‘‘(c) EXCEPTION FOR FIRST-TIME DEPOSITORS OF
EMPLOYMENT TAXES.—The Secretary may waive the pen-
alty imposed by subsection (a) on a person’s inadvertent
failure to deposit any employment tax if—
‘‘(1) such person meets the requirements re-
ferred to in section 7430(c)(4)(A)(iii),
‘‘(2) such failure occurs during the 1st quarter
that such person was required to deposit any em-
ployment tax, and
‘‘(3) the return of such tax was filed on or be-
fore the due date.
For purposes of this subsection, the term ‘employment
taxes’ means the taxes imposed by subtitle C.
‘‘(d) AUTHORITY TO ABATE PENALTY WHERE DE-
POSIT SENT TO SECRETARY.—The Secretary may abate
the penalty imposed by subsection (a) with respect to the
first time a depositor is required to make a deposit if the
amount required to be deposited is inadvertently sent to
the Secretary instead of to the appropriate government de-
pository.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to deposits required to be made
after the date of the enactment of this Act.
TITLE IV—JOINT RETURNS
SEC. 401. STUDIES OF JOINT RETURN-RELATED ISSUES.
The Secretary of the Treasury or his delegate and
the Comptroller General of the United States shall each
conduct separate studies of—
(1) the effects of changing the liability for tax
on a joint return from being joint and several to
being proportionate to the tax attributable to each
spouse,
(2) the effects of providing that, if a divorce de-
cree allocates liability for tax on a joint return filed
before the divorce, the Secretary may collect such li-
ability only in accordance with the decree,
(3) whether those provisions of the Internal
Revenue Code of 1986 intended to provide relief to
innocent spouses provide meaningful relief in all
cases where such relief is appropriate, and
(4) the effect of providing that community in-
come (as defined in section 66(d) of such Code)
which, in accordance with the rules contained in sec-
tion 879(a) of such Code, would be treated as the
income of one spouse is exempt from a levy for fail-
ure to pay any tax imposed by subtitle A by the
other spouse for a taxable year ending before their
marriage.
The reports of such studies shall be submitted to the Com-
mittee on Ways and Means of the House of Representa-
tives and the Committee on Finance of the Senate within
6 months after the date of the enactment of this Act.
SEC. 402. JOINT RETURN MAY BE MADE AFTER SEPARATE
RETURNS WITHOUT FULL PAYMENT OF TAX.
(a) GENERAL RULE.—Paragraph (2) of section
6013(b) (relating to limitations on filing of joint return
after filing separate returns) is amended by striking sub-
paragraph (A) and redesignating the following subpara-
graphs accordingly.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to taxable years beginning after
the date of the enactment of this Act.
SEC. 403. DISCLOSURE OF COLLECTION ACTIVITIES.
(a) IN GENERAL.—Subsection (e) of section 6103
(relating to disclosure to persons having material interest)
is amended by adding at the end the following new para-
graph:
‘‘(8) DISCLOSURE OF COLLECTION ACTIVITIES
WITH
RESPECT
TO
JOINT
RETURN.—If any defi-
ciency of tax with respect to a joint return is as-
sessed and the individuals filing such return are no
longer married or no longer reside in the same
household, upon request in writing by either of such
individuals, the Secretary shall disclose in writing to
the individual making the request whether the Sec-
retary has attempted to collect such deficiency from
such other individual, the general nature of such col-
lection activities, and the amount collected. The pre-
ceding sentence shall not apply to any deficiency
which may not be collected by reason of section
6502.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to requests made after the date
of the enactment of this Act.
TITLE V—COLLECTION
ACTIVITIES
SEC. 501. MODIFICATIONS TO LIEN AND LEVY PROVISIONS.
(a) WITHDRAWAL OF CERTAIN NOTICES.—Section
6323 (relating to validity and priority against certain per-
sons) is amended by adding at the end the following new
subsection:
‘‘(j) WITHDRAWAL
OF NOTICE
IN CERTAIN CIR-
CUMSTANCES.—
‘‘(1) IN GENERAL.—The Secretary may with-
draw a notice of a lien filed under this section and
this chapter shall be applied as if the withdrawn no-
tice had not been filed, if the Secretary determines
that—
‘‘(A) the filing of such notice was pre-
mature or otherwise not in accordance with ad-
ministrative procedures of the Secretary,
‘‘(B) the taxpayer has entered into an
agreement under section 6159 to satisfy the tax
liability for which the lien was imposed by
means of installment payments, unless such
agreement provides otherwise,
‘‘(C) the withdrawal of such notice will fa-
cilitate the collection of the tax liability, or
‘‘(D) with the consent of the taxpayer or
the Taxpayer Advocate, the withdrawal of such
notice would be in the best interests of the tax-
payer (as determined by the Taxpayer Advo-
cate) and the United States.
Any such withdrawal shall be made by filing notice
at the same office as the withdrawn notice. A copy
of such notice of withdrawal shall be provided to the
taxpayer.
‘‘(2) NOTICE
TO
CREDIT
AGENCIES, ETC.—
Upon written request by the taxpayer with respect
to whom a notice of a lien was withdrawn under
paragraph (1), the Secretary shall promptly make
reasonable efforts to notify credit reporting agencies,
and any financial institution or creditor whose name
and address is specified in such request, of the with-
drawal of such notice. Any such request shall be in
such form as the Secretary may prescribe.’’.
(b) RETURN
OF LEVIED PROPERTY
IN CERTAIN
CASES.—Section 6343 (relating to authority to release
levy and return property) is amended by adding at the
end the following new subsection:
‘‘(d) RETURN OF PROPERTY IN CERTAIN CASES.—
If—
‘‘(1) any property has been levied upon, and
‘‘(2) the Secretary determines that—
‘‘(A) the levy on such property was pre-
mature or otherwise not in accordance with ad-
ministrative procedures of the Secretary,
‘‘(B) the taxpayer has entered into an
agreement under section 6159 to satisfy the tax
liability for which the levy was imposed by
means of installment payments, unless such
agreement provides otherwise,
‘‘(C) the return of such property will facili-
tate the collection of the tax liability, or
‘‘(D) with the consent of the taxpayer or
the Taxpayer Advocate, the return of such
property would be in the best interests of the
(c) INFLATION ADJUSTMENT.—Section 6334 (relat-
ing to property exempt from levy) is amended by adding
at the end the following new subsection:
‘‘(f) INFLATION ADJUSTMENT.—
‘‘(1) IN GENERAL.—In the case of any calendar
year beginning after 1997, each dollar amount re-
ferred to in paragraphs (2) and (3) of subsection (a)
shall be increased by an amount equal to—
‘‘(A) such dollar amount, multiplied by
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for such calendar
year, by substituting ‘calendar year 1996’ for
‘calendar year 1992’ in subparagraph (B)
thereof.
‘‘(2) ROUNDING.—If any dollar amount after
being increased under paragraph (1) is not a mul-
tiple of $10, such dollar amount shall be rounded to
the nearest multiple of $10.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall take effect with respect to levies issued
after December 31, 1996.
SEC. 503. OFFERS-IN-COMPROMISE.
(a) REVIEW REQUIREMENTS.—Subsection (b) of sec-
tion 7122 (relating to records) is amended by striking
‘‘$500.’’ and inserting ‘‘$50,000. However, such com-
promise shall be subject to continuing quality review by
the Secretary.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall take effect on the date of the enactment
of this Act.
TITLE VI—INFORMATION
RETURNS
SEC. 601. CIVIL DAMAGES FOR FRAUDULENT FILING OF IN-
FORMATION RETURNS.
