under subparagraph (C)(ii) after the 30th 
day preceding the distribution. 
‘‘(C) DEFERRED TAX ACCOUNT.—For pur-
poses of subparagraph (B)(ii)— 
‘‘(i) OPENING BALANCE.—The opening 
balance in a deferred tax account with re-
spect to any trust interest is an amount 
equal to the tax which would have been im-
posed on the allocable expatriation gain 
with respect to the trust interest if such 
gain had been included in gross income 
under subsection (a). 
‘‘(ii) INCREASE
FOR
INTEREST.—The 
balance in the deferred tax account shall be 
increased by the amount of interest deter-
mined (on the balance in the account at the 
time the interest accrues), for periods after 
the 90th day after the expatriation date, by 
using the rates and method applicable 
under section 6621 for underpayments of 
tax for such periods, except that section 
6621(a)(2) shall be applied by substituting 
‘5 percentage points’ for ‘3 percentage 
points’ in subparagraph (B) thereof.
‘‘(iii) DECREASE
FOR
TAXES
PRE-
VIOUSLY PAID.—The balance in the tax de-
ferred account shall be reduced— 
‘‘(I) by the amount of taxes im-
posed by subparagraph (A) on any dis-
tribution to the person holding the 
trust interest, and 
‘‘(II) in the case of a person hold-
ing a nonvested interest, to the extent 
provided in regulations, by the amount 
of taxes imposed by subparagraph (A) 
on distributions from the trust with re-
spect to nonvested interests not held by 
such person. 
‘‘(D) ALLOCABLE EXPATRIATION GAIN.—For 
purposes of this paragraph, the allocable expa-
triation gain with respect to any beneficiary’s 
interest in a trust is the amount of gain which 
would be allocable to such beneficiary’s vested 
and nonvested interests in the trust if the bene-
ficiary held directly all assets allocable to such 
interests. 
‘‘(E) TAX DEDUCTED AND WITHHELD.—
‘‘(i) IN GENERAL.—The tax imposed by 
subparagraph (A)(ii) shall be deducted and
withheld by the trustees from the distribu-
tion to which it relates. 
‘‘(ii) EXCEPTION WHERE FAILURE TO 
WAIVE TREATY RIGHTS.—If an amount may 
not be deducted and withheld under clause 
(i) by reason of the distributee failing to 
waive any treaty right with respect to such 
distribution—
‘‘(I) the tax imposed by subpara-
graph (A)(ii) shall be imposed on the 
trust and each trustee shall be person-
ally liable for the amount of such tax, 
and 
‘‘(II) any other beneficiary of the 
trust shall be entitled to recover from 
the distributee the amount of such tax 
imposed on the other beneficiary. 
‘‘(F) DISPOSITION.—If a trust ceases to be 
a qualified trust at any time, a covered expa-
triate disposes of an interest in a qualified trust, 
or a covered expatriate holding an interest in a 
qualified trust dies, then, in lieu of the tax im-
posed by subparagraph (A)(ii), there is hereby 
imposed a tax equal to the lesser of—
‘‘(i) the tax determined under para-
graph (1) as if the day before the expatria-
tion date were the date of such cessation, 
disposition, or death, whichever is applica-
ble, or 
‘‘(ii) the balance in the tax deferred ac-
count immediately before such date. 
Such tax shall be imposed on the trust and each 
trustee shall be personally liable for the amount 
of such tax and any other beneficiary of the trust 
shall be entitled to recover from the covered expa-
triate or the estate the amount of such tax im-
posed on the other beneficiary. 
‘‘(G) DEFINITIONS AND SPECIAL RULES.—
For purposes of this paragraph—
‘‘(i) QUALIFIED
TRUST.—The term 
‘qualified trust’ means a trust which is de-
scribed in section 7701(a)(30)(E). 
‘‘(ii) VESTED
INTEREST.—The term 
‘vested interest’ means any interest which, 
as of the day before the expatriation date, is 
vested in the beneficiary. 
