Internal Revenue Service Restructuring and Reform Act of 1998
PL 105-206 (H.R.2676), enacted 07/22/1998

PUBLIC LAW 105-206—JULY 22, 1998 
112 STAT. 685 
Public Law 105-206 
105th Congress 
An Act 
To amend the Internal Revenue Code of 1986 to restructure and reform the Internal 
Revenue Service, and for other purposes. 
Be it enacted by the Senate and House of Representatives 
of 
the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE; WAIVER OF 
ESTIMATED TAX PENALTIES; TABLE OF CONTENTS. 
(a) SHORT TITLE.—^This Act may be cited as the "Internal 
Revenue Service Restructuring and Reform Act of 1998". 
(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 considered to be made to a section 
or other provision of the Internal Revenue Code of 1986. 
(c) WAIVER OF ESTIMATED TAX PENALTIES.—No addition to tax 
shall be made under section 6654 or 6655 of the Internal Revenue 
Code of 1986 with respect to any underpayment of an installment 
required to be paid on or before the 30th day after the date of 
the enactment of this Act to the extent such underpayment was 
created or increased by any provision of this Act. 
(d) TABLE OF CONTENTS.—^The table of contents for this Act 
is as follows: 
Sec. 1. Short title; amendment of 1986 Code; waiver of estimated tax penalties; 
table of contents. 
T I T L E I — R E O R G A N I Z A T I O N O F S T R U C T U R E AND MANAGEMENT OF 
THE 
INTERNAL REVENUE SERVICE 
Subtitle A—Reorganization of the Internal Revenue Service 
Sec. 1001. Reorganization of the Internal Revenue Service. 
Sec. 1002. Internal Revenue Service mission to focus on taxpayers' needs. 
Subtitle B—Executive Branch Governance and Senior Management 
Sec. 1101. Internal Revenue Service Oversight Board. 
Sec. 1102. Commissioner of Internal Revenue; other officials. 
Sec. 1103. Treasury Inspector General for Tax Administration. 
Sec. 1104. Other personnel. 
Sec. 1105. Prohibition on executive branch influence over taxpayer audits and other 
investigations. 
Subtitle C—^Personnel Flexibilities 
i 
Sec. 1201. Improvements in personnel flexibilities. 
Sec. 1202. Voluntary separation incentive payments. 
Sec. 1203. Termination of employment for misconduct. 
Sec. 1204. Basis for evaluation of Internal Revenue Service employees. 
Sec. 1205. Employee training program. 
TITLE II—ELECTRONIC FILING 
Sec. 2001. Electronic filing of tax and information returns. 
July 22, 1998 
[H.R. 2676] 
Internal Revenue 
Service 
Restructuring 
and Reform Act 
of 1998. 
26 u s e 1 note. 
26 u s e 6654 
note. 
112 STAT. 686 
PUBLIC LAW 105-206-JULY 22, 1998 
Sec. 2002. Due date for certain information returns. 
Sec. 2003. Paperless electronic filing. 
Sec. 2004. Return-free tax system. 
Sec. 2005. Access to account information. 
TITLE III—TAXPAYER PROTECTION AND RIGHTS 
Sec. 3000. Short title. 
Subtitle A—Burden of Proof 
Sec. 3001. Burden of proof 
Subtitle B—^Proceedings by Taxpayers 
Sec. 3101. Exfjansion of authority to award costs and certain fees. 
Sec. 3102. Civil damages for collection actions. 
Sec. 3103. Increase in size of cases permitted on small case calendar. 
Sec. 3104. Actions for refund with respect to certain estates which have elected the 
installment method of pa3Tnent. 
Sec. 3105. Administrative appeal of adverse Internal Revenue Service determination 
of tax-exempt status of bond issue. 
Sec. 3106. Civil action for release of erroneous lien. 
Subtitle C—^Relief for Innocent Spouses and for Taxpayers Unable To Manage Their 
Financial Affairs Due to Disabilities 
Sec. 3201. Relief from joint and several liability on joint return. 
Sec. 3202. Suspension of statute of limitations on filing refund claims during 
periods of disability. 
Subtitle D—Provisions Relating to Interest and Penalties 
Sec. 3301. Elimination of interest rate differential on overlapping periods of interest 
on tax overpayments and underpayments. 
Sec. 3302. Increase in overpayment rate payable to taxpayers other than corpora-
tions. 
Sec. 3303. Mitigation of penalty on individual's failure to pay for months during 
period of installment agreement. 
Sec. 3304. Mitigation of failure to deposit penalty. 
Sec. 3305. Suspension of interest and certain penalties where Secretary fails to 
contact individual taxpayer. 
Sec. 3306. Procedural requirements for imposition of penalties and additions to tax. 
Sec. 3307. Personal delivery of notice of penalty under section 6672. 
Sec. 3308. Notice of interest charges. 
Sec. 3309. Abatement of interest on underpayments by taxpayers in Presidentially 
declared disaster areas. 
Subtitle E—^Protections for Taxpayers Subject to Audit or Collection Activities 
PART I—DUE PROCESS 
Sec. 3401. Due process in Internal Revenue Service collection actions. 
PART II—EXAMINATION ACTIVITIES 
Sec. 3411. Confidentiality privileges relating to taxpayer communications. 
Sec. 3412. Limitation on financial status audit techniques. 
Sec. 3413. Software trade secrets protection. 
Sec. 3414. Threat of audit prohibited to coerce tip reporting alternative commitment 
agreements. 
Sec. 3415. Taxpayers allowed motion to quash all third-party summonses. 
Sec. 3416. Service of summonses to third-party recordkeepers permitted by mail. 
Sec. 3417. Notice of Internal Revenue Service contact of third parties. 
PART III—COLLECTION ACTIVITIES 
SUBPART A—^APPROVAL PROCESS 
Sec. 3421. Approval process for liens, levies, and seizures. 
SUBPART B—LIENS AND LEVIES 
Sec. 3431. Modifications to certain levy exemption amounts. 
Sec. 3432. Release of levy upon agreement that amount is uncollectible. 
Sec. 3433. Levy prohibited during pendency of refund proceedings. 
Sec. 3434. Approval required for jeopardy and termination assessments and 
jeopardy levies. 
Sec. 3435. Increase in amount of certain property on which lien not valid. 
PUBLIC LAW 105-206-^ULY 22, 1998 
112 STAT. 687 
Sec. 3436. Waiver of early withdrawal tax for Internal Revenue Service levies on 
employer-sponsored retirement plans or IRAs. 
SUBPART C—SEIZURES 
Sec. 3441. Prohibition of sales of seized property at less than minimum bid. 
Sec. 3442. Accounting of sales of seized property. 
Sec. 3443. Uniform asset disposal mechanism. 
Sec. 3444. Codification of Internal Revenue Service administrative procedures for 
seizure of taxpayer's property. 
Sec. 3445. Procedures for seizure of residences and businesses. 
\ 
PART IV—PROVISIONS RELATING TO EXAMINATION AND COLLECTION ACTIVITIES 
Sec. 3461. Procedures relating to extensions of statute of limitations by agreement. 
Sec. 3462. Offers-in-compromise. 
Sec. 3463. Notice of deficiency to specify deadlines for filing Tax Court petition. 
Sec. 3464. Refund or credit of overpayments before final determination. 
Sec. 3465. Internal Revenue Service procedures relating to appeals of examinations 
and collections. 
Sec. 3466. Application of certain fair debt collection procedures. 
Sec. 3467. Guaranteed availability of installment agreements. 
Sec. 3468. Prohibition on requestis to taxpayers to give up rights to bring actions. 
Subtitle F—Disclosures to Taxpayers 
Sec. 3501. Explanation of joint and several liability. 
Sec. 3502. Explanation of taxpayers' rights in interviews with the Internal Revenue 
Service. 
Sec. 3503. Disclosure of criteria for examination selection. 
Sec. 3504. Explanations of appeals and collection process. 
Sec. 3505. Explanation of reason for refund disallowance. 
Sec. 3506. Statements regarding installment agreements. 
Sec. 3507. Notification ofchange in tax matters partner. 
Sec. 3508. Disclosure to taxpayers. 
Sec. 3509. Disclosure of Chief Counsel advice. 
Subtitle G—Low-Income Taxpayer Clinics 
Sec. 3601. Low-income taxpayer clinics. 
Subtitle H—Other Matters 
Sec. 3701. Cataloging complaints. 
Sec. 3702. Archive of records of Internal Revenue Service, 
Sec. 3703. Payment of taxes. 
Sec. 3704. Clarification of authority of Secretary relating to the making of elections. 
Sec. 3705. Internal Revenue Service employee contacts. 
Sec. 3706. Use of pseudonyms by Internal Revenue Service employees. 
Sec. 3707. Illegal tax protester aesignation. 
Sec. 3708. Provision of confidential information to Congress by whistleblowers. 
Sec. 3709. Listing of local Internal Revenue Service telephone numbers and address-
es. 
Sec. 3710. Identification of return preparers. 
Sec. 3711. Offset of past-due, legally enforceable State income tax obligations 
against overpajmients. 
Sec. oQ^2. Reporting requirements in connection with education tax credit. 
Subtitle I—Studies 
Sec. 3801. Administration of penalties and interest. 
Sec. 3802. Confidentiality of tax return information. 
Sec. 3803. Study of noncompliance with internal revenue laws by taxpayers. 
Sec. 3804. Study of payments made for detection of underpayments and fraud. 
TITLE IV—CONGRESSIONAL ACCOUNTABILITY FOR THE INTERNAL 
REVENUE SERVICE 
Subtitle A—Oversight 
Sec. 4001. Expansion of duties of the Joint Committee on Taxation. 
Sec. 4002. Coordinated oversight reports. 
Subtitle B—Century Date Change 
Sec. 4011. Century date change. 
Subtitle C—^Tax Law Complexity 
Sec. 4021. Role of the Internal Revenue Service. 
112 STAT. 688 
PUBLIC LAW 105-206—JULY 22, 1998 
Sec. 4022. Tax law complexity analysis. 
TITLE V—ADDITIONAL PROVISIONS 
Sec. 5001. Lower capital gains rates to apply to property held more than 1 year. 
Sec. 5002. Clarification of exclusion of meals for certain employees. 
Sec. 5003. Clarification of designation of normal trade relations. 
TITLE VI—TECHNICAL CORRECTIONS 
Sec. 6001. Short title; coordination with other titles. 
Sec. 6002. Definitions. 
Sec. 6003. Amendments related to title I of 1997 Act. 
Sec. 6004. Amendments related to title II of 1997 Act. 
Sec. 6005. Amendments related to title III of 1997 Act. 
Sec. 6006. Amendment related to title IV of 1997 Act. 
Sec. 6007. Amendments related to title V of 1997 Act. 
Sec. 6008. Amendments related to title VII of 1997 Act. 
Sec. 6009. Amendments related to title IX of 1997 Act. 
Sec. 6010. Amendments related to title X of 1997 Act. 
Sec. 6011. Amendments related to title XI of 1997 Act. 
Sec. 6012. Amendments related to title XII of 1997 Act. 
Sec. 6013. Amendments related to title XIII of 1997 Act. 
Sec. 6014. Amendments related to title XIV of 1997 Act. 
Sec. 6015. Amendments related to title XV of 1997 Act. 
Sec. 6016. Amendments related to title XVI of 1997 Act. 
Sec. 6017. Amendment related to Transportation Equity Act for the 21st Century. 
Sec. 6018. Amendments related to Small Business Job Protection Act of 1996. 
Sec. 6019. Amendments related to Taxpayer Bill of Rights 2. 
Sec. 6020. Amendment related to Omnibus Budget Reconciliation Act of 1993. 
Sec. 6021. Amendment related to Revenue Reconciliation Act of 1990. 
Sec. 6022. Amendment related to Tax Reform Act of 1986. 
Sec. 6023. Miscellaneous clerical and deadwood changes. 
Sec. 6024. Effective date. 
TITLE VII—REVENUE PROVISIONS 
Sec. 7001. Clarification of deduction for deferred compensation. 
Sec. 7002. Termination of exception for certain real estate investment trusts from 
the treatment of stapled entities. 
Sec. 7003. Certain customer receivables ineligible for mark to market treatment. 
Sec. 7004. Modification of AGI limit for conversions to Roth IRAs. 
TITLE VIII—IDENTIFICATION OF LIMITED TAX BENEFITS SUBJECT TO 
LINE ITEM VETO 
Sec. 8001. Identification of limited tax benefits subject to line item veto. 
TITLE IX—TECHNICAL CORRECTIONS TO TRANSPORTATION EQUITY ACT 
FOR THE 2iST CENTURY 
Sec. 9001. Short title. 
Sec. 9002. Authorization and program subtitle. 
Sec. 9003. Restorations to general provisions subtitle. 
Sec. 9004. Restorations to program streamlining and flexibility subtitle. 
Sec. 9005. Restorations to safety subtitle. 
Sec. 9006. Elimination of duplicate provisions. 
Sec. 9007. Highway finance. 
Sec. 9008. High priority projects technical corrections. 
Sec. 9009. Federal Transit Administration programs. 
Sec. 9010. Motor carrier safety technical correction. 
Sec. 9011. Restorations to research title. 
Sec. 9012. Automobile safety and information. 
Sec. 9013. Technical corrections regarding subtitle A of title VIII. 
Sec. 9014. Corrections to veterans subtitle. 
Sec. 9015. Technical corrections regarding title IX. 
Sec. 9016. Effective date. 
'?#Uiiaa-*-
PUBLIC LAW 105-206—JULY 22, 1998 
112 STAT. 689 
TITLE I—REORGANIZATION OF STRUC-
TURE AND MANAGEMENT OF THE IN-
TERNAL REVENUE SERVICE 
Subtitle A—^Reorganization of the Internal 
Revenue Service 
SEC. 1001. REORGANIZATION OF THE INTERNAL REVENUE SERVICE. 
26 USC 7801 
(a) IN GENERAL.—^The Commissioner of Internal Revenue shall 
develop and implement a plan to reorganize the Internal Revenue 
Service. The plan shall— 
(1) supersede any organization or reorganization of the 
Internal Revenue Service based on any statute or reorganiza-
tion plan applicable on the effective date of this section; 
(2) eliminate or substantially modify the existing organiza-
tion of the Internal Revenue Service which is based on a 
national, regional, and district structure; 
(3) establish organizational units serving particular groups 
of taxpayers with similar needs; and 
(4) ensure an independent appeals function within the 
Internal Revenue Service, including the prohibition in the plan 
of ex parte communications between appeals officers and other 
Internal Revenue Service employees to the extent that such 
communications appear to compromise the independence of the 
appeals officers. 
(b) SAVINGS PROVISIONS.— 
(1) PRESERVATION OF SPECIFIC TAX RIGHTS AND REMEDIES.— 
Nothing in the plan developed and implemented under sub-
section (a) shall be considered to impair any right or remedy, 
including trial by jury, to recover any internal revenue tax 
alleged to have been erroneously or illegally assessed or col-
lected, or any penalty claimed to have been collected without 
authority, or any sum alleged to have been excessive or in 
any manner wrongfully collected under the internal revenue 
laws. For the purpose of any action to recover any such tax, 
penalty, or sum, all statutes, rules, and regulations referring 
to the collector of internal revenue, the principal officer for 
the internal revenue district, or the Secretary, shall be deemed 
to refer to the officer whose act or acts referred to in the 
preceding sentence gave rise to such action. The venue of any 
such action shall be the same as under existing law. 
(2) CONTINUING EFFECT OF LEGAL DOCUMENTS.—All orders, 
determinations, rules, regulations, permits, agreements, grants, 
contracts, certificates, licenses, registrations, privileges, and 
other administrative actions— 
(A) which have been issued, made, granted, or allowed 
to become effective by the President, any Federal agency 
or official thereof, or by a court of competent jurisdiction, 
in the performance of any function transferred or affected 
by the reorganization of the Internal Revenue Service or 
any other administrative unit of the Department of the 
Treasury under this section; and 
(B) which are in effect at the time this section takes 
effect, or were final before the effective date of this section 
112 STAT. 690 
PUBLIC LAW 105-206-^JULY 22, 1998 
and are to become effective on or after the effective date 
of this section, 
shall continue in effect according to their terms until modified, 
terminated, superseded, set aside, or revoked in accordance 
with law by the President, the Secretary of the Treasury, the 
Commissioner of Internal Revenue, or other authorized official, 
a court of competent jurisdiction, or by operation of law. 
(3) PROCEEDINGS NOT AFFECTED.—^The provisions of this 
section shall not affect any proceedings, including notices of 
proposed rulemaking, or any application for any license, permit, 
certificate, or financial assistance pending before the Depart-
ment of the Treasury (or any administrative unit of the Depart-
ment, including the Internal Revenue Service) at the time 
this section takes effect, with respect to functions transferred 
or affected by the reorganization under this section but such 
proceedings and applications shall continue. Orders shall be 
issued in such proceedings, appeals shall be taken therefrom, 
and payments shall be made pursuant to such orders, as if 
this section had not been enacted, and orders issued in any 
such proceedings shall continue in effect until modified, termi-
nated, superseded, or revoked by a duly authorized official, 
by a court of competent jurisdiction, or by operation of law. 
Nothing in this paragraph shall be deemed to prohibit the 
discontinuance or modification of any such proceeding under 
the same terms and conditions and to the same extent that 
such proceeding could have been discontinued or modified if 
this section had not been enacted. 
(4) SUITS NOT AFFECTED.—^The provisions of this section 
shall not affect suits commenced before the effective date of 
this section, and in all such suits, proceedings shall be had, 
appeals taken, and judgments rendered in the same manner 
and with the same effect as if this section had not been enacted. 
(5) NONABATEMENT OF ACTIONS.—^No suit, action, or other 
proceeding commenced by or against the Department of the 
Treasury (or any administrative unit of the Department, includ-
ing the Internal Revenue Service), or by or against any individ-
ual in the official capacity of such individual as an officer 
of the Department of the Treasury, shall abate by reason of 
the enactment of this section. 
(6) ADMINISTRATIVE ACTIONS RELATING TO PROMULGATION 
OF REGULATIONS.—Any administrative action relating to the 
preparation or promulgation of a regulation by the Department 
of the Treasury (or any administrative unit of the Department, 
including the Internal Revenue Service) relating to a function 
transferred or affected by the reorganization under this section 
may be continued by the Department of the Treasury through 
any appropriate administrative unit of the Department, includ-
ing the Internal Revenue Service with the same effect as if 
this section had not been enacted. 
(c) EFFECTIVE DATE.—^This section shall take effect on the date 
of the enactment of this Act. 
26 use 7801 
SEC. 1002. INTERNAL REVENUE SERVICE MISSION TO FOCUS ON TAX-
note. 
PAYERS'NEEDS. 
The Internal Revenue Service shall review and restate its mis-
sion to place a greater emphasis on serving the public and meeting 
taxpayers' needs. 
PUBLIC LAW 105-206-^ULY 22, 1998 
112 STAT. 691 
Subtitle B—^Executive Branch Governance 
and Senior Management 
SEC. 1101. INTERNAL REVENUE SERVICE OVERSIGHT BOARD. 
(a) IN GENERAL.—Section 7802 (relating to the Commissioner 
of Internal Revenue) is amended to read as follows: 
"SEC. 7802. INTERNAL REVENUE SERVICE OVERSIGHT BOARD. 
"(a) ESTABLISHMENT.—^There is established within the Depart-
ment of the Treasury the Internal Revenue Service Oversight Board 
(hereafter in this subchapter referred to as the 'Oversight Board'). 
"(b) MEMBERSHIP.— 
"(1) COMPOSITION.—^The Oversight Board shall be composed President, 
of nine members, as follows: 
"(A) six members shall be individuals who are not 
otherwise Federal officers or employees and who are 
appointed by the President, by and with the advice and 
consent of the Senate. 
"(B) one member shall be the Secretary of the Treasury 
or, if the Secretary so designates, the Deputy Secretary 
of the Treasury. 
"(C) one member shall be the Commissioner of Internal 
Revenue. 
"(D) one member shall be an individual who is a full-
time Federal employee or a representative of employees 
and who is appointed by the President, by and with the 
V 
advice and consent of the Senate. 
"(2) QUALIFICATIONS AND TERMS.— 
"(A) 
QUALIFICATIONS.—Members 
of 
the 
Oversight 
Board described in paragraph (1)(A) shall be appointed 
without regard to political affiliation and solely on the 
basis of their professional experience and expertise in one 
or more of the following areas: 
"(i) Management of large service organizations. 
"(ii) Customer service. 
-
"(iii) Federal tax laws, including tax administra-
tion and compliance. 
"(iv) Information technology. 
"(v) Organization development, 
"(vi) The needs and concerns of taxpayers, 
"(vii) The needs and concerns of small businesses. 
In the aggregate, the members of the Oversight Board 
described in paragraph (1)(A) should collectively bring to 
bear expertise in all of the areas described in the preceding 
sentence. 
"(B) TERMS.—Each member who is described in 
subparagraph (A) or (D) of paragraph (1) shall be appointed 
for a term of 5 years, except that of the members first 
appointed under paragraph (1)(A)— 
"(i) two members shall be appointed for a term 
of 3 years, 
"(ii) two members shall be appointed for a term 
of 4 years; and 
"(iii) two members shall be appointed for a term 
of 5 years. 
112 STAT. 692 
PUBLIC LAW 105-206—JULY 22, 1998 
"(C) REAPPOINTMENT.—An individual who is described 
in subparagraph (A) or (D) of paragraph (1) may be 
appointed to no more than two 5-year terms on the Over-
sight Board. 
"(D) VACANCY.—^Any vacancy on the Oversight Board 
shall be filled in the same manner as the original appoint-
ment. Any member appointed to fill a vacancy occurring 
before the expiration of the term for which the member's 
predecessor was appointed shall be appointed for the 
remainder of that term. 
"(3) ETHICAL CONSIDERATIONS.— 
"(A) FINANCIAL DISCLOSURE.—During the entire period 
that an individual appointed under subparagraph (A) or 
(D) of paragraph (1) is a member of the Oversight Board, 
such individual shall be treated as serving as an officer 
or employee referred to in section 101(f) of the Ethics 
in Government Act of 1978 for purposes of title I of such 
Act, except that section 101(d) of such Act shall apply 
without regard to the number of days of service in the 
position. 
"(B) RESTRICTIONS ON POST-EMPLOYMENT.—For pur-
poses of section 207(c) of title 18, United States Code, 
an individual appointed under subparagraph (A) or (D) 
of paragraph (1) shall be treated as an employee referred 
to in section 207(c)(2XA)(i) of such title during the entire 
period the individual is a member of the Board, except 
that subsections (c)(2XB) and (f) of section 207 of such 
title shall not apply. 
"(C) MEMBERS WHO ARE SPECIAL GOVERNMENT EMPLOY-
EES.—If an individual appointed under subparagraph (A) 
or (D) of paragraph (1) is a special Government employee, 
the following additional rules apply for purposes of chapter 
11 of title 18, United States Code: 
"(i) RESTRICTION ON REPRESENTATION.—In addition 
to any restriction under section 205(c) of title 18, 
United States Code, except as provided in subsections 
(d) through (i) of section 205 of such title, such individ-
ual (except in the proper discharge of official duties) 
shall not, with or without compensation, represent any-
one to or before any officer or employee of— 
"(I) the Oversight Board or the Internal Reve-
nue Service on any matter; 
"(II) the Department of the Treasury on any 
matter involving the internal revenue laws or 
involving the management or operations of the 
Internal Revenue Service; or 
"(III) the Department of Justice with respect 
to litigation involving a matter described in sub-
clause (I) or (II). 
"(ii) 
COMPENSATION FOR SERVICES PROVIDED BY 
ANOTHER.—^For purposes of section 203 of such title— 
"(I) such individual shall not be subject to 
the restrictions of subsection (a)( 1) thereof for shar-
ing in compensation earned by another for rep-
resentations on matters covered by such section, 
and 
PUBLIC LAW 105-206—JULY 22, 1998 
112 STAT. 693 
"(II) a person shall not be subject to the restric-
tions of subsection (a)(2) thereof for sharing such 
compensation with such individual. 
"(D) WAIVER.—^The President may, only at the time 
the President nominates the member of the Oversight 
Board described in paragraph (1)(D), waive for the term 
of the member any appropriate provision of chapter 11 
of title 18, United States Code, to the extent such waiver 
is necessary to allow such member to participate in the 
decisions of the Board while continuing to serve as a full-
time Federal employee or a representative of employees. 
Any such waiver shall not be effective unless a written 
intent of waiver to exempt such member (and actual waiver 
language) is submitted to the Senate with the nomination 
of such member. 
"(4) QUORUM.—^Five members of the Oversight Board shall 
constitute a quorum. A majority of members present and voting 
shall be required for the Oversight Board to take action. 
"(5) REMOVAL.— 
"(A) IN GENERAL.—^Any member of the Oversight Board 
appointed under subparagraph (A) or (D) of paragraph 
(1) may be removed at the will of the President. 
"(B) SECRETARY AND COMMISSIONER.—^An individual 
described in subparagraph (B) or (C) of paragraph (1) shall 
be removed upon termination of service in the office 
described in such subparagraph. 
"(6) CLAIMS.— 
"(A) IN GENERAL.—^Members of the Oversight Board 
who are described in subparagraph (A) or (D) of paragraph 
(1) shall have no personal liability under Federal law with 
respect to any claim arising out of or resulting from an 
act or omission by such member within the scope of service 
as a member. 
"(B) EFFECT ON OTHER LAW.—^This paragraph shall 
not be construed— 
"(i) to affect any other immunities and protections 
that may be available to such member under applicable 
law with respect to such transactions; 
"(ii) to affect any other right or remedy against 
the United States under applicable law; or 
"(iii) to limit or alter in any way the immunities 
that are available under applicable law for Federal 
officers and employees. 
"(c) GENERAL RESPONSIBILITIES.— 
"(1) OVERSIGHT.— 
"(A) IN GENERAL.—^The Oversight Board shall oversee 
the Internal 
Revenue 
Service in its 
administration, 
management, conduct, direction, and supervision of the 
execution and application of the internal revenue laws 
or related statutes and tax conventions to which the United 
States is a party. 
"(B) MISSION OF IRS.—^As part of its oversight functions 
described in subparagraph (A), the Oversight Board shall 
ensure that the organization and operation of the Internal 
Revenue Service allows it to carry out its mission. 
112 STAT. 694 
PUBLIC LAW 105-206-^JULY 22, 1998 
"(C) CONFIDENTIALITY.—The Oversight Board shall 
ensure that appropriate confidentiality is maintained in 
the exercise of its duties. 
"(2) EXCEPTIONS.—The Oversight Board shall have no 
responsibilities or authority with respect to— 
"(A) the development and formulation of Federal tax 
policy relating to existing or proposed internal revenue 
laws, related statutes, and tax conventions, 
"(B) specific law enforcement activities of the Internal 
Revenue Service, including specific compliance activities 
such as examinations, collection activities, and criminal 
investigations, 
"(C) specific procurement activities of the Internal 
Revenue Service, or 
"(D) except as provided in subsection (d)(3), specific 
personnel actions. 
"(d) SPECIFIC RESPONSIBILITIES.—The Oversight Board shall 
have the following specific responsibilities: 
"(1) STRATEGIC PLANS.—^To review and approve strategic 
plans of the Internal Revenue Service, including the establish-
ment of— 
"(A) mission and objectives, and standards of perform-
ance relative to either, and 
"(B) annual and long-range strategic plans. 
"(2) 
OPERATIONAL 
PLANS.—To review the 
operational 
functions of the Internal Revenue Service, including— 
"(A) plans for modernization of the tax system, 
"(B) plans for outsourcing or managed competition, 
and 
"(C) plans for training and education. 
"(3) MANAGEMENT.—To— 
"(A) recommend to the President candidates for 
appointment as the Commissioner of Internal Revenue and 
recommend to the President the removal of the Commis-
sioner; 
"(B) review the Commissioner's selection, evaluation, 
and compensation of Internal Revenue Service senior execu-
tives who have program msuiagement responsibility over 
significant functions of the Internal Revenue Service; and 
"(C) review and approve the Commissioner's plans for 
any major reorganization of the Internal Revenue Service. 
"(4) BUDGET.—TO— 
"(A) review and approve the budget request of the 
Internal Revenue Service prepared by the Commissioner; 
"(B) submit such budget request to the Secretary of 
the Treasury; and 
"(C) ensure that the budget request supports the 
annual and long-range strategic plans. 
"(5) TAXPAYER PROTECTION.—TO ensure the proper treat-
ment of taxpayers by the employees of the Internal Revenue 
Service. 
The Secretary shall submit the budget request referred to in para-
graph (4)(B) for any fiscal year to the President who shall submit 
such request, without revision, to Congress together with the Presi-
dent's annual budget request for the Internal Revenue Service 
for such fiscal year. 
"(e) BOARD PERSONNEL MATTERS.— 
PUBLIC LAW 105-206-^JULY 22, 1998 
112 STAT. 695 
"(1) COMPENSATION OF MEMBERS.— 
"(A) IN GENERAL.—Each member of the Oversight 
Board who— 
"(i) is described in subsection (b)(1)(A); or 
"(ii) is described in subsection (b)(1)(D) and is not 
otherwise a Federal officer or employee, 
shall be compensated at a rate of $30,000 per year. All 
other members shall serve without compensation for such 
service. 
"(B) CHAIRPERSON.—^In lieu of the amount specified 
in subparagraph (A), the Chairperson of the Oversight 
Board shall be compensated at a rate of $50,000 per year. 
"(2) TRAVEL EXPENSES.— 
"(A) IN GENERAL.—^The members of the Oversight 
Board shall be allowed travel expenses, including per diem 
in lieu of subsistence, at rates authorized for employees 
of agencies under subchapter I of chapter 57 of title 5, 
United States Code, to attend meetings of the Oversight 
Board and, with the advance approval of the Chairperson 
of the Oversight Board, while otherwise away from their 
homes or regular places of business for purposes of duties 
as a member of the Oversight Board. 
"(B) REPORT.—The Oversight Board shall include in 
its annual report under subsection (f)(3)(A) information 
with respect to the travel expenses allowed for members 
of the Oversight Board under this paragraph. 
"(3) STAFF.— 
"(A) IN GENERAL.—The Chairperson of the Oversight 
Board may appoint and terminate any personnel that may 
be necessary to enable the Board to perform its duties. 
"(B) 
DETAIL 
OF 
GOVERNMENT 
EMPLOYEES.—Upon 
request of the Chairperson of the Oversight Board, a Fed-
eral agency shall detail a Federal Government employee 
to the Oversight Board without reimbursement. Such detail 
shall be without interruption or loss of civil service status 
or privilege. 
"(4) PROCUREMENT OF TEMPORARY AND INTERMITTENT SERV-
ICES.—^The Chairperson of the Oversight Board may procure 
temporary and intermittent services under section 3109(b) of 
title 5, United States Code. 
"(f) ADMINISTRATIVE MATTERS.— 
"(1) CHAIR.— 
"(A) TERM.—^The members of the Oversight Board shall 
elect for a 2-year term a chairperson from among the 
members appointed under subsection (b)(1)(A). 
