements of subparagraph (A) shall be
treated as met with respect to such individual.
‘‘(4) SPECIAL RULE RELATING TO 2 OR MORE
CLAIMING QUALIFYING CHILD.—
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‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B) and subsection (e), if (but for
this paragraph) an individual may be and is
claimed as a qualifying child by 2 or more tax-
payers for a taxable year beginning in the same
calendar year, such individual shall be treated as
the qualifying child of the taxpayer who is—
‘‘(i) a parent of the individual, or
‘‘(ii) if clause (i) does not apply, the
taxpayer with the highest adjusted gross in-
come for such taxable year.
‘‘(B) MORE
THAN
PARENT
CLAIMING
QUALIFYING
CHILD.—If the parents claiming
any qualifying child do not file a joint return to-
gether, such child shall be treated as the quali-
fying child of—
‘‘(i) the parent with whom the child re-
sided for the longest period of time during
the taxable year, or
‘‘(ii) if the child resides with both par-
ents for the same amount of time during
such taxable year, the parent with the high-
est adjusted gross income.
‘‘(d) QUALIFYING RELATIVE.—For purposes of this
section—
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‘‘(1) IN
GENERAL.—The term ‘qualifying rel-
ative’ means, with respect to any taxpayer for any
taxable year, an individual—
‘‘(A) who bears a relationship to the tax-
payer described in paragraph (2),
‘‘(B) whose gross income for the calendar
year in which such taxable year begins is less
than the exemption amount (as defined in sec-
tion 151(d)),
‘‘(C) with respect to whom the taxpayer
provides over one-half of the individual’s support
for the calendar year in which such taxable year
begins, and
‘‘(D) who is not a qualifying child of such
taxpayer or of any other taxpayer for any tax-
able year beginning in the calendar year in
which such taxable year begins.
‘‘(2) RELATIONSHIP.—For purposes of para-
graph (1)(A), an individual bears a relationship to
the taxpayer described in this paragraph if the indi-
vidual is any of the following with respect to the tax-
payer:
‘‘(A) A child or a descendant of a child.
‘‘(B) A brother, sister, stepbrother, or step-
sister.
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‘‘(C) The father or mother, or an ancestor of
either.
‘‘(D) A stepfather or stepmother.
‘‘(E) A son or daughter of a brother or sis-
ter of the taxpayer.
‘‘(F) A brother or sister of the father or
mother of the taxpayer.
‘‘(G) A son-in-law, daughter-in-law, father-
in-law, mother-in-law, brother-in-law, or sister-
in-law.
‘‘(H) An individual (other than an indi-
vidual who at any time during the taxable year
was the spouse, determined without regard to
section 7703, of the taxpayer) who, for the tax-
able year of the taxpayer, has the same principal
place of abode as the taxpayer and is a member
of the taxpayer’s household.
‘‘(3) SPECIAL
RULE
RELATING
TO
MULTIPLE
SUPPORT AGREEMENTS.—For purposes of paragraph
(1)(C), over one-half of the support of an individual
for a calendar year shall be treated as received from
the taxpayer if—
‘‘(A) no one person contributed over one-half
of such support,
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‘‘(B) over one-half of such support was re-
ceived from 2 or more persons each of whom, but
for the fact that any such person alone did not
contribute over one-half of such support, would
have been entitled to claim such individual as a
dependent for a taxable year beginning in such
calendar year,
‘‘(C) the taxpayer contributed over 10 per-
cent of such support, and
‘‘(D) each person described in subparagraph
(B) (other than the taxpayer) who contributed
over 10 percent of such support files a written
declaration (in such manner and form as the
Secretary may by regulations prescribe) that
such person will not claim such individual as a
dependent for any taxable year beginning in
such calendar year.
‘‘(4) SPECIAL RULE RELATING TO INCOME OF
HANDICAPPED DEPENDENTS.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (1)(B), the gross income of an individual
who is permanently and totally disabled (as de-
fined in section 22(e)(3)) at any time during the
taxable year shall not include income attrib-
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utable to services performed by the individual at
a sheltered workshop if—
‘‘(i) the availability of medical care at
such workshop is the principal reason for
the individual’s presence there, and
‘‘(ii) the income arises solely from ac-
tivities at such workshop which are incident
to such medical care.