‘‘(iii) 
NONVESTED
INTEREST.—The 
term ‘nonvested interest’ means, with re-
spect to any beneficiary, any interest in a
and functions performed by a trust protector or 
any similar adviser. 
‘‘(B) OTHER DETERMINATIONS.—For pur-
poses of this section—
‘‘(i) CONSTRUCTIVE OWNERSHIP.—If a 
beneficiary of a trust is a corporation, part-
nership, trust, or estate, the shareholders, 
partners, or beneficiaries shall be deemed to 
be the trust beneficiaries for purposes of this 
section. 
‘‘(ii) TAXPAYER RETURN POSITION.—A 
taxpayer shall clearly indicate on its in-
come tax return—
‘‘(I) the methodology used to de-
termine that taxpayer’s trust interest 
under this section, and 
‘‘(II) if the taxpayer knows (or 
has reason to know) that any other 
beneficiary of such trust is using a dif-
ferent methodology to determine such 
beneficiary’s trust interest under this 
section. 
‘‘(g) TERMINATION OF DEFERRALS, ETC.—In the case 
of any covered expatriate, notwithstanding any other provi-
sion of this title—
‘‘(1) any period during which recognition of in-
come or gain is deferred shall terminate on the day 
before the expatriation date, and 
‘‘(2) any extension of time for payment of tax 
shall cease to apply on the day before the expatriation 
date and the unpaid portion of such tax shall be due 
and payable at the time and in the manner pre-
scribed by the Secretary. 
‘‘(h) IMPOSITION OF TENTATIVE TAX.—
‘‘(1) IN GENERAL.—If an individual is required 
to include any amount in gross income under sub-
section (a) for any taxable year, there is hereby im-
posed, immediately before the expatriation date, a tax 
in an amount equal to the amount of tax which 
would be imposed if the taxable year were a short tax-
able year ending on the expatriation date. 
‘‘(2) DUE DATE.—The due date for any tax im-
posed by paragraph (1) shall be the 90th day after the 
expatriation date. 
‘‘(3) TREATMENT OF TAX.—Any tax paid under 
paragraph (1) shall be treated as a payment of the 
tax imposed by this chapter for the taxable year to 
which subsection (a) applies. 
‘‘(4) DEFERRAL OF TAX.—The provisions of sub-
section (b) shall apply to the tax imposed by this sub-
section to the extent attributable to gain includible in 
gross income by reason of this section. 
‘‘(i) SPECIAL LIENS FOR DEFERRED TAX AMOUNTS.—
‘‘(1) IMPOSITION OF LIEN.—
‘‘(A) IN GENERAL.—If a covered expatriate 
makes an election under subsection (a)(4) or (b) 
which results in the deferral of any tax imposed 
by reason of subsection (a), the deferred amount 
(including any interest, additional amount, ad-
dition to tax, assessable penalty, and costs at-
tributable to the deferred amount) shall be a lien 
in favor of the United States on all property of 
the expatriate located in the United States (with-
out regard to whether this section applies to the 
property). 
‘‘(B) DEFERRED AMOUNT.—For purposes of 
this subsection, the deferred amount is the 
amount of the increase in the covered expatri-
ate’s income tax which, but for the election under 
subsection (a)(4) or (b), would have occurred by 
reason of this section for the taxable year includ-
ing the expatriation date. 
‘‘(2) PERIOD OF LIEN.—The lien imposed by this 
subsection shall arise on the expatriation date and 
continue until—
‘‘(A) the liability for tax by reason of this 
section is satisfied or has become unenforceable 
by reason of lapse of time, or 
‘‘(B) it is established to the satisfaction of 
the Secretary that no further tax liability may 
arise by reason of this section. 