"(B) POWERS.—Except as otherwise provided by a 
majority vote of the Oversight Board, the powers of the 
Chairperson shall include— 
"(i) establishing committees; 
"(ii) setting meeting places and times; 
"(iii) establishing meeting agendas; and 
"(iv) developing rules for the conduct of business. 
"(2) MEETINGS.—The Oversight Board shall meet at least 
quarterly and at such other times as the Chairperson deter-
mines appropriate. 
"(3) REPORTS.— 
112 STAT. 696 
PUBLIC LAW 105-206—JULY 22, 1998 
"(A) ANNUAL.—The Oversight Board shall each year 
report with respect to the conduct of its responsibilities 
under this title to the President, the Committees on Ways 
and Means, Government Reform and Oversight, and Appro-
priations of the House of Representatives and the Commit-
tees on Finance, Governmental Affairs, and Appropriations 
of the Senate. 
"(B) ADDITIONAL REPORT.—Upon a determination by 
the Oversight Board under subsection (c)(1)(B) that the 
organization and operation of the Internal Revenue Service 
are not allowing it to carry out its mission, the Oversight 
Board shall report such determination to the Committee 
on Ways and Means of the House of Representatives and 
the Committee on Finance of the Senate.". 
(b) RESTRICTION ON DISCLOSURE OF RETURN INFORMATION TO 
OVERSIGHT BOARD MEMBERS.—Section 6103(h) (relating to disclo-
sure to certain Federal officers and employees for purposes of tax 
administration, etc.) is amended by adding at the end the following 
new paragraph: 
"(5) INTERNAL REVENUE SERVICE OVERSIGHT BOARD.— 
"(A) IN GENERAL.—^Notwithstanding paragraph (1), and 
except as provided in subparagraph (B), no return or return 
information may be disclosed to any member of the Over-
sight Board described in subparagraph (A) or (D) of section 
7802(b)(1) or to any employee or detailee of such Board 
by reason of their service with the Board. Any request 
for information not permitted to be disclosed under the 
preceding sentence, and any contact relating to a specific 
taxpayer, made by any such individual to an officer or 
employee of the Internal Revenue Service shall be reported 
by such officer or employee to the Secretary, the Treasury 
Inspector General for Tax Administration, and the Joint 
Committee on Taxation. 
"(B) EXCEPTION FOR REPORTS TO THE BOARD.—If— 
"(i) the Commissioner or the Treasury Inspector 
General for Tax Administration prepares any report 
or other matter for the Oversight Board in order to 
assist the Board in carr3dng out its duties; and 
"(ii) the Commissioner or such Inspector General 
determines it is necessary to include any return or 
return information in such report or other matter to 
enable the Board to carry out such duties, 
such return or return information (other than information 
regarding taxpayer identity) may be disclosed to members, 
employees, or detailees of the Board solely for the purpose 
of carrying out such duties.". 
(c) CONFORMING AMENDMENTS.— 
(1) Section 4946(c) (relating to definitions and special rules 
for chapter 42) is amended by striking "or" at the end of 
paragraph (5), by striking the period at the end of paragraph 
(6) and inserting ", or", and by adding at the end the following 
new paragraph: 
"(7) a member of the Internal Revenue Service Oversight 
Board.". 
PUBLIC LAW 105-206-JULY 22, 1998 
112 STAT. 697 
(2) The table of sections for subchapter A of chapter 80 
is amended by striking the item relating to section 7802 and 
inserting the following new item: 
"Sec. 7802. Internal Revenue Service Oversight Board.". 
(d) EFFECTIVE DATE.— 
(1) IN GENERAL.—^The amendments made by this section 
shall take effect on the date of the enactment of this Act. 
(2) INITIAL NOMINATIONS TO INTERNAL REVENUE SERVICE 
OVERSIGHT BOARD.—^The President shall submit the initial 
nominations under section 7802 of the Internal Revenue Code 
of 1986, as added by this section, to the Senate not later 
than 6 months after the date of the enactment of this Act. 
(3) EFFECT ON ACTIONS PRIOR TO APPOINTMENT OF OVER-
'; 
SIGHT BOARD.—^Nothing in this section shall be construed to 
invalidate the actions and authority of the Internal Revenue 
Service prior to the appointment of the members of the Internal 
Revenue Service Oversight Board. 
SEC. 1102. COMMISSIONER OF INTERNAL REVENUE; OTHER OFFICIALS. 
(a) IN GENERAL.—Section 7803 (relating to other personnel) 
is amended to read as follows: 
"SEC. 7803. COMMISSIONER OF INTERNAL REVENUE; OTHER OFFI-
CIALS. 
"(a) COMMISSIONER OF INTERNAL REVENUE.— 
"(1) APPOINTMENT.— 
"(A) IN GENERAL.—^There shall be in the Department 
of the Treasury a Commissioner of Internal Revenue who 
shall be appointed by the President, by and with the advice 
and consent of the Senate, to a 5-year term. Such appoint-
ment shall be made from individuals who, among other 
qualifications, have a demonstrated ability in management. 
"(B) VACANCY.—^Any individual appointed to fill a 
vacancy in the position of Commissioner occurring before 
the expiration of the term for which such individual's prede-
cessor was appointed shall be appointed only for the 
remainder of that term. 
"(C) REMOVAL.—^The Commissioner may be removed 
at the will of the President. 
"(D) REAPPOINTMENT.—The Commissioner may 
be 
appointed to more than one 5-year term. 
"(2) DUTIES.—^The Commissioner shall have such duties 
and powers as the Secretary may prescribe, including the power 
to— 
"(A) administer, manage, conduct, direct, and supervise 
the execution and application of the internal revenue laws 
or related statutes and tax conventions to which the United 
States is a party; and 
"(B) recommend to the President a candidate for 
appointment as Chief Counsel for the Internal Revenue 
Service when a vacancy occurs, and recommend to the 
President the removal of such Chief Counsel. 
If the Secretary determines not to delegate a power specified 
in subparagraph (A) or (B), such determination may not take 
effect until 30 days after the Secretary notifies the Committees 
on Ways and Means, Government Reform and Oversight, and 
Appropriations of the House of Representatives and the 
26 use 7802 
note. 
President. 
Deadline. 
President. 
112 STAT. 698 
PUBLIC LAW 105-206-^ULY 22, 1998 
President. 
Committees on Finance, Grovernmental Affairs, and Appropria-
tions of the Senate. 
"(3) CONSULTATION WITH BOARD.—The Commissioner shall 
consult with the Oversight Board on all matters set forth in 
paragraphs (2) and (3) (other than paragraph (3)(A)) of section 
7802(d). 
"(b) CHIEF COUNSEL FOR THE INTERNAL REVENUE SERVICE.— 
"(1) APPOINTMENT.—There shall be in the Department of 
the Treasury a Chief Counsel for the Internal Revenue Service 
who shall be appointed by the President, by and with the 
consent of the Senate. 
"(2) DUTIES.—The Chief Counsel shall be the chief law 
officer for the Internal Revenue Service and shall perform such 
duties as may be prescribed by the Secretary, including the 
duty— 
"(A) to be legal advisor to the Commissioner and the 
Commissioner's officers and employees; 
"(B) to furnish legal opinions for the preparation and 
review of rulings and memoranda of technical advice; 
"(C) to prepare, review, and assist in the preparation 
of proposed legislation, treaties, regulations, and Executive 
orders relating to laws which affect the Internal Revenue 
Service; 
"(D) to represent the Commissioner in cases before 
the Tax Court; and 
"(E) to determine which civil actions should be litigated 
under the laws relating to the Internal Revenue Service 
and prepare recommendations for the Department of Jus-
tice regarding the commencement of such actions. 
If the Secretary determines not to delegate a power specified 
in subparagraph (A), (B), (C), (D), or (E), such determination 
may not take effect until 30 days after the Secretary notifies 
the Committees on Ways and Means, Government Reform and 
Oversight, and Appropriations of the House of Representatives 
and the Committees on Finance, Governmental Affairs, and 
Appropriations of the Senate. 
"(3) 
PERSONS TO WHOM CHIEF COUNSEL REPORTS.—^The 
Chief Counsel shall report directly to the Commissioner of 
Internal Revenue, except that— 
"(A) the Chief Counsel shall report to both the Commis-
sioner and the General Counsel for the Department of 
the Treasury with respect to— 
"(i) legal advice or interpretation of the tax law 
not relating solely to tax policy; 
"(ii) tax litigation; and 
"(B) the Chief Counsel shall report to the General 
Counsel with respect to legal advice or interpretation of 
the tax law relating solely to tax policy. 
If there is any disagreement between the Commissioner and 
the General Counsel with respect to any matter jointly referred 
to them under subparagraph (A), such matter shall be submit-
ted to the Secretary or Deputy Secretary for resolution. 
"(4) 
CHIEF COUNSEL PERSONNEL.—^All personnel in 
the 
Office of Chief Counsel shall report to the Chief Counsel. 
"(c) OFFICE OF THE TAXPAYER ADVOCATE.— 
"(1) ESTABLISHMENT.— 
PUBLIC LAW 105-206-JULY 22, 1998 
112 STAT. 699 
"(A) IN GENERAL.—^There is established in the Internal 
Revenue Service an office to be known as the 'Office of 
the Taxpayer Advocate'. 
"(B) NATIONAL TAXPAYER ADVOCATE .— 
"(i) IN GENERAL.—The Office of the Taxpayer Advo-
cate shall be under the supervision and direction of 
an official to be known as the 'National Taxpayer Advo-
cate', The National Taxpayer Advocate shall report 
directly to the Commissioner of Internal Revenue and 
shall be entitled to compensation 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, or, if the Secretary of the Treas-
ury so determines, at a rate fixed under section 9503 
of such title. 
"(ii) APPOINTMENT.—The National Taxpayer Advo-
cate shall be appointed by the Secretary of the Treas-
ury after consultation with the Commissioner of 
Internal Revenue and the Oversight Board and without 
regard to the provisions of title 5, United States Code, 
relating to appointments in the competitive service 
or the Senior Executive Service. 
"(iii) QUALIFICATIONS.—^An individual appointed 
under clause (ii) shall have— 
"(I) a background in customer service as well 
as tax law; and 
"(II) experience in representing individual tax-
payers. 
"(iv) RESTRICTION ON EMPLOYMENT.—An individual 
may be appointed as the National Taxpayer Advocate 
only if such individual was not an officer or employee 
of the Internal Revenue Service during the 2-year 
period ending with such appointment and such individ-
ual agrees not to accept any emplojmient with the 
Internal Revenue Service for at least 5 years after 
ceasing to be the National Taxpayer Advocate. Service 
as an officer or employee of the Office of the Taxpayer 
Advocate shall not be taken into account in applying 
this clause. 
"(2) FUNCTIONS OF OFFICE.— 
"(A) IN GENERAL.—It shall be the function of the Office 
of the Taxpayer Advocate to— 
"(i) assist taxpayers in resolving problems with 
the Internal Revenue Service; 
"(ii) identify areas in which taxpayers have prob-
lems in dealings with the Internal Revenue Service; 
"(iii) to the extent possible, propose changes in 
the administrative practices of the Internal Revenue 
Service to mitigate problems identified under clause 
(ii); and 
"(iv) identify potential legislative changes which 
may be appropriate to mitigate such problems. 
"(B) ANNUAL REPORTS.— 
"(i) OBJECTIVES.—Not later than June 30 of each Deadline, 
calendar year, the National Taxpayer Advocate shall 
report to the Committee on Ways and Means of the 
House of Representatives and the Committee on 
112 STAT. 700 
PUBLIC LAW 105-206-^ULY 22, 1998 
Finance of the Senate on the objectives of the Office 
of the Taxpayer Advocate for the fiscal year beginning 
in such calendar year. Any such report shall contain 
full and substantive analysis, in addition to statistical 
information. 
DeadHne. 
"(ii) ACTIVITIES.—Not later than December 31 of 
each calendar year, the National Taxpayer Advocate 
shall report to the Committee on Ways and Means 
of the House of Representatives and the Committee 
on Finance of the Senate on the activities of the Office 
of the Taxpayer Advocate during the fiscal year ending 
during such calendar year. Any such report shall con-
tain full and substantive analysis, in addition to statis-
tical information, and shall— 
"(I) identify the initiatives the Office of the 
Taxpayer Advocate has taken on improving tax-
payer services and Internal Revenue Service 
responsiveness; 
"(II) contain recommendations received from 
individuals with the authority to issue Taxpayer 
Assistance Orders under section 7811; 
"(III) contain a summary of at least 20 of 
the most serious problems encountered by tax-
payers, including a description of the nature of 
such problems; 
"(IV) contain an inventory of the 
items 
described in subclauses (I), (II), and (III) for which 
action has been taken and the result of such action; 
"(V) contain an 
inventory 
of the 
items 
described in subclauses (I), (II), and (III) for which 
action remains to be completed and the period 
during which each item has remained on such 
inventory; 
"(VI) contain an inventory of the 
items 
described in subclauses (I), (II), and (III) for which 
no action has been taken, the period during which 
each item has remained on such inventory, the 
reasons for the inaction, and identify any Internal 
Revenue Service official who is responsible for such 
inaction; 
"(VII) identify any Taxpayer Assistance Order 
which was not honored by the Internal Revenue 
Service in a timely manner, as specified under 
section 7811(b); 
"(VIII) contain recommendations for 
such 
administrative and legislative action as may be 
appropriate to resolve problems encountered by 
taxpayers; 
"(IX) identify areas of the tax law that impose 
significant compliance burdens on taxpayers or the 
Internal Revenue Service, including specific rec-
ommendations for remed3dng these problems; 
"(X) identify the 10 most litigated issues for 
each category of taxpayers, including recommenda-
tions for mitigating such disputes; and 
"(XI) include such other information as the 
National T£ixpayer Advocate may deem advisable. 
PUBLIC LAW 105-206-JULY 22, 1998 
112 STAT. 701 
"(iii) REPORT TO BE SUBMITTED DIRECTLY.—^Each 
report required under this subparagraph shall be pro-
vided directly to the committees described in clause 
(i) without any prior review or comment from the 
Commissioner, the Secretary of the Treasury, the Over-
sight Board, any other officer or employee of the 
Department of the Treasury, or the Office of Manage-
ment and Budget. 
"(iv) COORDINATION WITH REPORT OF TREASURY 
INSPECTOR GENERAL FOR TAX ADMINISTRATION.—To the 
extent that information required to be reported under 
clause (ii) is also required to be reported under para-
graph (1) or (2) of subsection (d) by the Treasury 
Inspector General for Tax Administration, the National 
Taxpayer Advocate shall not contain such information 
in the report submitted under such clause. 
"(C) OTHER RESPONSIBILITIES.—^The National Taxpayer 
Advocate shall— 
"(i) monitor the coverage and geographic allocation 
of local offices of taxpayer advocates; 
"(ii) develop guidance to be distributed to all 
Internal Revenue Service officers and employees outlin-
ing the criteria for referral of taxpayer inquiries to 
local offices of taxpayer advocates; 
"(iii) ensure that the local telephone number for 
each local office of the taxpayer advocate is published 
and available to taxpayers served by the office; and 
"(iv) in conjunction 
with the Commissioner, 
develop career paths for local taxpayer advocates choos-
ing to make a career in the Office of the Taxpayer 
Advocate. 
"(D) PERSONNEL ACTIONS.— 
"(i) IN GENERAL.—^The National Taxpayer Advocate 
shall have the responsibility and authority to— 
"(I) appoint local taxpayer advocates and make 
available at least 1 such advocate for each State; 
and 
"(II) evaluate and take personnel actions 
(including dismissal) with respect to any employee 
of any local office of a taxpayer advocate described 
in subclause (I). 
"(ii) 
CONSULTATION.—The 
National 
Taxpayer 
Advocate may consult with the appropriate supervisory 
personnel of the Internal Revenue Service in carrying 
out the National Taxpayer Advocate's responsibilities 
under this subparagraph. 
"(3) RESPONSIBILITIES OF COMMISSIONER.—The Commis- Procedures, 
sioner shall establish procedures requiring a formal response 
to all recommendations submitted to the Commissioner by the 
National Taxpayer Advocate within 3 months after submission 
to the Commissioner. 
"(4) OPERATION OF LOCAL OFFICES.— 
"(A) IN GENERAL.—^Each local taxpayer advocate— 
"(i) shall report to the National Taxpayer Advocate 
or delegate thereof; 
"(ii) may consult with the appropriate supervisory 
personnel of the Internal Revenue Service regarding 
112 STAT. 702 
PUBLIC LAW 105-206—JULY 22, 1998 
the daily operation of the local office of the taxpayer 
advocate; 
Notification. 
"(iii) shall, at the initial meeting with any taxpayer 
seeking the assistance of a local office of the taxpayer 
advocate, notify such taxpayer that the taxpayer advo-
cate offices operate independently of any other Internal 
Revenue Service office and report directly to Congress 
through the National Taxpayer Advocate; and 
"(iv) may, at the taxpayer advocate's discretion, 
not disclose to the Internal Revenue Service contact 
with, or information provided by, such taxpayer. 
"(B) 
MAINTENANCE OF INDEPENDENT COMMUNICA-
TIONS.—Each local office of the taxpayer advocate shall 
maintain a separate phone, facsimile, and other electronic 
communication access, and a separate post office address. 
"(d) ADDITIONAL DUTIES OF THE TREASURY INSPECTOR GENERAL 
FOR TAX ADMINISTRATION.— 
"(1) ANNUAL REPORTING.—^The Treasury Inspector General 
for Tax Administration shall include in one of the semiannual 
reports under section 5 of the Inspector Greneral Act of 1978— 
"(A) an evaluation of the compliance of the Internal 
Revenue Service with— 
"(i) restrictions under section 1204 of the Internal 
Revenue Service Restructuring and Reform Act of 1998 
on the use of enforcement statistics to evaluate Internal 
Revenue Service employees; 
"(ii) restrictions under section 7521 on directly con-
tacting taxpayers who have indicated that they prefer 
their representatives be contacted; 
"(iii) required procedures under section 6320 upon 
the filing of a notice of a lien; 
"(iv) required procedures under subchapter D of 
chapter 64 for seizure of property for collection of taxes, 
including required procedures under section 6330 
regarding levies; and 
"(v) restrictions under section 3707 of the Internal 
Revenue Service Restructuring and Reform Act of 1998 
on designation of taxpayers; 
"(B) a review and a certification of whether or not 
the Secretary is complying with the requirements of section 
6103(e)(8) to disclose information to an individual filing 
a joint return on collection activity involving the other 
individual filing the return; 
"(C) information regarding extensions of the statute 
of limitations for assessment and collection of tax under 
section 6501 and the provision of notice to taxpayers 
regarding requests for such extension; 
"(D) an evaluation of the adequacy and security of 
the technology of the Internal Revenue Service; 
"(E) any termination or mitigation under section 1203 
of the Internal Revenue Service Restructuring and Reform 
Act of 1998; 
"(F) information regarding improper denial of requests 
for information from the Internal Revenue Service identi-
fied under paragraph (3)(A); and 
PUBLIC LAW 105-206—JULY 22, 1998 
112 STAT. 703 
"(G) information regarding any administrative or civil 
actions with respect to violations of the fair debt collection 
provisions of section 6304, including— 
"(i) a summary of such actions initiated since the 
date of the last report; and 
"(ii) a summary of any judgments or awards 
granted as a result of such actions. 
"(2) SEMIANNUAL REPORTS.— 
"(A) IN GENERAL.—^The Treasury Inspector Greneral for 
Tax Administration shall include in each semiannual report 
under section 5 of the Inspector General Act of 1978— 
"(i) the number of taxpayer complaints during the 
reporting period; 
"(ii) the number of employee misconduct and tax-
payer abuse allegations received by the Internal Reve-
nue Service or the Inspector General during the period 
from taxpayers. Internal Revenue Service employees, 
and other sources; 
"(iii) a summary of the status of such complaints 
and allegations; and 
"(iv) a summary of the disposition of such com-
plaints and allegations, including the outcome of any 
Department of Justice action and any monies paid 
as a settlement of such complaints and allegations. 
"(B) Clauses (iii) and (iv) of subparagraph (A) shall Applicability, 
only apply to complaints and allegations of serious 
employee misconduct. 
"(3) OTHER RESPONSIBILITIES.—The Treasury 
Inspector 
General for Tax Administration shall— 
"(A) conduct periodic audits of a statistically valid sam-
ple of the total number of determinations made by the 
Internal Revenue Service to deny written requests to dis-
close information to taxpayers on the basis of section 6103 
of this title or section 552(b)(7) of title 5, United States 
Code; and 
"(B) establish and maintain a toll-free telephone num-
ber for taxpayers to use to confidentially register com-
plaints of misconduct by Internal Revenue Service employ-
ees and incorporate the telephone number in the statement 
required by section 6227 of the Omnibus Taxpayer Bill 
of Rights (Internal Revenue Service Publication No. 1).". 
(b) NOTICE OF RIGHT TO CONTACT OFFICE INCLUDED IN NOTICE 
OF DEFICIENCY.—Section 6212(a) (relating to notice of deficiency) 
is amended by adding at the end the following new sentence: 
"Such notice shall include a notice to the taxpayer of the taxpayer's 
right to contact a local office of the taxpayer advocate and the 
location and phone number of the appropriate office.". 
(c) EXPANSION OF AUTHORITY TO ISSUE TAXPAYER ASSISTANCE 
ORDERS.—Section 7811(a) (relating to taxpayer assistance orders) 
is amended to read as follows: 
"(a) AUTHORITY T O ISSUE.— 
"(1) IN GENERAL.—^Upon application filed by a taxpayer 
with the Office of the Taxpayer Advocate (in such form, manner, 
and at such time as the Secretary shall by regulations pre-
scribe), the National Taxpayer Advocate may issue a Taxpayer 
Assistance Order if— 
Communications 
and tele-
communication. 
Regulations. 
112 STAT. 704 
PUBLIC LAW 105-206—JULY 22, 1998 
"(A) the National Taxpayer Advocate determines the 
taxpayer is suffering or about to suffer a significant 
hardship as a result of the manner in which the internal 
revenue laws are being administered by the Secretary; 
or 
"(B) the taxpayer meets such other requirements as 
are set forth in regulations prescribed by the Secretary. 
"(2) 
DETERMINATION 
OF 
HARDSHIP.—For 
purposes 
of 
paragraph (1), a significant hardship shall include— 
"(A) an immediate threat of adverse action; 
"(B) a delay of more than 30 days in resolving taxpayer 
account problems; 
"(C) the incurring by the taxpayer of significant costs 
(including fees for professional representation) if relief is 
not granted; or 
"(D) irreparable injury to, or a long-term adverse 
impact on, the taxpayer if relief is not granted. 
"(3) 
STANDARD WHERE 
ADMINISTRATIVE 
GUIDANCE NOT 
FOLLOWED.—In cases where any Internal Revenue Service 
employee is not following applicable published administrative 
guidance (including the Internal 
Revenue Manual), the 
National Taxpayer Advocate shall construe the factors taken 
into account in determining whether to issue a taxpayer assist-
ance order in the manner most favorable to the taxpayer.". 
(d) 
CONFORMING 
AMENDMENTS 
RELATING 
TO 
NATIONAL 
TAXPAYER ADVOCATE.— 
(1) The following provisions are each amended by striking 
"Taxpayer Advocate" each place it appears and inserting 
"National Taxpayer Advocate": 
(A) Section 6323(j)(l)(D) (relating to withdrawal of 
notice in certain circumstances). 
(B) Section 6343(d)(2)(D) (relating to return of property 
in certain cases). 
(C) Section 7811(b)(2)(D) (relating to terms of a 
Taxpayer Assistance Order). 
(D) Section 7811(c) (relating to authority to modify 
or rescind). 
(E) Section 7811(d)(2) (relating to suspension of 
running of period of limitation). 
(F) Section 7811(e) (relating to independent action of 
Taxpayer Advocate). 
(G) Section 7811(f) (relating to Taxpayer Advocate). 
(2) Section 7811(d)(1) (relating to suspension of running 
of period of limitation) is amended by striking "Taxpayer 
Advocate's" and inserting "National Taxpayer Advocate's". 
(3) The headings of subsections (e) and (f) of section 7811 
are each amended by striking "TAXPAYER ADVOCATE" and 
inserting "NATIONAL TAXPAYER ADVOCATE". 
(e) ADDITIONAL CONFORMING AMENDMENTS.— 
(1) The table of sections for subchapter A of chapter 80 
is amended by striking the item relating to section 7803 and 
inserting the following new item: 
"Sec. 7803. Commissioner of Internal Revenue; other officials.". 
(2) Section 5109 of title 5, United States Code, is amended 
by striking subsection (b) and redesignating subsection (c) as 
subsection (b). 
PUBLIC LAW 105-206—JULY 22, 1998 
112 STAT. 705 
(3) Section 7611(fXl) (relating to restrictions on church 
tax inquiries and examinations) is amended by striking 
"Assistant Commissioner for Employee Plans and Exempt 
Organizations of the Internal Revenue Service" and inserting 
"Secretary". 
(f) EFFECTIVE DATE.— 
26 use 7803 
(1) IN GENERAL.—^Except as provided in paragraph (2), the no^. 
amendments made by this section shall take effect on the 
date of the enactment of this Act. 
(2) CHIEF COUNSEL.—Section 7803(b)(3) of the Internal 
Revenue Code of 1986, as added by this section, shall take 
effect on the date that is 90 days after the date of the enactment 
of this Act. 
(3) 
NATIONAL 
TAXPAYER 
ADVOCATE.—Notwithstanding 
section 7803(c)(l)(B)(iv) of such Code, as added by this section, 
in appointing the first National Taxpayer Advocate after 
the date of the enactment of this Act, the Secretary of the 
Treasury— 
(A) shall not appoint any individual who was an officer 
or employee of the Internal Revenue Service at any time 
during the 2-year period ending on the date of appointment; 
and 
(B) need not consult with the Internal Revenue Service 
Oversight Board if the Oversight Board has not been 
appointed. 
(4) CURRENT OFFICERS.— 
(A) In the case of an individual serving as Commis-
sioner of Internal Revenue on the date of the enactment 
of this Act who was appointed to such position before 
such date, the 5-year term required by section 7803(a)(1) 
of such Code, as added by this section, shall begin as 
of the date of such appointment. 
(B) Clauses (ii), (iii), and (iv) of section 7803(c)(1)(B) 
of such Code, as added by this section, shall not apply 
to the individual serving as Taxpayer Advocate on the 
date of the enactment of this Act. 
SEC. 1103. TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRA-
TION. 
(a) 
ESTABLISHMENT OF TWO INSPECTORS 
GENERAL IN THE 
DEPARTMENT OF THE TREASURY.—Section 2 of the Inspector General 
Act of 1978 (5 U.S.C. App.) is amended by striking the matter 
following paragraph (3) and inserting the following: 
"there is established— 
"(A) in each of such establishments an office of Inspec-
tor General, subject to subparagraph (B); and 
"(B) in the establishment of the Department of the 
Treasury— 
"(i) an Office of Inspector Greneral of the Depart-
ment of the Treasury; and 
"(ii) an OfRce of Treasury Inspector General for 
Tax Administration.". 
(b) AMENDMENTS TO SECTION 8 D OF THE INSPECTOR GENERAL 
ACT OF 1978.— 
(1) LIMITATION ON AUTHORITY OF INSPECTOR GENERAL.— 
Section 8D(a) of the Inspector General Act of 1978 (5 U.S.C. 
112 STAT. 706 
PUBLIC LAW 105-206—JULY 22, 1998 
5 u s e app. 
Procedures. 
5 u s e app. 
App.) is amended by adding at the end the following new 
paragraph: 
"(4) The Secretary of the Treasury may not exercise any 
power under paragraph (1) or (2) with respect to the Treasury 
Inspector General for Tax Administration.". 
(2) DUTIES OF INSPECTOR GENERAL OF THE DEPARTMENT 
OF THE TREASURY; 
RELATIONSHIP 
TO 
THE 
TREASURY 
INSPECTOR 
GENERAL FOR TAX ADMINISTRATION.—Section 8D(b) of such Act 
is amended— 
(A) by inserting "(1)" after "(b)"; and 
(B) by adding at the end the following new paragraphs: 
"(2) The Inspector General of the Department of the Treas-
ury shall exercise all duties and responsibilities of an Inspector 
General for the Department of the Treasury other than the 
duties and responsibilities exercised by the Treasury Inspector 
General for Tax Administration. 
"(3) The Secretary of the Treasury shall establish proce-
dures under which the Inspector General of the Department 
of the Treasury and the Treasury Inspector Greneral for Tax 
Administration will— 
"(A) determine how audits and investigations are 
allocated in cases of overlapping jurisdiction; and 
"(B) provide for coordination, cooperation, and effi-
ciency in the conduct of such audits and investigations.". 
(3) 
ACCESS TO RETURNS AND RETURN INFORMATION.— 
Section 8D(e) of such Act is amended— 
(A) in paragraph (1), by striking "Inspector General" 
and inserting "Treasury Inspector General for Tax Adminis-
tration"; 
(B) in paragraph (2), by striking all beginning with 
"(2)" through subparagraph (B); 
(C)(i) by redesignating subparagraph (C) of paragraph 
(2) as paragraph (2) of such subsection; and 
(ii) in such redesignated paragraph (2), by striking 
"Inspector General" and inserting "Treasury Inspector Gen-
eral for Tax Administration"; and 
(D)(i) by redesignating subparagraph (D) of such 
paragraph as paragraph (3) of such subsection; and 
(ii) in such redesignated paragraph (3), by striking 
"Inspector General" and inserting "Treasury Inspector (Gen-
eral for Tax Administration". 
(4) 
EFFECT 
ON 
CERTAIN 
FINAL 
DECISIONS 
OF 
THE 
SECRETARY.—Section 8D(f) of such Act is amended by striking 
"Inspector General" and inserting "Inspector General of the 
Department of the Treasury or the Treasury Inspector General 
for Tax Administration". 
(5) REPEAL OF LIMITATION ON REPORTS TO THE ATTORNEY 
GENERAL.—Section 8D of such Act is amended by striking 
subsection (g). 
(6) TRANSMISSION OF REPORTS.—Section 8D(h) of such Act 
is amended— 
(A) by striking "(h)" and inserting "(g)(1)"; 
(B) by striking "and the Committees on Grovernment 
Operations and Ways and Means of the House of Represent-
atives" and inserting "and the Committees on Government 
Reform and Oversight and Ways and Means of the House 
of Representatives"; and 
PUBLIC LAW 105-206-^JULY 22, 1998 
112 STAT. 707 
(C) by adding at the end the following new paragraph: 
"(2) Any report made by the Treasury Inspector General for 
Tax Administration that is required to be transmitted by the Sec-
retary of the Treasury to the appropriate committees or subcommit-
tees of Congress under section 5(d) shall also be transmitted, within 
the 7-day period specified under such subsection, to the Internal 
Revenue Service Oversight Board and the Commissioner of Internal 
Revenue.". 
(7) TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRA-
TION.—Section 8D of the Act is amended by adding at the 5USCapp. 
end the following new subsections: 
"(h) The Treasury Inspector General for Tax Administration 
shall exercise all duties and responsibilities of an Inspector General 
of an establishment with respect to the Department of the Treasury 
and the Secretary of the Treasury on all matters relating to the 
Internal Revenue Service. The Treasury Inspector General for Tax 
Administration shall have sole authority under this Act to conduct 
an audit or investigation of the Internal Revenue Service Oversight 
Board and the CWef Counsel for the Internal Revenue Service. 