(a) GENERAL RULE.—Subchapter B of chapter 76
(relating to proceedings by taxpayers and third parties)
is amended by redesignating section 7434 as section 7435
and by inserting after section 7433 the following new
section:
‘‘SEC. 7434. CIVIL DAMAGES FOR FRAUDULENT FILING OF
INFORMATION RETURNS.
‘‘(a) IN GENERAL.—If any person willfully files a
fraudulent information return with respect to payments
purported to be made to any other person, such other per-
son may bring a civil action for damages against the per-
son so filing such return.
‘‘(b) DAMAGES.—In any action brought under sub-
section (a), upon a finding of liability on the part of the
defendant, the defendant shall be liable to the plaintiff in
an amount equal to the greater of $5,000 or the sum of—
‘‘(1) any actual damages sustained by the plain-
tiff as a proximate result of the filing of the fraudu-
lent information return (including any costs attrib-
utable to resolving deficiencies asserted as a result
of such filing),
‘‘(2) the costs of the action, and
‘‘(3) in the court’s discretion, reasonable attor-
neys fees.
‘‘(c) PERIOD
FOR
BRINGING
ACTION.—Notwith-
standing any other provision of law, an action to enforce
the liability created under this section may be brought
without regard to the amount in controversy and may be
brought only within the later of—
‘‘(1) 6 years after the date of the filing of the
fraudulent information return, or
‘‘(2) 1 year after the date such fraudulent in-
formation return would have been discovered by ex-
ercise of reasonable care.
‘‘(d) COPY OF COMPLAINT FILED WITH IRS—Any
person bringing an action under subsection (a) shall pro-
vide a copy of the complaint to the Internal Revenue Serv-
ice upon the filing of such complaint with the court.
‘‘(e) FINDING
OF COURT TO INCLUDE CORRECT
AMOUNT OF PAYMENT.—The decision of the court award-
ing damages in an action brought under subsection (a)
shall include a finding of the correct amount which should
have been reported in the information return.
‘‘(f) INFORMATION RETURN.—For purposes of this
section, the term ‘information return’ means any state-
ment described in section 6724(d)(1)(A).’’.
(b) CLERICAL AMENDMENT.—The table of sections
for subchapter B of chapter 76 is amended by striking
the item relating to section 7434 and inserting the follow-
ing:
‘‘Sec. 7434. Civil damages for fraudulent filing of information returns.
‘‘Sec. 7435. Cross references.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to fraudulent information returns
filed after the date of the enactment of this Act.
SEC. 602. REQUIREMENT TO CONDUCT REASONABLE IN-
VESTIGATIONS OF INFORMATION RETURNS.
(a) GENERAL RULE.—Section 6201 (relating to as-
sessment authority) is amended by redesignating sub-
section (d) as subsection (e) and by inserting after sub-
section (c) the following new subsection:
‘‘(d) REQUIRED REASONABLE VERIFICATION OF IN-
FORMATION RETURNS.—In any court proceeding, if a tax-
payer asserts a reasonable dispute with respect to any
item of income reported on an information return filed
with the Secretary under subpart B or C of part III of
subchapter A of chapter 61 by a third party and the tax-
payer has fully cooperated with the Secretary (including
providing, within a reasonable period of time, access to
and inspection of all witnesses, information, and docu-
ments within the control of the taxpayer as reasonably re-
quested by the Secretary), the Secretary shall have the
burden of producing reasonable and probative information
concerning such deficiency in addition to such information
return.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect on the date of the enact-
ment of this Act.
TITLE VII—AWARDING OF COSTS
AND CERTAIN FEES
SEC. 701. UNITED STATES MUST ESTABLISH THAT ITS POSI-
TION IN PROCEEDING WAS SUBSTANTIALLY
JUSTIFIED.
(a) GENERAL RULE.—Subparagraph (A) of section
7430(c)(4) (defining prevailing party) is amended by
striking clause (i) and by redesignating clauses (ii) and
(iii) as clauses (i) and (ii), respectively.
(b) BURDEN OF PROOF ON UNITED STATES.—Para-
graph (4) of section 7430(c) is amended by redesignating
subparagraph (B) as subparagraph (C) and by inserting
after subparagraph (A) the following new subparagraph:
‘‘(B) EXCEPTION IF UNITED STATES ES-
TABLISHES THAT ITS POSITION WAS SUBSTAN-
TIALLY JUSTIFIED.—
‘‘(i) GENERAL RULE.—A party shall
not be treated as the prevailing party in a
proceeding to which subsection (a) applies
if the United States establishes that the
position of the United States in the pro-
ceeding was substantially justified.
‘‘(ii) PRESUMPTION OF NO JUSTIFICA-
TION IF INTERNAL REVENUE SERVICE DID
NOT FOLLOW CERTAIN PUBLISHED GUID-
ANCE.—For purposes of clause (i), the po-
sition of the United States shall be pre-
sumed not to be substantially justified if
the Internal Revenue Service did not follow
its applicable published guidance in the ad-
ministrative proceeding. Such presumption
may be rebutted.
‘‘(iii) APPLICABLE PUBLISHED GUID-
ANCE.—For purposes of clause (ii), the
term 
‘applicable 
published 
guidance’
means—
‘‘(I) regulations, revenue rulings,
revenue procedures, information re-
leases, notices, and announcements,
and
‘‘(II) any of the following which
are issued to the taxpayer: private let-
ter rulings, technical advice memo-
randa, and determination letters.’’.
(c) CONFORMING AMENDMENTS.—
(1) Subparagraph (B) of section 7430(c)(2) is
amended by striking ‘‘paragraph (4)(B)’’ and insert-
ing ‘‘paragraph (4)(C)’’.
(2) Subparagraph (C) of section 7430(c)(4), as
redesignated by subsection (b), is amended by strik-
ing ‘‘subparagraph (A)’’ and inserting ‘‘this para-
graph’’.
(3) Sections 6404(g) and 6656(c)(1), as amend-
ed by this Act, are each amended by striking ‘‘sec-
tion 7430(c)(4)(A)(iii)’’ and inserting ‘‘section
7430(c)(4)(A)(ii)’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply in the case of proceedings com-
menced after the date of the enactment of this Act.
SEC. 702. INCREASED LIMIT ON ATTORNEY FEES.
(a) IN GENERAL.—Paragraph (1) of section 7430(c)
(defining reasonable litigation costs) is amended—
(1) by striking ‘‘$75’’ in clause (iii) of subpara-
graph (B) and inserting ‘‘$110’’,
(2) by striking ‘‘an increase in the cost of living
or’’ in clause (iii) of subparagraph (B), and
(3) by adding after clause (iii) the following:
‘‘In the case of any calendar year beginning after
1996, the dollar amount referred to in clause (iii)
shall be increased by an amount equal to such dollar
amount multiplied by the cost-of-living adjustment
determined under section 1(f)(3) for such calendar
year, by substituting ‘calendar year 1995’ for ‘cal-
endar year 1992’ in subparagraph (B) thereof. If
any dollar amount after being increased under the
preceding sentence is not a multiple of $10, such
dollar amount shall be rounded to the nearest mul-
tiple of $10.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply in the case of proceedings com-
menced after the date of the enactment of this Act.
SEC. 703. FAILURE TO AGREE TO EXTENSION NOT TAKEN
INTO ACCOUNT.