‘‘(B) SHELTERED
WORKSHOP
DEFINED.—
For purposes of subparagraph (A), the term
‘sheltered workshop’ means a school—
‘‘(i) which provides special instruction
or training designed to alleviate the dis-
ability of the individual, and
‘‘(ii) which is operated by an organiza-
tion described in section 501(c)(3) and ex-
empt from tax under section 501(a), or by
a State, a possession of the United States,
any political subdivision of any of the fore-
going, the United States, or the District of
Columbia.
‘‘(5) SPECIAL RULES FOR SUPPORT.—For pur-
poses of this subsection—
‘‘(A) payments to a spouse which are in-
cludible in the gross income of such spouse under
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section 71 or 682 shall not be treated as a pay-
ment by the payor spouse for the support of any
dependent, and
‘‘(B) in the case of the remarriage of a par-
ent, support of a child received from the parent’s
spouse shall be treated as received from the par-
ent.
‘‘(e) SPECIAL RULE FOR DIVORCED PARENTS.—
‘‘(1) IN GENERAL.—Notwithstanding subsection
(c)(4) or (d)(1)(C), if—
‘‘(A) a child receives over one-half of the
child’s support during the calendar year from
the child’s parents—
‘‘(i) who are divorced or legally sepa-
rated under a decree of divorce or separate
maintenance,
‘‘(ii) who are separated under a writ-
ten separation agreement, or
‘‘(iii) who live apart at all times dur-
ing the last 6 months of the calendar year,
and
‘‘(B) such child is in the custody of 1 or
both of the child’s parents for more than one-half
of the calendar year,
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such child shall be treated as being the qualifying
child or qualifying relative of the noncustodial parent
for a calendar year if the requirements described in
paragraph (2) are met.
‘‘(2) REQUIREMENTS.—For purposes of para-
graph (1), the requirements described in this para-
graph are met if—
‘‘(A) a decree of divorce or separate mainte-
nance or written separation agreement between
the parents applicable to the taxable year begin-
ning in such calendar year provides that—
‘‘(i) the noncustodial parent shall be
entitled to any deduction allowable under
section 151 for such child, or
‘‘(ii) the custodial parent will sign a
written declaration (in such manner and
form as the Secretary may prescribe) that
such parent will not claim such child as a
dependent for such taxable year, or
‘‘(B) in the case of such an agreement exe-
cuted before January 1, 1985, the noncustodial
parent provides at least $600 for the support of
such child during such calendar year.
For purposes of subparagraph (B), amounts expended
for the support of a child or children shall be treated
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as received from the noncustodial parent to the extent
that such parent provided amounts for such support.
‘‘(3) CUSTODIAL
PARENT
AND
NONCUSTODIAL
PARENT.—For purposes of this subsection—
‘‘(A) CUSTODIAL PARENT.—The term ‘custo-
dial parent’ means the parent with whom a
child shared the same principal place of abode
for the greater portion of the calendar year.
‘‘(B) NONCUSTODIAL
PARENT.—The term
‘noncustodial parent’ means the parent who is
not the custodial parent.
‘‘(4) 
EXCEPTION
FOR
MULTIPLE-SUPPORT
AGREEMENTS.—This subsection shall not apply in
any case where over one-half of the support of the
child is treated as having been received from a tax-
payer under the provision of subsection (d)(3).
‘‘(f) OTHER DEFINITIONS AND RULES.—For purposes
of this section—
‘‘(1) CHILD DEFINED.—
‘‘(A) IN GENERAL.—The term ‘child’ means
an individual who is—
‘‘(i) a son, daughter, stepson, or step-
daughter of the taxpayer, or
‘‘(ii) an eligible foster child of the tax-
payer.