"(i) In addition to the requirements of the first sentence of 
section 3(a), the Treasury Inspector General for Tax Administration 
should have demonstrated ability to lead a large and complex 
organization. 
"(j) An individual appointed to the position of Treasury Inspec-
tor General for Tax Administration, the Assistant Inspector General 
for Auditing of the Office of the Treasury Inspector Greneral for 
Tax Administration under section 3(d)(1), the Assistant Inspector 
General for Investigations of the Office of the Treasury Inspector 
General for Tax Administration under section 3(d)(2), or any posi-
tion of Deputy Inspector General of the Office of the Treasury 
Inspector General for Tax Administration may not be an employee 
of the Internal Revenue Service— 
"(1) during the 2-year period preceding the date of appoint-
ment to such position; or 
"(2) during the 5-year period following the date such 
individual ends service in such position. 
"(k)(l) In addition to the duties and responsibilities exercised 
by an inspector general of an establishment, the Treasury Inspector 
General for Tax Administration— 
"(A) shall have the duty to enforce criminal provisions 
under section 7608(b) of the Internal Revenue Code of 1986; 
"(B) in addition to the functions authorized under section 
7608(b)(2) of such Code, may carry firearms; 
"(C) shall be responsible for protecting the Internal Reve-
nue Service against external attempts to corrupt or threaten 
employees of the Internal Revenue Service, but shall not be 
responsible for the conducting of background checks and the 
providing of physical security; and 
"(D) may designate any employee in the Office of the Treas-
ury Inspector General for Tax Administration to enforce such 
laws and perform such functions referred to under subpara-
graphs (A), (B), and (C). 
"(2)(A) In performing a law enforcement function under para-
graph (1), the Treasury Inspector General for Tax Administration 
shall report any reasonable grounds to believe there has been 
a violation of Federal criminal law to the Attorney General at 
112 STAT. 708 
PUBLIC LAW 105-206—JULY 22, 1998 
an appropriate time as determined by the Treasury Inspector Gen-
eral for Tax Administration, notwithstanding section 4(d). 
"(B) In the administration of section 5(d) and subsection (g)(2) 
of this section, the Secretary of the Treasury may transmit the 
required report with respect to the Treasury Inspector General 
for Tax Administration at an appropriate time as determined by 
the Secretary, if the problem, abuse, or deficiency relates to— 
"(i) the performance of a law enforcement function under 
paragraph (1); and 
"(ii) sensitive information concerning matters under sub-
section (a)(1)(A) through (F). 
"(3) Nothing in this subsection shall be construed to affect 
the authority of any other person to carry out or enforce any 
provision specified in paragraph (1). 
"(1)(1) The Commissioner of Internal Revenue or the Internal 
Revenue Service Oversight Board may request, in writing, the 
Treasury Inspector General for Tax Administration to conduct an 
audit or investigation relating to the Internal Revenue Service. 
If the Treasury Inspector General for Tax Administration deter-
mines not to conduct such audit or investigation, the Inspector 
General shall timely provide a written explanation for such deter-
mination to the person making the request. 
Reports. 
"(2)(A) Any final report of an audit conducted by the Treasury 
Inspector General for Tax Administration shall be timely submitted 
by the Inspector General to the Commissioner of Internal Revenue 
and the Internal Revenue Service Oversight Board. 
Records. 
"(B) The Treasury Inspector General for Tax Administration 
shall periodically submit to the Commissioner and Board a list 
of investigations for which a final report has been completed by 
the Inspector General and shall provide a copy of any such report 
upon request of the Commissioner or Board. 
Applicability. 
"(C) This paragraph 
applies regardless of whether the 
applicable audit or investigation is requested under paragraph (1).". 
(c) TRANSFER OF FUNCTIONS.— 
(1) IN GENERAL.—Section 9(a)(1) of the Inspector General 
Act of 1978 (5 U.S.C. App.) is amended in subparagraph (L)— 
(A) by inserting "(i)" after "(L)"; 
(B) by inserting "and" after the semicolon; and 
(C) by adding at the end the following new clause: 
"(ii) of the Treasury Inspector General for Tax 
Administration, effective 180 days after the date of 
the enactment of the Internal 
Revenue 
Service 
Restructuring and Reform Act of 1998, the Office of 
Chief Inspector of the Internal Revenue Service;". 
X (2) TERMINATION OF OFFICE OF CHIEF INSPECTOR.—^Effective 
upon the transfer of functions under the amendment made 
by paragraph (1), the Office of Chief Inspector of the Internal 
Revenue Service is terminated. 
(3) RETENTION OF CERTAIN INTERNAL AUDIT PERSONNEL.— 
In making the transfer under the amendment made by para-
graph (1), the Commissioner of Internal Revenue shall des-
ignate and retain an appropriate number (not in excess of 
300) of internal audit full-time equivalent employee positions 
necessary for management relating to the Internal Revenue 
Service. 
Effective date. 
(4) ADDITIONAL PERSONNEL TRANSFERS.—Effective 180 d a y s 
5 use app. 
after the date of the enactment of this Act, the Secretary 
Effective date. 
Effective date. 
5 u s e app. 
5 u s e app. 
PUBLIC LAW 105-206-^ULY 22, 1998 
112 STAT. 709 
of the Treasury shall transfer 21 full-time equivalent positions 
from the Office of the Inspector General of the Department 
of the Treasury to the Office of the Treasury Inspector General 
for Tax Administration. 
(d) AUDITS AND REPORTS OF AGENCY FINANCIAL STATEMENTS.— 3i use 3521 
Subject to section 352 Kg) of title 31, United States Code— 
"ote. 
(1) the Inspector General of the Department of the Treasury 
shall, subject to paragraph (2)— 
(A) audit each financial statement in accordance with 
section 3521(e) of such title; and 
(B) prepare and submit each report required under 
section 3521(f) of such title; and 
(2) the Treasury Inspector General for Tax Administration 
shall— 
(A) audit that portion of each financial statement 
referred to under paragraph (1)(A) that relates to custodial 
and administrative accounts of the Internal Revenue 
Service; and 
(B) prepare that portion of each report referred to 
under paragraph (1)(B) that relates to custodial and 
administrative accounts of the Internal Revenue Service. 
(e) TECHNICAL AND CONFORMING AMENDMENTS.— 
(1) TRANSFER OF FUNCTIONS.—Section 8D(b) of the Inspec-
tor General Act of 1978 (5 U.S.C. App.) is amended by striking 
"and the internal audits and internal investigations performed 
by the Office of Assistant Commissioner (Inspection) of the 
Internal Revenue Service". 
(2) AMENDMENTS RELATING TO REFERENCES TO THE INSPEC-
TOR GENERAL OF THE DEPARTMENT OF THE TREASURY.— 
(A) LIMITATION ON AUTHORITY.—Section 8D(a) 
of 
the 
Inspector General Act of 1978 (5 U.S.C. App.) is amended— 
(i) in the first sentence of paragraph (1), by insert-
ing "of the Department of the Treasu^' aft;er "Inspec-
tor General"; 
(ii) in paragraph (2), by inserting "of the Depart-
ment of the Treasury" after "prohibit the Inspector 
General"; and 
(iii) in paragraph (3)— 
(I) in the first sentence, by inserting "of the 
Department of the Treasury" sifter "notify the 
Inspector General"; and 
(II) in the second sentence, by inserting "of 
the Department of the Treasury" after "notice, the 
Inspector General". 
(B) DUTIES.—Section 8D(b) of such Act is amended 
in the second sentence by inserting "of the Department 
of the Treasury" after "Inspector General". 
(C) AUDITS AND INVESTIGATIONS.—Section 8D (c) 
and 
(d) of such Act are amended by inserting "of the Depart-
ment of the Treasury" after "Inspector General" each place 
it appears. 
(3) REFERENCES.—^The second section 8G of the Inspector 
General Act of 1978 (relating to rule of construction of special 
provisions) is amended— 
(A) by striking "SEC. 8 G " and inserting "SEC. 8H"; 
(B) by striking "or 8E" and inserting "8E or 8F"; and 
112 STAT. 710 
PUBLIC LAW 105-206-^JULY 22, 1998 
(C) by striking "section 8F(a)" and inserting "section 
8G(a)". 
(4) AMENDMENT TO INTERNAL REVENUE CODE OF I986.— 
Section 7608(b)(1) is amended by striking "or of the Internal 
Security Division". 
SEC. 1104. OTHER PERSONNEL. 
(a) IN GENERAL.—Section 7804 (relating to the effect of reorga-
nization plans) is amended to read as follows: 
"SEC. 7804. OTHER PERSONNEL. 
"(a) APPOINTMENT AND SUPERVISION.—Unless otherwise pre-
scribed by the Secretary, the Commissioner of Internal Revenue 
is authorized to employ such number of persons as the Commis-
sioner deems proper for the administration and enforcement of 
the internal revenue laws, and the Commissioner shall issue all 
necessary directions, instructions, orders, and rules applicable to 
such persons. 
"(b) POSTS OF DUTY OF EMPLOYEES IN FIELD SERVICE OR 
TRAVELING.—Unless otherwise prescribed by the Secretary— 
"(1) DESIGNATION OF POST OF DUTY.—^The Commissioner 
shall determine and designate the posts of duty of all such 
persons engaged in field work or traveling on official business 
outside of the District of Columbia. 
"(2) DETAIL OF PERSONNEL FROM FIELD SERVICE.—^The 
Commissioner may order any such person engaged in field 
work to duty in the District of Columbia, for such periods 
as the Commissioner may prescribe, and to any designated 
post of duty outside the District of Columbia upon the comple-
tion of such duty. 
"(c) DELINQUENT INTERNAL REVENUE OFFICERS AND EMPLOY-
EES.—If any officer or employee of the Treasury Department acting 
in connection with the internal revenue laws fails to account for 
and pay over any amount of money or property collected or received 
by him in connection with the internal revenue laws, the Secretary 
shall issue notice and demand to such officer or employee for 
pa5mient of the amount which he failed to account for and pay 
over, and, upon failure to pay the amount demanded within the 
time specified in such notice, the amount so demanded shall be 
deemed imposed upon such officer or employee and assessed upon 
the date of such notice and demand, and the provisions of chapter 
64 and all other provisions of law relating to the collection of 
assessed taxes shall be applicable in respect of such amount.". 
(b) CONFORMING AMENDMENTS.— 
(1) Subsection (b) of section 6344 is amended by striking 
"section 7803(d)" and inserting "section 7804(c)". 
(2) The table of sections for subchapter A of chapter 80 
is amended by striking the item relating to section 7804 and 
inserting the following new item: 
"Sec. 7804. Other personnel.". 
26 use 7804 
(c) EFFECTIVE DATE.—^The amendments made by this section 
note. 
shall take effect on the dateof the enactment of this Act. 
PUBLIC LAW 105-206—JULY 22, 1998 
112 STAT. 711 
SEC. 1105. PROHIBITION ON EXECUTTVE BRANCH INFLUENCE OVER 
TAXPAYER AUDITS AND OTHER INVESTIGATIONS. 
(a) IN GENERAL.—Part I of subchapter A of chapter 75 (relating 
to crimes, other offenses, and forfeitures) is amended by adding 
after section 7216 the following new section: 
"SEC. 7217. PROHIBITION ON EXECUTIVE BRANCH INFLUENCE OVER 
TAXPAYER AUDITS AND OTHER INVESTIGATIONS. 
"(a) PROHIBITION.—It shall be unlawful for any applicable per-
son to request, directly or indirectly, any officer or employee of 
the Internal Revenue Service to conduct or terminate an audit 
or other investigation of any particular teixpayer with respect to 
the tax liability of such taxpayer. 
"(b) REPORTING REQUIREMENT.—^Any officer or employee of the 
Internal Revenue Service receiving any request prohibited by sub-
section (a) shall report the receipt of such request to the Treasury 
Inspector Greneral for Tax Administration. 
"(c) EXCEPTIONS.—Subsection (a) shall not apply to any written 
request made— 
"(1) to an applicable person by or on behalf of the taxpayer 
and forwarded by such applicable person to the Internal Reve-
nue Service; 
"(2) by an applicable person for disclosure of return or 
return information under section 6103 if such request is made 
in accordance with the requirements of such section; or 
"(3) by the Secretary of the Treasury as a consequence 
of the implementation of a change in teix policy. 
"(d) PENALTY.—^Any person who willfully violates subsection 
(a) or fails to report under subsection (b) shall be punished upon 
conviction by a fine in any amount not exceeding $5,000, or impris-
onment of not more than 5 years, or both, together with the costs 
of prosecution. 
"(e) APPLICABLE PERSON.—^For purposes of this section, the 
term 'applicable person' means— 
"(1) the President, the Vice President, any employee of 
the executive office of the President, and any employee of 
the executive office of the Vice President; and 
"(2) any individual (other than the Attorney General of 
the United States) serving in a position specified in section 
5312 of title 5, United States Code.". 
(b) CLERICAL AMENDMENT.—The table of sections for part I 
of subchapter A of chapter 75 is amended by adding after the 
item relating to section 7216 the following new item: 
"Sec. 7217. Prohibition on executive branch influence over taxpayer audits 
and other investigations.". 
(c) EFFECTIVE DATE.—^The amendments made by this section 26USC7217 
shall apply to requests made after the date of the enactment of note. 
this Act. 
^ Subtitle C—^Personnel Flexibilities 
SEC. 1201. IMPROVEMENTS IN PERSONNEL FLEXIBILITIES. 
(a) IN GENERAL.—Part III of title 5, United States Code, is 
amended by adding at the end the following new subpart: 
58-194 O - 98 - 24 : QL 3 Part 1 
112 STAT. 712 
PUBLIC LAW 105-206-JULY 22, 1998 
'^Subpart I—^Miscellaneous 
"CHAPTER 95—PERSONNEL FLEXIBILITIES RELATING 
TO THE INTERNAL REVENUE SERVICE 
"Sec. 
"9501. Internal Revenue Service personnel flexibilities. 
"9502. Pay authority for critical positions. 
"9503. Streamlined critical pay authority. 
"9504. Recruitment, retention, relocation incentives, and relocation expenses. 
"9505. Performance awards for senior executives. 
"9506. Limited appointments to career reserved Senior Executive Service positions. 
"9507. Streamlined demonstration project authority. 
"9508. General workforce performance management system. 
"9509. General workforce classification and pay. 
"9510. General workforce staffing. 
"§ 9501. Internal Revenue Service personnel flexibilities 
"(a) Any flexibilities provided by sections 9502 through 9510 
of this chapter shall be exercised in a manner consistent with— 
"(1) chapter 23 (relating to merit system principles and 
prohibited personnel practices); 
"(2) provisions relating to preference eligibles; 
"(3) except as otherwise specifically provided, section 5307 
(relating to the aggregate limitation on pay); 
"(4) except as otherwise specifically provided, chapter 71 
(relating to labor-management relations); and 
"(5) subject to subsections (b) and (c) of section 1104, as 
though such authorities were delegated to the Secretary of 
the IVeasury under section 1104(a)(2). 
"(b) The Secretary of the Treasury shall provide the Office 
of Personnel Management with any information that Office requires 
in carrying out its responsibilities under this section. 
"(c) Employees within a unit to which a labor organization 
is accorded exclusive recognition under chapter 71 shall not be 
subject to any flexibility provided by sections 9507 through 9510 
of this chapter unless the exclusive representative and the Internal 
Revenue Service have entered into a written agreement which 
specifically provides for the exercise of that flexibility. Such written 
agreement may be imposed by the Federal Services Impasses Panel 
under section 7119. 
'*§ 9502. Pay authority for critical positions 
"(a) When the Secretary of the Treasury seeks a grant of 
authority under section 5377 for critical pay for 1 or more positions 
at the Internal Revenue Service, the Office of Management and 
Budget may fix the rate of basic pay, notwithstanding sections 
5377(d)(2) and 5307, at any rate up to the salary set in accordance 
with section 104 of title 3. 
"(b) Notwithstanding section 5307, no allowance, diffierential, 
bonus, award, or similar cash pa3anent may be paid to any employee 
receiving critical pay at a rate fixed under subsection (a), in any 
calendar year if, or to the extent that, the employee's total annual 
compensation will exceed the maximum amount of total annual 
compensation payable at the salary set in accordance with section 
104 of title 3. 
*'§ 9503. Streamlined critical pay authority 
"(a) Notwithstanding section 9502, and without regard to the 
provisions of this title governing appointments in the competitive 
PUBLIC LAW 105-206-JULY 22, 1998 
112 STAT. 713 
service or the Senior Executive Service and chapters 51 and 53 
(relating to classification and pay rates), the Secretary of the Treas-
ury may, for a period of 10 years after the date of enactment 
of this section, establish, fix the compensation of, and appoint 
individuals to, designated critical administrative, technical, and 
professional positions needed to carry out the functions of the 
Internal Revenue Service, if— 
"(1) the positions— 
"(A) require expertise of an extremely high level in 
an administrative, technical, or professional field; and 
"(B) are critical to the Internal Revenue Service's 
successful accomplishment of an important mission; 
"(2) exercise of the authority is necessary to recruit or 
retain an individual exceptionally well qualified for the position; 
"(3) the number of such positions does not exceed 40 at 
any one time; 
"(4) designation of such positions are approved by the 
Secretary of the Treasury; 
"(5) the terms of such appointments are limited to no 
more than 4 years; 
"(6) appointees to such positions were not Internal Revenue 
Service employees prior to June 1, 1998; 
"(7) total annual compensation for any appointee to such 
positions does not exceed the highest total annual compensation 
payable at the rate determined under section 104 of title 3; 
and 
"(8) all such positions are excluded from the collective 
bargaining unit. 
"(b) Individuals appointed under this section shall not be consid-
ered to be employees for purposes of subchapter II of chapter 
75. 
**§9504. Recruitment, retention, relocation incentives, and 
relocation expenses 
"(a) For a period of 10 years after the date of enactment 
of this section and subject to approval by the Office of Personnel 
Management, the Secretary of the Treasury may provide for vari-
ations from sections 5753 and 5754 governing payment of recruit-
ment, relocation, and retention incentives. 
"(b) For a period of 10 years after the date of enactment 
of this section, the Secretary of the Treasury may pay from appro-
priations made to the Internal Revenue Service allowable relocation 
expenses under section 5724a for employees transferred 
or 
reemployed and allowable travel and transportation expenses under 
section 5723 for new appointees, for any new appointee appointed 
to a position for which pay is fixed under section 9502 or 9503 
after June 1, 1998. 
*
*
§ 9505. Performance awards for senior executives 
"(a) For a period of 10 years after the date of enactment 
of this section. Internal Revenue Service senior executives who 
have program management responsibility over significant functions 
of the Internal Revenue Service may be paid a performance bonus 
without regard to the limitation in section 5384(b)(2) if the Secretary 
of the Treasury finds such award warranted based on the executive's 
performance. 
112 STAT. 714 
PUBLIC LAW 105-206-JULY 22, 1998 
"(b) In evaluating an executive's performance for purposes of 
an award under this section, the Secretary of the Treasury shall 
take into account the executive's contributions toward the successful 
accomplishment of goals and objectives established under the 
Government Performance and Results Act of 1993, division E of 
the Clinger-Cohen Act of 1996 (Public Law 104-106; 110 Stat. 
679), Revenue Procedure 64-22 (as in effect on July 30, 1997), 
taxpayer service surveys, and other performance metrics or plans 
established in consultation with the Internal Revenue Service Over-
sight Board. 
"(c) Any award in excess of 20 percent of an executive's rate 
of basic pay shall be approved by the Secretary of the Treasury. 
"(d) Notwithstanding section 5384(b)(3), the Secretary of the 
Treasury shall determine the aggregate amount of performance 
awards available to be paid during any fiscal year under this 
section and section 5384 to career senior executives in the Internal 
Revenue Service. Such amount may not exceed an amount equal 
to 5 percent of the aggregate amount of basic pay paid to career 
senior executives in the Internal Revenue Service during the preced-
ing fiscal year. The Internal Revenue Service shall not be included 
in the determination under section 5384(b)(3) of the aggregate 
amount of performance awards payable to career senior executives 
in the Department of the Treasury other than the Internal Revenue 
Service, 
"(e) Notwithstanding section 5307, a performance bonus award 
may not be paid to an executive in a calendar year if, or to the 
extent that, the executive's total annual compensation will exceed 
the maximum amount of total annual compensation payable at 
the rate determined under section 104 of title 3. 
^'§9506. Limited appointments to career reserved Senior 
Executive Service positions 
"(a) In the application of section 3132, a 'career reserved posi-
tion' in the Internal Revenue Service means a position designated 
under section 3132(b) which may be filled only by— 
"(1) a career appointee; or 
"(2) a limited emergency appointee or a limited term 
appointee— 
"(A) who, immediately upon entering the career 
reserved position, was serving under a career or career-
conditional appointment outside the Senior Executive 
Service; or 
"(B) whose limited emergency or limited term appoint-
ment is approved in advance by the Office of Personnel 
Management, 
"(b)(1) The number of positions described under subsection (a) 
which are filled by an appointee as described under paragraph 
(2) of such subsection may not exceed 10 percent of the total 
number of Senior Executive Service positions in the Internal Reve-
nue Service. 
"(2) Notwithstanding section 3132— 
"(A) the term of an appointee described under subsection 
(a)(2) may be for any period not to exceed 3 years; and 
"(B) such an appointee may serve— 
"(i) two such terms; or 
"(ii) two such terms in addition to any unexpired term 
applicable at the time of appointment. 
PUBLIC LAW 105-206—JULY 22, 1998 
112 STAT. 715 
"§ 9507. Streamlined demonstration project authority 
"(a) The exercise of any of the flexibiUties under sections 9502 
through 9510 shall not affect the authority of the Secretary of 
the Treasury to implement for the Internal Revenue Service a 
demonstration project subject to chapter 47, as provided in sub-
section (b). 
"(b) In applying section 4703 to a demonstration project 
described in section 4701(a)(4) which involves the Internal Revenue 
Service— 
"(1) section 4703(b)(1) shall be deemed to read as follows: 
"'(1) develop a plan for such project which describes its 
purpose, the employees to be covered, the project itself, its 
anticipated outcomes, and the method of evaluating the 
project;'; 
"(2) section 4703(b)(3) shall not apply; 
"(3) the 180-day notification period in section 4703(b)(4) 
shall be deemed to be a notification period of 30 days; 
"(4) section 4703(b)(6) shall be deemed to read as follows: 
" '(6) provides each House of Congress with the final version 
of the plan.'; 
"(5) section 4703(c)(1) shall be deemed to read as follows: 
"*(1) subchapter V of chapter 63 or subpart G of part 
III of this title;'; 
"(6) the requirements of paragraphs (1)(A) and (2) of section 
4703(d) shall not apply; and 
"(7) notwithstanding section 4703(d)(1)(B), based on an 
evaluation as provided in section 4703(h), the Office of Person-
nel Management and the Secretary of the Treasury, except 
as otherwise provided by this subsection, may waive the termi-
nation date of a demonstration project under section 4703(d). 
"(c) At least 90 days before waiving the termination date under Deadline, 
subsection (b)(7), the Office of Personnel Management shall publish Federal Register, 
in the Federal Register a notice of its intention to waive the termi- Publication, 
nation date and shall inform in writing both Houses of Congress 
of its intention. 
*
*
§ 9508. General workforce performance management system 
"(a) In lieu of a performance appraisal system established under 
section 4302, the Secretary of the Treasury shall, within 1 year 
after the date of enactment of this section, establish for the Internal 
Revenue Service a performance management system that— 
"(1) maintains individual accountability by— 
"(A) establishing one or more retention standards for 
each employee related to the work of the employee and 
expressed in terms of individual performance, and commu-
nicating such retention standards to employees; 
"(B) making periodic determinations of whether each 
employee meets or does not meet the employee's established 
retention standards; and 
"(C) taking actions, in accordance with applicable laws 
and regulations, with respect to any employee whose 
performance does not meet established retention standards, 
including denying any increases in basic pay, promotions, 
and credit for performance under section 3502, and taking 
one or more of the following actions: 
"(i) Reassignment. 
112 STAT. 716 
PUBLIC LAW 105-206-^JULY 22, 1998 
"(ii) An action under chapter 43 or chapter 75 
of this title. 
"(iii) Any other appropriate action to resolve the 
performance problem; and 
"(2) except as provided under section 1204 of the Internal 
Revenue Service Restructuring and Reform Act of 1998, 
strengthens the system's effectiveness by— 
"(A) establishing goals or objectives for individual, 
group, or organizational performance (or any combination 
thereof), consistent with the Internal Revenue Service's 
f
)erformance planning procedures, including those estab-
ished under the Grovemment Performance and Results 
Act of 1993, division E of the Clinger-Cohen Act of 1996 
(Public Law 104-106; 110 Stat. 679), Revenue Procedure 
64-22 (as in effect on July 30, 1997), and taxpayer service 
surveys, and communicating such goals or objectives to 
employees; 
"(B) using such goals and objectives to make perform-
ance distinctions among employees or groups of employees; 
and 
"(C) using performance assessments as a basis for 
granting employee awards, adjusting an employee's rate 
of basic pay, and other appropriate personnel actions, in 
accordance with applicable laws and regulations. 
"(b)(1) For purposes of subsection (a)(2), the term 'performance 
assessment' means a determination of whether or not retention 
standards established under subsection (a)(1)(A) are met, and any 
additional performance determination made on the basis of perform-
ance goals and objectives established under subsection (a)(2)(A), 
"(2) For purposes of this title, the term 'unacceptable perform-
ance' with respect to an employee of the Internal Revenue Service 
covered by a performance management system established under 
this section means performance of the employee which fails to 
meet a retention standard established under this section. 
"(c)(1) The Secretary of the Treasury may establish an awards 
program designed to provide incentives for and recognition of 
organizational, group, and individual achievements by providing 
for granting awards to employees who, as individuals or members 
of a group, contribute to meeting the performance goals and objec-
tives established under this chapter by such means as a superior 
individual or group accomplishment, a documented productivity 
gain, or sustained superior performance. 
"(2) A cash award under subchapter I of chapter 45 may be 
granted to an employee of the Internal Revenue Service without 
the need for any approval under section 4502(b). 
"(d)(1) In applying sections 4303(b)(1)(A) and 7513(b)(1) to 
employees of the Internal Revenue Service, *30 days' may be deemed 
to be '15 days'. 
"(2) Notwithstanding the second sentence of section 5335(c), 
an employee of the Internal Revenue Service shall not have a 
right to appeal the denial of a periodic step increase under section 
5335 to the Merit Systems Protection Board. 
*
*
§ 9509. General workforce classification and pay 
"(a) For purposes of this section, the term 'broad-banded system' 
means a system for grouping positions for pay, job evaluation, 
and other purposes that is different from the system established 
PUBLIC LAW 105-206—JULY 22, 1998 
112 STAT. 717 
under chapter 51 and subchapter III of chapter 53 as a result 
of combining grades and related ranges of rates of pay in one 
or more occupational series. 
"(b)(1)(A) The Secretary of the Treasury may, subject to criteria Regulations, 
to be prescribed by the Office of Personnel Management, establish 
one or more broad-banded systems covering all or any portion 
of the Internal Revenue Service workforce. 
"(B) With the approval of the Office of Personnel Management, 
a broad-banded system established under this section may either 
include or consist of positions that otherwise would be subject 
to subchapter IV of chapter 53 or section 5376. 
"(2) The Office of Personnel Management may require the 
Secretary of the Treasury to submit information relating to broad-
banded systems at the Internal Revenue Service. 
"(3) Except as otherwise provided under this section, employees 
under a broad-banded system shall continue to be subject to the 
laws and regulations covering employees under the pay system 
that otherwise would apply to such employees. 
"(4) The criteria to be prescribed by the Office of Personnel Regulations. 
Management shall, at a minimum— 
"(A) ensure that the structure of any broad-banded system 
maintains the principle of equal pay for substantially equal 
work; 
"(B) establish the minimum and maximum number of 
grades that may be combined into pay bands; 
"(C) establish requirements for setting minimum and maxi-
mum rates of pay in a pay band; 
"(D) establish requirements for adjusting the pay of an 
employee within a pay band; 
"(E) establish requirements for setting the pay of a super-
visory employee whose position is in a pay band or who super-
vises employees whose positions are in pay bands; and 
"(F) establish requirements and methodologies for setting 
the pay of an employee upon conversion to a broad-banded 
system, initial appointment, change of position or tjT)e of 
appointment (including promotion, demotion, transfer, reassign-
ment, reinstatement, placement in another pay band, or move-
ment to a different geographic location), and movement between 
a broad-banded system and another pay system. 
"(c) With the approval of the Office of Personnel Management 
and in accordance with a plan for implementation submitted by 
the Secretary of the Treasury, the Secretary may, with respect 
to Internal Revenue Service employees who are covered by a broad-
banded system established under this section, provide for variations 
from the provisions of subchapter VI of chapter 53. 
*
*
§ 9510. General workforce staffing 
"(a)(1) Except as otherwise provided by this section, an 
employee of the Internal Revenue Service may be selected for a 
permanent appointment in the competitive service in the Internal 
Revenue Service through internal competitive promotion procedures 
if— 
"(A) the employee has completed, in the competitive service, 
2 years of current continuous service under a term appointment 
or any combination of term appointments; 
112 STAT. 718 
PUBLIC LAW 105-206—JULY 22, 1998 
"(B) such term appointment or appointments were made 
under 
competitive 
procedures 
prescribed 
for 
permanent 
appointments; 
"(C) the employee's performance under such term appoint-
ment or appointments met established retention standards, 
or, if not covered by a performance management system estab-
lished under section 9508, was rated at the fully successful 
level or higher (or equivalent thereof); and 
"(D) the vacancy announcement for the term appointment 
from which the conversion is made stated that there was a 
potential for subsequent conversion to a permanent appoint-
ment. 
"(2) An appointment under this section may be made only 
to a position in the same line of work as a position to which 
the employee received a term appointment under competitive proce-
dures, 
"(b)(1) Notwithstanding subchapter 1 of chapter 33, the Sec-
retary of the Treasury may establish category rating systems for 
evaluating applicants for Internal Revenue Service positions in 
the competitive service under which qualified candidates are divided 
into two or more quality categories on the basis of relative degrees 
of merit, rather than assigned individual numerical ratings. 
"(2) Each applicant who meets the minimum qualification 
requirements for the position to be filled shall be assigned to an 
appropriate category based on an evaluation of the applicant's 
knowledge, skills, and abilities relative to those needed for success-
ful performance in the position to be filled. 
"(3) Within each quality category established under paragraph 
(1), preference eligibles shall be listed ahead of individuals who 
are not preference eligibles. For other than scientific and profes-
sional positions at or higher than GS-9 (or equivalent), preference 
eligibles who have a compensable service-connected disability of 
10 percent or more, and who meet the minimum qualification 
standards, shall be listed in the highest quality category. 
"(4) An appointing authority may select any applicant from 
the highest quality category or, if fewer than three candidates 
have been assigned to the highest quality category, from a merged 
category consisting of the highest and second highest quality cat-
egories. 