(a) IN GENERAL.—Paragraph (1) of section 7430(b)
(relating to requirement that administrative remedies be
exhausted) is amended by adding at the end the following
new sentence: ‘‘Any failure to agree to an extension of the
time for the assessment of any tax shall not be taken into
account for purposes of determining whether the prevail-
ing party meets the requirements of the preceding sen-
tence.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply in the case of proceedings com-
menced after the date of the enactment of this Act.
SEC. 704. AWARD OF LITIGATION COSTS PERMITTED IN DE-
CLARATORY JUDGMENT PROCEEDINGS.
(a) IN GENERAL.—Subsection (b) of section 7430 is
amended by striking paragraph (3) and by redesignating
paragraph (4) as paragraph (3).
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply in the case of proceedings com-
menced after the date of the enactment of this Act.
TITLE VIII—MODIFICATION TO
RECOVERY 
OF 
CIVIL 
DAM-
AGES 
FOR 
UNAUTHORIZED
COLLECTION ACTIONS
SEC. 801. INCREASE IN LIMIT ON RECOVERY OF CIVIL DAM-
AGES FOR UNAUTHORIZED COLLECTION AC-
TIONS.
(a) GENERAL RULE.—Subsection (b) of section 7433
(relating to damages) is amended by striking ‘‘$100,000’’
and inserting ‘‘$1,000,000’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to actions by officers or employ-
ees of the Internal Revenue Service after the date of the
enactment of this Act.
SEC. 802. COURT DISCRETION TO REDUCE AWARD FOR
LITIGATION COSTS FOR FAILURE TO EX-
HAUST ADMINISTRATIVE REMEDIES.
(a) GENERAL RULE.—Paragraph (1) of section
7433(d) (relating to civil damages for certain unauthor-
ized collection actions) is amended to read as follows:
‘‘(1) AWARD FOR DAMAGES MAY BE REDUCED
IF ADMINISTRATIVE REMEDIES NOT EXHAUSTED.—
The amount of damages awarded under subsection
(b) may be reduced if the court determines that the
plaintiff has not exhausted the administrative rem-
edies available to such plaintiff within the Internal
Revenue Service.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply in the case of proceedings com-
menced after the date of the enactment of this Act.
TITLE 
IX—MODIFICATIONS 
TO
PENALTY FOR FAILURE TO
COLLECT AND PAY OVER TAX
SEC. 901. PRELIMINARY NOTICE REQUIREMENT.
(a) IN GENERAL.—Section 6672 (relating to failure
to collect and pay over tax, or attempt to evade or defeat
tax) is amended by redesignating subsection (b) as sub-
section (c) and by inserting after subsection (a) the follow-
ing new subsection:
‘‘(b) PRELIMINARY NOTICE REQUIREMENT.—
‘‘(1) IN
GENERAL.—No penalty shall be im-
posed under subsection (a) unless the Secretary noti-
fies the taxpayer in writing by mail to an address as
determined under section 6212(b) that the taxpayer
shall be subject to an assessment of such penalty.
‘‘(2) TIMING OF NOTICE.—The mailing of the
notice described in paragraph (1) shall precede any
notice and demand of any penalty under subsection
(a) by at least 60 days.
‘‘(3) STATUTE
OF
LIMITATIONS.—If a notice
described in paragraph (1) with respect to any pen-
alty is mailed before the expiration of the period
provided by section 6501 for the assessment of such
penalty (determined without regard to this para-
graph), the period provided by such section for the
assessment of such penalty shall not expire before
the later of—
‘‘(A) the date 90 days after the date on
which such notice was mailed, or
‘‘(B) if there is a timely protest of the pro-
posed assessment, the date 30 days after the
Secretary makes a final administrative deter-
mination with respect to such protest.
‘‘(4) EXCEPTION
FOR
JEOPARDY.—This sub-
section shall not apply if the Secretary finds that the
collection of the penalty is in jeopardy.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to proposed assessments made
after June 30, 1996.
SEC. 902. DISCLOSURE OF CERTAIN INFORMATION WHERE
MORE THAN 1 PERSON LIABLE FOR PENALTY
FOR FAILURE TO COLLECT AND PAY OVER
TAX.
(a) IN GENERAL.—Subsection (e) of section 6103
(relating to disclosure to persons having material interest),
as amended by section 403, is amended by adding at the
end the following new paragraph:
‘‘(9) DISCLOSURE
OF
CERTAIN
INFORMATION
WHERE MORE THAN 1 PERSON SUBJECT TO PEN-
ALTY UNDER SECTION 6672.—If the Secretary deter-
mines that a person is liable for a penalty under sec-
tion 6672(a) with respect to any failure, upon re-
quest in writing of such person, the Secretary shall
disclose in writing to such person—
‘‘(A) the name of any other person whom
the Secretary has determined to be liable for
such penalty with respect to such failure, and
‘‘(B) whether the Secretary has attempted
to collect such penalty from such other person,
the general nature of such collection activities,
and the amount collected.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect on the date of the enact-
ment of this Act.
SEC. 903. RIGHT OF CONTRIBUTION WHERE MORE THAN 1
PERSON LIABLE FOR PENALTY FOR FAILURE
TO COLLECT AND PAY OVER TAX.
(a) IN GENERAL.—Section 6672 (relating to failure
to collect and pay over tax, or attempt to evade or defeat
tax) is amended by adding at the end the following new
subsection:
‘‘(d) RIGHT OF CONTRIBUTION WHERE MORE THAN
1 PERSON LIABLE FOR PENALTY.—If more than 1 person
is liable for the penalty under subsection (a) with respect
to any tax, each person who paid such penalty shall be
entitled to recover from other persons who are liable for
such penalty an amount equal to the excess of the amount
paid by such person over such person’s proportionate
share of the penalty. Any claim for such a recovery may
be made only in a proceeding which is separate from, and
is not joined or consolidated with—
‘‘(1) an action for collection of such penalty
brought by the United States, or
‘‘(2) a proceeding in which the United States
files a counterclaim or third-party complaint for the
collection of such penalty.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to penalties assessed after the
date of the enactment of this Act.
SEC. 904. VOLUNTEER BOARD MEMBERS OF TAX-EXEMPT
ORGANIZATIONS EXEMPT FROM PENALTY
FOR FAILURE TO COLLECT AND PAY OVER
TAX.
(a) IN GENERAL.—Section 6672 is amended by add-
ing at the end the following new subsection:
‘‘(e) EXCEPTION FOR VOLUNTARY BOARD MEMBERS
OF TAX-EXEMPT ORGANIZATIONS.—No penalty shall be
imposed by subsection (a) on any unpaid, volunteer mem-
ber of any board of trustees or directors of an organization
exempt from tax under subtitle A if such member—
‘‘(1) is solely serving in an honorary capacity,
‘‘(2) does not participate in the day-to-day or
financial operations of the organization, and
‘‘(3) does not have actual knowledge of the fail-
ure on which such penalty is imposed.
The preceding sentence shall not apply if it results in no
person being liable for the penalty imposed by subsection
(a).’’.
(b) PUBLIC INFORMATION REQUIREMENTS.—
(1) IN GENERAL.—The Secretary of the Treas-
ury or the Secretary’s delegate (hereafter in this
subsection referred to as the ‘‘Secretary’’) shall take
such actions as may be appropriate to ensure that
employees are aware of their responsibilities under
the Federal tax depository system, the circumstances
under which employees may be liable for the penalty
imposed by section 6672 of the Internal Revenue
Code of 1986, and the responsibility to promptly re-
port to the Internal Revenue Service any failure re-
ferred to in subsection (a) of such section 6672.