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‘‘(B) ADOPTED
CHILD.—In determining
whether any of the relationships specified in sub-
paragraph (A)(i) or paragraph (4) exists, a le-
gally adopted individual of the taxpayer, or an
individual who is lawfully placed with the tax-
payer for legal adoption by the taxpayer, shall be
treated as a child of such individual by blood.
‘‘(C) ELIGIBLE FOSTER CHILD.—For pur-
poses of subparagraph (A)(ii), the term ‘eligible
foster child’ means an individual who is placed
with the taxpayer by an authorized placement
agency or by judgment, decree, or other order of
any court of competent jurisdiction.
‘‘(2) STUDENT
DEFINED.—The term ‘student’
means an individual who during each of 5 calendar
months during the calendar year in which the taxable
year of the taxpayer begins—
‘‘(A) is a full-time student at an edu-
cational 
organization 
described 
in 
section
170(b)(1)(A)(ii), or
‘‘(B) is pursuing a full-time course of insti-
tutional on-farm training under the supervision
of an accredited agent of an educational organi-
zation described in section 170(b)(1)(A)(ii) or of
a State or political subdivision of a State.
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‘‘(3) DETERMINATION OF HOUSEHOLD STATUS.—
An individual shall not be treated as a member of the
taxpayer’s household if at any time during the tax-
able year of the taxpayer the relationship between
such individual and the taxpayer is in violation of
local law.
‘‘(4) BROTHER AND SISTER.—The terms ‘brother’
and ‘sister’ include a brother or sister by the half
blood.
‘‘(5) SPECIAL SUPPORT TEST IN CASE OF STU-
DENTS.—For purposes of subsections (c)(1)(D) and
(d)(1)(C), in the case of an individual who is—
‘‘(A) a child of the taxpayer, and
‘‘(B) a student,
amounts received as scholarships for study at an edu-
cational 
organization 
described 
in 
section
170(b)(1)(A)(ii) shall not be taken into account.
‘‘(6) TREATMENT OF MISSING CHILDREN.—
‘‘(A) IN GENERAL.—Solely for the purposes
referred to in subparagraph (B), a child of the
taxpayer—
‘‘(i) who is presumed by law enforce-
ment authorities to have been kidnapped by
someone who is not a member of the family
of such child or the taxpayer, and
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‘‘(ii) who had, for the taxable year in
which the kidnapping occurred, the same
principal place of abode as the taxpayer for
more than one-half of the portion of such
year before the date of the kidnapping,
shall be treated as meeting the requirement of
subsection (c)(1)(B) with respect to a taxpayer
for all taxable years ending during the period
that the child is kidnapped.
‘‘(B) PURPOSES.—Subparagraph (A) shall
apply solely for purposes of determining—
‘‘(i) the deduction under section 151(c),
‘‘(ii) the credit under section 24 (relat-
ing to child tax credit),
‘‘(iii) whether an individual is a sur-
viving spouse or a head of a household (as
such terms are defined in section 2), and
‘‘(iv) the earned income credit under
section 32.
‘‘(C) COMPARABLE TREATMENT OF CERTAIN
QUALIFYING
RELATIVES.—For purposes of this
section, a child of the taxpayer—
‘‘(i) who is presumed by law enforce-
ment authorities to have been kidnapped by
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someone who is not a member of the family
of such child or the taxpayer, and
‘‘(ii) who was (without regard to this
paragraph) a qualifying relative of the tax-
payer for the portion of the taxable year be-
fore the date of the kidnapping,
shall be treated as a qualifying relative of the
taxpayer for all taxable years ending during the
period that the child is kidnapped.
‘‘(D) TERMINATION OF TREATMENT.—Sub-
paragraphs (A) and (C) shall cease to apply as
of the first taxable year of the taxpayer begin-
ning after the calendar year in which there is a
determination that the child is dead (or, if ear-
lier, in which the child would have attained age
18).
‘‘(7) CROSS REFERENCES.—
‘‘For provision treating child as dependent of both
parents for purposes of certain provisions, see sec-
tions 105(b), 132(h)(2)(B), and 213(d)(5).’’.