"(5) Notwithstanding paragraph (4), the appointing authority 
may not pass over a preference eligible in the same or higher 
category from which selection is made unless the requirements 
of section 3317(b) or 3318(b), as applicable, are satisfied. 
"(c) The Secretary of the Treasury may detail employees among 
the offices of the Internal Revenue Service without regard to the 
120-day limitation in section 3341(b). 
"(d) Notwithstanding any other provision of law, the Secretary 
of the Treasury may establish a probationary period under section 
3321 of up to 3 years for Internal Revenue Service positions if 
the Secretary of the Treasury determines that the nature of the 
work is such that a shorter period is insufficient to demonstrate 
complete proficiency in the position. 
"(e) Nothing in this section exempts the Secretary of the 
Treasury from— 
"(1) any emplo3mient priority established under direction 
of the President for the placement of surplus or displaced 
employees; or 
PUBLIC LAW 105-206-^ULY 22, 1998 
112 STAT. 719 
"(2) any obligation under a court order or decree relating 
to the emplo3nTient practices of the Internal Revenue Service 
or the Department of the Treasury.". 
(b) CLERICAL AMENDMENT.—The table of sections for part III 
of title 5, United States Code, is amended by adding at the end 
the following new items: 
"Subpart I—Miscellaneous 
'^5. Personnel flexibilities relating to the Internal Revenue Service 9601". 
SEC. 1202. VOLUNTARY SEPARATION INCENTIVE PAYMENTS. 
5 USC 5597 note. 
(a) DEFINITION.—In this section, the term "employee" means 
an employee (as defined by section 2105 of title 5, United States 
Code) who is employed by the Internal Revenue Service serving 
under an appointment without time limitation, and has been cur-
rently employed for a continuous period of at least 3 years, but 
does not include— 
(1) a reemployed annuitant under subchapter III of chapter 
83 or chapter 84 of title 5, United States Code, or another 
retirement system; 
(2) an employee having a disability on the basis of which 
such employee is or would be eligible for disability retirement 
under the applicable retirement system referred to in paragraph 
(1); 
(3) an employee who is in receipt of a specific notice of 
involuntary separation for misconduct or unacceptable perform-
ance; 
(4) an employee who, upon completing an additional period 
of service as referred to in section 3(b)(2)(B)(ii) of the Federal 
Workforce Restructuring Act of 1994 (5 U.S.C. 5597 note), 
would qualify for a voluntary separation incentive payment 
under section 3 of such Act; 
(5) an employee who has previously received any voluntary 
separation incentive payment by the Federal Government under 
this section or any other authority and has not repaid such 
payment; 
(6) an employee covered by statutory reemplo3nnent rights 
who is on transfer to another organization; or 
(7) any employee who, during the 24-month period preced-
ing the date of separation, has received a recruitment or reloca-
tion bonus under section 5753 of title 5, United States Code, 
or who, within the 12-month period preceding the date of sepa-
ration, received a retention allowance under section 5754 of 
title 5, United States Code. 
(b) AUTHORITY TO PROVIDE VOLUNTARY SEPARATION INCENTIVE 
PAYMENTS.— 
(1) IN GENERAL.—^The Commissioner of Internal Revenue 
may pay voluntary separation incentive pa3mnents under this 
section to any employee to the extent necessary to carry out 
the plan to reorganize the Internal Revenue Service under 
section 1001. 
(2) AMOUNT AND TREATMENT OF PAYMENTS.—A voluntary 
separation incentive payment— 
(A) shall be paid in a lump sum after the employee's 
separation; 
(B) shall be paid from appropriations or funds available 
for the payment of the basic pay of the employees; 
(C) shall be equal to the lesser of— 
112 STAT. 720 
PUBLIC LAW 105-206—JULY 22, 1998 
(i) an amount equal to the amount the employee 
would be entitled to receive under section 5595(c) of 
title 5, United States Code; or 
(ii) an amount determined by an agency head not 
to exceed $25,000; 
(D) may not be made except in the case of any qualify-
ing employee who voluntarily separates (whether by retire-
ment or resignation) before January 1, 2003; 
(E) shall not be a basis for payment, and shall not 
be included in the computation, of any other type of Grovem-
ment benefit; and 
(F) shall not be taken into account in determining 
the amount of any severance pay to which the employee 
may be entitled under section 5595 of title 5, United States 
Code, based on any other separation. 
(c) ADDITIONAL INTERNAL REVENUE SERVICE CONTRIBUTIONS 
TO THE RETIREMENT F U N D . — 
(1) IN GENERAL.—In addition to any other pa3mients which 
it is required to make under subchapter III of chapter 83 
of title 5, United States Code, the Internal Revenue Service 
shall remit to the Office of Personnel Management for deposit 
in the Treasury of the United States to the credit of the Civil 
Service Retirement and Disability Fund an amount equal to 
15 percent of the final basic pay of each employee who is 
covered under subchapter III of chapter 83 or chapter 84 of 
title 5, United States Code, to whom a voluntary separation 
incentive has been paid under this section. 
(2) DEFINITION.—In paragraph (1), the term "final basic 
pay", with respect to an employee, means the total amount 
of basic pay which would be payable for a year of service 
by such employee, computed using the employee's final rate 
of basic pay, and, if last serving on other than a full-time 
basis, with appropriate adjustment therefor. 
(d) EFFECT OF SUBSEQUENT EMPLOYMENT WITH THE GOVERN-
MENT.—An individual who has received a voluntary separation 
incentive pa3anent under this section and accepts any employment 
for compensation with the (government of the United States, or 
who works for any agency of the United States Government through 
a personal services contract, within 5 years after the date of the 
separation on which the payment is based shall be required to 
pay, prior to the individual's first day of emplo3mient, the entire 
amount of the incentive payment to the Internal Revenue Service. 
(e) 
EFFECT ON INTERNAL REVENUE 
SERVICE 
EMPLOYMENT 
LEVELS.— 
(1) INTENDED EFFECT.—Voluntary separations under this 
section are not intended to necessarily reduce the total number 
of full-time equivalent positions in the Internal Revenue Serv-
ice. 
(2) USE OF VOLUNTARY SEPARATIONS.—^The Internal Reve-
nue Service may redeploy or use the full-time equivalent posi-
tions vacated by voluntary separations under this section to 
make other positions available to more critical locations or 
more critical occupations. 
26 use 7804 
SEC. 1203. TERMINATION OF EMPLOYMENT FOR MISCONDUCT. 
(a) IN GENERAL.—Subject to subsection (c), the Commissioner 
of Internal Revenue shall terminate the employment of any 
PUBLIC LAW 105-206—JULY 22, 1998 
112 STAT. 721 
employee of the Internal Revenue Service if there is a final adminis-
trative or judicial determination that such employee committed 
any act or omission described under subsection (b) in the perform-
ance of the employee's official duties. Such termination shall be 
a removal for cause on charges of misconduct. 
(b) ACTS OR OMISSIONS.—^The acts or omissions referred to 
under subsection (a) are— 
(1) willful failure to obtain the required approval signatures 
on documents authorizing the seizure 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 represent-
ative; 
(3) with respect to a taxpayer, taxpayer representative, 
or other employee of the Internal Revenue Service, 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 Amendments of 1972; 
(iii) the Age Discrimination in Employment Act 
of 1967; 
(iv) the Age Discrimination Act of 1975; 
(v) section 501 or 504 of the Rehabilitation Act 
of 1973; or 
(vi) title I of the Americans with Disabilities Act 
of 1990; 
(4) falsifying or destroying documents to conceal mistakes 
made by any employee with respect to a matter involving 
a taxpayer or taxpayer representative; 
(5) assault or battery on a taxpayer, taxpayer representa-
tive, or other employee of the Internal Revenue Service, 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 the Internal Revenue Code of 1986, Depart-
ment of Treasury regulations, or policies of the Internal Reve-
nue Service (including the Internal Revenue Manual) for the 
purpose of retaliating against, or harassing, a taxpayer, tax-
payer representative, or other employee of the Internal Revenue 
Service; 
(7) willful misuse of the provisions of section 6103 of the 
Internal Revenue Code of 1986 for the purpose of concealing 
information from a congressional inquiry; 
(8) willful failure to file any return of tax required under 
the Internal Revenue Code of 1986 on or before the date pre-
scribed therefor (including any extensions), unless such failure 
is due to reasonable cause and not to willfiil neglect; 
(9) willful understatement of Federal tax liability, unless 
such understatement is due to reasonable cause and not to 
willful neglect; and 
(10) threatening to audit a taxpayer for the purpose of 
extracting personal gain or benefit. 
(c) DETERMINATION OF COMMISSIONER.— 
(1) IN GENERAL.—^The Commissioner of Internal Revenue 
may take a personnel action other than termination for an 
act or omission under subsection (a). 
112 STAT. 722 
PUBLIC LAW 105-206—JULY 22, 1998 
26 use 7804 
note. 
26 use 7803 
note. 
Applicability. 
26 use 7804. 
Deadline. 
(2) DISCRETION.—The exercise of authority under para-
graph (1) shall be at the sole discretion of the Commissioner 
of Internal Revenue and may not be delegated to any other 
officer. The Commissioner of Internal Revenue, in his sole 
discretion, may establish a procedure which will be used to 
determine whether an individual should be referred to the 
Commissioner of Internal Revenue for a determination by the 
Commissioner under paragraph (1). 
(3) No APPEAL.—^Any determination of the Commissioner 
of Internal Revenue under this subsection may not be appealed 
in any administrative or judicial proceeding. 
(d) DEFINITION.—^For purposes of the provisions described in 
clauses (i), (ii), and (iv) of subsection (b)(3)(B), references to a 
program or activity receiving 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. 
SEC. 1204. BASIS FOR EVALUATION OF INTERNAL REVENUE SERVICE 
EMPLOYEES. 
(a) IN GENERAL.—^The Internal Revenue Service shall not use 
records of tax enforcement results— 
(1) to evaluate employees; or 
(2) to impose or suggest production quotas or goals with 
respect to such employees. 
(b) TAXPAYER SERVICE.—^The Internal Revenue Service shall 
use the fair and equitable treatment of taxpayers by employees 
as one of the standards for evaluating employee performance. 
(c) CERTIFICATION.—^Each appropriate supervisor shall certify 
quarterly by letter to the Commissioner of Internal Revenue 
whether or not tax enforcement results are being used in a manner 
prohibited by subsection (a). 
(d) TECHNICAL AND CONFORMING AMENDMENT.—Section 6231 
of the Technical and Miscellaneous Revenue Act of 1988 (Public 
Law 100-647; 102 Stat. 3734) is repealed. 
(e) EFFECTIVE DATE.—^This section shall apply to evaluations 
conducted on or after the date of the enactment of this Act. 
SEC. 1205. EMPLOYEE TRAINING PROGRAM. 
(a) IN GENERAL.—^Not later than 180 days after the date of 
the enactment of this Act, the Commissioner of Internal Revenue 
shall implement an employee training program and shall submit 
an employee training plan to the Committee on Finance of the 
Senate and the Committee on Ways and Means of the House 
of Representatives. 
(b) CONTENTS.—^The plan submitted under subsection (a) 
shall— 
(1) detail a comprehensive employee training program to 
ensure adequate customer service training; 
(2) detail a schedule for training and the fiscal years during 
which the training will occur; 
(3) detail the funding of the program and relevant informa-
tion to demonstrate the priority and commitment of resources 
to the plan; 
(4) review the organizational design of customer service; 
(5) provide for the implementation of a performance 
development system; and 
PUBLIC LAW 105-206—JULY 22, 1998 
112 STAT. 723 
(6) provide for at least 16 hours of conflict management 
training during fiscal year 1999 for employees conducting collec-
tion activities. 
TITLE II—ELECTRONIC FILING 
SEC. 2001. ELECTRONIC FILING OF TAX AND INFORMATION RETURNS. 
(a) IN GENERAL.—It is the policy of Congress that— 
(1) paperless filing should be the preferred and most 
convenient means of filing Federal tax and information returns; 
(2) it should be the goal of the Internal Revenue Service 
to have at least 80 percent of all such returns filed electronically 
by the year 2007; and 
(3) the Internal Revenue Service should cooperate with 
and encourage the private sector by encouraging competition 
to increase electronic filing of such returns. 
(b) STRATEGIC PLAN.— 
(1) IN GENERAL.—^Not later than 180 days after the date 
of the enactment of this Act, the Secretary of the Treasury 
or the Secretary's delegate (hereafter in this section referred 
to as the "Secretary") shall establish a plan to eliminate bar-
riers, provide incentives, and use competitive market forces 
to increase electronic filing gradually over the next 10 years 
while maintaining processing times for paper returns at 40 
days. To the extent practicable, such plan shall provide that 
all returns prepared electronically for taxable years beginning 
after 2001 shall be filed electronically. 
(2) ELECTRONIC COMMERCE ADVISORY GROUP.—TO ensure 
that the Secretary receives input from the private sector in 
the development and implementation of the plan required by 
paragraph (1), the Secretary shall convene an electronic com-
merce advisory group to include representatives from the small 
business community and from the tax practitioner, preparer, 
and computerized tax processor communities and other rep-
resentatives from the electronic filing industry. 
(c) PROMOTION OF ELECTRONIC FILING AND INCENTIVES.— 
Section 6011 is amended by redesignating subsection (f) as sub-
section (g) and by inserting after subsection (e) the following new 
subsection: 
"(f) PROMOTION OF ELECTRONIC FILING.— 
"(1) IN GENERAL.—^The Secretary is authorized to promote 
the benefits of and encourage the use of electronic tax adminis-
tration programs, as they become available, through the use 
of mass communications and other means. 
"(2) INCENTIVES.—^The Secretary may implement proce-
dures to provide for the pajmnent of appropriate incentives 
for electronically filed returns.". 
(d) ANNUAL REPORTS.—Not later than June 30 of each calendar 
year after 1998, the Chairperson of the Internal Revenue Service 
Oversight Board, the Secretary of the Treasury, and the Chair-
person of the electronic commerce advisory group established under 
subsection (b)(2) shall report to the Committees on Ways and 
Means, Appropriations, Grovemment Reform and Oversight, and 
Small Business of the House of Representatives and the Committees 
on Finance, Appropriations, Governmental Affairs, and Small Busi-
ness of the Senate on— 
26 use 6011 
note. 
26 use 6011 
note. 
Deadline. 
Deadline. 
26 use 6011 
note. 
112 STAT. 724 
PUBLIC LAW 105-206-JULY 22, 1998 
Deadline. 
Applicability. 
26 use 6071 
note. 
Procedures. 
(1) the progress of the Internal Revenue Service in meeting 
the goal of receiving electronically 80 percent of tax and 
information returns by 2007; 
(2) the status of the plan required by subsection (b); 
(3) the legislative changes necessary to assist the Internal 
Revenue Service in meeting such goal; and 
(4) the effects on small businesses and the self-employed 
of electronically filing tax and information returns. 
SEC. 2002. DUE DATE FOR CERTAIN INFORMATION RETURNS. 
(a) INFORMATION RETURNS FILED ELECTRONICALLY.—Section 
6071 (relating to time for filing returns and other documents) 
is amended by redesignating subsection (b) as subsection (c) and 
by inserting after subsection (a) the following new subsection: 
"(b) ELECTRONICALLY FILED INFORMATION RETURNS.—Returns 
made under subparts B and C of part III of this subchapter which 
are filed electronically shall be filed on or before March 31 of 
the year following the calendar year to which such returns relate.". 
(b) STUDY RELATING TO TIME FOR PROVIDING NOTICE TO 
RECIPIENTS.— 
(1) IN GENERAL.—^The Secretary of the Treasury shall con-
duct a study evaluating the effect of extending the deadline 
for providing statements to persons with respect to whom 
information is required to be furnished under subparts B and 
C of part III of subchapter A of chapter 61 of the Internal 
Revenue Code of 1986 (other than section 6051 of such Code) 
from January 31 to February 15 of the year in which the 
return to which the statement relates is required to be filed. 
(2) REPORT.—^Not later than June 30, 1999, the Secretary 
of the Treasury shall submit a report on the study under 
paragraph (1) to the Committee on Ways and Means of the 
House of Representatives and the Committee on Finance of 
the Senate. 
(c) EFFECTIVE DATE.—^The amendment made by subsection (a) 
shall apply to returns required to be filed after December 31, 
1999. 
SEC. 2003. PAPERLESS ELECTRONIC FILING. 
(a) IN GENERAL.—Section 6061 (relating to signing of returns 
and other documents) is amended— 
(1) by striking "Except as otherwise provided b y and 
inserting the following: 
"(a) GENERAL RULE.—^Except as otherwise provided by sub-
section (b) and"; and 
(2) by adding at the end the following new subsection: 
"(b) ELECTRONIC SIGNATURES.— 
"(1) IN GENERAL.—^The Secretary shall develop procedures 
for the acceptance of signatures in digital or other electronic 
form. Until such time as such procedures are in place, the 
Secretary may— 
"(A) waive the requirement of a signature for; or 
"(B) provide for alternative methods of signing or 
subscribii^, 
a particular type or class of return, declaration, statement, 
or other document required or permitted to be made or written 
under internal revenue laws and regulations. 
PUBLIC LAW 105-206—JULY 22, 1998 
112 STAT. 725 
"(2) TREATMENT OF ALTERNATIVE METHODS.—^Notwithstand-
ing any other provision of law, any return, declaration, state-
ment, or other document filed and verified, signed, or subscribed 
under any method adopted under paragraph (1)(B) shall be 
treated for all purposes (both civil and criminal, including pen-
alties for perjury) in the same manner as though signed or 
subscribed. 
"(3) PUBLISHED GUIDANCE.—^The Secretary shall publish 
guidance as appropriate to define and implement any waiver 
of the signature requirements or any method adopted under 
paragraph (1).". 
(b) ACKNOWLEDGMENT OF ELECTRONIC FILING.—Section 7502(c) 
is amended to read as follows: 
"(c) 
REGISTERED 
AND 
CERTIFIED 
MAILING; 
ELECTRONIC 
FILING.— 
"(1) REGISTERED MAIL.—For purposes of this section, if 
any return, claim, statement, or other document, or pajmaent, 
is sent by United States registered mail— 
"(A) such registration shall be prima facie evidence 
that the return, claim, statement, or other document was 
delivered to the agency, officer, or office to which addressed; 
and 
"(B) the date of registration shall be deemed the post-
mark date. 
"(2) CERTIFIED MAIL; ELECTRONIC FILING.—^The Secretary 
is authorized to provide by regulations the extent to which 
the provisions of paragraph (1) with respect to prima facie 
evidence of delivery and the postmark date shall apply to 
certified mail and electronic filing.". 
(c) ESTABLISHMENT OF PROCEDURES FOR OTHER INFORMATION.— 
In the case of taxable periods beginning after December 31, 1999, 
the Secretary of the Treasury or the Secretary's delegate shall, 
to the extent practicable, establish procedures to accept, in 
electronic form, any other information, statements, elections, or 
schedules, from taxpayers filing returns electronically, so that such 
taxpayers will not be required to file any paper. 
(d) INTERNET AVAILABILITY.—In the case of taxable periods 
beginning after December 31, 1998, the Secretary of the Treasury 
or the Secretary's delegate shall establish procedures for all tax 
forms, instructions, and publications created in the most recent 
5-year period to be made available electronically on the Internet 
in a searchable database at approximately the same time such 
records are available to the public in paper form. In addition, 
in the case of taxable periods beginning after December 31, 1998, 
the Secretary of the Treasury or the Secretary's delegate shall, 
to the extent practicable, establish procedures for other taxpayer 
guidance to be made available electronically on the Internet in 
a searchable database at approximately the same time such guid-
ance is available to the public in paper form. 
(e) PROCEDURES FOR AUTHORIZING DISCLOSURE ELECTRONI-
CALLY.—^The Secretary shall establish procedures for any taxpayer 
to authorize, on an electronically filed return, the Secretary to 
disclose information under section 6103(c) of the Internal Revenue 
Code of 1986 to the preparer of the return. 
(f) EFFECTIVE DATE.—^The amendments made by this section 
shall take effect on the date of the enactment of this Act. 
Regulations. 
26 use 6011 
note. 
Procedures. 
26 use 7805 
note. 
26 use 6103 
note. 
26 use 6061 
note. 
112 STAT. 726 
PUBLIC LAW 105-206-^JULY 22, 1998 
26 use 6012 
note. 
Procedures. 
Deadline. 
Deadlines. 
26 use 6103 
note. 
Procedvires. 
SEC. 2004. RETURN-FREE TAX SYSTEM. 
(a) IN GENERAL.—^The Secretary of the Treasury or the Sec-
retary's delegate shall develop procedures for the implementation 
of a return-free tax system under which appropriate individuals 
would be permitted to comply with the Internal Revenue Code 
of 1986 without making the return required under section 6012 
of such Code for taxable years beginning after 2007. 
(b) REPORT.—Not later than June 30 of each calendar year 
after 1999, the Secretary shall report to the Committee on Ways 
and Means of the House of Representatives and the Committee 
on Finance of the Senate on— 
(1) what additional resources the Internal Revenue Service 
would need to implement such a system; 
(2) the changes to the Internal Revenue Code of 1986 
that could enhance the use of such a system; 
(3) the procedures developed pursuant to subsection (a); 
and 
(4) the number and classes of taxpayers that would be 
permitted to use the procedures developed pursuant to sub-
section (a). 
SEC. 2005. ACCESS TO ACCOUNT INFORMATION. 
(a) IN GENERAL.—Not later than December 31, 2006, the Sec-
retary of the Treasury or the Secretar/s delegate shall develop 
procedures under which a taxpayer filing returns electronically 
(and their designees under section 6103(c) of the Internal Revenue 
Code of 1986) would be able to review the taxpayer's account 
electronicsdly, but only if all necessary safeguards to ensure the 
privacy of such account information are in place. 
(b) REPORT.—^Not later than December 31, 2003, the Secretary 
of the Treasury shall report on the progress the Secretary is making 
on the development of procedures under subsection (a) to the 
Committee on Ways and Means of the House of Representatives 
and the Committee on Finance of the Senate. 
Taxpayer Bill of 
Rights 3. 
TITLE III- TAXPAYER PROTECTION AND 
RIGHTS 
26USClnote. 
SEC. 3000. SHORT TITLE. 
This title may be cited as the "Taxpayer Bill of Rights 3". 
Subtitle A—^Burden of Proof 
SEC. 3001. BURDEN OF PROOF. 
(a) IN GENERAL.—Chapter 76 (relating to judicial proceedings) 
is amended by adding at the end the following new subchapter: 
"Subchapter E—Burden of Proof 
"Sec. 7491. Burden of proof. 
"SEC. 7491. BURDEN OF PROOF. 
"(a) BURDEN SHIFTS WHERE TAXPAYER PRODUCES CREDIBLE 
EVIDENCE.— 
PUBLIC LAW 105-206-^ULY 22, 1998 
112 STAT. 727 
"(1) GENERAL RULE.—If, in any court proceeding, a taxpayer 
introduces credible evidence with respect to any factual issue 
relevant to ascertaining the liability of the taxpayer for any 
tax imposed by subtitle A or B, the Secretary shall have the 
burden of proof with respect to such issue. 
"(2) LIMITATIONS.—^Paragraph (1) shall apply with respect Applicability, 
to an issue only if— 
"(A) the taxpayer has complied with the requirements 
under this title to substantiate any item; 
"(B) the taxpayer has maintained all records required 
under this title and has cooperated with reasonable 
requests by the Secretary for witnesses, information, docu-
ments, meetings, and interviews; and 
"(C) in the case of a partnership, corporation, or trust, 
the taxpayer is described in section 7430(c)(4)(A)(ii). 
"(3) COORDINATION.—^Paragraph (1) shall not apply to any 
issue if any other provision of this title provides for a specific 
burden of proof with respect to such issue. 
"(b) USE OF STATISTICAL INFORMATION ON UNRELATED TAX-
PAYERS.—^In the case of an individual taxpayer, the Secretary shall 
have the burden of proof in any court proceeding with respect 
to any item of income which was reconstructed by the Secretary 
solely through the use of statistical information on unrelated tax-
payers. 
"(c) PENALTIES.—^Notwithstanding any other provision of this 
title, the Secretary shall have the burden of production in any 
court proceeding with respect to the liability of any individual 
for any penalty, addition to tax, or additional amount imposed 
by this title.". 
(b) CONFORMING AMENDMENT.—^The table of subchapters for 
chapter 76 is amended by adding at the end the following new 
item: 
"SUBCHAPTER E. Burden of proof.". 
(c) EFFECTIVE DATE.— 
(1) IN GENERAL.—The amendments made by this section 
shall apply to court proceedings arising in connection with 
examinations commencing after the date of the enactment of 
this Act. 
(2) TAXABLE PERIODS OR EVENTS AFTER DATE OF ENACT-
MENT.—^In any case in which there is no examination, such 
amendments shall apply to court proceedings arising in connec-
tion with taxable periods or events beginning or occurring after 
such date of enactment. 
Applicability. 
26 use 7491 
note. 
Subtitle B—Proceedings by Taxpayers 
Courts. 
SEC. 3101. EXPANSION OF AUTHORITY TO AWARD COSTS AND CERTAIN 
FEES. 
(a) INCREASE IN ATTORNEY'S FEES.— 
(1) INCREASE IN HOURLY AMOUNT.—Clause (iii) of section 
7430(c)(1)(B) (relating to reasonable litigation costs) is amended 
by striking "$110" and inserting "$125". 
(2) AWARD OF HIGHER ATTORNEY'S FEES BASED ON COMPLEX-
ITY OF ISSUES.—Clause (iii) of section 7430(c)(1)(B) (relating 
to the award of costs and certain fees) is amended by inserting 
112 STAT. 728 
PUBLIC LAW 105-206-^ULY 22, 1998 
"the difficulty of the issues presented in the case, or the local 
availability of tax expertise," before "justifies a higher rate". 
(b) AWARD OF ADMINISTRATIVE COSTS INCURRED AFTER 3 0 -
DAY LETTER.—Paragraph (2) of section 7430(c) is amended by strik-
ing the last sentence and inserting the following new flush sentence: 
"Such term shall only include costs incurred on or after which-
ever of the following is the earliest: (i) the date of the receipt 
by the taxpayer of the notice of the decision of the Internal 
Revenue Service Office of Appeals; (ii) the date of the notice 
of deficiency; or (iii) the date on which the first letter of pro-
posed deficiency which allows the taxpayer an opportunity for 
administrative review in the Internal Revenue Service Office 
of Appeals is sent.". 
(c) AWARD OF FEES FOR CERTAIN ADDITIONAL SERVICES.— 
Paragraph (3) of section 7430(c) is amended to read as follows: 
"(3) ATTORNEYS FEES.— 
"(A) IN GENERAL.—For purposes of paragraphs (1) and 
(2), fees for the services of an individual (whether or not 
an attorney) who is authorized to practice before the Tax 
Court or before the Internal Revenue Service shall be treat-
ed as fees for the services of an attorney. 
"(B) PRO BONO SERVICES.—The court may award 
reasonable attorneys fees under subsection (a) in excess 
of the attorneys fees paid or incurred if such fees are 
less than the reasonable attorneys fees because an individ-
ual is representing the prevailing party for no fee or for 
a fee which (taking into account all the facts and cir-
Applicability. 
cumstances) is no more than a nominal fee. This subpara-
graph shall apply only if such award is paid to such individ-
ual or such individual's employer.". 
(d) DETERMINATION OF WHETHER POSITION OF UNITED STATES 
Is 
SUBSTANTIALLY 
JUSTIFIED.—Subparagraph 
(B) 
of 
section 
7430(c)(4) is amended by redesignating clause (iii) as clause (iv) 
and by inserting after clause (ii) the following new clause: 
"(iii) EFFECT OF LOSING ON SUBSTANTIALLY SIMILAR 
ISSUES.—In determining for purposes of clause (i) 
whether the position of the United States was substan-
tially justified, the court shall take into account 
whether the United States has lost in courts of appeal 
for other circuits on substantially similar issues.". 
(e) TAXPAYER TREATED AS PREVAILING IF JUDGMENT Is LESS 
THAN TAXPAYER'S OFFER.— 
(1) IN GENERAL.—Section 7430(c)(4) (defining prevailing 
party) is amended by adding at the end the following new 
subparagraph: 
"(E) 
SPECIAL RULES WHERE JUDGMENT LESS THAN 
TAXPAYER'S OFFER.— 
"(i) IN GENERAL.—^A party to a court proceeding 
meeting the requirements of subparagraph (A)(ii) shall 
be treated as the prevailing party if the liability of 
the taxpayer pursuant to the judgment in the proceed-
ing (determined without regard to interest) is equal 
to or less than the liability of the taxpayer which 
would have been so determined if the United States 
had accepted a qualified offer of the party under sub-
section (g). 
PUBLIC LAW 105-206-JULY 22, 1998 
112 STAT. 729 
"(ii) EXCEPTIONS.—^This subparagraph shall not 
apply to— 
"(I) any judgment issued pursuant to a settle-
ment; or 
"(II) any proceeding in which the amount of 
tax liability is not in issue, including any declara-
tory judgment proceeding, any proceeding to 
enforce or quash any summons issued pursuant 
! 
to this title, and any action to restrain disclosure 
under section 6110(f). 
"(iii) SPECIAL RULES.—If this subparagraph applies Applicability. 
to any court proceeding— 
"(I) the determination under clause (i) shall 
be made by reference to the last qualified offer 
made with respect to the tax liability at issue 
in the proceeding; and 
"(II) reasonable administrative and litigation 
costs shall only include costs incurred on and after 
the date of such offer. 
"(iv) COORDINATION.—This subparagraph shall not 
apply to a party which is a prevailing party under 
any other provision of this paragraph.". 
(2) QUALIFIED OFFER.—Section 7430 is amended by adding 
at the end the following new subsection: 
"(g) QUALIFIED OFFER.—^For purposes of subsection (c)(4)— 
"(1) IN GENERAL.—^The term 'qualified offer' means a 
written offer which— 
"(A) is made by the taxpayer to the United States 
during the qualified offer period; 
"(B) specifies the offered amount of the taxpayer's 
liability (determined without regard to interest); 
"(C) is designated at the time it is made as a qualified 
offer for purposes of this section; and 
"(D) remains open during the period beginning on the 
date it is made and ending on the earliest of the date 
the offer is rejected, the date the trial begins, or the 90th 
day after the date the offer is made. 
"(2) QUALIFIED OFFER PERIOD.—For purposes of this sub-
section, the term 'qualified offer period' means the period— 
"(A) beginning on the date on which the first letter 
of proposed deficiency which allows the taxpayer an oppor-
tunity for administrative review in the Internal Revenue 
Service Office of Appeals is sent, and 
"(B) ending on the date which is 30 days before the 
date the case is first set for trial.". 
(f) AWARD OF ATTORNEYS FEES IN UNAUTHORIZED INSPECTION 
AND DISCLOSURE CASES.—Section 7431(c) (relating to damages) is 
amended by striking the period at the end of paragraph (2) and 
inserting ", plus", and by adding at the end the following new 
paragraph: 
"(3) in the case of a plaintiff which is described in section 
7430(c)(4)(A)(ii), reasonable attorneys fees, except that if the 
defendant is the United States, reasonable attorneys fees may 
be awarded only if the plaintiff is the prevailing party (as 
determined under section 7430(c)(4)).". 