Such actions shall include—
(A) printing of a warning on deposit cou-
pon booklets and the appropriate tax returns
that certain employees may be liable for the
penalty imposed by such section 6672, and
(B) the development of a special informa-
tion packet.
(2) DEVELOPMENT
OF
EXPLANATORY
MATE-
RIALS.—The Secretary shall develop materials ex-
plaining the circumstances under which board mem-
bers of tax-exempt organizations (including vol-
untary and honorary members) may be subject to
penalty under section 6672 of such Code. Such ma-
terials shall be made available to tax-exempt organi-
zations.
(3) IRS INSTRUCTIONS.—The Secretary shall
clarify the instructions to Internal Revenue Service
employees on the application of the penalty under
section 6672 of such Code with regard to voluntary
members of boards of trustees or directors of tax-ex-
empt organizations.
TITLE 
X—MODIFICATIONS 
OF
RULES RELATING TO SUM-
MONSES
SEC. 1001. ENROLLED AGENTS INCLUDED AS THIRD-PARTY
RECORDKEEPERS.
(a) IN GENERAL.—Paragraph (3) of section 7609(a)
(relating to third-party recordkeeper defined) is amended
by striking ‘‘and’’ at the end of subparagraph (G), by
striking the period at the end of subparagraph (H) and
inserting ‘‘; and’’, and by adding at the end the following
the subparagraph:
‘‘(I) any enrolled agent.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to summonses issued after the
date of the enactment of this Act.
SEC. 1002. SAFEGUARDS RELATING TO DESIGNATED SUM-
MONSES.
(a) STANDARD OF REVIEW.—Subparagraph (A) of
section 6503(k)(2) (defining designated summons) is
amended by redesignating clauses (i) and (ii) as clauses
(ii) and (iii), respectively, and by inserting before clause
(ii) (as so redesignated) the following new clause:
‘‘(i) the issuance of such summons is
preceded by a review of such issuance by
the regional counsel of the Office of Chief
Counsel for the region in which the exam-
ination of the corporation is being con-
ducted,’’.
(b) LIMITATION
ON
PERSONS
TO
WHOM
DES-
IGNATED SUMMONS MAY BE ISSUED.—Paragraph (1) of
section 6503(k) is amended by striking ‘‘with respect to
any return of tax by a corporation’’ and inserting ‘‘to a
corporation (or to any other person to whom the corpora-
tion has transferred records) with respect to any return
of tax by such corporation for a taxable year (or other
period) for which such corporation is being examined
under the coordinated examination program (or any suc-
cessor program) of the Internal Revenue Service’’.
(c) 
CLERICAL
AMENDMENT.—Section 
6503 
is
amended by redesignating subsections (k) and (l) (as
amended by this section) as subsections (j) and (k), re-
spectively.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to summonses issued after the date
of the enactment of this Act.
SEC. 1003. ANNUAL REPORT TO CONGRESS CONCERNING
DESIGNATED SUMMONSES.
Not later than December 31 of each calendar year
after 1995, the Secretary of the Treasury or his delegate
shall report to the Committee on Ways and Means of the
House of Representatives and the Committee on Finance
of the Senate on the number of designated summonses (as
defined in section 6503(j) of the Internal Revenue Code
of 1986) which were issued during the preceding 12
months.
TITLE XI—RELIEF FROM RETRO-
ACTIVE 
APPLICATION 
OF
TREASURY 
DEPARTMENT
REGULATIONS
SEC. 1101. RELIEF FROM RETROACTIVE APPLICATION OF
TREASURY DEPARTMENT REGULATIONS.
(a) IN GENERAL.—Subsection (b) of section 7805
(relating to rules and regulations) is amended to read as
follows:
‘‘(b) RETROACTIVITY OF REGULATIONS.—
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this subsection, no temporary, proposed, or
final regulation relating to the internal revenue laws
shall apply to any taxable period ending before the
earliest of the following dates:
‘‘(A) The date on which such regulation is
filed with the Federal Register.
‘‘(B) In the case of any final regulation,
the date on which any proposed or temporary
regulation to which such final regulation relates
was filed with the Federal Register.
‘‘(C) The date on which any notice sub-
stantially describing the expected contents of
any temporary, proposed, or final regulation is
issued to the public.
‘‘(2) EXCEPTION FOR PROMPTLY ISSUED REGU-
LATIONS.—Paragraph (1) shall not apply to regula-
tions filed or issued within 18 months of the date of
the enactment of the statutory provision to which
the regulation relates.
‘‘(3) PREVENTION OF ABUSE.—The Secretary
may provide that any regulation may take effect or
apply retroactively to prevent abuse.
‘‘(4) 
CORRECTION
OF
PROCEDURAL
DE-
FECTS.—The Secretary may provide that any regu-
lation may apply retroactively to correct a proce-
dural defect in the issuance of any prior regulation.
‘‘(5) INTERNAL REGULATIONS.—The limitation
of paragraph (1) shall not apply to any regulation
relating to internal Treasury Department policies,
practices, or procedures.
‘‘(6) CONGRESSIONAL
AUTHORIZATION.—The
limitation of paragraph (1) may be superseded by a
legislative grant from Congress authorizing the Sec-
retary to prescribe the effective date with respect to
any regulation.
‘‘(7) ELECTION TO APPLY RETROACTIVELY.—
The Secretary may provide for any taxpayer to elect
to apply any regulation before the dates specified in
paragraph (1).
‘‘(8) APPLICATION
TO
RULINGS.—The Sec-
retary may prescribe the extent, if any, to which any
ruling (including any judicial decision or any admin-
istrative determination other than by regulation) re-
lating to the internal revenue laws shall be applied
without retroactive effect.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply with respect to regulations
which relate to statutory provisions enacted on or after
the date of the enactment of this Act.
TITLE XII—MISCELLANEOUS
PROVISIONS
SEC. 1201. PHONE NUMBER OF PERSON PROVIDING PAYEE
STATEMENTS REQUIRED TO BE SHOWN ON
SUCH STATEMENT.
(a) GENERAL RULE.—The following provisions are
each amended by striking ‘‘name and address’’ and insert-
ing ‘‘name, address, and phone number of the information
contact’’:
(1) Section 6041(d)(1).
(2) Section 6041A(e)(1).
(3) Section 6042(c)(1).
(4) Section 6044(e)(1).
(5) Section 6045(b)(1).
(6) Section 6049(c)(1)(A).
(7) Section 6050B(b)(1).
(8) Section 6050H(d)(1).
(9) Section 6050I(e)(1).
(10) Section 6050J(e).
(11) Section 6050K(b)(1).
(12) Section 6050N(b)(1).
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall apply to statements required to be fur-
nished after December 31, 1996 (determined without re-
gard to any extension).
SEC. 1202. REQUIRED NOTICE OF CERTAIN PAYMENTS.
If any payment is received by the Secretary of the
Treasury or his delegate from any taxpayer and the Sec-
retary cannot associate such payment with such taxpayer,
the Secretary shall make reasonable efforts to notify the
taxpayer of such inability within 60 days after the receipt
of such payment.
SEC. 1203. UNAUTHORIZED ENTICEMENT OF INFORMATION
DISCLOSURE.
(a) IN GENERAL.—Subchapter B of chapter 76 (re-
lating to proceedings by taxpayers and third parties), as
amended by section 601(a), is amended by redesignating
section 7435 as section 7436 and by inserting after section
7434 the following new section:
‘‘SEC. 7435. CIVIL DAMAGES FOR UNAUTHORIZED ENTICE-
MENT OF INFORMATION DISCLOSURE.