SEC. 502. MODIFICATIONS OF DEFINITION OF HEAD OF
HOUSEHOLD.
(a) HEAD
OF HOUSEHOLD.—Clause (i) of section
2(b)(1)(A) is amended to read as follows:
‘‘(i) a qualifying child of the indi-
vidual (as defined in section 152(c), deter-
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mined without regard to section 152(e)), but
not if such child—
‘‘(I) is married at the close of the
taxpayer’s taxable year, and
‘‘(II) is not a dependent of such
individual 
by 
reason 
of 
section
152(b)(2) or 152(b)(3), or both, or’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 2(b)(2) is amended by striking sub-
paragraph (A) and by redesignating subparagraphs
(B), (C), and (D) as subparagraphs (A), (B), and
(C), respectively.
(2) Clauses (i) and (ii) of section 2(b)(3)(B) are
amended to read as follows:
‘‘(i) subparagraph (H) of section
152(d)(2), or
‘‘(ii) paragraph (3) of section 152(d).’’.
SEC. 503. MODIFICATIONS OF DEPENDENT CARE CREDIT.
(a) IN GENERAL.—Section 21(a)(1) is amended by
striking ‘‘In the case of an individual who maintains a
household which includes as a member one or more quali-
fying individuals (as defined in subsection (b)(1))’’ and in-
serting ‘‘In the case of an individual for which there are
1 or more qualifying individuals (as defined in subsection
(b)(1)) with respect to such individual’’.
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(b) QUALIFYING INDIVIDUAL.—Paragraph (1) of sec-
tion 21(b) is amended to read as follows:
‘‘(1) QUALIFYING INDIVIDUAL.—The term ‘quali-
fying individual’ means—
‘‘(A) a dependent of the taxpayer (as de-
fined in section 152(a)(1)) who has not attained
age 13,
‘‘(B) a dependent of the taxpayer who is
physically or mentally incapable of caring for
himself or herself and who has the same prin-
cipal place of abode as the taxpayer for more
than one-half of such taxable year, or
‘‘(C) the spouse of the taxpayer, if the
spouse is physically or mentally incapable of
caring for himself or herself and who has the
same principal place of abode as the taxpayer
for more than one-half of such taxable year.’’.
(c) CONFORMING AMENDMENT.—Paragraph (1) of sec-
tion 21(e) is amended to read as follows:
‘‘(1) PLACE OF ABODE.—An individual shall not
be treated as having the same principal place of abode
of the taxpayer if at any time during the taxable year
of the taxpayer the relationship between the indi-
vidual and the taxpayer is in violation of local law.’’.
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SEC. 504. MODIFICATIONS OF CHILD TAX CREDIT.
(a) IN GENERAL.—Paragraph (1) of section 24(c) is
amended to read as follows:
‘‘(1) IN GENERAL.—The term ‘qualifying child’
means a qualifying child of the taxpayer (as defined
in section 152(c)) who has not attained age 17.’’.
(b) CONFORMING AMENDMENT.—Section 24(c)(2) is
amended by striking ‘‘the first sentence of section 152(b)(3)’’
and inserting ‘‘subparagraph (A) of section 152(b)(3)’’.
SEC. 505. MODIFICATIONS OF EARNED INCOME CREDIT.
(a) QUALIFYING CHILD.—Paragraph (3) of section
32(c) is amended to read as follows:
‘‘(3) QUALIFYING CHILD.—
‘‘(A) IN
GENERAL.—The term ‘qualifying
child’ means a qualifying child of the taxpayer
(as defined in section 152(c), determined without
regard to paragraph (1)(D) thereof and section
152(e)).
‘‘(B) 
MARRIED
INDIVIDUAL.—The 
term
‘qualifying child’ shall not include an individual
who is married as of the close of the taxpayer’s
taxable year unless the taxpayer is entitled to a
deduction under section 151 for such taxable
year with respect to such individual (or would be
so entitled but for section 152(e)).