(g) EFFECTIVE DATE.—^The amendments made by this section Applicability. 
shall apply to costs incurred (and, in the case of the amendment 
26 uSC 7430 
note. 
112 STAT. 730 
PUBLIC LAW 105-206-^ULY 22, 1998 
made by subsection (c), services performed) more than 180 days 
after the date of the enactment of this Act. 
SEC. 3102. CIVIL DAMAGES FOR COLLECTION ACTIONS. 
(a) EXTENSION TO NEGLIGENCE ACTIONS.— 
(1) IN GENERAL.—Section 7433 (relating to civil damages 
for certain unauthorized collection actions) is amended— 
(A) in subsection (a), by inserting ", or by reason of 
negligence," after "recklessly or intentionally"; and 
(B) in subsection (b)— 
(i) in the matter preceding paragraph (1), by 
inserting "($100,000, in the case of negligence)" after 
"$1,000,000"; and 
(ii) in paragraph (1), by inserting "or negligent" 
after "reckless or intentional". 
(2) 
REQUIREMENT 
THAT 
ADMINISTRATIVE 
REMEDIES BE 
EXHAUSTED.—Paragraph (1) of section 7433(d) is amended to 
read as follows: 
"(1) 
REQUIREMENT THAT ADMINISTRATIVE 
REMEDIES BE 
EXHAUSTED.—^A judgment for damages shall not be awarded 
under subsection (b) unless the court determines that the plain-
tiff has exhausted the administrative remedies available to 
such plaintiff within the Internal Revenue Service.". 
(b) DAMAGES ALLOWED IN CIVIL ACTIONS BY PERSONS OTHER 
THAN TAXPAYERS.—Section 7426 is amended by redesignating sub-
section (h) as subsection (i) and by adding after subsection (g) 
the following new subsection: 
"(h) RECOVERY OF DAMAGES PERMITTED IN CERTAIN CASES.— 
"(1) IN GENERAL.—^Notwithstanding subsection (b), if, in 
any action brought under this section, there is a finding that 
any officer or employee of the Internal Revenue Service reck-
lessly or intentionally, or by reason of negligence, disregarded 
any provision of this title the defendant shall be liable to 
the plaintiff in an amount equal to the lesser of $1,000,000 
($100,000 in the case of negligence) or the sum of— 
"(A) actual, direct economic damages sustained by the 
plaintiff as a proximate result of the reckless or intentional 
or negligent disregard of any provision of this title by 
the officer or employee (reduced by any amount of such 
damages awarded under subsection (b)); and 
"(B) the costs of the action. 
AppUcability. 
"(2) REQUIREMENT THAT ADMINISTRATIVE REMEDIES BE 
EXHAUSTED; MITIGATION; PERIOD.—^The rules of section 7433(d) 
shall apply for purposes of this subsection. 
"(3) PAYMENT AUTHORITY.—Claims pursuant to this section 
shall be payable out of funds appropriated under section 1304 
of title 31, United States Code.". 
(c) 
CIVIL DAMAGES FOR IRS 
VIOLATIONS OF BANKRUPTCY 
PROCEDURES.— 
(1) IN GENERAL.—Section 7433 (relating to civil damages 
for certain unauthorized collection actions) is amended by add-
ing at the end the following new subsection: 
"(e) 
ACTIONS 
FOR 
VIOLATIONS 
OF 
CERTAIN 
BANKRUPTCY 
PROCEDURES.— 
"(1) IN GENERAL.—If, in connection with any collection of 
Federal tax with respect to a taxpayer, any officer or employee 
of the Internal Revenue Service willfully violates any provision 
PUBLIC LAW 105-206-^ULY 22, 1998 
112 STAT. 731 
of section 362 (relating to automatic stay) or 524 (relating 
to effect of discharge) of title 11, United States Code (or any 
successor provision), or any regulation promulgated under such 
provision, such taxpayer may petition the bankruptcy court 
to recover damages against the United States. 
"(2) REMEDY TO BE EXCLUSIVE.— 
"(A) IN GENERAL.—^Except as provided in subparagraph 
(B), notwithstanding section 105 of such title 11, such 
petition shall be the exclusive remedy for recovering dam-
ages resulting from such actions. 
"(B) CERTAIN OTHER ACTIONS PERMITTED.—Subpara-
graph (A) shall not apply to an action under section 362(h) 
of such title 11 for a violation of a stay provided by section 
362 of such title; except that— 
"(i) administrative and litigation costs in connec-
tion with such an action may only be awarded under 
section 7430; and 
"(ii) administrative costs may be awarded only if 
incurred on or after the date that the bankruptcy peti-
tion is filed.". 
(2) CONFORMING AMENDMENT.—Subsection (b) of section 
7433 is amended by inserting "or petition filed under subsection 
(e)" after "subsection (a)". 
(d) EFFECTIVE DATE.—^The amendments made by this section 
shall apply to actions of officers or employees of the Internal Reve-
nue Service after the date of the enactment of this Act. 
SEC. 3103. INCREASE IN SIZE O F CASES PERMITTED ON SMALL CASE 
CALENDAR, 
(a) IN GENERAL.—Section 7463 (relating to disputes involving 
$10,000 or less) is amended by striking "$10,000" each place it 
appears (including the section heading) and inserting "$50,000". 
(b) CONFORMING AMENDMENTS.— 
(1) Sections 7436(c)(1) and 7443A(b)(3) are each amended 
by striking "$10,000" and inserting "$50,000". 
(2) The table of sections for part II of subchapter C of 
chapter 76 is amended by striking "$10,000" in the item relating 
to section 7463 and inserting "$50,000". 
(c) EFFECTIVE DATE.—^The amendments made by this section 
shall apply to proceedings commenced after the date of the enact-
ment of this Act. 
SEC. 3104. ACTIONS FOR REFUND WITH RESPECT TO CERTAIN ESTATES 
WHICH HAVE ELECTED THE INSTALLMENT METHOD OF 
PAYMENT. 
(a) IN GENERAL.—Section 7422 is amended by redesignating 
subsection (j) as subsection (k) and by inserting after subsection 
(i) the following new subsection: 
"(j) SPECIAL RULE FOR ACTIONS WITH RESPECT TO ESTATES 
FOR WHICH AN ELECTION UNDER SECTION 6166 Is MADE.— 
"(1) IN GENERAL.—The district courts of the United States 
and the United States Court of Federal Claims shall not fail 
to have jurisdiction over any action brought by the representa-
tive of an estate to which this subsection applies to determine 
the correct amount of the estate tax liability of such estate 
(or for any refund with respect thereto) solely because the 
full amount of such liability has not been paid by reason of 
an election under section 6166 with respect to such estate. 
Applicability. 
26 use 7426 
note. 
Applicability. 
26 use 7436 
note. 
112 STAT. 732 
PUBLIC LAW 105-206-^ULY 22, 1998 
Applicability. 
26 use 7422 
note. 
"(2) ESTATES TO WHICH SUBSECTION APPLIES.—This sub-
section shall apply to any estate if, as of the date the action 
is filed— 
"(A) no portion of the installments payable under sec-
tion 6166 have been accelerated; 
"(B) all such installments the due date for which is 
on or before the date the action is filed have been paid; 
"(C) there is no case pending in the Tax Court with 
respect to the tax imposed by section 2001 on the estate 
and, if a notice of deficiency under section 6212 with respect 
to such tax has been issued, the time for filing a petition 
with the Tax Court with respect to such notice has expired; 
and 
"(D) no proceeding for declaratory judgment under 
section 7479 is pending. 
"(3) PROHIBITION ON COLLECTION OF DISALLOWED LIABIL-
ITY.—If the court redetermines under paragraph (1) the estate 
tax liability of an estate, no part of such liability which is 
disallowed by a decision of such court which has become final 
may be collected by the Secretary, and amounts paid in excess 
of the installments determined by the court as currently due 
and payable shall be refiinded.". 
(b) EXTENSION OF TIME TO FILE REFUND SUIT.—Section 7479 
(relating to declaratory judgments relating to eligibility of estate 
with respect to installment payments under section 6166) is amend-
ed by adding at the end the following new subsection: 
"(c) EXTENSION OF TIME TO FILE REFUND SUIT.—The 2-year 
period in section 6532(a)(1) for filing suit for refund after disallow-
ance of a claim shall be suspended during the 90-day period after 
the mailing of the notice referred to in subsection (b)(3) and, if 
a pleading has been filed with the Tax Court under this section, 
until the decision of the Tax Court has become final.". 
(c) EFFECTIVE DATE.—^The amendments made by this section 
shall apply to any claim for refund filed after the date of the 
enactment of this Act. 
SEC. 3105. ADMINISTRATIVE APPEAL OF ADVERSE INTERNAL REVENUE 
SERVICE DETERMINATION OF TAX-EXEMPT STATUS OF 
BOND ISSUE. 
The Internal Revenue Service shall amend its administrative 
procedures to provide that if, upon examination, the Internal Reve-
nue Service proposes to an issuer that interest on previously issued 
obligations of such issuer is not excludable from gross income under 
section 103(a) of the Internal Revenue Code of 1986, the issuer 
of such obligations shall have an administrative appeal of right 
to a senior officer of the Internal Revenue Service Office of Appeals. 
SEC. 3106. CIVIL ACTION FOR RELEASE OF ERRONEOUS UEN. 
(a) RIGHT OF SUBSTITUTION OF VALUE.—Subsection (b) of section 
6325 (relating to release of lien or discharge of property) is amended 
by adding at the end the following new paragraph: 
"(4) RIGHT OF SUBSTITUTION OF VALUE.— 
"(A) IN GENERAL.—At the request of the owner of any 
property subject to any lien imposed by this chapter, the 
Secretary shall issue a certificate of discharge of such prop-
erty if such owner— 
"(i) deposits with the Secretary an amount of 
money equal to the value of the interest of the United 
PUBLIC LAW 105-206-^JULY 22, 1998 
112 STAT. 733 
States (as determined by the Secretary) in the property; 
or 
"(ii) furnishes a bond acceptable to the Secretary 
in a Uke amount. 
"(B) REFUND OF DEPOSIT WITH INTEREST AND RELEASE 
OF BOND.—^The Secretary shall refund the amount so depos-
ited (and shall pay interest at the overpayment rate under 
section 6621), and shall release such bond, to the extent 
that the Secretary determines that— 
"(i) the unsatisfied liability giving rise to the lien 
can be satisfied from a source other than such property; 
or 
"(ii) the value of the interest of the United States 
in the property is less than the Secretary's prior deter-
mination of such value. 
"(C) USE OF DEPOSIT, ETC., IF ACTION TO CONTEST LIEN 
NOT FILED.—If no action is filed under section 7426(a)(4) 
within the period prescribed therefor, the Secretary shall, 
within 60 days sifter the expiration of such period— 
"(i) apply the amount deposited, or collect on such 
bond, to the extent necessary to satisfy the unsatisfied 
liability secured by the lien; and 
"(ii) refund (with interest as described in subpara-
graph (B)) any portion of the amount deposited which 
is not used to satisfy such liability. 
"(D) EXCEPTION.—Subparagraph (A) shall not apply 
if the owner of the property is the person whose unsatisfied 
liability gave rise to the lien.", 
(b) CIVIL ACTION TO RELEASE ERRONEOUS LIEN.— 
(1) IN GENERAL.—Subsection (a) of section 7426 (relating 
to civil actions by persons other than tsixpayers) is amended 
by adding at the end the following new paragraph: 
"(4) SUBSTITUTION OF VALUE.—^If a certificate of discharge 
is issued to any person under section 6325(b)(4) with respect 
to any property, such person may, within 120 days after the 
day on which such certificate is issued, bring a civil action 
against the United States in a district court of the United 
States for a determination of whether the value of the interest 
of the United States (if any) in such property is less than 
the value determined by the Secretary. No other action may 
be brought by such person for such a determination.". 
(2) FORM OF RELIEF.— 
(A) IN GENERAL.—Subsection (b) of section 7426 is 
amended by adding at the end the following new paragraph: 
"(5) SUBSTITUTION OF VALUE.—^If the court determines that 
the Secretary's determination of the value of the interest of 
the United States in the property for purposes of section 
6325(b)(4) exceeds the actual value of such interest, the court 
shall grant a judgment ordering a refund of the amount depos-
ited, and a release of the bond, to the extent that the aggregate 
of the amounts thereof exceeds such value determined by the 
court.". 
(B) 
INTEREST ALLOWED ON REFUND OF DEPOSIT.— 
Subsection (g) of section 7426 is amended by striking "and" 
at the end of paragraph (1), by striking the period at 
the end of paragraph (2) and inserting "; and", and by 
adding at the end the following new paragraph: 
112 STAT. 734 
PUBLIC LAW 105-206—JULY 22, 1998 
"(3) in the case of a judgment pursuant to subsection (b)(5) 
which orders a refund of any amount, from the date the Sec-
retary received such amount to the date of payment of such 
judgment.". 
(3) SUSPENSION OF RUNNING OF STATUTE OF LIMITATION.— 
Subsection (f) of section 6503 is amended to read as follows: 
"(f) WRONGFUL SEIZURE OF OR LIEN ON PROPERTY OF THIRD 
PARTY.— 
"(1) WRONGFUL SEIZURE.—The running of the period under 
section 6502 shall be suspended for a period equal to the 
period from the date property (including money) of a third 
party is wrongfully seized or received by the Secretary to the 
date the Secretary returns property pursuant to section 6343(b) 
or the date on which a judgment secured pursuant to section 
7426 with respect to such property becomes final, and for 
30 days thereafter. The running of such period shall be sus-
pended under this paragraph only with respect to the amount 
of such assessment equal to the amount of money or the value 
of specific property returned. 
"(2) WRONGFUL LIEN.—In the case of any assessment for 
which a lien was made on any property, the running of the 
period under section 6502 shall be suspended for a period 
equal to the period beginning on the date any person becomes 
entitled to a certificate under section 6325(b)(4) with respect 
to such property and ending on the date which is 30 days 
after the earlier of— 
"(A) the earliest date on which the Secretary no longer 
holds any amount as a deposit or bond provided under 
section 6325(b)(4) by reason of such deposit or bond being 
used to satisfy the unpaid tax or being refunded or released; 
or 
"(B) the date that the judgment secured under section 
7426(b)(5) becomes final. 
The running of such period shall be suspended under this 
paragraph only with respect to the amount of such assessment 
equal to the value of the interest of the United States in 
the property plus interest, penalties, additions to the tax, and 
additional amounts attributable thereto.". 
26 use 6325 
(c) EFFECTIVE DATE.—^The amendments made by this section 
note. 
shall take effect on the date of the enactment of this Act. 
Subtitle C—Relief for Innocent Spouses 
and for Taxpayers Unable To Manage 
Their Financial Affairs Due to Disabil-
ities 
SEC. 3201. REUEF FROM JOINT AND SEVERAL LIABIUTY ON JOINT 
RETURN. 
(a) IN GENERAL.—Subpart B of part II of subchapter A of 
chapter 61 is amended by inserting after section 6014 the following 
new section: 
"SEC. 6015. RELIEF FROM JOINT AND SEVERAL LIABILITY ON JOINT 
RETURN. 
"(a) IN GENERAL.—Notwithstanding section 6013(d)(3)— 
PUBLIC LAW 105-206—JULY 22, 1998 
112 STAT. 735 
"(1) an individual who has made a joint return may elect 
to seek relief under the procedures prescribed under subsection 
(b); and 
"(2) if such individual is eligible to elect the application 
of subsection (c), such individual may, in addition to any elec-
tion under paragraph (1), elect to limit such individual's liability 
for any deficiency with respect to such joint return in the 
manner prescribed under subsection (c). 
Any determination under this section shall be made without regard 
to community property laws. 
"(b) PROCEDURES FOR RELIEF FROM LIABILITY APPLICABLE TO 
ALL JOINT FILERS.— 
"(1) IN GENERAL.—^Under procedures prescribed by the 
Secretary, if— 
"(A) a joint return has been made for a taxable year; 
"(B) on such return there is an understatement of 
tax attributable to erroneous items of one individual filing 
the joint return; 
"(C) the other individual filing the joint return estab-
lishes that in signing the return he or she did not know, 
and had no reason to know, that there was such understate-
ment; 
"(D) taking into account all the facts and cir-
cumstances, it is inequitable to hold the other individual 
liable for the deficiency in tax for such taxable year attrib-
utable to such understatement; and 
i ,, 
"(E) the other individual elects (in such form as the Deadline. 
Secretary may prescribe) the benefits of this subsection 
not later than the date which is 2 years after the date 
the Secretary has begun collection activities with respect 
to the individual making the election, 
then the other individual shall be relieved of liability for tax 
(including interest, penalties, and other amounts) for such tax-
able year to the extent such liability is attributable to such 
understatement. 
"(2) APPORTIONMENT OF RELIEF.—If an individual who, but 
for paragraph (1)(C), would be relieved of liability under para-
graph (1), establishes that in signing the return such individual 
did not know, and had no reason to know, the extent of such 
understatement, then such individual shall be relieved of liabil-
ity for tax (including interest, penalties, and other amounts) 
for such taxable year to the extent that such liability is attrib-
utable to the portion of such understatement of which such 
individual did not know and had no reason to know. 
"(3) UNDERSTATEMENT.—^For purposes of this subsection, 
the term ^understatement' has the meaning given to such term 
by section 6662(d)(2)(A). 
"(c) 
PROCEDURES TO 
LIMIT LIABILITY FOR TAXPAYERS NO 
LONGER MARRIED OR TAXPAYERS LEGALLY SEPARATED OR NOT 
LIVING TOGETHER.— 
"(1) IN GENERAL.—^Except as provided in this subsection, 
if an individual who has made a joint return for any taxable 
year elects the application of this subsection, the individual's 
liability for any deficiency which is assessed with respect to 
the return shall not exceed the portion of such deficiency prop-
erly allocable to the individual under subsection (d). 
112 STAT. 736 
PUBLIC LAW 105-206-^ULY 22, 1998 
Deadline. 
"(2) BURDEN OF PROOF.—Except as provided in subpara-
graph (A)(ii) or (C) of paragraph (3), each individual who elects 
the application of this subsection shall have the burden of 
proof with respect to establishing the portion of any deficiency 
allocable to such individual. 
"(3) ELECTION.— 
"(A) INDIVIDUALS ELIGIBLE TO MAKE ELECTION.— 
"(i) IN GENERAL.—^An individual shall only be 
eligible to elect the application of this subsection if— 
"(I) at the time such election is filed, such 
individual is no longer married to, or is legally 
separated from, the individual with whom such 
individual filed the joint return to which the elec-
tion relates; or 
"(II) such individual was not a member of 
the same household as the individual with whom 
such joint return was filed at any time during 
the 12-month period ending on the date such elec-
tion is filed. 
"(ii) CERTAIN TAXPAYERS INELIGIBLE TO ELECT.— 
If the Secretary demonstrates that assets were trans-
ferred between individuals filing a joint return as part 
of a fi-audulent scheme by such individuals, an election 
under this subsection by either individual shall be 
invalid (and section 6013(d)(3) shall apply to the joint 
return). 
"(B) TIME FOR ELECTION.—An election imder this sub-
section for any taxable year shall be made not later than 
2 years after the date on which the Secretary has begun 
collection activities with respect to the individual making 
the election. 
"(C) ELECTION NOT VALID WITH RESPECT TO CERTAIN 
DEFICIENCIES.—If the Secretary demonstrates that an 
individual making an election under this subsection had 
actual knowledge, at the time such individual signed the 
return, of any item giving rise to a deficiency (or portion 
thereof) which is not allocable to such individual imder 
subsection (d), such election shall not apply to such defi-
ciency (or portion). This subparagraph shall not apply 
where the individual with actual knowledge establishes 
that such individual signed the return under duress. 
"(4) 
LLVBILITY INCREASED BY REASON OF TRANSFERS OF 
PROPERTY TO AVOID TAX.— 
"(A) IN GENERAL.—Notwithstanding any other provi-
sion of this subsection, the portion of the deficiency for 
which the individual electing the application of this sub-
section is liable (without regard to this paragraph) shall 
be increased by the value of any disqualified asset trans-
ferred to the individued. 
"(B) DISQUALIFIED ASSET.—For purposes of this para-
graph— 
"(i) IN GENERAL.—The term 'disquahfied asset' 
means any property or right to property transferred 
to £in individual msiking the election under this sub-
section with respect to a joint return by the other 
PUBLIC LAW 105-206-^JULY 22, 1998 
112 STAT. 737 
purpose of the transfer was the avoidance of tax or 
pa3naientoftax. 
"(ii) PRESUMPTION.— 
"(I) IN GENERAL.—For purposes of clause (i), 
except as provided in subclause (II), any transfer 
which is made after the date which is 1 year 
before the date on which the first letter of proposed 
deficiency which allows the taxpayer an oppor-
tunity for administrative review in the Internal 
Revenue Service Office of Appeals is sent shall 
be presumed to have as its principal purpose the 
avoidance of tax or pajnnent of tax. 
"(II) EXCEPTIONS.—Subclause (I) shall not 
apply to any transfer pursuEint to a decree of 
divorce or separate maintenance or a written 
instrument incident to such a decree or to emy 
transfer which an individual establishes did not 
have as its principal purpose the avoidance of tax 
or payment of tax. 
"(d) ALLOCATION OF DEFICIENCY.—For purposes of sub-
section (c)— 
"(1) IN GENERAL.—^The portion of any deficiency on a joint 
return allocated to an individual shall be the amoimt which 
bears the seune ratio to such deficiency as the net amount 
of items taken into account in computing the deficiency and 
allocable to the individual under paragraph (3) bears to the 
net amount of all items taken into account in computing the 
deficiency. 
"(2) SEPARATE TREATMENT OF CERTAIN ITEMS.—If a defi-
ciency (or portion thereof) is attributable to— 
"(A) the disallowance of a credit; or 
"(B) any tax (other than tax imposed by section 1 
or 55) required to be included with the joint return; 
and such item is allocated to one individual under paragraph 
(3), such deficiency (or portion) shall be allocated to such 
individual. Any such item shall not be taken into account 
under paragraph (1). 
"(3) 
ALLOCATION OF ITEMS GIVING RISE TO THE DEFI-
CIENCY.—For purposes of this subsection— 
"(A) IN GENERAL.—Except as provided in paragraphs 
(4) and (5), any item giving rise to a deficiency on a joint 
return shall be allocated to individuals filing the return 
in the same manner as it would have been allocated if 
the individuals had filed separate returns for the taxable 
year. 
"(B) EXCEPTION WHERE OTHER SPOUSE BENEFITS.— Regulations. 
Under rules prescribed by the Secretary, an item otherwise 
allocable to an individual imder subparagraph (A) shall 
be allocated to the other individual filing the joint return 
to the extent the item gave rise to a tax benefit on the 
joint return to the other individual. 
"(C) EXCEPTION FOR FRAUD.—The Secretary may pro-
vide for an allocation of any item in a manner not pre-
scribed by subparagraph (A) if the Secretary establishes 
that such allocation is appropriate due to fraud of one 
or both individuals. 
112 STAT. 738 
PUBLIC LAW 105-206-JULY 22, 1998 
Applicability. 
Applicability. 
"(4) 
LIMITATIONS ON SEPARATE RETURNS DISREGARDED.— 
If an item of deduction or credit is disallowed in its entirety 
solely because a separate return is filed, such disallowance 
shall be disregarded and the item shall be computed as if 
a joint return had been filed and then allocated between the 
spouses appropriately. A similar rule shall apply for purposes 
of section 86. 
"(5) CHILD'S LIABILITY.—If the liability of a child of a tax-
payer is included on a joint return, such liability shall be 
disregarded in computing the separate liability of either spouse 
and such liability shall be allocated appropriately between the 
spouses. 
"(e) PETITION FOR REVIEW BY TAX COURT.— 
"(1) IN GENERAL.—In the case of an individual who elects 
to have subsection (b) or (c) apply— 
"(A) IN GENERAL.—^The individual may petition the Tax 
Court (and the Tax Court shall have jurisdiction) to deter-
mine the appropriate relief available to the individual 
under this section if such petition is filed during the 90-
day period beginning on the date on which the Secretary 
mails by certified or registered mail a notice to such individ-
ual of the Secretary's determination of relief available to 
the individual. Notwithstanding the preceding sentence, 
an individual may file such petition at any time after 
the date which is 6 months after the date such election 
is filed with the Secretary and before the close of such 
90-day period. 
"(B) 
RESTRICTIONS APPLICABLE TO COLLECTION OF 
ASSESSMENT.— 
"(i) IN GENERAL.—Except as otherwise provided 
in section 6851 or 6861, no levy or proceeding in court 
shall be made, begun, or prosecuted against the 
individual making an election under subsection (b) or 
(c) for collection of any assessment to which such elec-
tion relates until the expiration of the 90-day period 
described in subparagraph (A), or, if a petition has 
been filed with the Tax Court, until the decision of 
the Tax Court has become final. Rules similar to the 
rules of section 7485 shall apply with respect to the 
collection of such assessment. 
"(ii) AUTHORITY TO ENJOIN COLLECTION ACTIONS.— 
Notwithstanding the provisions of section 7421(a), the 
beginning of such levy or proceeding during the time 
the prohibition under clause (i) is in force may be 
enjoined by a proceeding in the proper court, including 
the Tax Court. The Tax Court shall have no jurisdiction 
under this subparagraph to enjoin any action or 
proceeding unless a timely petition has been filed 
under subparagraph (A) and then only in respect of 
the amount of the assessment to which the election 
under subsection (b) or (c) relates. 
"(2) SUSPENSION OF RUNNING OF PERIOD OF LIMITATIONS.— 
The running of the period of limitations in section 6502 on 
the collection of the assessment to which the petition under 
paragraph (1)(A) relates shall be suspended for the period dur-
ing which the Secretary is prohibited by paragraph (1)(B) from 
PUBLIC LAW 105-206-^JULY 22, 1998 
112 STAT. 739 
collecting by levy or a proceeding in court and for 60 days 
thereafter. 
"(3) APPLICABLE RULES.— 
"(A) ALLOWANCE OF CREDIT OR REFUND.—^Except as 
provided in subparagraph (B), notwithstanding any other 
law or rule of law (other than section 6512(b), 7121, or 
7122), credit or refund shall be allowed or made to the 
extent attributable to the application of this section. 
"(B) RES JUDICATA.—In the case of any election under 
subsection (b) or (c), if a decision of the Tax Court in 
any prior proceeding for the same taxable year has become 
final, such decision shall be conclusive except with respect 
to the qualification of the individual for relief which was 
not an issue in such proceeding. The exception contained 
in the preceding sentence shall not apply if the Tax Court 
determines that the individual participated meaningfully 
in such prior proceeding. 
"(C) LIMITATION ON TAX COURT JURISDICTION.—If a suit 
for refund is begun by either individual filing the joint 
return pursuant to section 6532— 
"(i) the Tax Court shall lose jurisdiction of the 
individual's action under this section to whatever 
extent jurisdiction is acquired by the district court 
or the United States Court of Federal Claims over 
the taxable years that are the subject of the suit for 
refund; and 
"(ii) the court acquiring jurisdiction shall have 
jurisdiction over the petition filed under this sub-
section. 
"(4) NOTICE TO OTHER SPOUSE.—The Tax Court shall estab- Regulations, 
lish rules which provide the individual filing a joint return 
but not making the election under subsection (b) or (c) with 
adequate notice and an opportunity to become a party to a 
proceeding under either such subsection. 
"(f) EQUITABLE RELIEF.—^Under procedures prescribed by the 
Secretary, if— 
"(1) taking into account all the facts and circumstances, 
it is inequitable to hold the individual liable for any unpaid 
tax or any deficiency (or any portion of either); and 
"(2) relief is not available to such individual under sub-
section (b) or (c), 
the Secretary may relieve such individual of such liability. 
"(g) REGULATIONS.—^The Secretary shall prescribe such regula-
tions as are necessary to carry out the provisions of this section, 
including— 
"(1) regulations providing methods for allocation of items 
other than the methods under subsection (d)(3); and 
"(2) regulations providing the opportunity for an individual 
to have notice of, and an opportunity to participate in, any 
administrative proceeding with respect to an election made 
under subsection (b) or (c) by the other individual filing the 
joint return.". 
(b) EQUITABLE RELIEF FOR INDIVIDUALS NOT FILING JOINT 
RETURN.—Section 66(c) (relating to spouse relieved of liability in 
certain other cases) is amended by adding at the end the following 
new sentence: "Under procedures prescribed by the Secretary, if. Procedures, 
taking into account all the facts and circumstances, it is inequitable 
112 STAT. 740 
PUBLIC LAW 105-206—JULY 22, 1998 
Deadline. 
26 use 6015 
note. 
26 use 6013 
note. 
26 use 6015 
note. 
Applicability. 
to hold the individual liable for any unpaid tax or any deficiency 
(or any portion of either) attributable to any item for which relief 
is not available under the preceding sentence, the Secretary may 
relieve such individual of such liability.". 
(c) SEPARATE FORM FOR APPLYING FOR SPOUSAL RELIEF.—Not 
later than 180 days after the date of the enactment of this Act, 
the Secretary of the Treasury shall develop a separate form with 
instructions for use by taxpayers in applying for relief under section 
6015(a) of the Internal Revenue Code of 1986, as added by this 
section. 
(d) SEPARATE NOTICE TO EACH FILER.—The Secretary of the 
Treasury shall, wherever practicable, send any notice relating to 
a joint return under section 6013 of the Internal Revenue Code 
of 1986 separately to each individual filing the joint return. 
(e) CONFORMING AMENDMENTS.— 
(1) Section 6013 is amended by striking subsection (e). 
(2) Subparagraph (A) of section 6230(c)(5) is amended by 
striking "section 6013(e)" and inserting "section 6015". 
(3) Section 7421(a) is amended by inserting "6015(d)," after 
"sections". 
(f) CLERICAL AMENDMENT.—^The table of sections for subpart 
B of part II of subchapter A of chapter 61 is amended by inserting 
after the item relating to section 6014 the following new item: 
"Sec. 6015. Relief from joint and several liability on joint return.". 
(g) EFFECTIVE DATES.— 
(1) IN GENERAL.—^Except as provided in paragraph (2), the 
amendments made by this section shall apply to any liability 
for tax arising after the date of the enactment of this Act 
and any liability for tax arising on or before such date but 
remaining unpaid as of such date. 
(2) 2-YEAR PERIOD.—^The 2-year period under subsection 
(b)(1)(E) or (c)(3)(B) of section 6015 of the Internal Revenue 
Code of 1986 shall not expire before the date which is 2 years 
after the date of the first collection activity after the date 
of the enactment of this Act. 
SEC. 3202. SUSPENSION OF STATUTE OF UMITATIONS ON FIUNG 
REFUND CLAIMS DURING PERIODS OF DISABIUTY. 
(a) IN GENERAL.—Section 6511 (relating to limitations on credit 
or refund) is amended by redesignating subsection (h) as subsection 
(i) and by inserting after subsection (g) the following new subsection: 
"(h) RUNNING OF PERIODS OF LIMITATION SUSPENDED WHILE 
TAXPAYER IS UNABLE TO MANAGE FINANCIAL AFFAIRS DUE TO 
DISABILITY.— 
"(1) IN GENERAL.—In the case of an individual, the running 
of the periods specified in subsections (a), (b), and (c) shall 
be suspended during any period of such individual's life that 
such individual is financially disabled. 