‘‘(a) IN GENERAL.—If any officer or employee of the
United States intentionally compromises the determina-
tion or collection of any tax due from an attorney, certified
public accountant, or enrolled agent representing a tax-
payer in exchange for information conveyed by the tax-
payer to the attorney, certified public accountant, or en-
rolled agent for purposes of obtaining advice concerning
the taxpayer’s tax liability, such taxpayer may bring a civil
action for damages against the United States in a district
court of the United States. Such civil action shall be the
exclusive remedy for recovering damages resulting from
such actions.
‘‘(b) DAMAGES.—In any action brought under sub-
section (a), upon a finding of liability on the part of the
defendant, the defendant shall be liable to the plaintiff in
an amount equal to the lesser of $500,000 or the sum
of—
‘‘(1) actual, direct economic damages sustained
by the plaintiff as a proximate result of the informa-
tion disclosure, and
‘‘(2) the costs of the action.
Damages shall not include the taxpayer’s liability for any
civil or criminal penalties, or other losses attributable to
incarceration or the imposition of other criminal sanctions.
‘‘(c) PAYMENT AUTHORITY.—Claims pursuant to
this section shall be payable out of funds appropriated
under section 1304 of title 31, United States Code.
‘‘(d) PERIOD
FOR BRINGING ACTION.—Notwith-
standing any other provision of law, an action to enforce
liability created under this section may be brought without
regard to the amount in controversy and may be brought
only within 2 years after the date the actions creating such
liability would have been discovered by exercise of reason-
able care.
‘‘(e) MANDATORY STAY.—Upon a certification by the
Commissioner or the Commissioner’s delegate that there
is an ongoing investigation or prosecution of the taxpayer,
the district court before which an action under this section
is pending shall stay all proceedings with respect to such
action pending the conclusion of the investigation or pros-
ecution.
‘‘(f) CRIME-FRAUD
EXCEPTION.—Subsection (a)
shall not apply to information conveyed to an attorney,
certified public accountant, or enrolled agent for the pur-
pose of perpetrating a fraud or crime.’’.
(b) CLERICAL AMENDMENT.—The table of sections
for subchapter B of chapter 76, as amended by section
601(b), is amended by striking the item relating to section
7435 and by adding at the end the following new items:
‘‘Sec. 7435. Civil damages for unauthorized enticement of information disclo-
sure.
‘‘Sec. 7436. Cross references.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to actions after the date of the
enactment of this Act.
SEC. 1204. ANNUAL REMINDERS TO TAXPAYERS WITH OUT-
STANDING DELINQUENT ACCOUNTS.
(a) IN GENERAL.—Chapter 77 (relating to mis-
cellaneous provisions) is amended by adding at the end
the following new section:
‘‘SEC. 7524. ANNUAL NOTICE OF TAX DELINQUENCY.
‘‘Not less often than annually, the Secretary shall
send a written notice to each taxpayer who has a tax delin-
quent account of the amount of the tax delinquency as
of the date of the notice.’’.
(b) CLERICAL AMENDMENT.—The table of sections
for chapter 77 is amended by adding at the end the follow-
ing new item:
‘‘Sec. 7524. Annual notice of tax delinquency.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to calendar years after 1996.
SEC. 1205. 5-YEAR EXTENSION OF AUTHORITY FOR UNDER-
COVER OPERATIONS.
(a) IN GENERAL.—Paragraph (3) of section 7601(c)
of the Anti-Drug Abuse Act of 1988 is amended by strik-
ing all that follows ‘‘this Act’’ and inserting a period.
(b) RESTORATION OF AUTHORITY FOR 5 YEARS.—
Subsection (c) of section 7608 is amended by adding at
the end the following new paragraph:
‘‘(6) APPLICATION
OF
SECTION.—The provi-
sions of this subsection—
‘‘(A) shall apply after November 17, 1988,
and before January 1, 1990, and
‘‘(B) shall apply after the date of the en-
actment of this paragraph and before January
1, 2001.
All amounts expended pursuant to this subsection
during the period described in subparagraph (B)
shall be recovered to the extent possible, and depos-
ited in the Treasury of the United States as mis-
cellaneous receipts, before January 1, 2001.’’.
(c) ENHANCED OVERSIGHT.—
(1) ADDITIONAL
INFORMATION
REQUIRED
IN
REPORTS TO CONGRESS.—Subparagraph (B) of sec-
tion 7608(c)(4) is amended—
(A) by striking ‘‘preceding the period’’ in
clause (ii),
(B) by striking ‘‘and’’ at the end of clause
(ii), and
(C) by striking clause (iii) and inserting
the following:
‘‘(iii) the number, by programs, of un-
dercover investigative operations closed in
the 1-year period for which such report is
submitted, and
‘‘(iv) the following information with
respect to each undercover investigative op-
eration pending as of the end of the 1-year
period for which such report is submitted
or closed during such 1-year period—
‘‘(I) the date the operation began
and the date of the certification re-
ferred to in the last sentence of para-
graph (1),
‘‘(II) 
the 
total 
expenditures
under the operation and the amount
and use of the proceeds from the op-
eration,
‘‘(III) a detailed description of
the operation including the potential
violation 
being 
investigated 
and
whether the operation is being con-
ducted under grand jury auspices, and
‘‘(IV) the results of the operation
including the results of criminal pro-
ceedings.’’.
(2) AUDITS REQUIRED WITHOUT REGARD TO
AMOUNTS INVOLVED.—Subparagraph (C) of section
7608(c)(5) is amended to read as follows:
‘‘(C) UNDERCOVER INVESTIGATIVE OPER-
ATION.—The term ‘undercover investigative op-
eration’ means any undercover investigative op-
eration of the Service; except that, for purposes
of subparagraphs (A) and (C) of paragraph (4),
such term only includes an operation which is
exempt from section 3302 or 9102 of title 31,
United States Code.’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall take effect on the date of the
enactment of this Act.
SEC. 1206. DISCLOSURE OF FORM 8300 INFORMATION ON
CASH TRANSACTIONS.
(a) IN GENERAL.—Subsection (l) of section 6103 (re-
lating to disclosure of returns and return information for
purposes other than tax administration) is amended by
adding at the end the following new paragraph:
‘‘(15) DISCLOSURE OF RETURNS FILED UNDER
SECTION 6050I.—The Secretary may, upon written
request, disclose to officers and employees of—
‘‘(A) any Federal agency,
‘‘(B) any agency of a State or local govern-
ment, or
‘‘(C) any agency of the government of a
foreign country,
information contained on returns filed under section
6050I. Any such disclosure shall be made on the
same basis, and subject to the same conditions, as
apply to disclosures of information on reports filed
under section 5313 of title 31, United States Code;
except that no disclosure under this paragraph shall
be made for purposes of the administration of any
tax law.’’.
(b) CONFORMING AMENDMENTS.—
(1) Subsection (i) of section 6103 is amended
by striking paragraph (8).
(2) Subparagraph (A) of section 6103(p)(3) is
amended—
(A) by striking ‘‘(7)(A)(ii), or (8)’’ and in-
serting ‘‘or (7)(A)(ii)’’, and
(B) by striking ‘‘or (14)’’ and inserting
‘‘(14), or (15)’’.
(3) The material preceding subparagraph (A) of
section 6103(p)(4) is amended—
(A) by striking ‘‘(5), or (8)’’ and inserting
‘‘or (5)’’,
(B) by striking ‘‘(i)(3)(B)(i), or (8)’’ and
inserting ‘‘(i)(3)(B)(i),’’, and
(C) by striking ‘‘or (12)’’ and inserting
‘‘(12), or (15)’’.