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‘‘(C) PLACE OF ABODE.—For purposes of
subparagraph (A), the requirements of section
152(c)(1)(B) shall be met only if the principal
place of abode is in the United States.
‘‘(D) IDENTIFICATION REQUIREMENTS.—
‘‘(i) IN GENERAL.—A qualifying child
shall not be taken into account under sub-
section (b) unless the taxpayer includes the
name, age, and TIN of the qualifying child
on the return of tax for the taxable year.
‘‘(ii) OTHER
METHODS.—The Sec-
retary may prescribe other methods for pro-
viding the information described in clause
(i).’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 32(c)(1) is amended by striking sub-
paragraph (C) and by redesignating subparagraphs
(D), (E), (F), and (G) as subparagraphs (C), (D),
(E), and (F), respectively.
(2) Section 32(c)(4) is amended by striking
‘‘(3)(E)’’ and inserting ‘‘(3)(C)’’.
(3) Section 32(m) is amended by striking ‘‘sub-
sections 
(c)(1)(F)’’ 
and 
inserting 
‘‘subsections
(c)(1)(E)’’.
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SEC. 506. MODIFICATIONS OF DEDUCTION FOR PERSONAL
EXEMPTION FOR DEPENDENTS.
Subsection (c) of section 151 is amended to read as
follows:
‘‘(c) ADDITIONAL EXEMPTION FOR DEPENDENTS.—An
exemption of the exemption amount for each individual who
is a dependent (as defined in section 152) of the taxpayer
for the taxable year.’’.
SEC. 507. TECHNICAL AND CONFORMING AMENDMENTS.
(1) Section 2(a)(1)(B)(i) is amended by insert-
ing ‘‘, determined without regard to subsections
(b)(1), (b)(2), and (d)(1)(B) thereof’’ after ‘‘section
152’’.
(2) Section 21(e)(5) is amended—
(A) by striking ‘‘paragraph (2) or (4) of’’ in
subparagraph (A), and
(B) by striking ‘‘within the meaning of sec-
tion 152(e)(1)’’ and inserting ‘‘as defined in sec-
tion 152(e)(3)(A)’’.
(3) Section 21(e)(6)(B) is amended by striking
‘‘section 151(c)(3)’’ and inserting ‘‘section 152(f)(1)’’.
(4) Section 25B(c)(2)(B) is amended by striking
‘‘151(c)(4)’’ and inserting ‘‘152(f)(2)’’.
(5)(A) Subparagraphs (A) and (B) of section
51(i)(1) are each amended by striking ‘‘paragraphs
(1) through (8) of section 152(a)’’ both places it ap-
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pears and inserting ‘‘subparagraphs (A) through (G)
of section 152(d)(2)’’.
(B) Section 51(i)(1)(C) is amended by striking
‘‘152(a)(9)’’ and inserting ‘‘152(d)(2)(H)’’.
(6) Section 72(t)(2)(D)(i)(III) is amended by in-
serting ‘‘, determined without regard to subsections
(b)(1), (b)(2), and (d)(1)(B) thereof’’ after ‘‘section
152’’.
(7) Section 72(t)(7)(A)(iii) is amended by strik-
ing ‘‘151(c)(3)’’ and inserting ‘‘152(f)(1)’’.
(8) Section 42(i)(3)(D)(ii)(I) is amended by in-
serting ‘‘, determined without regard to subsections
(b)(1), (b)(2), and (d)(1)(B) thereof’’ after ‘‘section
152’’.
(9) Subsections (b) and (c)(1) of section 105 are
amended by inserting ‘‘, determined without regard to
subsections (b)(1), (b)(2), and (d)(1)(B) thereof’’ after
‘‘section 152’’.
(10) Section 120(d)(4) is amended by inserting
‘‘(determined without regard to subsections (b)(1),
(b)(2), and (d)(1)(B) thereof)’’ after ‘‘section 152’’.
(11) Section 125(e)(1)(D) is amended by insert-
ing ‘‘, determined without regard to subsections
(b)(1), (b)(2), and (d)(1)(B) thereof’’ after ‘‘section
152’’.