"(2) FINANCIALLY DISABLED.— 
"(A) IN GENERAL.—^For purposes of paragraph (1), an 
individual is financially disabled if such individual is 
unable to manage his financial affairs by reason of a medi-
cally determinable physical or mental impairment of the 
individual which can be expected to result in death or 
which has lasted or can be expected to last for a continuous 
period of not less than 12 months. An individual shall 
not be considered to have such an impairment unless proof 
'"''?^':-^-
PUBLIC LAW 105-206-^JULY 22, 1998 
112 STAT. 741 
of the existence thereof is furnished in such form and 
manner as the Secretary may require. 
"(B) EXCEPTION WHERE INDIVIDUAL HAS GUARDIAN, 
ETC.—^An individual shall not be treated as financially dis-
abled during any period that such individual's spouse or 
any other person is authorized to act on behalf of such 
individual in financial matters.". 
(b) EFFECTIVE DATE.—^The amendment made by subsection (a) 
shall apply to periods of disability before, on, or after the date 
of the enactment of this Act but shall not apply to any claim 
for credit or refund which (without regard to such amendment) 
is barred by the operation of any law or rule of law (including 
res judicata) as of the date of the enactment of this Act. 
Subtitle D—^Provisions Relating to Interest 
and Penalties 
Applicability. 
26 use 6511 
note. 
SEC. 3301. ELIMINATION OF INTEREST RATE DIFFERENTIAL ON OVER-
LAPPING PERIODS OF INTEREST ON TAX OVERPAY-
MENTS AND UNDERPAYMENTS. 
(a) IN GENERAL.—Section 6621 (relating to determination of 
rate of interest) is amended by adding at the end the following 
new subsection: 
"(d) ELIMINATION OF INTEREST ON OVERLAPPING PERIODS OF 
TAX OVERPAYMENTS AND UNDERPAYMENTS.—TO the extent that, 
for any period, interest is payable under subchapter A and allowable 
under subchapter B on equivalent underpajmients and overpay-
ments by the same taxpayer of tax imposed by this title, the 
net rate of interest under this section on such amounts shall be 
zero for such period.". 
(b) CONFORMING AMENDMENT.—Subsection (f) of section 6601 
(relating to satisfaction by credits) is amended by adding at the 
end the following new sentence: "The preceding sentence shall 
not apply to the extent that section 6621(d) applies.". 
(c) EFFECTIVE DATES.— 
(1) IN GENERAL.—Except as provided under paragraph (2), 
the amendments made by this section shall apply to interest 
for periods beginning after the date of the enactment of this 
Act. 
(2) SPECIAL RULE.—^The amendments made by this section 
shsdl apply to interest for periods beginning before the date 
of the enactment of this Act if the taxpayer— 
(A) reasonably identifies and establishes periods of 
such tax overpayments and underpayments for which the 
zero rate applies; and 
(B) not later than December 31, 1999, requests the Deadline. 
Secretary of the Treasury to apply section 6621(d) of the 
Internal Revenue Code of 1986, as added by subsection 
(a), to such periods. 
SEC. 3302. INCREASE IN OVERPAYMENT RATE PAYABLE TO TAXPAYERS 
OTHER THAN CORPORATIONS. 
(a) IN GENERAL.—Subparagraph (B) of section 6621(a)(1) 
(defining overpayment rate) is amended to read as follows: 
"(B) 3 percentage points (2 percentage points in the 
case of a corporation).". 
Applicability. 
26 use 6601 
note. 
112 STAT. 742 
PUBLIC LAW 105-206—JULY 22, 1998 
Applicability. 
26 use 6621 
note. 
Applicability. 
26 use 6651 
note. 
Applicability. 
26 use 6656 
note. 
(b) EFFECTIVE DATE.—^The amendment made by this section 
shall apply to interest for the second and succeeding calendar 
quarters beginning after the date of the enactment of this Act. 
SEC. 3303. MITIGATION OF PENALTY ON INDIVIDUAL'S FAILURE TO 
PAY FOR MONTHS DURING PERIOD OF INSTALLMENT 
AGREEMENT. 
(a) IN GENERAL.—Section 6651 (relating to failure to file tax 
return or to pay tax) is amended by adding at the end the following 
new subsection: 
"(h) LIMITATION ON PENALTY ON INDIVIDUAL'S FAILURE TO PAY 
FOR MONTHS DURING PERIOD OF INSTALLMENT AGREEMENT.—In 
the case of an individual who files a return of tax on or before 
the due date for the return (including extensions), paragraphs (2) 
and (3) of subsection (a) shall each be applied by substituting 
'0.25' for '0.5' each place it appears for purposes of determining 
the addition to tax for any month during which an installment 
agreement under section 6159 is in efffect for the pa3mrient of such 
tax.". 
(b) EFFECTIVE DATE.—^The amendment made by this section 
shall apply for purposes of determining additions to the tax for 
months beginning after December 31, 1999. 
SEC. 3304. MITIGATION OF FAILURE TO DEPOSIT PENALTY. 
(a) TAXPAYER MAY DESIGNATE PERIODS TO WHICH DEPOSITS 
APPLY.—Section 6656 (relating to underpajmient of deposits) is 
amended by adding at the end the following new subsection: 
"(e) DESIGNATION OF PERIODS TO WHICH DEPOSITS APPLY.— 
"(1) IN GENERAL.—^A person may, with respect to any 
deposit of tax to be reported on such person's return for a 
specified tax period, designate the period or periods within 
such specified tax period to which the deposit is to be applied 
for purposes of this section. 
"(2) TIME FOR MAKING DESIGNATION.—A person may make 
a designation under paragraph (1) only during the 90-day period 
beginning on the date of a notice that a penalty under sub-
section (a) has been imposed for the specified tax period to 
which the deposit relates.". 
(b) EXPANSION OF EXEMPTION FOR FIRST-TIME DEPOSITS.— 
(1) IN GENERAL.—^Paragraph (2) of section 6656(c) (relating 
to exemption for first-time depositors of emplojmient taxes) 
is amended to read as follows: 
"(2) such failure— 
"(A) occurs during the first quarter that such person 
was required to deposit any emplo3mtient tax; or 
"(B) if such person is required to change the frequency 
of deposits of any employment tax, relates to the first 
deposit to which such change applies, and". 
(c) 
PERIODS APPLY TO CURRENT LIABILITIES UNLESS 
DES-
IGNATED OTHERWISE.—Paragraph (1) of section 6656(e) (as added 
by subsection (a) of this section) is amended to read as follows: 
"(e) DESIGNATION OF PERIODS TO WHICH DEPOSITS APPLY.— 
"(1) IN GENERAL.—^A deposit made under this section shall 
be applied to the most recent period or periods within the 
specified tax period to which the deposit relates, unless the 
person making such deposit designates a different period or 
periods to which such deposit is to be applied.". 
(d) EFFECTIVE DATE.— 
PUBLIC LAW 105-206-JULY 22, 1998 
112 STAT. 743 
(1) IN GENERAL.—^The amendments made by this section 
shall apply to deposits required to be made after the 180th 
day after the date of the enactment of this Act. 
(2) APPLICATION TO CURRENT LIABILITIES.—^The amendment 
made by subsection (c) shall apply to deposits required to 
be made after December 31, 2001. 
SEC. 3305. SUSPENSION OF INTEREST AND CERTAIN PENALTIES 
WHERE SECRETARY FAILS TO CONTACT INDIVIDUAL TAX-
PAYER. 
(a) IN GENERAL.—Section 6404 (relating to abatements) is 
amended by redesignating subsection (g) as subsection (h) and 
by inserting after subsection (f) the following new subsection: 
"(g) SUSPENSION OF INTEREST AND CERTAIN PENALTIES WHERE 
SECRETARY FAILS TO CONTACT TAXPAYER.— 
"(1) SUSPENSION.— 
"(A) IN GENERAL.—In the case of an individual who 
files a return of tax imposed by subtitle A for a taxable 
year on or before the due date for the return (including 
extensions), if the Secretary does not provide a notice to 
the taxpayer specifically stating the taxpayer's liability and 
the basis for the liability before the close of the 1-year 
period (18-month period in the case of taxable years begin-
ning before January 1, 2004) beginning on the later of— 
"(i) the date on which the return is filed; or 
"(ii) the due date of the return without regard 
to extensions, 
the Secretary shall suspend the imposition of any interest, 
penalty, addition to tax, or additional amount with respect 
to any failure relating to the return which is computed 
by reference to the period of time the failure continues 
to exist and which is properly allocable to the suspension 
period. 
"(B) SEPARATE APPLICATION.—^This paragraph shall be 
applied separately with respect to each item or adjustment. 
"(2) EXCEPTIONS.—^Paragraph (1) shall not apply to— 
"(A) any penalty imposed by section 6651; 
"(B) any interest, penalty, addition to tax, or additional 
amount in a case involving fraud; 
"(C) any interest, penalty, addition to tax, or additional 
amount with respect to any t£ix liability shown on the 
return; or 
"(D) any criminal penalty. 
"(3) SUSPENSION PERIOD.—For purposes of this subsection, 
the term 'suspension period' means the period— 
"(A) beginning on the day after the close of the 1-
year period (18-month period in the case of taxable years 
beginning before January 1, 2004) under paragraph (1); 
and 
"(B) ending on the date which is 21 days after the 
date on which notice described in paragraph (1)(A) is pro-
vided by the Secretary.". 
(b) EFFECTIVE DATE.—^The amendments made by this section Applicability, 
shall apply to taxable years ending sifter the date of the enactment 
26 USC 6404 
of this Act. 
'^°^-
59-194 O - 98 - 25: QL 3 Part 1 
112 STAT. 744 
PUBLIC LAW 105-206-^ULY 22, 1998 
SEC. 
3306. 
PROCEDURAL REQUIREMENTS FOR IMPOSITION OF 
PENALTIES AND ADDITIONS TO TAX. 
(a) IN GENERAL.—<;!hapter 68 (relating to additions to the tax, 
additional amounts, and assessable penalties) is amended by adding 
at the end the following new subchapter: 
"Subchapter C—Procedural Requirements 
Applicability. 
26 u s e 6751 
note. 
"Sec. 6751. Procedural requirements. 
"SEC. 6751. PROCEDURAL REQUIREMENTS. 
"(a) 
COMPUTATION OF PENALTY INCLUDED IN NOTICE.—^The 
Secretary shall include with each notice of penalty under this 
title information with respect to the name of the penalty, the 
section of this title under which the penalty is imposed, and a 
computation of the penalty. 
"(b) APPROVAL OF ASSESSMENT.— 
"(1) IN GElsTERAL.—No penalty under this title shall be 
assessed unless the initial determination of such assessment 
is personally approved (in writing) by the immediate supervisor 
of the individual making such determination or such higher 
level official as the Secretary may designate. 
"(2) EXCEPTIONS.—Paragraph (1) shall not apply to— 
"(A) any addition to tax under section 6651, 6654, 
or 6655; or 
"(B) any 
other 
penalty 
automatically 
calculated 
through electronic means. 
"(c) PENALTIES.—^For purposes of this section, the term 'penalty' 
includes any addition to tax or any additional amount.". 
(b) CONFORMING AMENDMENT.—^The table of subchapters for 
chapter 68 is amended by adding at the end the following new 
item: 
"SUBCHAPTER C. Procedural requirements.". 
(c) EFFECTIVE DATE.—^The amendments made by this section 
shall apply to notices issued, and penalties assessed, after December 
31, 2000. 
SEC. 3307. PERSONAL DELIVERY OF NOTICE OF PENALTY UNDER 
SECTION 6672. 
(a) IN GENERAL.—Paragraph (1) of section 6672(b) (relating 
to failure to collect and pay over tax, or attempt to evade or 
defeat tax) is amended by inserting "or in person" after "section 
6212(b)". 
(b) CONFORMING AMENDMENTS.— 
(1) Paragraph (2) of section 6672(b) is amended by inserting 
"(or, in the case of such a notice delivered in person, such 
delivery)" after "paragraph (1)". 
(2) Paragraph (3) of section 6672(b) is amended by inserting 
"or delivered in person" after "mailed" each place it appears. 
26 use 6672 
(c) EFFECTIVE DATE.—^The amendments made by this section 
note. 
shall take effect on the date of the enactment of this Act. 
SEC. 3308. NOTICE OF INTEREST CHARGES. 
(a) IN GENERAL.—Chapter 67 (relating to interest) is amended 
by adding at the end the following new subchapter: 
PUBLIC LAW 105-206—JULY 22, 1998 
112 STAT. 745 
"Subchapter D—Notice requirements 
"Sec. 6631. Notice requirements. 
"SEC. 6631. NOTICE REQUIREMENTS. 
"The Secretary shall include with each notice to an individual 
taxpayer which includes an amount of interest required to be paid 
by such taxpayer under this title information with respect to the 
section of this title under which the interest is imposed and a 
computation of the interest.". 
(b) CONFORMING AMENDMENT.—^The table of subchapters for 
chapter 67 is amended by adding at the end the following new 
item: 
"SUBCHAPTER D. Notice requirements.". 
(c) EFFECTIVE DATE.—^The amendments made by this section 
shall apply to notices issued after December 31, 2000. 
SEC. 3309. ABATEMENT OF INTEREST ON UNDERPAYMENTS 
BY 
TAXPAYERS IN PRESIDENTIALLY DECLARED DISASTER 
AREAS. 
(a) IN GENERAL.—Section 6404 (relating to abatements), as 
amended by section 3305, is amended by redesignating subsection 
(h) as subsection (i) and by inserting after subsection (g) the follow-
ing new subsection: 
"(h) 
ABATEMENT 
OF 
INTEREST 
ON 
UNDERPAYMENTS 
BY 
TAXPAYERS IN PRESIDENTIALLY DECLARED DISASTER AREAS.— 
"(1) IN GENERAL.—If the Secretary extends for any period 
the time for filing income tax returns under section 6081 and 
the time for paying income tax with respect to such returns 
under section 6161 for any taxpayer located in a Presidentially 
declared disaster area, the Secretary shall abate for such period 
the assessment of any interest prescribed under section 6601 
on such income tax. 
"(2) 
PRESIDENTIALLY 
DECLARED 
DISASTER 
AREA.—^For 
purposes of paragraph (1), the term 'Presidentially declared 
disaster area' means, with respect to any taxpayer, any area 
which the President has determined warrants assistance by 
the Federal Government under the Disaster Relief and Emer-
gency Assistance Act.". 
(b) EFFECTIVE DATE.—^The amendment made by this section 
shall apply to disasters declared after December 31, 1997, with 
respect to taxable years beginning after December 31, 1997. 
(c) EMERGENCY DESIGNATION.— 
(1) For the purposes of section 252(e) of the Balanced 
Budget and Emergency Deficit Control Act, Congress designates 
the provisions of this section as an emergency requirement. 
(2) The amendments made by subsections (a) and (b) of 
this section shall only take effect upon the transmittal by 
the President to the Congress of a message designating the 
provisions of subsections (a) and (b) as an emergency require-
ment pursuant to section 252(e) of the Balanced Budget and 
Emergency Deficit Control Act. 
Applicability. 
26 use 6631 
note. 
Applicability. 
26 use 6404 
note. 
26 use 6404 
note. 
112 STAT. 746 
PUBLIC LAW 105-206-JULY 22, 1998 
Subtitle E—Protections for Taxpayers 
Subject to Audit or Collection Activities 
PART I—DUE PROCESS 
SEC. 3401. DUE PROCESS IN INTERNAL REVENUE SERVICE COLLEC-
TION ACTIONS. 
(a) NOTICE AND OPPORTUNITY FOR HEARING UPON FILING OF 
NOTICE OF LIEN.—Subchapter C of chapter 64 (relating to lien 
for taxes) is amended by inserting before the table of sections 
the following: 
"Part I. 
Due process for liens. 
"Part II. Liens. 
"PART I—DUE PROCESS FOR LIENS 
"Sec. 6320. Notice and opportunity for hearing upon filing of notice of lien. 
"SEC. 6320. NOTICE AND OPPORTUNITY FOR HEARING UPON FIUNG 
OF NOTICE OF UEN. 
"(a) REQUIREMENT OF NOTICE.— 
"(1) IN GENERAL.—The Secretary shall notify in writing 
the person described in section 6321 of the filing of a notice 
of lien under section 6323. 
"(2) TIME AND METHOD FOR NOTICE.—^The notice required 
under paragraph (1) shall be— 
"(A) given in person; 
"(B) left at the dwelling or usual place of business 
of such person; or 
"(C) sent by certified or registered mail to such person's 
last known address, 
not more than 5 business days after the day of the filing 
of the notice of lien. 
"(3) INFORMATION INCLUDED WITH NOTICE.—^The notice 
required under paragraph (1) shall include in simple and non-
technical terms— 
"(A) the amount of unpaid tax; 
"(B) the right of the person to request a hearing during 
the 30-day period beginning on the day after the 5-day 
period described in paragraph (2); 
"(C) the administrative appeals available to the tax-
payer with respect to such lien and the procedures relating 
to such appeals; and 
"(D) the provisions of this title and procedures relating 
to the release of liens on property. 
"(b) RIGHT TO FAIR HEARING.— 
"(1) IN GENERAL.—If the person requests a hearing under 
subsection (a)(3)(B), such hearing shall be held by the Internal 
Revenue Service Office of Appeals. 
"(2) ONE HEARING PER PERIOD.—^A person shall be entitled 
to only one hearing under this section with respect to the 
taxable period to which the unpaid tax specified in subsection 
(a)(3)(A) relates. 
"(3) IMPARTIAL OFFICER.—^The hearing under this sub-
section shall be conducted by an officer or employee who has 
PUBLIC LAW 105-206-^ULY 22, 1998 
112 STAT. 747 
had no prior involvement with respect to the unpaid tax speci-
fied in subsection (a)(3)(A) before the first hearing under this 
section or section 6330. A taxpayer may waive the requirement 
of this paragraph. 
"(4) COORDINATION WITH SECTION 6330.—TO the extent prac-
ticable, a hearing under this section shall be held in conjunction 
with a hearing under section 6330. 
"(c) CONDUCT OF HEARING; REVIEW; SUSPENSIONS.—^For pur- Appiicabiuty. 
poses of this section, subsections (c), (d) (other than paragraph 
(2)(B) thereof), and (e) of section 6330 shall apply. 
"PART II—LIENS". 
(b) NOTICE AND OPPORTUNITY FOR HEARING BEFORE LEVY.— 
Subchapter D of chapter 64 (relating to seizure of property for 
collection of taxes) is amended by inserting before the table of 
sections the following: 
"Part I. 
Due process for collections. 
"Part II. Levy. 
"PART I—DUE PROCESS FOR COLLECTIONS 
"Sec. 6330. Notice and opportunity for hearing before levy. 
"SEC. 6330. NOllCE AND OPPORTUNITY FOR HEARING BEFORE LEVY. 
"(a) REQUIREMENT OF NOTICE BEFORE LEVY,— 
"(1) IN GENERAL.—^No levy may be made on any property 
or right to property of any person unless the Secretary has 
notified such person in writing of their right to a hearing 
under this section before such levy is made. Such notice shall 
be required only once for the taxable period to which the 
unpaid tax specified in paragraph (3)(A) relates. 
"(2) TIME AND METHOD FOR NOTICE.—^The notice required 
under paragraph (1) shall be— 
"(A) given in person; 
"(B) left at the dwelling or usual place of business 
of such person; or 
"(C) sent by certified or registered mail, return receipt 
requested, to such person's last known address; 
not less than 30 days before the day of the first levy with 
respect to the amount of the unpaid tax for the taxable period. 
"(3) INFORMATION INCLUDED WITH NOTICE.—The notice 
required under paragraph (1) shall include in simple and non-
technical terms— 
"(A) the amount of unpaid tax; 
"(B) the right of the person to request a hearing during 
the 30-day period under paragraph (2); and 
"(C) the proposed action by the Secretary and the rights 
of the person with respect to such action, including a brief 
statement which sets forth— 
"(i) the provisions of this title relating to levy 
and sale of property; 
"(ii) the procedures applicable to the levy and sale 
of property under this title; 
"(iii) the administrative appeals available to the 
taxpayer with respect to such levy and sale and the 
procedures relating to such appeals; 
112 STAT. 748 
PUBLIC LAW 105-206—JULY 22, 1998 
"(iv) the alternatives available to taxpayers which 
could prevent levy on property (including installment 
agreements under section 6159); and 
"(v) the provisions of this title and procedures 
relating to redemption of property and release of liens 
on property. 
"(b) RIGHT TO FAIR HEARING.— 
"(1) IN GENERAL.—If the person requests a hearing under 
subsection (a)(3)(B), such hearing shall be held by the Internal 
Revenue Service Office of Appeals. 
"(2) ONE HEARING PER PERIOD.—A person shall be entitled 
to only one hearing under this section with respect to the 
taxable period to which the unpaid tax specified in subsection 
(a)(3)(A) relates. 
"(3) IMPARTIAL OFFICER.—The hearing under this sub-
section shall be conducted by an officer or employee who has 
had no prior involvement with respect to the unpaid tax speci-
fied in subsection (a)(3)(A) before the first hearing under this 
section or section 6320. A taxpayer may waive the requirement 
of this paragraph. 
"(c) MATTERS CONSIDERED AT HEARING.—In the case of any 
hearing conducted under this section— 
"(1) REQUIREMENT OF INVESTIGATION.—^The appeals officer 
shall at the hearing obtain verification from the Secretary 
that the requirements of any applicable law or administrative 
procedure have been met. 
"(2) ISSUES AT HEARING.— 
"(A) IN GENERAL.—^The person may raise at the hearing 
any relevant issue relating to the unpaid tax or the pro-
posed levy, including— 
"(i) appropriate spousal defenses; 
"(ii) challenges to the appropriateness of collection 
actions; and 
"(iii) offers of collection alternatives, which may 
include the posting of a bond, the substitution of other 
assets, an installment agreement, or an offer-in-com-
promise. 
"(B) UNDERLYING LIABILITY.—^The person may also 
raise at the hearing challenges to the existence or amount 
of the underlying tax liability for any tax period if the 
person did not receive any statutory notice of deficiency 
for such tax liability or did not otherwise have an oppor-
tunity to dispute such tax liability. 
"(3) BASIS FOR THE DETERMINATION.—^The determination 
by an appeals officer under this subsection shall take into 
consideration— 
"(A) the verification presented under paragraph (1); 
"(B) the issues raised under paragraph (2); and 
"(C) whether any proposed collection action balances 
the need for the efficient collection of taxes with the legiti-
mate concern of the person that any collection action be 
no more intrusive than necessary. 
"(4) CERTAIN ISSUES PRECLUDED.—^An issue may not be 
raised at the hearing if— 
"(A) the issue was raised and considered at a previous 
hearing under section 6320 or in any other previous 
administrative or judicial proceeding; and 
PUBLIC LAW 105-206—JULY 22, 1998 
112 STAT. 749 
"(B) the person seeking to raise the issue participated 
meaningfully in such hearing or proceeding. 
This paragraph shall not apply to any issue with respect to 
which subsection (d)(2)(B) applies. 
"(d) PROCEEDING AFTER HEARING.— 
"(1) JUDICIAL REVIEW OF DETERMINATION.—^The person may, 
within 30 days of a determination under this section, appeal 
such determination— 
"(A) to the Tax Court (and the Tax Court shall have 
jurisdiction to hear such matter); or 
"(B) if the Tax Court does not have jurisdiction of 
the underlying tax liability, to a district court of the United 
States. 
If a court determines that the appeal was to an incorrect 
court, a person shall have 30 days after the court determination 
to file such appeal with the correct court. 
"(2) JURISDICTION RETAINED AT IRS OFFICE OF APPEALS.— 
The Internal Revenue Service Office of Appeals shall retain 
jurisdiction with respect to any determination made under this 
section, including subsequent hearings requested by the person 
who requested the original hearing on issues regarding— 
"(A) collection actions taken or proposed with respect 
; 
to such determination; and 
"(B) after the person has exhausted all administrative 
remedies, a change in circumstances with respect to such 
person which affects such determination. 
"(e) SUSPENSION OF COLLECTIONS AND STATUTE OF LIMITA-
TIONS.— 
"(1) IN GENERAL.—Except as provided in paragraph (2), 
if a hearing is requested under subsection (a)(3)(B), the levy 
actions which are the subject of the requested hearing and 
the running of any period of limitations under section 6502 
(relating to collection after assessment), section 6531 (relating, 
to criminal prosecutions), or section 6532 (relating to other 
suits) shall be suspended for the period during which such 
hearing, and appeals therein, are pending. In no event shall 
any such period expire before the 90th day after the day on 
which there is a final determination in such hearing. 
"(2) LEVY UPON APPEAL.—^Paragraph (1) shall not apply 
to a levy action while an appeal is pending if the underl3dng 
tax liability is not at issue in the appeal and the court deter-
mines that the Secretary has shown good cause not to suspend 
the levy. 
"(f) JEOPARDY AND STATE REFUND COLLECTION.—If— 
"(1) the Secretary has made a finding under the last sen-
tence of section 6331(a) that the collection of tax is in jeopardy; 
or 
"(2) the Secretary has served a levy on a State to collect 
a Federal tax liability from a State tax refund, 
this section shall not apply, except that the taxpayer shall be 
given the opportunity for the hearing described in this section 
within a reasonable period of time after the levy. 
"PART II—LEVY". 
(c) REVIEW BY SPECIAL TRIAL JUDGES ALLOWED.— 
112 STAT. 750 
PUBLIC LAW 105-206—JULY 22, 1998 
(1) IN GENERAL.—Section 7443(b) (relating to proceedings 
which may be assigned to special trial judges) is amended 
by striking "and" at the end of paragraph (3), by redesignating 
paragraph (4) as paragraph (5), and by inserting after para-
graph (3) the following new paragraph: 
"(4) any proceeding under section 6320 or 6330, and". 
(2) AUTHORITY TO MAKE DECISIONS.—Section 7443(c) (relat-
ing to authority to make court decisions) is amended by striking 
"or (3)" and inserting "(3), or (4)". 
Applicability. 
(d) EFFECTIVE DATE.—^The amendments made by this section 
26 use 6320 
shall apply to collection actions initiated after the date which is 
^°^- 
180 days after the date of the enactment of this Act. 
PART II—EXAMINATION ACTIVITIES 
SEC. 3411. CONFIDENTIAUTY PRIVILEGES RELATING TO TAXPAYER 
COMMUNICATIONS. 
(a) IN GENERAL.—Chapter 77 (relating to miscellaneous provi-
sions) is amended by adding at the end the following new section: 
"SEC. 7525. CONFIDENTIALITY PRIVILEGES RELATING TO TAXPAYER 
COMMUNICATIONS. 
"(a) 
UNIFORM APPLICATION TO TAXPAYER 
COMMUNICATIONS 
WITH FEDERALLY AUTHORIZED PRACTITIONERS.— 
"(1) GENERAL RULE.—^With respect to tax advice, the same 
common law protections of confidentiality which apply to a 
communication between a taxpayer and an attorney shall also 
apply to a communication between a taxpayer and any federally 
authorized tax practitioner to the extent the communication 
would be considered a privileged communication if it were 
between a taxpayer and an attorney. 
"(2) LIMITATIONS.—Paragraph (1) may only be asserted in— 
"(A) any noncriminal tax matter before the Internal 
Revenue Service; and 
"(B) any noncriminal tax proceeding in Federal court 
brought by or against the United States. 
"(3) DEFINITIONS.—^For purposes of this subsection— 
"(A) FEDERALLY AUTHORIZED TAX PRACTITIONER.—^The 
term 'federally authorized tax practitioner' means any 
individual who is authorized under Federal law to practice 
before the Internal Revenue Service if such practice is 
subject to Federal regulation under section 330 of title 
3^1, United States Code. 
"(B) TAX ADVICE.—^The term 'tax advice* means advice 
given by an individual with respect to a matter which 
is within the scope of the individual's authority to practice 
described in subparagraph (A). 
"(b) SECTION NOT TO APPLY TO COMMUNICATIONS REGARDING 
CORPORATE TAX SHELTERS.—^The privilege under subsection (a) 
shall not apply to any written communication between a federally 
authorized tax practitioner and a director, shareholder, officer, or 
employee, agent, or representative of a corporation in connection 
with the promotion of the direct or indirect participation of such 
corporation 
in 
any 
tax 
shelter 
(as 
defined 
in 
section 
6662(d)(2)(C)(iii)).". 
PUBLIC LAW 105-206-^ULY 22, 1998 
112 STAT. 751 
(b) CONFORMING AMENDMENT.—^The table of sections for such 
chapter 77 is amended by adding at the end the following new 
item: 
"Sec. 7525. Confidentiality privileges relating to taxpayer communica-
tions.". 
(c) EFFECTIVE DATE.—^The amendments made by this section Applicability, 
shall apply to communications made on or after the date of the 26 USC 7525 
enactment of this Act. 
^°^-
SEC. 3412. LIMITATION ON FINANCIAL STATUS AUDIT TECHNIQUES. 
Section 7602 (relating to examination of books and witnesses) 
is amended by adding at the end the following new subsection: 
"(d) LIMITATION ON EXAMINATION ON UNREPORTED INCOME.— 
The Secretary shall not use financial status or economic reality 
examination techniques to determine the existence of unreported 
income of any taxpayer unless the Secretary has a reasonable 
indication that there is a likelihood of such unreported income.". 
SEC. 3413. SOFTWARE TRADE SECRETS PROTECTION. 
(a) IN GENERAL.—Subchapter A of chapter 78 (relating to exam-
ination and inspection) is amended by redesignating section 7612 
as section 7613 and by inserting after 7611 the following new 
section: 
"SEC. 7612. SPECIAL PROCEDURES FOR SUMMONSES FOR COMPUTER 
SOFTWARE. 
"(a) GENERAL RULE.—^For purposes of this title— 
"(1) except as provided in subsection (b), no summons may 
be issued under this title, and the Secretary may not begin 
any action under section 7604 to enforce any summons to 
produce or analyze any tax-related computer software source 
code; and 
"(2) any software and related materials which are provided 
to the Secretary under this title shall be subject to the safe-
guards under subsection (c). 
"(b) 
CIRCUMSTANCES UNDER 
WHICH 
COMPUTER SOFTWARE 
SOURCE CODE MAY B E PROVIDED.— 
"(1) IN GENERAL.—Subsection (a)(1) shall not apply to any 
portion, item, or component of tax-related computer software 
source code if— 
"(A) the Secretary is unable to otherwise reasonably 
ascertain the correctness of any item on a return from— 
"(i) the taxpayer's books, papers, records, or other 
data; or 
"(ii) the computer software executable code (and 
any modifications thereof) to which such source code 
relates and any associated data which, when executed, 
produces the output to ascertain the correctness of 
the item; 
"(B) the Secretary identifies with reasonable specificity 
the portion, item, or component of such source code needed 
to verify the correctness of such item on the return; and 
"(C) the Secretary determines that the need for the 
portion, item, or component of such source code with respect 
to such item outweighs the risks of unauthorized disclosure 
of trade secrets. 