(4) Clause (ii) of section 6103(p)(4)(F) is
amended—
(A) by striking ‘‘(5), or (8)’’ and inserting
‘‘or (5)’’, and
(B) by striking ‘‘or (14)’’ and inserting
‘‘(14), or (15)’’.
(5) Paragraph (2) of section 7213(a) is amend-
ed by striking ‘‘or (12)’’ and inserting ‘‘(12), or
(15)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date of the enactment
of this Act.
SEC. 1207. DISCLOSURE OF RETURNS AND RETURN INFOR-
MATION TO DESIGNEE OF TAXPAYER.
Subsection (c) of section 6103 (relating to disclosure
of returns and return information to designee of taxpayer)
is amended by striking ‘‘written request for or consent to
such disclosure’’ and inserting ‘‘request for or consent to
such disclosure’’.
SEC. 1208. STUDY OF NETTING OF INTEREST ON OVERPAY-
MENTS AND LIABILITIES.
(a) IN GENERAL.—The Secretary of the Treasury or
his delegate shall—
(1) conduct a study of the manner in which the
Internal Revenue Service has implemented the net-
ting of interest on overpayments and underpayments
and of the policy and administrative implications of
global netting, and
(2) before submitting the report of such study,
hold a public hearing to receive comments on the
matters included in such study.
(b) REPORT.—The report of such study shall be sub-
mitted not later than 6 months after the date of the enact-
ment of this Act to the Committee on Ways and Means
of the House of Representatives and the Committee on
Finance of the Senate.
SEC. 1209. EXPENSES OF DETECTION OF UNDERPAYMENTS
AND FRAUD, ETC.
(a) IN GENERAL.—Section 7623 (relating to ex-
penses of deduction and punishment of frauds) is amended
to read as follows:
‘‘SEC. 7623. EXPENSES OF DETECTION OF UNDERPAYMENTS
AND FRAUD, ETC.
‘‘The Secretary, under regulations prescribed by the
Secretary, is authorized to pay such sums as he deems
necessary for—
‘‘(1) detecting underpayments of tax, and
‘‘(2) detecting and bringing to trial and punish-
ment persons guilty of violating the internal revenue
laws or conniving at the same,
in cases where such expenses are not otherwise provided
for by law. Any amount payable under the preceding sen-
tence shall be paid from the proceeds of amounts (other
than interest) collected by reason of the information pro-
vided, and any amount so collected shall be available for
such payments.’’.
(b) CLERICAL AMENDMENT.—The table of sections
for subchapter B of chapter 78 is amended by striking
the item relating to section 7623 and inserting the follow-
ing new item:
‘‘Sec. 7623. Expenses of detection of underpayments and fraud, etc.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date which is 6 months
after the date of the enactment of this Act.
(d) REPORT.—The Secretary of the Treasury or his
delegate shall submit an annual report to the Committee
on Ways and Means of the House of Representatives and
the Committee on Finance of the Senate on the payments
under section 7623 of the Internal Revenue Code of 1986
during the year and on the amounts collected for which
such payments were made.
SEC. 1210. USE OF PRIVATE DELIVERY SERVICES FOR TIME-
LY-MAILING-AS-TIMELY-FILING RULE.
Section 7502 (relating to timely mailing treated as
timely filing and paying) is amended by adding at the end
the following new subsection:
‘‘(f) TREATMENT
OF PRIVATE DELIVERY SERV-
ICES.—
‘‘(1) IN GENERAL.—Any reference in this sec-
tion to the United States mail shall be treated as in-
cluding a reference to any designated delivery serv-
ice, and any reference in this section to a postmark
by the United States Postal Service shall be treated
as including a reference to any date recorded or
marked as described in paragraph (2)(C) by any
designated delivery service.
‘‘(2) DESIGNATED
DELIVERY
SERVICE.—For
purposes of this subsection, the term ‘designated de-
livery service’ means any delivery service provided by
a trade or business if such service is designated by
the Secretary for purposes of this section. The Sec-
retary may designate a delivery service under the
preceding sentence only if the Secretary determines
that such service—
‘‘(A) is available to the general public,
‘‘(B) is at least as timely and reliable on
a regular basis as the United States mail,
‘‘(C) records electronically to its data base,
kept in the regular course of its business, or
marks on the cover in which any item referred
to in this section is to be delivered, the date on
which such item was given to such trade or
business for delivery, and
‘‘(D) meets such other criteria as the Sec-
retary may prescribe.
‘‘(3) EQUIVALENTS OF REGISTERED AND CER-
TIFIED MAIL.—The Secretary may provide a rule
similar to the rule of paragraph (1) with respect to
any service provided by a designated delivery service
which is substantially equivalent to United States
registered or certified mail.’’.
SEC. 1211. REPORTS ON MISCONDUCT OF IRS EMPLOYEES.
On or before June 1 of each calendar year after 1996,
the Secretary of the Treasury shall submit to the Commit-
tee on Ways and Means of the House of Representatives
and the Committee on Finance of the Senate a report
on—
(1) all categories of instances involving the mis-
conduct of employees of the Internal Revenue Serv-
ice during the preceding calendar year, and
(2) the disposition during the preceding cal-
endar year of any such instances (without regard to
the year of the misconduct).
TITLE XIII—REVENUE OFFSETS
Subtitle A—Application of Failure-
to-Pay Penalty to Substitute Re-
turns
SEC. 1301. APPLICATION OF FAILURE-TO-PAY PENALTY TO
SUBSTITUTE RETURNS.
(a) GENERAL RULE.—Section 6651 (relating to fail-
ure to file tax return or to pay tax) is amended by adding
at the end the following new subsection:
‘‘(g) TREATMENT OF RETURNS PREPARED BY SEC-
RETARY UNDER SECTION 6020(b).—In the case of any
return made by the Secretary under section 6020(b)—
‘‘(1) such return shall be disregarded for pur-
poses of determining the amount of the addition
under paragraph (1) of subsection (a), but
‘‘(2) such return shall be treated as the return
filed by the taxpayer for purposes of determining the
amount of the addition under paragraphs (2) and
(3) of subsection (a).’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply in the case of any return the
due date for which (determined without regard to exten-
sions) is after the date of the enactment of this Act.
Subtitle B—Exicse Taxes on
Amounts of Private Excess Benefits
SEC. 1311. EXCISE TAXES FOR FAILURE BY CERTAIN CHARI-
TABLE ORGANIZATIONS TO MEET CERTAIN
QUALIFICATION REQUIREMENTS.
(a) IN GENERAL.—Chapter 42 (relating to private
foundations and certain other tax-exempt organizations)
is amended by redesignating subchapter D as subchapter
E and by inserting after subchapter C the following new
subchapter:
‘‘Subchapter D—Failure by Certain Chari-
table Organizations To Meet Certain
Qualification Requirements
‘‘Sec. 4958. Taxes on excess benefit transactions.
‘‘SEC. 4958. TAXES ON EXCESS BENEFIT TRANSACTIONS.
‘‘(a) INITIAL TAXES.—
‘‘(1) ON THE DISQUALIFIED PERSON.—There is
hereby imposed on each excess benefit transaction a
tax equal to 25 percent of the excess benefit. The
tax imposed by this paragraph shall be paid by any
disqualified person referred to in subsection (f)(1)
with respect to such transaction.