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(12) Section 129(c)(2) is amended by striking
‘‘151(c)(3)’’ and inserting ‘‘152(f)(1)’’.
(13) The first sentence of section 132(h)(2)(B) is
amended by striking ‘‘151(c)(3)’’ and inserting
‘‘152(f)(1)’’.
(14) Section 153 is amended by striking para-
graph (1) and by redesignating paragraphs (2), (3),
and (4) as paragraphs (1), (2), and (3), respectively.
(15) Section 170(g)(1) is amended by inserting
‘‘(determined without regard to subsections (b)(1),
(b)(2), and (d)(1)(B) thereof)’’ after ‘‘section 152’’.
(16) Section 170(g)(3) is amended by striking
‘‘paragraphs (1) through (8) of section 152(a)’’ and
inserting ‘‘subparagraphs (A) through (G) of section
152(d)(2)’’.
(17) Section 213(a) is amended by inserting ‘‘,
determined without regard to subsections (b)(1),
(b)(2), and (d)(1)(B) thereof’’ after ‘‘section 152’’.
(18) The second sentence of section 213(d)(11) is
amended by striking ‘‘paragraphs (1) through (8) of
section 152(a)’’ and inserting ‘‘subparagraphs (A)
through (G) of section 152(d)(2)’’.
(19) Section 220(d)(2)(A) is amended by insert-
ing ‘‘, determined without regard to subsections
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(b)(1), (b)(2), and (d)(1)(B) thereof’’ after ‘‘section
152’’.
(20) Section 221(d)(4) is amended by inserting
‘‘(determined without regard to subsections (b)(1),
(b)(2), and (d)(1)(B) thereof)’’ after ‘‘section 152’’.
(21) Section 529(e)(2)(B) is amended by striking
‘‘paragraphs (1) through (8) of section 152(a)’’ and
inserting ‘‘subparagraphs (A) through (G) of section
152(d)(2)’’.
(22) Section 2032A(c)(7)(D) is amended by
striking ‘‘section 151(c)(4)’’ and inserting ‘‘section
152(f)(2)’’.
(23) Section 2057(d)(2)(B) is amended by insert-
ing ‘‘, determined without regard to subsections
(b)(1), (b)(2), and (d)(1)(B) thereof’’ after ‘‘section
152’’.
(24) Section 7701(a)(17) is amended by striking
‘‘152(b)(4), 682,’’ and inserting ‘‘682’’.
(25) Section 7702B(f)(2)(C)(iii) is amended by
striking ‘‘paragraphs (1) through (8) of section
152(a)’’ and inserting ‘‘subparagraphs (A) through
(G) of section 152(d)(2)’’.
(26) Section 7703(b)(1) is amended—
(A) by striking ‘‘151(c)(3)’’ and inserting
‘‘152(f)(1)’’, and
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(B) by striking ‘‘paragraph (2) or (4) of’’.
SEC. 508. EFFECTIVE DATE.
The amendments made by this subtitle shall apply to
taxable years beginning after December 31, 2004.
Subtitle B—Simplification Through
Elimination of Inoperative Pro-
visions
SEC. 511. SIMPLIFICATION THROUGH ELIMINATION OF IN-
OPERATIVE PROVISIONS.
(a) IN GENERAL.—
(1) ADJUSTMENTS IN TAX TABLES SO THAT IN-
FLATION
WILL
NOT
RESULT
IN
TAX
INCREASES.—
Paragraph (7) of section 1(f) is amended to read as
follows:
‘‘(7) SPECIAL RULE FOR CERTAIN BRACKETS.—
In prescribing tables under paragraph (1) which
apply to taxable years beginning in a calendar year
after 1994, the cost-of-living adjustment used in mak-
ing adjustments to the dollar amounts at which the
36 percent rate bracket begins or at which the 39.6
percent rate bracket begins shall be determined under
paragraph (3) by substituting ‘1993’ for ‘1992’.’’.