"(2) EXCEPTIONS.—Subsection (a)(1) shall not apply to— 
112 STAT. 752 
PUBLIC LAW 105-206-.JULY 22, 1998 
"(A) any inquiry into any offense connected with the 
administration or enforcement of the internal revenue laws; 
"(B) any tax-related computer software source code 
acquired or developed by the taxpayer or a related person 
primarily for internal use by the taxpayer or such person 
rather than for commercial distribution; 
"(C) any communications between the owner of the 
tax-related computer software source code and the taxpayer 
or related persons; or 
"(D) any tax-related computer software source code 
which is required to be provided or made available pursu-
ant to any other provision of this title. 
"(3) COOPERATION REQUIRED.—For purposes of paragraph 
(1), the Secretary shall be treated as meeting the requirements 
of subparagraphs (A) and (B) of such paragraph if— 
"(A) the Secretary determines that it is not feasible 
to determine the correctness of an item without access 
to the computer software executable code and associated 
data described in paragraph (l)(A)(ii); 
"(B) the Secretary makes a formal request to the tax-
payer for such code and data and to the owner of the 
computer software source code for such executable code; 
and 
"(C) such code and data is not provided within 180 
days of such request. 
Courts. 
"(4) RIGHT TO CONTEST SUMMONS.—In any proceeding 
brought under section 7604 to enforce a summons issued under 
the authority of this subsection, the court shall, at the request 
of any party, hold a hearing to determine whether the 
applicable requirements of this subsection have been met. 
"(c) SAFEGUARDS TO ENSURE PROTECTION OF TRADE SECRETS 
AND OTHER CONFIDENTIAL INFORMATION.— 
"(1) ENTRY OF PROTECTIVE ORDER.—In any court proceeding 
to enforce a summons for any portion of software, the court 
may receive evidence and issue any order necessary to prevent 
the disclosure of trade secrets or other confidential information 
with respect to such software, including requiring that any 
information be placed under seal to be opened only as directed 
by the court. 
"(2) 
PROTECTION 
OF SOFTWARE.—^Notwithstanding 
any 
other provision of this section, and in addition to any protections 
ordered pursuant to paragraph (1), in the case of software 
that comes into the possession or control of the Secretary in 
the course of any examination with respect to any taxpayer— 
"(A) the software may be used only in connection with 
the examination of such taxpayer's return, any appeal by 
the taxpayer to the Internal Revenue Service Office of 
Appeals, any judicial proceeding (and any appeals there-
from), and any inquiry into any offense connected with 
the administration or enforcement of the internal revenue 
laws; 
"(B) the Secretary shall provide, in advance, to the 
taxpayer and the owner of the software a written list 
of the names of all individuals who will analyze or other-
wise have access to the software; 
"(C) the software shall be maintained in a secure area 
or place, and, in the case of computer software source 
PUBLIC LAW 105-206-JULY 22, 1998 
112 STAT. 753 
code, shall not be removed from the owner's place of busi-
ness unless the owner permits, or a court orders, such 
removal; 
"(D) the software may not be copied except as necessary 
to perform such analysis, and the Secretary shall number 
all copies made and certify in writing that no other copies 
have been (or will be) made; 
"(E) at the end of the period during which the software 
may be used under subparagraph (A)— 
"(i) the software and all copies thereof shall be 
returned to the person from whom they were obtained 
and any copies thereof made under subparagraph (D) 
on the hard drive of a machine or other mass storage 
device shall be permanently deleted; and 
"(ii) the Secretary shall obtain from any person 
who analyzes or otherwise had access to such software 
a written certification under penalty of perjury that 
all copies and related materials have been returned 
and that no copies were made of them; 
"(F) the software may not be decompiled or disassem-
bled; 
"(G) the Secretary shall provide to the taxpayer and 
the owner of any interest in such software, as the case 
may be, a written agreement, between the Secretary and 
any person who is not an officer or employee of the United 
States and who will analyze or otherwise have access to 
such software, which provides that such person agrees 
not to— 
"(i) disclose such software to any person other 
than persons to whom such information could be dis-
closed for tax administration purposes under section 
6103; or 
"(ii) participate for 2 years in the development 
of software which is intended for a similar purpose 
as the software examined; and 
"(H) the software shall be treated as return information 
for purposes of section 6103. 
For purposes of subparagraph (C), the owner shall make avail-
able any necessary equipment or materials for analysis of com-
puter software source code required to be conducted on the 
owner's premises. The owner of any interest in the software 
shall be considered a party to any agreement described in 
subparagraph (G). 
"(d) DEFINITIONS.—For purposes of this section— 
"(1) SOFTWARE.—^The term 'software' includes computer 
software source code and computer software executable code. 
"(2) COMPUTER SOFTWARE SOURCE CODE.—^The term 'com-
puter software source code' means— 
"(A) the code written by a programmer using a 
programming language which is comprehensible to appro-
priately trained persons and is not capable of directly being 
used to give instructions to a computer; 
"(B) related programmers' notes, design documents, 
memoranda, and similar documentation; and 
"(C) related customer communications. 
"(3) COMPUTER SOFTWARE EXECUTABLE CODE.—^The term 
'computer software executable code' means— 
112 STAT. 754 
PUBLIC LAW 1 0 5 - 2 0 6 - J U L Y 22, 1998 
"(A) any object code, machine code, or other code read-
able by a computer when loaded into its memory and 
used directly by such computer to execute instructions; 
and 
"(B) any related user manuals. 
"(4) OWNER.—^The term 'owner' shall, with respect to any 
software, include the developer of the software. 
"(5) RELATED PERSON.—A person shall be treated as related 
to another person if such persons are related persons under 
section 267 or 707(b). 
"(6) TAX-RELATED COMPUTER SOFTWARE SOURCE CODE.— 
The term 'tax-related computer software source code' means 
the computer source code for any computer software program 
intended for accounting, tax return preparation or compliance, 
or tax planning.". 
(b) UNAUTHORIZED DISCLOSURE OF SOFTWARE.—Section 7213 
(relating to unauthorized disclosure of information) is amended 
by redesignating subsection (d) as subsection (e) and by inserting 
after subsection (c) the following new subsection: 
"(d) DISCLOSURE OF SOFTWARE.—Any person who willfully 
divulges or makes known software (as defined in section 7612(d)(1)) 
to any person in violation of section 7612 shall be guilty of a 
felony and, upon conviction thereof, shall be fined not more than 
$5,000, or imprisoned not more than 5 years, or both, together 
with the costs of prosecution.". 
(c) APPLICATION OF SPECIAL PROCEDURES FOR THIRD-PARTY 
SUMMONSES.—Paragraph (2) of section 7603(b), as amended by 
section 3416(a), is amended by striking "and" at the end of subpara-
graph (H), by striking a period at the end of subparagraph (I) 
and inserting ", and", and by adding at the end the following 
new subparagraph: 
"(J) any owner or developer of a computer software 
source code (as defined in section 7612(d)(2)). 
Applicability. 
Subparagraph (J) shall apply only with respect to a summons 
requiring the production of the source code referred to in 
subparagraph (J) or the program and data described in section 
7612(b)(l)(A)(ii) to which such source code relates.". 
(d) CONFORMING AMENDMENT.—^The table of sections for sub-
chapter A of chapter 78 is amended by striking the item relating 
to section 7612 and by inserting the following new item: 
"Sec. 7612. Special procedures for summonses for computer software. 
"Sec. 7613. Cross references.". 
Applicability. 
(e) EFFECTIVE DATE.— 
26 use 7612 
(1) IN GENERAL.—^The amendments made by this section 
"°*®- 
shall apply to summonses issued, and software acquired, after 
the date of the enactment of this Act. 
(2) SOFTWARE PROTECTION.—In the case of any software 
acquired on or before such date of enactment, the requirements 
of section 7612(a)(2) of the Internal Revenue Code of 1986 
(as added by such amendments) shall apply after the 90th 
day after such date. The preceding sentence shall not apply 
to the requirement under section 7612(c)(2)(G)(ii) of such Code 
(as so added). 
PUBLIC LAW 105-206—JULY 22, 1998 
112 STAT. 755 
SEC. 3414. THREAT OF AUDIT PROHIBITED TO COERCE TIP REPORTING 
26 USC 6053 
ALTERNATIVE COMMITMENT AGREEMENTS. 
no^. 
The Secretary of the Treasury or the Secretary's delegate shall 
instruct employees of the Internal Revenue Service that they may 
not threaten to audit any taxpayer in an attempt to coerce the 
taxpayer into entering into a Tip Reporting Alternative Commit-
ment Agreement. 
SEC. 3415. TAXPAYERS ALLOWED MOTION TO QUASH ALL THIRD-PARTY 
SUMMONSES. 
(a) IN GENERAL.—Paragraph (1) of section 7609(a) (relating 
to summonses to which section applies) is amended by striking 
so much of such paragraph as precedes "notice of the summons" 
and inserting the following: 
"(1) IN GENERAL.—If any summons to which this section 
applies requires the giving of testimony on or relating to, the 
production of any portion of records made or kept on or relating 
to, or the production of any computer software source code 
(as defined in 7612(d)(2)) with respect to, any person (other 
than the person summoned) who is identified in the summons, 
then". 
(b) COORDINATION WITH OTHER AUTHORITY.—Section 7609 
(relating to special procedures for third-party summonses) is amend-
ed by adding at the end the following new subsection: 
"(j) USE OF SUMMONS NOT REQUIRED.—Nothing in this section 
shall be construed to limit the Secretary's ability to obtain informa-
tion, other than by summons, through formal or informal procedures 
authorized by sections 7601 and 7602.". 
(c) CONFORMING AMENDMENTS.— 
(1) Subsection (a) of section 7609 is amended by striking 
paragraphs (3) and (4), by redesignating paragraph (5) as para-
graph (3), and by striking in paragraph (3) (as so redesignated) 
"subsection (c)(2)(B)" and inserting "subsection (c)(2)(D)". 
(2) Subsection (c) of section 7609 is amended to read as 
follows: 
"(c) SUMMONS TO WHICH SECTION APPLIES.— 
"(1) IN GENERAL.—Except as provided in paragraph (2), 
this section shall apply to any summons issued under para-
graph (2) of section 7602(a) or under section 6420(e)(2), 
6421(g)(2), 6427( j)(2), or 7612. 
"(2) EXCEPTIONS.—^This section shall not apply to any 
summons— 
"(A) served on the person with respect to whose liability 
the summons is issued, or any officer or employee of such 
person; 
"(B) issued to determine whether or not records of 
the business transactions or affairs of an identified person 
have been made or kept; 
"(C) issued solely to determine the identity of any 
person having a numbered account (or similar arrange-
ment) with a bank or other institution described in section 
7603(b)(2)(A); 
"(D) issued in aid of the collection of— 
"(i) an assessment made or judgment rendered 
against the person with respect to whose liability the 
summons is issued; or 
112 STAT. 756 
PUBLIC LAW 105-206-^JULY 22, 1998 
"(ii) the liability at law or in equity of any trans-
feree or fiduciary of any person referred to in clause 
(i); 
"(E)(i) issued by a criminal investigator of the Internal 
Revenue Service in connection with the investigation of 
an offense connected with the administration or enforce-
ment of the internal revenue laws; and 
"(ii) served on any person who is not a third-party 
recordkeeper (as defined in section 7603(b)); or 
"(F) described in subsection (f) or (g). 
"(3) RECORDS.—For purposes of this section, the term 
'records' includes books, papers, and other data.". 
(3) Paragraph (2) of section 7609(e) is amended by striking 
"third-party recordkeeper's" and all that follows through "sub-
section (f)" and inserting "summoned partes response to the 
summons". 
(4) Subsection (f) of section 7609 is amended— 
(A) by striking "described in subsection (c)" and insert-
ing "described in subsection (c)(1)"; and 
(B) by inserting "or testimony" after "records" in para-
graph (3). 
(5) Subsection (g) of section 7609 is amended by striking 
"In the case of any summons described in subsection (c), the 
provisions of subsections (a)(1) and (b) shall not apply if" and 
inserting "A summons is described in this subsection if". 
(6)(A) Subsection (i) of section 7609 is amended by striking 
"THIRD-PARTY RECORDKEEPER AND" in the subsection heading. 
(B) Paragraph (1) of section 7609(i) is amended by striking 
"described in subsection (c), the third-party recordkeeper" and 
inserting "to which this section applies for the production of 
records, the summoned party". 
(C) Paragraph (2) of section 7609(i) is amended— 
(i) by striking "RECORDICEEPER" in the heading and 
inserting "SUMMONED PARTY"; and 
(ii) by striking "the third-party recordkeeper" and 
inserting "the summoned party". 
(D) Paragraph (3) of section 7609(i) is amended to read 
as follows: 
"(3) PROTECTION FOR SUMMONED PARTY WHO DISCLOSES.— 
Any summoned party, or agent or employee thereof, making 
a disclosure of records or testimony pursuant to this section 
in good faith reliance on the certificate of the Secretary or 
an order of a court requiring production of records or the 
giving of such testimony shall not be liable to any customer 
or other person for such disclosure.". 
Applicability. 
(d) EFFECTIVE DATE.—^The amendments made by this section 
26 use 7609 
shall apply to summonses served after the date of the enactment 
""*«• 
of this Act. 
SEC. 3416. SERVICE OF SUMMONSES TO THIRD-PARTY RECORD-
KEEPERS PERMITTED BY MAIL. 
(a) IN GENERAL.—Section 7603 (relating to service of summons) 
is amended by striking "A summons issued" and inserting "(a) 
IN GENERAL.—A summons issued" and by adding at the end the 
following new subsection: 
"(b) SERVICE BY MAIL TO THIRD-PARTY RECORDKEEPERS.— 
PUBLIC LAW 105-206—JULY 22, 1998 
112 STAT. 757 
"(1) IN GENERAL.—^A summons referred to in subsection 
(a) for the production of books, papers, records, or other data 
by a third-party recordkeeper may also be served by certified 
or registered mail to the last known address of such record-
keeper. 
"(2) THIRD-PARTY RECORDKEEPER.—For purposes of para-
graph (1), the term 'third-party recordkeeper' means— 
"(A) any mutual savings bank, cooperative bank, 
domestic building and loan association, or other savings 
institution chartered and supervised as a savings and loan 
or similar association under Federal or State law, any 
bank (as defined in section 581), or any credit union (within 
the meaning of section 50l(c)(14)(A)); 
"(B) any consumer reporting agency (as defined under 
section 603(f) of the Fair Credit Reporting Act (15 U.S.C. 
1681a(f))); 
"(C) any person extending credit through the use of 
credit cards or similar devices; 
"(D) any broker (as defined in section 3(a)(4) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(4))); 
"(E) any attorney; 
, 
"(F) any accountant; 
"(G) any barter exchange (as defined in section 
6045(c)(3)); 
"(H) any regulated investment company (as defined 
in section 851) and any agent of such regulated investment 
company when acting as an agent thereof, and 
"(I) any enrolled agent.". 
(b) EFFECTIVE DATE.—^The amendment made by this section Applicability, 
shall apply to summonses served after the date of the enactment 
26 USC 7603 
of this Act. 
"°*^-
SEC. 3417. NOTICE OF INTERNAL REVENUE SERVICE CONTACT OF 
THIRD PARTIES. 
(a) IN GENERAL.—Section 7602 (relating to examination of books 
and witnesses), as amended by section 3412, is amended by 
redesignating subsections (c) and (d) as subsections (d) and (e), 
respectively, and by inserting after subsection (b) the following 
new subsection: 
"(c) NOTICE OF CONTACT OF THIRD PARTIES.— 
"(1) GENERAL NOTICE.—^An officer or employee of the 
Internal Revenue Service may not contact any person other 
than the taxpayer with respect to the determination or collec-
tion of the tax liability of such taxpayer without providing 
reasonable notice in advance to the taxpayer that contacts 
with persons other than the taxpayer may be made. 
"(2) NOTICE OF SPECIFIC CONTACTS.—^The Secretary shall Records, 
periodically provide to a taxpayer a record of persons contacted 
during such period by the Secretary with respect to the deter-
mination or collection of the tax liability of such taxpayer. 
Such record shall also be provided upon request of the taxpayer. 
"(3) EXCEPTIONS.—This subsection shall not apply— 
"(A) to any contact which the taxpayer has authorized; 
"(B) if the Secretary determines for good cause 
shown that such notice would jeopardize collection of any 
tax or such notice may involve reprisal against any person; 
or 
112 STAT. 758 
PUBLIC LAW 105-206—JULY 22, 1998 
"(C) with respect to any pending criminal investiga-
tion.". 
Applicability. 
(b) EFFECTIVE DATE.—^The amendments made by subsection 
26 use 7602 
(a) shall apply to contacts made after the 180th day after the 
*
• 
date of the enactment of this Act. 
PART III—COLLECTION ACTIVITIES 
Subpart A—^Approval Process 
26 use 6301 
SEC. 3421. APPROVAL PROCESS FOR LIENS, LEVIES, AND SEIZURES. 
Procedures. 
(a) IN GENERAL.—^The Commissioner of Internal Revenue shall 
develop and implement procedures under which— 
(1) a determination by an employee to file a notice of 
lien or levy with respect to, or to levy or seize, any property 
or right to property would, where appropriate, be required 
to be reviewed by a supervisor of the employee before the 
action was taken; and 
(2) appropriate disciplinary action would be taken against 
the employee or supervisor where the procedures under para-
graph (1) were not followed. 
(b) REVIEW PROCESS.—^The review process under subsection 
(a)(1) may include a certification that the employee has— 
(1) reviewed the taxpayer's information; 
(2) verified that a balance is due; and 
(3) affirmed that the action proposed to be taken is appro-
priate given the taxpayer's circumstances, considering the 
amount due and the value of the property or right to property. 
(c) EFFECTIVE DATES.— 
(1) IN GENERAL.—Except as provided in paragraph (2), this 
section shall take effect on the date of the enactment of this 
Act. 
Applicability. 
(2) AUTOMATED COLLECTION SYSTEM ACTIONS.—^In the case 
of any action under an automated collection system, this section 
shall apply to actions initiated after December 31, 2000. 
Subpart B—^Liens and Levies 
SEC. 3431. MODIFICATIONS TO CERTAIN LEVY EXEMPTION AMOUNTS. 
(a) FUEL, ETC.—Section 6334(a)(2) (relating to fuel, provisions, 
furniture, and personal effects) is amended by striking "$2,500" 
and inserting "$6,250". 
(b) BOOKS, ETC.—Section 6334(a)(3) (relating to books and tools 
of a trade, business, or profession) is amended by striking "$1,250" 
and inserting "$3,125". 
(c) CONFORMING AMENDMENT.—Section 6334(g)(1) (relating to 
inflation adjustment) is amended— 
(1) by striking "1997" and inserting "1999"; and 
(2) by striking "1996" in subparagraph (B) and inserting 
"1998". 
26 use 6334 
(d) EFFECTIVE DATE.—^The amendments made by this section 
note. 
shall take effect with respect to levies issued after the date of 
the enactment of this Act. 
PUBLIC LAW 105-206-^ULY 22, 1998 
112 STAT. 759 
SEC. 3432. RELEASE OF LEVY UPON AGREEMENT THAT AMOUNT IS 
UNCOLLECTIBLE. 
(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: 
"(e) 
RELEASE OF LEVY UPON AGREEMENT THAT AMOUNT IS 
NOT COLLECTIBLE.—In the case of a levy on the salary or wages 
payable to or received by the taxpayer, upon agreement with the 
taxpayer that the tax is not collectible, the Secretary shall release 
such levy as soon as practicable.". 
(b) EFFECTIVE DATE.—^The amendment made by this section Applicability, 
shall apply to levies imposed after December 31, 1999. 
26 USC 6343 
SEC. 3433. LEVY PROHIBITED DURING PENDENCY OF REFUND 
PROCEEDINGS. 
(a) IN GENERAL.—Section 6331 (relating to levy and distraint) 
is amended by redesignating subsection (i) as subsection (j) and 
by inserting after subsection (h) the following new subsection: 
"(i) No LEVY DURING PENDENCY OF PROCEEDINGS FOR REFUND 
OF DIVISIBLE TAX.— 
"(1) IN GENERAL.—^No levy may be made under subsection 
(a) on the property or rights to property of any person with 
respect to any unpaid divisible tax during the pendency of 
any proceeding brought by such person in a proper Federal 
trial court for the recovery of any portion of such divisible 
tax which was paid by such person if— 
"(A) the decision in such proceeding would be res judi-
cata with respect to such unpaid tax; or 
"(B) such person would be collaterally estopped from 
contesting such unpaid tax by reason of such proceeding. 
"(2) DIVISIBLE TAX.—For purposes of paragraph (1), the 
term 'divisible tax' means— 
"(A) any tax imposed by subtitle C; and 
"(B) the penalty imposed by section 6672 with respect 
to any such tax. 
"(3) EXCEPTIONS.— 
"(A) CERTAIN UNPAID TAXES.—^This subsection shall not 
apply with respect to any unpaid tax if— 
"(i) the taxpayer files a written notice with the 
Secretary which waives the restriction imposed by this 
subsection on levy with respect to such tax; or 
"(ii) the Secretary finds that the collection of such 
tax is in jeopardy. 
"(B) 
CERTAIN LEVIES.—^This subsection 
shall 
not 
apply to— 
"(i) any levy to carry out an offset under section 
6402; and 
"(ii) any levy which was first made before the 
date that the applicable proceeding under this sub-
section commenced. 
"(4) LIMITATION ON COLLECTION ACTIVITY; AUTHORITY TO 
ENJOIN COLLECTION.— 
"(A) LIMITATION ON COLLECTION.—NO proceeding in 
court for the collection of any unpaid tax to which para-
graph (1) applies shall be begun by the Secretary during 
the pendency of a proceeding under such paragraph. This 
subparagraph shall not apply to— 
112 STAT. 760 
PUBLIC LAW 105-206—JULY 22, 1998 
"(i) any counterclaim in a proceeding under such 
paragraph; or 
"(ii) any proceeding relating to a proceeding under 
such paragraph. 
"(B) AUTHORITY TO ENJOIN.—^Notwithstanding section 
7421(a), a levy or collection proceeding prohibited by this 
subsection may be enjoined (during the period such prohibi-
tion is in force) by the court in which the proceeding 
under paragraph (1) is brought. 
"(5) SUSPENSION OF STATUTE OF LIMITATIONS ON COLLEC-
TION.—^The period of limitations under section 6502 shall be 
suspended for the period during which the Secretary is prohib-
ited under this subsection from making a levy. 
"(6) PENDENCY OF PROCEEDING.—For purposes of this sub-
section, a proceeding is pending beginning on the date such 
proceeding commences and ending on the date that a final 
order or judgment from which an appeal may be taken is 
entered in such proceeding.". 
26 use 6331 
(b) EFFECTIVE DATE.—^The amendment made by this section 
note. 
shall apply to unpaid tax attributable to taxable periods beginning 
after December 31, 1998. 
SEC. 3434, APPROVAL REQUIRED FOR JEOPARDY AND TERMINATION 
ASSESSMENTS AND JEOPARDY LEVIES. 
(a) IN GENERAL.—Paragraph (1) of section 7429(a) (relating 
to review of jeopardy levy or assessment procedures) is amended 
to read as follows: 
"(1) ADMINISTRATIVE REVIEW.— 
"(A) PRIOR APPROVAL REQUIRED.—No assessment may 
be made under section 6851(a), 6852(a), 6861(a), or 6862, 
and no levy may be made under section 6331(a) less than 
30 days after notice and demand for payment is made, 
unless the Chief Counsel for the Internal Revenue Service 
(or such Counsel's delegate) personally approves (in writ-
ing) such assessment or levy. 
"(B) INFORMATION TO TAXPAYER.—^Within 5 days after 
the day on which such an assessment or levy is made, 
the Secretary shall provide the taxpayer with a written 
statement of the information upon which the Secretary 
relied in making such assessment or levy.". 
Applicability. 
(b) EFFECTIVE DATE.—^The amendment made by this section 
26 use 7429 
shall apply to taxes assessed and levies made after the date of 
°°*®- 
the enactment of this Act. 
SEC. 3435. INCREASE IN AMOUNT OF CERTAIN PROPERTY ON WHICH 
LIEN NOT VALID. 
(a) CERTAIN PROPERTY.— 
(1) IN GENERAL.—Subsection (b) of section 6323 (relating 
to validity and priority against certain persons) is amended— 
(A) by striking "$250" in paragraph (4) (relating to 
personal property purchased in casual sale) and inserting 
"$1,000"; and 
(B) by striking "$1,000" in paragraph (7) (relating to 
residential property subject to a mechanic's lien for certain 
repairs and improvements) and inserting "$5,000". 
(2) INFLATION ADJUSTMENT.—Subsection (i) of section 6323 
(relating to special rules) is amended by adding at the end 
the following new paragraph: 
. 'fi^'*'t^'0i(->'-Jifi-'i9^^g^tKi^ 
'»l.1c-««.-%f ••^-~ 
PUBLIC LAW 105-206—JULY 22, 1998 
112 STAT. 761 
"(4) COST-OF-LIVING ADJUSTMENT.—^In the case of notices 
of liens imposed by section 6321 which are filed in any calendar 
year after 1998, each of the dollar amounts under paragraph 
(4) or (7) of subsection (b) shall be increased by an amount 
equal to— 
"(A) such dollar amount, multiplied by 
"(B) the cost-of-living adjustment determined under 
section 1(f)(3) for the calendar year, determined by 
substituting 'calendar year 1996' for 'calendar year 1992' 
in subparagraph (B) thereof. 
If any amount as adjusted under the preceding sentence is 
not a multiple of $10, such amount shall be rounded to the 
nearest multiple of $10.". 
(b) EXPANSION OF TREATMENT OF PASSBOOK LOANS.—^Paragraph 
(10) of section 6323(b) is amended— 
(1) by striking "PASSBOOK LOANS" in the heading and 
inserting "DEPOSIT-SECURED LOANS"; 
(2) by striking ", evidenced by a passbook,"; and 
(3) by striking all that follows "secured by such account" 
and inserting a period. 
(c) EFFECTIVE DATE.—^The amendments made by this section 
shall take effect on the date of the enactment of this Act. 
SEC. 3436. WAIVER OF EARLY WITHDRAWAL TAX FOR INTERNAL REVE-
NUE SERVICE LEVIES ON EMPLOYER-SPONSORED 
RETIREMENT PLANS OR IRAs. 
(a) IN GENERAL.--Section 72(t)(2)(A) (relating to subsection not 
to apply to certain distributions) is amended by striking "or" at 
the end of clauses (iv) and (v), by striking the period at the end 
of clause (vi) and inserting ", or", and by adding at the end the 
following new clause: 
"(vii) made on account of a levy under section 
6331 on the qualified retirement plan.". 
(b) EFFECTIVE DATE.—^The amendments made by this section 
shall apply to distributions after December 31, 1999. 
Subpart C—Seizures 
SEC. 3441. PROHIBITION OF SALES OF SEIZED PROPERTY AT LESS 
THAN MINIMUM BID. 
(a) IN GENERAL.—Section 6335(e)(l)(A)(i) (relating to deter-
minations relating to minimum price) is amended by striking "a 
minimum price for which such property shall be sold" and inserting 
"a minimum price below which such property shall not be sold". 
(b) REFERENCE TO PENALTY FOR VIOLATION.—Section 6335(e) 
is amended by adding at the end the following new paragraph: 
"(4) CROSS REFERENCE.— 
"For provision providing for civil damages for violation of para-
graph (l)(A)(i), see section 7433.". 
(c) EFFECTIVE DATE.—^The amendments made by this section 
shall apply to sales made after the date of the enactment of this 
Act. 
SEC. 3442. ACCOUNTING OF SALES OF SEIZED PROPERTY. 
(a) IN GENERAL.—Section 6340 (relating to records of sale) 
is amended— 
(1) in subsection (a)— 
26 use 6323 
note. 
Applicability. 
26 use 72 note. 
Applicability. 
26 use 6335 
note. 
112 STAT. 762 
PUBLIC LAW 105-206-^ULY 22, 1998 
(A) by striking "real"; and 
(B) by inserting "or certificate of sale of personal 
property after "deed"; and 
(2) by adding at the end the following new subsection: 
"(c) ACCOUNTING TO TAXPAYER.—^The taxpayer with respect to 
whose liability the sale was conducted or who redeemed the property 
shall be furnished— 
"(1) the record under subsection (a) (other than the names 
of the purchasers); 
"(2) the amount from such sale applied to the taxpayer's 
liability; and 
"(3) the remaining balance of such liability.". 
Applicability. 
(b) EFFECTIVE DATE.—^The amendments made by this section 
26 use 6340 
shall apply to seizures occurring after the date of the enactment 
"'^t^- 
of this Act. 
26 use 6335 
SEC. 3443. UNIFORM ASSET DISPOSAL MECHANISM. 
Deadline. 
Not later than the date which is 2 years after the date of 
the enactment of this Act, the Secretary of the Treasury or the 
Secretary's delegate shall implement a uniform asset disposal 
mechanism for sales undei' section 6335 of the Internal Revenue 
Code of 1986. The mechanism should be designed to remove any 
participation in such sales by revenue officers of the Internal Reve-
nue Service and should consider the use of outsourcing. 
SEC. 3444. CODIFICATION OF INTERNAL REVENUE SERVICE ADMINIS-
TRATIVE PROCEDURES FOR SEIZURE OF TAXPAYER'S 
PROPERTY. 
(a) IN GENERAL.—Section 6331 (relating to levy and distraint), 
as amended by section 3433, is amended by redesignating subsection 
(j) as subsection (k) and by inserting after subsection (i) the follow-
ing new subsection: 
"(j) No LEVY BEFORE INVESTIGATION OF STATUS OF PROPERTY.— 
"(1) IN GENERAL.—For purposes of appl3dng the provisions 
of this subchapter, no levy may be made on any property 
or right to property which is to be sold under section 6335 
until a thorough investigation of the status of such property 
has been completed. 
"(2) ELEMENTS IN INVESTIGATION.—For purposes of para-
graph (1), an investigation of the status of any property shall 
include— 
"(A) a verification of the taxpayer's liability; 
"(B) the completion of an 
analysis under 
sub-
section (f); 
"(C) the determination that the equity in such property 
is sufficient to yield net proceeds from the sale of such 
property to apply to such liability; and 
"(D) a thorough consideration of alternative collection 
methods.". 
26 use 6331 
(b) EFFECTIVE DATE.—^The amendments made by this section 
note. 
shall take effect on the date of the enactment of this Act. 
SEC. 
3445. PROCEDURES FOR SEIZURE OF RESIDENCES AND 
BUSINESSES. 
(a) IN GENERAL.—Section 6334(a)(13) (relating to property 
exempt from levy) is amended to read as follows: 
PUBLIC LAW 105-206-JULY 22, 1998 
112 STAT. 763 
"(13) RESIDENCES EXEMPT IN SMALL DEFICIENCY CASES AND 
PRINCIPAL RESIDENCES AND CERTAIN BUSINESS ASSETS EXEMPT 
IN ABSENCE OF CERTAIN APPROVAL OR JEOPARDY.— 
"(A) RESIDENCES IN SMALL DEFICIENCY CASES.—If the 
amount of the levy does not exceed $5,000— 
"(i) any real property used as a residence by the 
taxpayer; or 
"(ii) any real property of the taxpayer (other than 
real property which is rented) used by any other 
individual as a residence. 
