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‘‘(2) NONECONOMIC SUBSTANCE TRANSACTION.—
The term ‘noneconomic substance transaction’ means
any transaction if—
‘‘(A) there is a lack of economic substance
(within the meaning of section 7701(o)(1)) for
the transaction giving rise to the claimed benefit
or the transaction was not respected under sec-
tion 7701(o)(2), or
‘‘(B) the transaction fails to meet the re-
quirements of any similar rule of law.
‘‘(d) RULES APPLICABLE TO COMPROMISE OF PEN-
ALTY.—
‘‘(1) IN GENERAL.—If the 1st letter of proposed
deficiency which allows the taxpayer an opportunity
for administrative review in the Internal Revenue
Service Office of Appeals has been sent with respect
to a penalty to which this section applies, only the
Commissioner of Internal Revenue may compromise
all or any portion of such penalty.
‘‘(2) APPLICABLE
RULES.—The rules of para-
graphs (2) and (3) of section 6707A(d) shall apply for
purposes of paragraph (1).
‘‘(e) COORDINATION WITH OTHER PENALTIES.—Ex-
cept as otherwise provided in this part, the penalty imposed
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by this section shall be in addition to any other penalty
imposed by this title.
‘‘(f) CROSS REFERENCES.—
‘‘(1) For coordination of penalty with understatements
under section 6662 and other special rules, see section
6662A(e).
‘‘(2) For reporting of penalty imposed under this section to
the Securities and Exchange Commission, see section
6707A(e).’’.
(b) COORDINATION WITH OTHER UNDERSTATEMENTS
AND PENALTIES.—
(1) The second sentence of section 6662(d)(2)(A)
is amended by inserting ‘‘and without regard to items
with respect to which a penalty is imposed by section
6662B’’ before the period at the end.
(2) Subsection (e) of section 6662A is amended—
(A) in paragraph (1), by inserting ‘‘and
noneconomic substance transaction understate-
ments’’ after ‘‘reportable transaction understate-
ments’’ both places it appears,
(B) in paragraph (2)(A), by inserting ‘‘and
a noneconomic substance transaction understate-
ment’’ after ‘‘reportable transaction understate-
ment’’,
(C) in paragraph (2)(B), by inserting
‘‘6662B or’’ before ‘‘6663’’,
(D) in paragraph (2)(C)(i), by inserting
‘‘or section 6662B’’ before the period at the end,
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(E) in paragraph (2)(C)(ii), by inserting
‘‘and section 6662B’’ after ‘‘This section’’,
(F) in paragraph (3), by inserting ‘‘or non-
economic substance transaction understatement’’
after ‘‘reportable transaction understatement’’,
and
(G) by adding at the end the following new
paragraph:
‘‘(4) NONECONOMIC
SUBSTANCE
TRANSACTION
UNDERSTATEMENT.—For purposes of this subsection,
the term ‘noneconomic substance transaction under-
statement’ has the meaning given such term by sec-
tion 6662B(c).’’.
(3) Subsection (e) of section 6707A is amended—
(A) by striking ‘‘or’’ at the end of subpara-
graph (B), and
(B) by striking subparagraph (C) and in-
serting the following new subparagraphs:
‘‘(C) is required to pay a penalty under sec-
tion 6662B with respect to any noneconomic
substance transaction, or
‘‘(D) is required to pay a penalty under
section 6662(h) with respect to any transaction
and would (but for section 6662A(e)(2)(C)) have
been subject to penalty under section 6662A at a
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rate prescribed under section 6662A(c) or under
section 6662B,’’.
(c) CLERICAL AMENDMENT.—The table of sections for
part II of subchapter A of chapter 68 is amended by insert-
ing after the item relating to section 6662A the following
new item:
‘‘Sec. 6662B. Penalty for understatements attributable to transactions lacking
economic substance, etc.’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to transactions entered into after the
date of the enactment of this Act.
SEC. 413. DENIAL OF DEDUCTION FOR INTEREST ON UN-
DERPAYMENTS 
ATTRIBUTABLE 
TO 
NON-
ECONOMIC SUBSTANCE TRANSACTIONS.
(a) IN GENERAL.—Section 163(m) (relating to interest
on unpaid taxes attributable to nondisclosed reportable
transactions) is amended—
(1) by striking ‘‘attributable’’ and all that fol-
lows and inserting the following: ‘‘attributable to—
‘‘(1) the portion of any reportable transaction
understatement (as defined in section 6662A(b)) with
respect 
to 
which 
the 
requirement 
of 
section
6664(d)(2)(A) is not met, or
‘‘(2) any noneconomic substance transaction un-
derstatement (as defined in section 6662B(c)).’’, and
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(2) by inserting ‘‘AND
NONECONOMIC
SUB-
STANCE TRANSACTIONS’’ in the heading thereof after
‘‘TRANSACTIONS’’.
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply to transactions after the date of the en-
actment of this Act in taxable years ending after such date.
Subtitle C—Improvements in Effi-
ciency and Safeguards in Inter-
nal Revenue Service Collection
SEC. 421. 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.