(2) CREDIT FOR PRODUCING FUEL FROM NON-
CONVENTIONAL SOURCE.—Section 29 is amended by
striking subsection (e) and by redesignating sub-
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sections (f) and (g) as subsections (e) and (f), respec-
tively.
(3) EARNED INCOME CREDIT.—Paragraph (1) of
section 32(b) is amended—
(A) by striking subparagraphs (B) and (C),
and
(B) in subparagraph (A) by striking ‘‘(A)
IN GENERAL.—In the case of taxable years begin-
ning after 1995’’ and moving the table 2 ems to
the left.
(4) GENERAL
BUSINESS
CREDITS.—Subsection
(d) of section 38 is amended by striking paragraph
(3).
(5) CARRYBACK AND CARRYFORWARD OF UNUSED
CREDITS.—Subsection (d) of section 39 is amended by
striking paragraphs (1) through (8) and by redesig-
nating paragraphs (9) and (10) as paragraphs (1)
and (2), respectively.
(6) ADJUSTMENTS
BASED
ON
ADJUSTED
CUR-
RENT EARNINGS.—Clause (ii) of section 56(g)(4)(F) is
amended by striking ‘‘In the case of any taxable year
beginning after December 31, 1992, clause’’ and in-
serting ‘‘Clause’’.
(7) ITEMS OF TAX PREFERENCE; DEPLETION.—
Paragraph (1) of section 57(a) is amended by striking
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‘‘Effective with respect to taxable years beginning
after December 31, 1992, this’’ and inserting ‘‘This’’.
(8) INTANGIBLE DRILLING COSTS.—
(A) Clause (i) of section 57(a)(2)(E) is
amended by striking ‘‘In the case of any taxable
year beginning after December 31, 1992, this’’
and inserting ‘‘This’’.
(B) Clause (ii) of section 57(a)(2)(E) is
amended by striking ‘‘(30 percent in the case of
taxable years beginning in 1993)’’.
(9) ANNUITIES; CERTAIN PROCEEDS OF ENDOW-
MENT AND LIFE INSURANCE CONTRACTS.—Section 72
is amended—
(A) in subsection (c)(4) by striking ‘‘; except
that if such date was before January 1, 1954,
then the annuity starting date is January 1,
1954’’, and
(B) in subsection (g)(3) by striking ‘‘Janu-
ary 1, 1954, or’’ and ‘‘, whichever is later’’.
(10) ACCIDENT
AND
HEALTH
PLANS.—Section
105(f) is amended by striking ‘‘or (d)’’.
(11) FLEXIBLE SPENDING ARRANGEMENTS.—Sec-
tion 106(c)(1) is amended by striking ‘‘Effective on
and after January 1, 1997, gross’’ and inserting
‘‘Gross’’.
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(12) CERTAIN COMBAT ZONE COMPENSATION OF
MEMBERS OF THE ARMED FORCES.—Subsection (c) of
section 112 is amended—
(A) by striking ‘‘(after June 24, 1950)’’ in
paragraph (2), and
(B) striking ‘‘such zone;’’ and all that fol-
lows in paragraph (3) and inserting ‘‘such
zone.’’.
(13) PRINCIPAL RESIDENCE.—Section 121(b)(3)
is amended—
(A) by striking subparagraph (B); and
(B) in subparagraph (A) by striking ‘‘(A)
IN GENERAL.—’’ and moving the text 2 ems to
the left.
(14) CERTAIN REDUCED UNIFORMED SERVICES
RETIREMENT PAY.—Section 122(b)(1) is amended by
striking ‘‘after December 31, 1965,’’.
(15) GREAT PLAINS CONSERVATION PROGRAM.—
Section 126(a) is amended by striking paragraph (6)
and by redesignating paragraphs (7), (8), (9), and
(10) as paragraphs (6), (7), (8), and (9), respectively.
(16) MORTGAGE
REVENUE
BONDS
FOR
RESI-
DENCES
IN
FEDERAL
DISASTER
AREAS.—Section
143(k) is amended by striking paragraph (11).