‘‘(3) CERTAIN RULES APPLY.—The rules set forth 
in paragraphs (1), (3), and (4) of section 6324A(d) 
shall apply with respect to the lien imposed by this 
subsection as if it were a lien imposed by section 
6324A. 
‘‘(j) REGULATIONS.—The Secretary shall prescribe 
such regulations as may be necessary or appropriate to 
carry out the purposes of this section.’’.
(b) INCLUSION IN INCOME OF GIFTS AND BEQUESTS 
RECEIVED BY UNITED STATES CITIZENS AND RESIDENTS 
FROM EXPATRIATES.—Section 102 (relating to gifts, etc. 
not included in gross income) is amended by adding at the 
end the following new subsection: 
‘‘(d) GIFTS AND INHERITANCES FROM COVERED EX-
PATRIATES.—
‘‘(1) IN GENERAL.—Subsection (a) shall not ex-
clude from gross income the value of any property ac-
quired by gift, bequest, devise, or inheritance from a 
covered expatriate after the expatriation date. For
purposes of this subsection, any term used in this sub-
section which is also used in section 877A shall have 
the same meaning as when used in section 877A. 
‘‘(2) EXCEPTIONS FOR TRANSFERS OTHERWISE 
SUBJECT TO ESTATE OR GIFT TAX.—Paragraph (1) 
shall not apply to any property if either—
‘‘(A) the gift, bequest, devise, or inheritance 
is—
‘‘(i) shown on a timely filed return of 
tax imposed by chapter 12 as a taxable gift 
by the covered expatriate, or
‘‘(ii) included in the gross estate of the 
covered expatriate for purposes of chapter 
11 and shown on a timely filed return of 
tax imposed by chapter 11 of the estate of 
the covered expatriate, or 
‘‘(B) no such return was timely filed but no 
such return would have been required to be filed 
even if the covered expatriate were a citizen or 
long-term resident of the United States.’’.
(c) DEFINITION OF TERMINATION OF UNITED STATES 
CITIZENSHIP.—Section 7701(a) is amended by adding at 
the end the following new paragraph: 
‘‘(48) TERMINATION OF UNITED STATES CITIZEN-
SHIP.—
‘‘(A) IN GENERAL.—An individual shall not 
cease to be treated as a United States citizen be-
fore the date on which the individual’s citizen-
ship is treated as relinquished under section 
877A(e)(3). 
‘‘(B) DUAL
CITIZENS.—Under regulations 
prescribed by the Secretary, subparagraph (A) 
shall not apply to an individual who became at 
birth a citizen of the United States and a citizen 
of another country.’’. 
(d) INELIGIBILITY
FOR
VISA
OR
ADMISSION
TO 
UNITED STATES.—
(1) IN GENERAL.—Section 212(a)(10)(E) of the 
Immigration 
and 
Nationality 
Act 
(8 
U.S.C. 
1182(a)(10)(E)) is amended to read as follows: 
‘‘(E) FORMER
CITIZENS
NOT
IN
COMPLI-
ANCE
WITH
EXPATRIATION
REVENUE
PROVI-
SIONS.—Any alien who is a former citizen of the 
United States who relinquishes United States 
citizenship (within the meaning of section 
877A(e)(3) of the Internal Revenue Code of 1986) 
and who is not in compliance with section 877A 
of such Code (relating to expatriation).’’. 
(2) AVAILABILITY OF INFORMATION.—
(A) IN GENERAL.—Section 6103(l) (relating 
to disclosure of returns and return information 
for purposes other than tax administration) is 
amended by adding at the end the following new 
paragraph: 
‘‘(18) DISCLOSURE TO DENY VISA OR ADMISSION 
TO CERTAIN EXPATRIATES.—Upon written request of 
the Attorney General or the Attorney General’s dele-
gate, the Secretary shall disclose whether an indi-
vidual is in compliance with section 877A (and if not 
in compliance, any items of noncompliance) to offi-
cers and employees of the Federal agency responsible 
for administering section 212(a)(10)(E) of the Immi-
gration and Nationality Act solely for the purpose of, 
and to the extent necessary in, administering such 
section 212(a)(10)(E).’’. 