‘‘(2) ON THE MANAGEMENT.—In any case in
which a tax is imposed by paragraph (1), there is
hereby imposed on the participation of any organiza-
tion manager in the excess benefit transaction,
knowing that it is such a transaction, a tax equal to
10 percent of the excess benefit, unless such partici-
pation is not willful and is due to reasonable cause.
The tax imposed by this paragraph shall be paid by
any organization manager who participated in the
excess benefit transaction.
‘‘(b) ADDITIONAL TAX ON THE DISQUALIFIED PER-
SON.—In any case in which an initial tax is imposed by
subsection (a)(1) on an excess benefit transaction and the
excess benefit involved in such transaction is not corrected
within the taxable period, there is hereby imposed a tax
equal to 200 percent of the excess benefit involved. The
tax imposed by this subsection shall be paid by any dis-
qualified person referred to in subsection (f)(1) with re-
spect to such transaction.
‘‘(c) EXCESS BENEFIT TRANSACTION; EXCESS BEN-
EFIT.—For purposes of this section—
‘‘(1) EXCESS BENEFIT TRANSACTION.—
‘‘(A) IN GENERAL.—The term ‘excess ben-
efit transaction’ means any transaction in
which an economic benefit is provided by an ap-
plicable tax-exempt organization directly or in-
directly to or for the use of any disqualified
person if the value of the economic benefit pro-
vided exceeds the value of the consideration (in-
cluding the performance of services) received
for providing such benefit. For purposes of the
preceding sentence, an economic benefit shall
not be treated as consideration for the perform-
ance of services unless such organization clearly
indicated its intent to so treat such benefit.
‘‘(B) EXCESS BENEFIT.—The term ‘excess
benefit’ means the excess referred to in sub-
paragraph (A).
‘‘(2) AUTHORITY TO INCLUDE CERTAIN OTHER
PRIVATE
INUREMENT.—To the extent provided in
regulations prescribed by the Secretary, the term
‘excess benefit transaction’ includes any transaction
in which the amount of any economic benefit pro-
vided to or for the use of a disqualified person is de-
termined in whole or in part by the revenues of 1
or more activities of the organization but only if
such transaction results in inurement not permitted
under paragraph (3) or (4) of section 501(c), as the
case may be. In the case of any such transaction,
the excess benefit shall be the amount of the
inurement not so permitted.
‘‘(d) SPECIAL RULES.—For purposes of this sec-
tion—
‘‘(1) JOINT AND SEVERAL LIABILITY.—If more
than 1 person is liable for any tax imposed by sub-
section (a) or subsection (b), all such persons shall
be jointly and severally liable for such tax.
‘‘(2) LIMIT FOR MANAGEMENT.—With respect
to any 1 excess benefit transaction, the maximum
amount of the tax imposed by subsection (a)(2) shall
not exceed $10,000.
‘‘(e) APPLICABLE TAX-EXEMPT ORGANIZATION.—
For purposes of this subchapter, the term ‘applicable tax-
exempt organization’ means—
‘‘(1) any organization which (without regard to
any excess benefit) would be described in paragraph
(3) or (4) of section 501(c) and exempt from tax
under section 501(a), and
‘‘(2) any organization which was described in
paragraph (1) at any time during the 5-year period
ending on the date of the transaction.
Such term shall not include a private foundation (as de-
fined in section 509(a)).
‘‘(f) OTHER DEFINITIONS.—For purposes of this sec-
tion—
‘‘(1) DISQUALIFIED PERSON.—The term ‘dis-
qualified person’ means, with respect to any trans-
action—
‘‘(A) any person who was, at any time dur-
ing the 5-year period ending on the date of
such transaction, in a position to exercise sub-
stantial influence over the affairs of the organi-
zation,
‘‘(B) a member of the family of an individ-
ual described in subparagraph (A), and
‘‘(C) a 35-percent controlled entity.
‘‘(2) ORGANIZATION MANAGER.—The term ‘or-
ganization manager’ means, with respect to any ap-
plicable tax-exempt organization, any officer, direc-
tor, or trustee of such organization (or any individ-
ual having powers or responsibilities similar to those
of officers, directors, or trustees of the organiza-
tion).
‘‘(3) 35-PERCENT CONTROLLED ENTITY.—
‘‘(A) IN GENERAL.—The term ‘35-percent
controlled entity’ means—
‘‘(i) a corporation in which persons
described in subparagraph (A) or (B) of
paragraph (1) own more than 35 percent
of the total combined voting power,
‘‘(ii) a partnership in which such per-
sons own more than 35 percent of the
profits interest, and
‘‘(iii) a trust or estate in which such
persons own more than 35 percent of the
beneficial interest.
‘‘(B) 
CONSTRUCTIVE
OWNERSHIP
RULES.—Rules similar to the rules of para-
graphs (3) and (4) of section 4946(a) shall
apply for purposes of this paragraph.
‘‘(4) FAMILY MEMBERS.—The members of an
individual’s family shall be determined under section
4946(d); except that such members also shall in-
clude the brothers and sisters (whether by the whole
or half blood) of the individual and their spouses.
‘‘(5) TAXABLE PERIOD.—The term ‘taxable pe-
riod’ means, with respect to any excess benefit
transaction, the period beginning with the date on
which the transaction occurs and ending on the ear-
liest of—
‘‘(A) the date of mailing a notice of defi-
ciency under section 6212 with respect to the
tax imposed by subsection (a)(1), or
‘‘(B) the date on which the tax imposed by
subsection (a)(1) is assessed.
‘‘(6) CORRECTION.—The terms ‘correction’ and
‘correct’ mean, with respect to any excess benefit
transaction, undoing the excess benefit to the extent
possible, and taking any additional measures nec-
essary to place the organization in a financial posi-
tion not worse than that in which it would be if the
disqualified person were dealing under the highest fi-
duciary standards.’’.
(b) APPLICATION OF PRIVATE INUREMENT RULE TO
TAX-EXEMPT ORGANIZATIONS DESCRIBED IN SECTION
501(c)(4).—
(1) IN
GENERAL.—Paragraph (4) of section
501(c) is amended by inserting ‘‘(A)’’ after ‘‘(4)’’
and by adding at the end the following:
‘‘(B) Subparagraph (A) shall not apply to an
entity unless no part of the net earnings of such en-
tity inures to the benefit of any private shareholder
or individual.’’.
(2) SPECIAL
RULE
FOR
CERTAIN
COOPERA-
TIVES.—In the case of an organization operating on
a cooperative basis which, before the date of the en-
actment of this Act, was determined by the Sec-
retary of the Treasury or his delegate, to be de-
scribed in section 501(c)(4) of the Internal Revenue
Code of 1986 and exempt from tax under section
501(a) of such Code, the allocation or return of net
margins or capital to the members of such organiza-
tion in accordance with its incorporating statute and
bylaws shall not be treated for purposes of such
Code as the inurement of the net earnings of such
organization to the benefit of any private share-
holder or individual. The preceding sentence shall
apply only if such statute and bylaws are substan-
tially as such statute and bylaws were in existence
on the date of the enactment of this Act.
(c) TECHNICAL AND CONFORMING AMENDMENTS.—
(1) Subsection (e) of section 4955 is amend-
ed—
(A) by striking ‘‘SECTION 4945’’ in the
heading and inserting ‘‘SECTIONS 4945 AND
4958’’, and
(B) by inserting before the period ‘‘or an
excess benefit for purposes of section 4958’’.
(2) Subsections (a), (b), and (c) of section 4963
are each amended by inserting ‘‘4958,’’ after
‘‘4955,’’.