(B) SAFEGUARDS.—Section 6103(p)(4) (re-
lating to safeguards) is amended by striking ‘‘or 
(17)’’ each place it appears and inserting ‘‘(17), 
or (18)’’. 
(3) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply to individuals who re-
linquish United States citizenship on or after the date 
of the enactment of this Act. 
(e) CONFORMING AMENDMENTS.—
(1) Section 877 is amended by adding at the end 
the following new subsection: 
‘‘(g) APPLICATION.—This section shall not apply to an 
expatriate (as defined in section 877A(e)) whose expatria-
tion date (as so defined) occurs on or after September 12, 
2002.’’. 
(2) Section 2107 is amended by adding at the 
end the following new subsection: 
‘‘(f) APPLICATION.—This section shall not apply to 
any expatriate subject to section 877A.’’. 
(3) Section 2501(a)(3) is amended by adding at 
the end the following new subparagraph: 
‘‘(F) APPLICATION.—This paragraph shall 
not apply to any expatriate subject to section 
877A.’’. 
(4)(A) Paragraph (1) of section 6039G(d) is 
amended by inserting ‘‘or 877A’’ after ‘‘section 877’’. 
(B) The second sentence of section 6039G(e) is 
amended by inserting ‘‘or who relinquishes United 
States citizenship (within the meaning of section 
877A(e)(3))’’ after ‘‘877(a))’’. 
(C) Section 6039G(f) is amended by inserting 
‘‘or 877A(e)(2)(B)’’ after ‘‘877(e)(1)’’. 
(f) CLERICAL AMENDMENT.—The table of sections for 
subpart A of part II of subchapter N of chapter 1 is amend-
ed by inserting after the item relating to section 877 the 
following new item:
‘‘Sec. 877A. Tax responsibilities of expatriation.’’.
(g) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in this 
subsection, the amendments made by this section shall 
apply to expatriates (within the meaning of section 
877A(e) of the Internal Revenue Code of 1986, as 
added by this section) whose expatriation date (as so 
defined) occurs on or after September 12, 2002. 
(2) GIFTS AND BEQUESTS.—Section 102(d) of 
the Internal Revenue Code of 1986 (as added by sub-
section (b)) shall apply to gifts and bequests received 
on or after September 12, 2002, from an individual 
or the estate of an individual whose expatriation date 
(as so defined) occurs after such date. 
(3) DUE DATE FOR TENTATIVE TAX.—The due 
date under section 877A(h)(2) of the Internal Revenue 
Code of 1986, as added by this section, shall in no 
event occur before the 90th day after the date of the 
enactment of this Act.
SEC. 202. EXTENSION OF INTERNAL REVENUE SERVICE 
USER FEES. 
(a) IN GENERAL.—Chapter 77 (relating to miscella-
neous provisions) is amended by adding at the end the fol-
lowing new section:
‘‘SEC. 7527. INTERNAL REVENUE SERVICE USER FEES. 
‘‘(a) GENERAL RULE.—The Secretary shall establish 
a program requiring the payment of user fees for—
‘‘(1) requests to the Internal Revenue Service for 
ruling letters, opinion letters, and determination let-
ters, and 
‘‘(2) other similar requests. 
‘‘(b) PROGRAM CRITERIA.—
‘‘(1) IN GENERAL.—The fees charged under the 
program required by subsection (a)—
‘‘(A) shall vary according to categories (or 
subcategories) established by the Secretary, 
‘‘(B) shall be determined after taking into 
account the average time for (and difficulty of) 
complying with requests in each category (and 
subcategory), and 
‘‘(C) shall be payable in advance. 