(3) Subsection (e) of section 6213 is amended
by inserting ‘‘4958 (relating to private excess bene-
fit),’’ before ‘‘4971’’.
(4) Paragraphs (2) and (3) of section 7422(g)
are each amended by inserting ‘‘4958,’’ after
‘‘4955,’’.
(5) Subsection (b) of section 7454 is amended
by inserting ‘‘or whether an organization manager
(as defined in section 4958(f)(2)) has ‘knowingly’
participated in an excess benefit transaction (as de-
fined in section 4958(c)),’’ after ‘‘section 4912(b),’’.
(6) The table of subchapters for chapter 42 is
amended by striking the last item and inserting the
following:
‘‘SUBCHAPTER D. Failure by certain charitable organizations to
meet certain qualification requirements.
‘‘SUBCHAPTER E. Abatement of first and second tier taxes in cer-
tain cases.’’.
(d) EFFECTIVE DATES.—
(1) IN GENERAL.—The amendments made by
this section (other than subsection (b)) shall apply
to excess benefit transactions occurring on or after
September 14, 1995.
(2) BINDING
CONTRACTS.—The amendments
referred to in paragraph (1) shall not apply to any
benefit arising from a transaction pursuant to any
written contract which was binding on September
13, 1995, and at all times thereafter before such
transaction occurred.
(3) APPLICATION
OF
PRIVATE
INUREMENT
RULE TO TAX-EXEMPT ORGANIZATIONS DESCRIBED
IN SECTION 501(c)(4).—
(A) IN GENERAL.—The amendment made
by subsection (b) shall apply to inurement oc-
curring on or after September 14, 1995.
(B) BINDING
CONTRACTS.—The amend-
ment made by subsection (b) shall not apply to
any inurement occurring before January 1,
1997, pursuant to a written contract which was
binding on September 13, 1995, and at all
times thereafter before such inurement oc-
curred.
SEC. 1312. REPORTING OF CERTAIN EXCISE TAXES AND
OTHER INFORMATION.
(a) REPORTING BY ORGANIZATIONS DESCRIBED IN
SECTION 501(c)(3).—Subsection (b) of section 6033 (re-
lating to certain organizations described in section
501(c)(3)) is amended by striking ‘‘and’’ at the end of
paragraph (9), by redesignating paragraph (10) as para-
graph (14), and by inserting after paragraph (9) the fol-
lowing new paragraphs:
‘‘(10) the respective amounts (if any) of the
taxes paid by the organization during the taxable
year under the following provisions:
‘‘(A) section 4911 (relating to tax on ex-
cess expenditures to influence legislation),
‘‘(B) section 4912 (relating to tax on dis-
qualifying lobbying expenditures of certain or-
ganizations), and
‘‘(C) section 4955 (relating to taxes on po-
litical expenditures of section 501(c)(3) organi-
zations),
‘‘(11) the respective amounts (if any) of the
taxes paid by the organization, or any disqualified
person with respect to such organization, during the
taxable year under section 4958 (relating to taxes on
private excess benefit from certain charitable organi-
zations),
‘‘(12) such information as the Secretary may
require with respect to any excess benefit trans-
action (as defined in section 4958),
‘‘(13) such information with respect to disquali-
fied persons as the Secretary may prescribe, and’’.
(b) 
ORGANIZATIONS
DESCRIBED
IN
SECTION
501(c)(4).—Section 6033 is amended by redesignating
subsection (f) as subsection (g) and by inserting after sub-
section (e) the following new subsection:
‘‘(f) CERTAIN ORGANIZATIONS DESCRIBED IN SEC-
TION 501(c)(4).—Every organization described in section
501(c)(4) which is subject to the requirements of sub-
section (a) shall include on the return required under sub-
section (a) the information referred to in paragraphs (11),
(12) and (13) of subsection (b) with respect to such orga-
nization.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to returns for taxable years begin-
ning after the date of the enactment of this Act.
SEC. 1313. EXEMPT ORGANIZATIONS REQUIRED TO PRO-
VIDE COPY OF RETURN.
(a) REQUIREMENT TO PROVIDE COPY.—
(1) Subparagraph (A) of section 6104(e)(1) (re-
lating to public inspection of annual returns) is
amended to read as follows:
‘‘(A) IN GENERAL.—During the 3-year pe-
riod beginning on the filing date—
‘‘(i) a copy of the annual return filed
under section 6033 (relating to returns by
exempt organizations) by any organization
to which this paragraph applies shall be
made available by such organization for in-
spection during regular business hours by
any individual at the principal office of
such organization and, if such organization
regularly maintains 1 or more regional or
district offices having 3 or more employees,
at each such regional or district office, and
‘‘(ii) upon request of an individual
made at such principal office or such a re-
gional or district office, a copy of such an-
nual return shall be provided to such indi-
vidual without charge other than a reason-
able fee for any reproduction and mailing
costs.
The request described in clause (ii) must be
made in person or in writing. If the request
under clause (ii) is made in person, such copy
shall be provided immediately and, if made in
writing, shall be provided within 30 days.’’.
(2) Clause (ii) of section 6104(e)(2)(A) is
amended by inserting before the period at the end
the following: ‘‘(and, upon request of an individual
made at such principal office or such a regional or
district office, a copy of the material requested to be
available for inspection under this subparagraph
shall be provided (in accordance with the last sen-
tence of paragraph (1)(A)) to such individual with-
out charge other than reasonable fee for any repro-
duction and mailing costs)’’.
(3) Subsection (e) of section 6104 is amended
by adding at the end the following new paragraph:
‘‘(3) LIMITATION.—Paragraph (1)(A)(ii) (and
the corresponding provision of paragraph (2)) shall
not apply to any request if, in accordance with regu-
lations promulgated by the Secretary, the organiza-
tion has made the requested documents widely avail-
able, or, the Secretary determines, upon application
by an organization, that such request is part of a
harassment campaign and that compliance with such
request is not in the public interest.’’.
(b) INCREASE IN PENALTY FOR WILLFUL FAILURE
TO ALLOW PUBLIC INSPECTION OF CERTAIN RETURNS,
ETC.—Section 6685 is amended by striking ‘‘$1,000’’ and
inserting ‘‘$5,000’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to requests made on or after the
60th day after the Secretary of the Treasury first issues
the regulations referred to section 6104(e)(3) of the Inter-
nal Revenue Code of 1986 (as added by subsection (a)(3)).
SEC. 1314. INCREASE IN PENALTIES ON EXEMPT ORGANIZA-
TIONS FOR FAILURE TO FILE COMPLETE AND
TIMELY ANNUAL RETURNS.
(a) IN GENERAL.—Subparagraph (A) of section
6652(c)(1) (relating to annual returns under section
6033) is amended by striking ‘‘$10’’ and inserting ‘‘$20’’
and by striking ‘‘$5,000’’ and inserting ‘‘$10,000’’.
(b) LARGER PENALTY ON ORGANIZATIONS HAVING
GROSS RECEIPTS IN EXCESS OF $1,000,000.—Subpara-
graph (A) of section 6652(c)(1) is amended by adding at
the end the following new sentence: ‘‘In the case of an
organization having gross receipts exceeding $1,000,000
for any year, with respect to the return required under
section 6033 for such year, the first sentence of this sub-
paragraph shall be applied by substituting ‘$100’ for ‘$20’
and, in lieu of applying the second sentence of this sub-
paragraph, the maximum penalty under this subparagraph
shall not exceed $50,000.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to returns for taxable years ending
on or after the date of the enactment of this Act.
Passed the House of Representatives April 16, 1996.
Attest:
Clerk.