‘‘(2) EXEMPTIONS, ETC.—
‘‘(A) IN
GENERAL.—The Secretary shall 
provide for such exemptions (and reduced fees) 
under such program as the Secretary determines 
to be appropriate. 
‘‘(B) EXEMPTION FOR CERTAIN REQUESTS 
REGARDING
PENSION
PLANS.—The Secretary 
shall not require payment of user fees under such 
program for requests for determination letters
with respect to the qualified status of a pension 
benefit plan maintained solely by 1 or more eli-
gible employers or any trust which is part of the 
plan. The preceding sentence shall not apply to 
any request—
‘‘(i) made after the later of—
‘‘(I) the fifth plan year the pen-
sion benefit plan is in existence, or 
‘‘(II) the end of any remedial 
amendment period with respect to the 
plan beginning within the first 5 plan 
years, or 
‘‘(ii) made by the sponsor of any proto-
type or similar plan which the sponsor in-
tends to market to participating employers. 
‘‘(C) DEFINITIONS AND SPECIAL RULES.—
For purposes of subparagraph (B)—
‘‘(i) PENSION
BENEFIT
PLAN.—The 
term ‘pension benefit plan’ means a pen-
sion, profit-sharing, stock bonus, annuity, 
or employee stock ownership plan. 
‘‘(ii) ELIGIBLE EMPLOYER.—The term 
‘eligible employer’ means an eligible em-
ployer 
(as 
defined 
in 
section 
408(p)(2)(C)(i)(I)) which has at least 1 em-
ployee who is not a highly compensated em-
ployee (as defined in section 414(q)) and is 
participating in the plan. The determina-
tion of whether an employer is an eligible 
employer under subparagraph (B) shall be 
made as of the date of the request described 
in such subparagraph. 
‘‘(iii) DETERMINATION
OF
AVERAGE 
FEES CHARGED.—For purposes of any de-
termination of average fees charged, any re-
quest to which subparagraph (B) applies 
shall not be taken into account. 
‘‘(3) AVERAGE FEE REQUIREMENT.—The average 
fee charged under the program required by subsection 
(a) shall not be less than the amount determined 
under the following table:
Average 
‘‘Category 
Fee 
Employee plan ruling and opinion ..............................................
$250
Exempt organization ruling .........................................................
$350
Employee plan determination ......................................................
$300
Exempt organization determination ............................................
$275
Chief counsel ruling .......................................................................
$200.
‘‘(c) TERMINATION.—No fee shall be imposed under 
this section with respect to requests made after September 
30, 2012.’’. 
(b) CONFORMING AMENDMENTS.—
(1) The table of sections for chapter 77 is amend-
ed by adding at the end the following new item:
‘‘Sec. 7527. Internal Revenue Service user fees.’’.
(2) Section 10511 of the Revenue Act of 1987 is 
repealed. 
(3) Section 620 of the Economic Growth and 
Tax Relief Reconciliation Act of 2001 is repealed. 
(c) LIMITATIONS.—Notwithstanding any other provi-
sion of law, any fees collected pursuant to section 7527 of 
the Internal Revenue Code of 1986, as added by subsection 
(a), shall not be expended by the Internal Revenue Service 
unless provided by an appropriations Act. 
(d) EFFECTIVE DATE.—The amendments made by this 
section shall apply to requests made after the date of the 
enactment of this Act.
Amend the title so as to read: ‘‘An Act to amend the 
Internal Revenue Code of 1986 to improve tax equity for 
military personnel, and for other purposes.’’.
Calendar No. 603
107TH CONGRESS 
2D SESSION 
H. R. 5063
[Report No. 107–283] 
AN ACT 
To amend the Internal Revenue Code of 1986 to 
provide a special rule for members of the uni-
formed services in determining the exclusion of 
gain from the sale of a principal residence and to 
restore the tax exempt status of death gratuity 
payments to members of the uniformed services. 
SEPTEMBER 17, 2002
Reported with an amendment and an amendment to the 
title