"(B) 
PRINCIPAL RESIDENCES AND CERTAIN BUSINESS 
ASSETS.—Except to the extent provided in subsection (e)— 
"(i) the principal residence of the taxpayer (within 
the meaning of section 121); and 
"(ii) tangible personal property or real property 
(other than real property which is rented) used in 
the trade or business of an individual taxpayer.". 
(b) 
LEVY 
ALLOWED 
IN 
CERTAIN 
CIRCUMSTANCES.—Section 
6334(e) is amended to read as follows: 
"(e) LEVY ALLOWED ON PRINCIPAL RESIDENCES AND CERTAIN 
BUSINESS ASSETS IN CERTAIN CIRCUMSTANCES.— 
"(1) PRINCIPAL RESIDENCES.— 
"(A) APPROVAL REQUIRED.—^A principal residence shall 
not be exempt from levy if a judge or magistrate of a 
district court of the United States approves (in writing) 
the levy of such residence. 
"(B) JURISDICTION.—The district courts of the United 
States shall have exclusive jurisdiction to approve a levy 
under subparagraph (A). 
"(2) CERTAIN BUSINESS ASSETS.—^Property (other than a 
principal residence) described in subsection (a)(13)(B) shall not 
be exempt from levy if— 
"(A) a district director or assistant district director 
of the Internal Revenue Service personally approves (in 
writing) the levy of such property; or 
"(B) the Secretary finds that the collection of tax is 
in jeopardy. 
An official may not approve a levy under subparagraph (A) 
unless the official determines that the taxpayer's other assets 
subject to collection are insufficient to pay the amount due, 
together with expenses of the proceedings.". 
(c) STATE FISH AND WILDLIFE PERMITS.— 
26 use 6334 
(1) IN GENERAL.—^With respect to permits issued by a State note-
and required under State law for the harvest of fish or wildlife 
in the trade or business of an individual taxpayer, the term 
"other assets" as used in section 6334(e)(2) of the Internal 
Revenue Code of 1986 shall include future income which may 
be derived by such taxpayer from the commercial sale of fish 
or wildlife under such permit. 
(2) CONSTRUCTION.—Paragraph (1) shall not be construed 
to invalidate or in any way prejudice any assertion that the 
privilege embodied in permits described in paragraph (1) is 
not property or a right to property under the Internal Revenue 
Code of 1986. 
(d) EFFECTIVE DATE.—^The amendments made by this section 26 use 6334 
shall take effect on the date of the enactment of this Act. 
note. 
112 STAT. 764 
PUBLIC LAW 105-206—JULY 22, 1998 
PART IV—PROVISIONS RELATING TO 
EXAMINATION AND COLLECTION ACTIVITIES 
26 u s e 6501 
note. 
Applicability. 
Expiration date. 
Guidelines. 
SEC. 3461. PROCEDURES RELATING TO EXTENSIONS OF STATUTE OF 
LIMITATIONS BY AGREEMENT. 
(a) AUTHORITY TO EXTEND 10-YEAR COLLECTION PERIOD AFTER 
ASSESSMENT.—Section 6502(a) (relating to length of period after 
collection) is amended— 
(1) by striking paragraph (2) and inserting: 
"(2) if— 
"(A) there is an installment agreement between the 
taxpayer and the Secretary, prior to the date which is 
90 days after the expiration of any period for collection 
agreed upon in writing by the Secretary and the taxpayer 
at the time the installment agreement was entered into; 
or 
"(B) there is a release of levy under section 6343 after 
such 10-year period, prior to the expiration of any period 
for collection agreed upon in writing by the Secretary and 
the taxpayer before such release."; and 
(2) by striking the first sentence in the matter following 
paragraph (2). 
(b) 
NOTICE TO TAXPAYER OF RIGHT TO REFUSE OR LIMIT 
EXTENSION.—^Paragraph (4) of section 6501(c) (relating to the period 
for limitations on assessment and collection) is amended— 
(1) by striking "Where" and inserting the following: 
"(A) IN GENERAL.—^Where"; and 
(2) by adding at the end the following new subparagraph: 
"(B) 
NOTICE TO TAXPAYER OF RIGHT TO REFUSE OR 
LIMIT EXTENSION.—^The Secretary shall notify the taxpayer 
of the taxpayer's right to refuse to extend the period of 
limitations, or to limit such extension to particular issues 
or to a particular period of time, on each occasion when 
the taxpayer is requested to provide such consent.". 
(c) EFFECTIVE DATE.— 
(1) IN GENERAL.—^The amendments made by this section 
shall apply to requests to extend the period of limitations 
made after December 31, 1999. 
(2) PRIOR REQUEST.—If, in any request to extend the period 
of limitations made on or before December 31, 1999, a taxpayer 
agreed to extend such period beyond the 10-year period referred 
to in section 6502(a) of the Internal Revenue Code of 1986, 
such extension shall expire on the latest of— 
(A) the last day of such 10-year period; 
(B) December 31, 2002; or 
(C) in the case of an extension in connection with 
an installment agreement, the 90th day after the end of 
the period of such extension. 
S E C . 3462. O F F E R S - I N - C O M P R O M I S E . 
(a) STANDARDS FOR EVALUATION OF OFFERS-IN-COMPROMISE.— 
Section 7122 (relating to offers-in-compromise) is amended by 
adding at the end the following new subsection: 
"(c) STANDARDS FOR EVALUATION OF OFFERS.— 
"(1) IN GENERAL.—^The Secretary shall prescribe guidelines 
for officers and employees of the Internal Revenue Service 
PUBLIC LAW 105-206—JULY 22, 1998 
112 STAT. 765 
to determine whether an offer-in-compromise is adequate and 
should be accepted to resolve a dispute. 
"(2) ALLOWANCES FOR BASIC LIVING EXPENSES.— 
"(A) IN GENERAL.—In prescribing guidelines under Publication, 
paragraph (1), the Secretary shall develop and publish 
schedules of national and local allowances designed to pro-
vide that taxpayers entering into a compromise have an 
adequate means to provide for basic living expenses. 
"(B) USE OF SCHEDULES.—^The guidelines shall provide 
that officers and employees of the Internal Revenue Service 
shall determine, on the basis of the facts and circumstances 
of each taxpayer, whether the use of the schedules pub-
lished under subparagraph (A) is appropriate and shall 
not use the schedules to the extent such use would result 
in the taxpayer not having adequate means to provide 
for basic living expenses. 
"(3) SPECIAL RULES RELATING TO TREATMENT OF OFFERS.— 
The guidelines under paragraph (1) shall provide that— 
"(A) an officer or employee of the Internal Revenue 
Service shall not reject an offer-in-compromise from a low-
income taxpayer solely on the basis of the amount of the 
offer; and 
"(B) in the case of an offer-in-compromise which relates 
only to issuesof liability of the taxpayer— 
"(i) such offer shall not be rejected solely because 
the Secretary is unable to locate the taxpayer's return 
or return information for verification of such liability; 
and 
"(ii) the taxpayer shall not be required to provide 
a financial statement.", 
(b) LEVY PROHIBITED WHILE OFFER-IN-COMPROMISE PENDING 
OR INSTALLMENT AGREEMENT PENDING OR IN EFFECT.—Section 6331 
(relating to levy and distraint), as amended by sections 3433 and 
3444, is amended by redesignating subsection (k) as subsection 
(1) and by inserting after subsection (j) the following new subsection: 
"(k) No LEVY WHILE CERTAIN OFFERS PENDING OR INSTALL-
MENT AGREEMENT PENDING OR IN EFFECT.— 
"(1) OFFER-IN-COMPROMISE PENDING.—^No levy may be made 
under subsection (a) on the property or rights to property 
of any person with respect to any unpaid tax— 
"(A) during the period that an offfer-in-compromise by 
such person under section 7122 of such unpaid tax is 
pending with the Secretary; and 
"(B) if such offer is rejected by the Secretary, during 
the 30 days thereafter (and, if an appeal of such rejection 
is filed within such 30 days, during the period that such 
appeal is pending). 
For purposes of subparagraph (A), an offer is pending beginning 
on the date the Secretary accepts such offer for processing. 
"(2) INSTALLMENT AGREEMENTS.—^No levy may be made 
under subsection (a) on the property or rights to property 
of any person with respect to any unpaid tax— 
: 
"(A) during the period that an offer by such person 
for an installment agreement under section 6159 for pay-
ment of such unpaid tax is pending with the Secretary; 
"(B) if such offer is rejected by the Secretary, during 
the 30 days thereafter (and, if an appeal of such rejection 
112 STAT. 766 
PUBLIC LAW 105-206-^ULY 22, 1998 
Procedures. 
26 u s e 7122 
note. 
Applicability. 
26 u s e 6331 
note. 
is filed within such 30 days, during the period that such 
appeal is pending); 
"(C) during the period that such an installment agree-
ment for payment of such unpaid tax is in effect; and 
"(D) if such agreement is terminated by the Secretary, 
during the 30 days thereafter (and, if an appeal of such 
termination is filed within such 30 days, during the period 
that such appeal is pending). 
"(3) CERTAIN RULES TO APPLY.—Rules similar to the rules 
of paragraphs (3), (4), and (5) of subsection (i) shall apply 
for purposes of this subsection.". 
(c) REVIEW OF REJECTIONS OF OFFERS-IN-COMPROMISE AND 
INSTALLMENT AGREEMENTS.— 
(1) IN GENERAL.—Section 7122 (relating to compromises), 
as amended by subsection (a), is amended by adding at the 
end the following new subsection: 
"(d) ADMINISTRATIVE REVIEW.—^The Secretary shall establish 
procedures— 
"(1) for an independent administrative review of any rejec-
tion of a proposed offer-in-compromise or installment agreement 
made by a taxpayer under this section or section 6159 before 
such rejection is communicated to the taxpayer; and 
"(2) which allow a taxpayer to appeal any rejection of 
such offer or agreement to the Internal Revenue Service Office 
of Appeals.". 
(2) CONFORMING AMENDMENT.—Section 6159 (relating to 
installment agreements) is amended by adding at the end the 
following new subsection: 
"(d) CROSS REFERENCE.— 
'Tor rights to administrative review and appeal, see section 
7122(d).". 
(d) 
PREPARATION OF STATEMENT RELATING TO OFFERS-IN-
COMPROMISE.—^The Secretary of the Treasury shall prepare a state-
ment which sets forth in simple, nontechnical terms the rights 
of a taxpayer and the obligations of the Internal Revenue Service 
relating to offers-in-compromise. Such statement shall— 
(1) advise taxpayers who have entered into a compromise 
of the advantages of promptly notifying the Internal Revenue 
Service of any change of address or marital status; 
(2) provide notice to taxpayers that in the case of a com-
promise terminated due to the actions of one spouse or former 
spouse, the Internal Revenue Service will, upon application, 
reinstate such compromise with the spouse or former spouse 
who remains in compliance with such compromise; and 
(3) provide notice to the taxpayer that the taxpayer may 
appeal the rejection of an offer-in-compromise to the Internal 
Revenue Service Office of Appeals. 
(e) EFFECTIVE DATES.— 
(1) IN GENERAL.—^The amendments made by this section 
shall apply to proposed offers-in-compromise and installment 
agreements submitted after the date of the enactment of this 
Act. 
(2) SUSPENSION OF COLLECTION BY LEVY.—^The amendment 
made by subsection (b) shall apply to offers-in-compromise 
pending on or made after December 31, 1999. 
H-ti^Pili^' 
PUBLIC LAW 105-206-JULY 22, 1998 
112 STAT. 767 
SEC. 3463. NOTICE OF DEFICIENCY TO SPECIFY DEADLINES FOR 
FILING TAX COURT PETITION. 
(a) IN GENERAL.—^The Secretary of the Treasury or the 
Secretary's delegate shall include on each notice of deficiency under 
section 6212 of the Internal Revenue Code of 1986 the date deter-
mined by such Secretary (or delegate) as the last day on which 
the taxpayer may file a petition with the Tax Court. 
(b) LATER FILING DEADLINES SPECIFIED ON NOTICE OF DEFI-
CIENCY To BE BINDING.—Subsection (a) of section 6213 (relating 
to restrictions applicable to deficiencies; petition to Tax Court) 
is amended by adding at the end the following new sentence: 
"Any petition filed with the Tax Court on or before the last date 
specified for filing such petition by the Secretary in the notice 
of deficiency shall be treated as timely filed.". 
(c) EFFECTIVE DATE.—Subsection (a) and the amendment made 
by subsection (b) shall apply to notices mailed Eifter December 
31, 1998. 
SEC. 3464. REFUND OR CREDIT OF OVERPAYMENTS BEFORE FINAL 
DETERMINATION. 
(a) TAX COURT PROCEEDINGS.—Subsection (a) of section 6213 
is amended— 
(1) by striking ", including the Tax Court." and inserting 
", including the Tax Court, and a refund may be ordered by 
such court of any amount collected within the period during 
which the Secretary is prohibited from collecting by levy or 
through a proceeding in court under the provisions of this 
subsection."; and 
(2) by striking "to enjoin any action or proceeding" and 
inserting "to enjoin any action or proceeding or order any 
refund". 
(b) OTHER PROCEEDINGS.—Subsection (a) of section 6512 is 
amended by striking the period at the end of paragraph (4) and 
inserting ", and", and by inserting after paragraph (4) the following 
new paragraphs: 
"(5) As to any amount collected within the period during 
which the Secretary is prohibited from making the assessment 
or from collecting by levy or through a proceeding in court 
under the provisions of section 6213(a); and 
"(6) As to overpayments the Secretary is authorized to 
refund or credit pending appeal as provided in subsection (b).". 
(c) REFUND OR CREDIT PENDING APPEAL.—^Paragraph (1) of 
section 6512(b) is amended by adding at the end the following 
new sentence: "If a notice of appeal in respect of the decision 
of the Tax Court is filed under section 7483, the Secretary is 
authorized to refund or credit the overpayment determined by the 
Tax Court to the extent the overpayment is not contested on 
appeal.". 
(d) EFFECTIVE DATE.—^The amendments made by this section 
shall take effect on the date of the enactment of this Act. 
SEC. 3465. INTERNAL REVENUE SERVICE PROCEDURES RELATING TO 
APPEALS OF EXAMINATIONS AND COLLECTIONS. 
(a) DISPUTE RESOLUTION PROCEDURES.— 
(1) IN GENERAL.—Chapter 74 (relating to closing agree-
ments and compromises) is amended by redesignating section 
26 use 6212 
note. 
Applicability. 
26 use 6213 
note. 
26 use 6213 
note. 
112 STAT. 768 
PUBLIC LAW 105-206—JULY 22, 1998 
7123 as section 7124 and by inserting after section 7122 the 
following new section: 
"SEC. 7123. APPEALS DISPUTE RESOLUTION PROCEDURES. 
"(a) EARLY REFERRAL TO APPEALS PROCEDURES.—^The Secretary 
shall prescribe procedures by which any taxpayer may request 
early referral of 1 or more unresolved issues from the examination 
or collection division to the Internal Revenue Service Office of 
Appeals. 
"(b) ALTERNATIVE DISPUTE RESOLUTION PROCEDURES.— 
"(1) MEDIATION.—^The Secretary shall prescribe procedures 
under which a taxpayer or the Internal Revenue Service Office 
of Appeals may request non-binding mediation on any issue 
unresolved at the conclusion of— 
"(A) appeals procedures; or 
"(B) unsuccessful attempts to enter into a closing agree-
ment under section 7121 or a compromise under section 
7122. 
"(2) ARBITRATION.—^The Secretary shall establish a pilot 
program under which a taxpayer and the Internal Revenue 
Service Office of Appeals may jointly request binding arbitration 
on any issue unresolved at the conclusion of— 
"(A) appeals procedures; or 
"(B) unsuccessful attempts to enter into a closing agree-
ment under section 7121 or a compromise under section 
7122.". 
(2) CONFORMING AMENDMENT.—^The table of sections for 
chapter 74 is amended by striking the item relating to section 
7123 and inserting the following new items: 
"Sec. 7123. Appeals dispute resolution procedures. 
"Sec. 7124. Cross references.". 
(b) APPEALS OFFICERS IN EACH STATE.—The Commissioner of 
Internal Revenue shall ensure that an appeals officer is regularly 
available within each State. 
(c) 
APPEALS VIDEOCONFERENCING ALTERNATIVE FOR RURAL 
AREAS.—^The Commissioner of Internal Revenue shall consider the 
use of the videoconferencing of appeals conferences between appeals 
officers and taxpayers seeking appeals in rural or remote areas. 
SEC. 3466. A P P U C A T I O N OF CERTAIN FAIR DEBT COLLECTION PROCE-
DURES. 
(a) IN GENERAL.—Subchapter A of chapter 64 (relating to collec-
tion) is amended by inserting after section 6303 the following new 
section: 
"SEC. 6304. FAIR TAX COLLECTION PRACTICES. 
"(a) COMMUNICATION WITH THE TAXPAYER.—Without the prior 
consent of the taxpayer given directly to the Secretary or the 
express permission of a court of competent jurisdiction, the Sec-
retary may not communicate with a taxpayer in connection with 
the collection of any unpaid tax— 
"(1) at any unusual time or place or a time or place known 
or which should be known to be inconvenient to the taxpayer; 
"(2) if the Secretary knows the taxpayer is represented 
by any person authorized to practice before the Internal Reve-
nue Service with respect to such unpaid tax and has knowledge 
of, or can readily ascertain, such person's name and address, 
PUBLIC LAW 105-206-^JULY 22, 1998 
112 STAT. 769 
unless such person fails to respond within a reasonable period 
of time to a communication from the Secretary or unless such 
person consents to direct communication with the taxpayer; 
or 
"(3) at the taxpayer's place of emplojnnent if the Secretary 
knows or has reason to know that the taxpayer's employer 
prohibits the taxpayer from receiving such communication. 
In the absence of knowledge of circumstances to the contrary, 
the Secretary shall assume that the convenient time for commu-
nicating with a taxpayer is after 8 a.m. and before 9 p.m., local 
time at the taxpayer's location. 
"(b) PROHIBITION OF HARASSMENT AND ABUSE.—^The Secretary 
may not engage in any conduct the natural consequence of which 
is to harass, oppress, or abuse any person in connection with 
the collection of any unpaid tax. Without limiting the general 
application of the foregoing, the following conduct is a violation 
of this subsection: 
"(1) The use or threat of use of violence or other criminal 
means to harm the physical person, reputation, or property 
i of any person. 
"(2) The use of obscene or profane language or language 
the natural consequence of which is to abuse the hearer or 
reader. 
"(3) Causing a telephone to ring or engaging any person 
in telephone conversation repeatedly or continuously with 
intent to annoy, abuse, or harass any person at the called 
number. 
"(4) Except as provided under rules similar to the rules 
in section 804 of the Fair Debt Collection Practices Act (15 
U.S.C. 1692b), the placement of telephone calls without mean-
ingful disclosure of the caller's identity. 
"(c) CIVIL ACTION FOR VIOLATIONS OF SECTION.— 
"For civil action for violations of this section, see section 7433.". 
(b) CLERICAL AMENDMENT.—^The table of sections for subchapter 
A of chapter 64 is amended by inserting after the item relating 
to section 6303 the following new item: 
"Sec. 6304. Fair tax collection practices.". 
(c) EFFECTIVE DATE.—^The amendments made by this section 26 use 6304 
shall take effect on the date of the enactment of this Act. 
note. 
SEC. 3467. GUARANTEED AVAILABILITY OF INSTALLMENT AGREE-
MENTS. 
(a) IN GENERAL.—Section 6159 (relating to agreements for pay-
ment of tax liability in installments) is amended by redesignating 
subsection (c) as subsection (d) and by inserting after subsection 
(b) the following new subsection: 
"(c) SECRETARY REQUIRED TO ENTER INTO INSTALLMENT AGREE-
MENTS IN CERTAIN CASES.—^In the case of a liabiUty for tax of 
an individual under subtitle A, the Secretary shall enter into an 
agreement to accept the payment of such tax in installments if, 
as of the date the individual offers to enter into the agreement— 
"(1) the aggregate amount of such liability (determined 
without regard to interest, penalties, additions to the tax, and 
additional amounts) does not exceed $10,000; 
112 STAT. 770 
PUBLIC LAW 105-206—JULY 22, 1998 
"(2) the taxpayer (and, if such liabiHty relates to a joint 
return, the taxpayer's spouse) has not, during any of the preced-
ing 5 taxable years— 
"(A) failed to file any return of tax imposed by sub-
title A; 
"(B) failed to pay any tax required to be shown on 
any such return; or 
"(C) entered into an installment agreement under this 
section for payment of any tax imposed by subtitle A, 
"(3) the Secretary determines that the taxpayer is finan-
cially unable to pay such liability in full when due (and the 
taxpayer submits such information as the Secretary may 
require to make such determination); 
"(4) the agreement requires full pa3mient of such liability 
within 3 years; and 
"(5) the taxpayer agrees to comply with the provisions 
of this title for the period such agreement is in effect.". 
26 use 6159 
(b) EFFECTIVE DATE.—^The amendment made by this section 
°ote. 
shall take effect on the date of the enactment of this Act. 
26 use 7421 
SEC. 3468. PROHIBITION ON REQUESTS TO TAXPAYERS TO GIVE UP 
note. 
RIGHTS TO BRING ACTIONS. 
(a) PROHIBITION.—No officer or employee of the United States 
may request a taxpayer to waive the taxpayer's right to bring 
a civil action against the United States or any officer or employee 
of the United States for any action taken in connection with the 
internal revenue laws. 
(b) EXCEPTIONS.—Subsection (a) shall not apply in any case 
where— 
(1) a taxpayer waives the right described in subsection 
(a) knowingly and voluntarily; or 
(2) the request by the officer or employee is made in person 
and the taxpayer's attorney or other federally authorized tax 
practitioner (within the meaning of section 7525(a)(3)(A) of 
the Internal Revenue Code of 1986) is present, or the request 
is made in writing to the taxpayer's attorney or other represent-
ative. 
Subtitle F—Disclosures to Taxpayers 
Procedures. 
26 use 7801 
note. 
Deadline. 
26 use 7801 
note. 
Deadline. 
SEC. 3501. EXPLANATION OF JOINT AND SEVERAL LIABILITY. 
(a) IN GENERAL.—^The Secretary of the Treasury or the 
Secretarys delegate shall, as soon as practicable, but not later 
than 180 days after the date of the enactment of this Act, establish 
procedures to clearly alert married taxpayers of their joint and 
several liabilities on all appropriate publications and instructions. 
(b) RIGHT TO LIMIT LIABILITY.—^The procedures under sub-
section (a) shall include requirements that notice of an individual's 
right to relief under section 6015 of the Internal Revenue Code 
of 1986 shall be included in the statement required by section 
6227 of the Omnibus Taxpayer Bill of Rights (Internal Revenue 
Service Publication No. 1) and in any collection-related notices. 
SEC. 3502. EXPLANATION OF TAXPAYERS' RIGHTS IN INTERVIEWS WITH 
THE INTERNAL REVENUE SERVICE. 
The Secretary of the Treasury or the Secretary's delegate shall, 
as soon as practicable, but not later than 180 days after the date 
PUBLIC LAW 105-206—JULY 22, 1998 
112 STAT. 771 
of the enactment of this Act, revise the statement required by 
section 6227 of the Omnibus Taxpayer Bill of Rights (Internal 
Revenue Service Publication No. 1) to more clearly inform taxpayers 
of their rights— 
(1) to be represented at interviews with the Internal 
Revenue Service by any person authorized to practice before 
the Internal Revenue Service; and 
(2) to suspend an interview pursuant to section 7521(b)(2) 
of the Internal Revenue Code of 1986. 
SEC. 3503. DISCLOSURE OF CRITERIA FOR EXAMINATION SELECTION. 
(a) IN GENERAL.—^The Secretary of the Treasury or the Sec-
retary's delegate shall, as soon as practicable, but not later than 
180 days after the date of the enactment of this Act, incorporate 
into the statement required by section 6227 of the Omnibus Tax-
payer Bill of Rights (Internal Revenue Service Publication No. 
1) a statement which sets forth in simple and nontechnical terms 
the criteria and procedures for selecting teixpayers for examination. 
Such statement shall not include any information the disclosure 
of which would be detrimental to law enforcement, but shall specify 
the general procedures used by the Internal Revenue Service, 
including whether taxpayers are selected for examination on the 
basis of information available in the media or on the basis of 
information provided to the Internal Revenue Service by informants. 
(b) 
TRANSMISSION 
TO 
COMMITTEES 
OF 
CONGRESS.—The 
Secretary shall transmit drafts of the statement required under 
subsection (a) (or proposed revisions to any such statement) to 
the Committee on Ways and Means of the House of Representatives 
and the Committee on Finance of the Senate on the same day. 
SEC. 3504. EXPLANATIONS OF APPEALS AND COLLECTION PROCESS. 
The Secretary of the Treasury or the Secretary's delegate shall, 
as soon as practicable, but not later than 180 days after the date 
of the enactment of this Act, include with any first letter of proposed 
deficiency which allows the taxpayer an opportunity for administra-
tive review in the Internal Revenue Service Office of Appeals an 
explanation of the entire process from examination through collec-
tion with respect to such proposed deficiency, including the assist-
ance available to the taxpayer from the National Taxpayer Advocate 
at various points in the process. 
SEC. 3505. EXPLANATION OF REASON FOR REFUND DISALLOWANCE. 
(a) IN GENERAL.—Section 6402 (relating to authority to make 
credits or refunds) is amended by adding at the end the following 
new subsection: 
"(j) EXPLANATION OF REASON FOR REFUND DISALLOWANCE.— 
In the case of a disallowance of a claim for refund, the Secretary 
shall provide the taxpayer with an explanation for such disallow-
ance.". 
(b) EFFECTIVE DATE.—^The amendment made by this section 
shall apply to disallowances after the 180th day after the date 
of the enactment of this Act. 
SEC. 3506. STATEMENTS REGARDING INSTALLMENT AGREEMENTS. 
The Secretary of the Treasury or the Secretary's delegate shall, 
beginning not later than July 1, 2000, provide each taxpayer who 
has an installment agreement in effect under section 6159 of the 
Internal Revenue Code of 1986 an annual statement setting forth 
26 u s e 7801 
note. 
Deadline. 
26 u s e 6212 
note. 
Deadline. 
Applicability. 
26 u s e 6402 
note. 
26 u s e 6159 
note. 
Deadline. 
112 STAT. 772 
PUBLIC LAW 105-206—JULY 22, 1998 
Deadline. 
Applicability. 
26 use 6231 
note. 
26 use 7801 
note. 
the initial balance at the beginning of the year, the payments 
made during the year, and the remaining balance as of the end 
of the year. 
SEC. 3507. NOTIFICATION OF CHANGE IN TAX MATTERS PARTNER. 
(a) IN GENERAL.—Section 6231(a)(7) (defining tax matters part-
ner) is amended by adding at the end the following new sentence: 
"The Secretary shall, within 30 days of selecting a tax matters 
partner under the preceding sentence, notify all partners required 
to receive notice under section 6223(a) of the name and address 
of the person selected.". 
(b) EFFECTIVE DATE.—^The amendment made by this section 
shall apply to selections of tax matters partners made by the 
Secretary of the Treasury after the date of the enactment of this 
Act. 
SEC. 3508. DISCLOSURE TO TAXPAYERS. 
The Secretary of the Treasury or the Secretar/s delegate shall 
ensure that any instructions booklet accompanying an individual 
Federal income tax return form (including forms 1040, 1040A, 
1040EZ, and any similar or successor forms) shall include, in clear 
language, in conspicuous print, and in a conspicuous place, a concise 
description of the conditions under which return information may 
be disclosed to any party outside the Internal Revenue Service, 
including disclosure to any State or agency, body, or commission 
(or legal representative) thereof. 
SEC. 3509. DISCLOSURE OF CHIEF COUNSEL ADVICE. 
(a) IN GENERAL.—Section 6110(b)(1) (defining written deter-
mination) is amended by striking "or technical advice memorandum" 
and inserting "technical advice memorandum, or Chief Counsel 
advice". 
(b) CHIEF COUNSEL ADVICE.—Section 6110 (relating to public 
inspection of written determinations) is amended by redesignating 
subsections (i), (j), (k), and (1) as subsections (j), (k), (1), and (m), 
respectively, and by inserting after subsection (h) the following 
new subsection: 
"(i) 
SPECIAL 
RULES FOR DISCLOSURE 
OF CHIEF 
COUNSEL 
ADVICE.— 
"(1) CHIEF COUNSEL ADVICE DEFINED.— 
"(A) IN GENERAL.—For purposes of this section, the 
term 'Chief Counsel advice' means written advice or 
instruction, under whatever name or designation, prepared 
by any national office component of the Office of Chief 
Counsel which— 
"(i) is issued to field or service center employees 
of the Service or regional or district employees of the 
Office of Chief Counsel; and 
"(ii) conveys— 
"(I) any legal interpretation of a revenue 
provision; 
"(II) any Internal Revenue Service or Office 
of Chief Counsel position or policy concerning a 
revenue provision; or 
"(III) any legal interpretation of State law, 
foreign law, or other Federal law relating to the 
assessment or collection of any liability under a 
revenue provision. 
"
^ 'A.'^'i-at' 
PUBLIC LAW 105-206-JULY 22, 1998 
112 STAT. 773 
"(B) REVENUE PROVISION DEFINED.—For purposes of 
subparagraph (A), the term 'revenue provision' means any 
existing or former internal revenue law, regulation, revenue 
ruling, revenue procedure, other published or unpublished 
guidance, or tax treaty, either in general or as applied 
to specific taxpayers or groups of specific taxpayers. 
"(2) ADDITIONAL DOCUMENTS TREATED AS CHIEF COUNSEL 
ADVICE.—^The Secretary may by regulation provide that this 
section shall apply to any advice or instruction prepared and 
issued by the Office of Chief Counsel which is not described 
in paragraph (1). 
"(3) DELETIONS FOR CHIEF COUNSEL ADVICE.—In the case 
of Chief Counsel advice open to public inspection pursuant 
to this section— 
"(A) paragraphs (2) through (7) of subsection (c) shall 
not apply, but 
"(B) the Secretary may make deletions of material 
in accordance with subsections (b) and (c) of section 552 
of title 5, United States Code, except that in applying 
subsection (b)(3) of such section, no statutory provision 
of this title shall be taken into account. 
"(4) NOTICE OF INTENTION TO DISCLOSE.— 
"(A) NONTAXPAYER-SPECIFIC CHIEF COUNSEL ADVICE.— 
In the case of Chief Counsel advice which is written without 
reference to a specific taxpayer or group of specific tax-
payers— 
"(i) subsection (f)(1) shall not apply; and 
"(ii) the Secretary shall, within 60 days after the Deadline 
issuance of the Chief Counsel advice, complete any 
deletions described in subsection (c)(1) or paragraph 
(3) and make the Chief Counsel advice, as so edited, 
open for public inspection. 
"(B) 
TAXPAYER-SPECIFIC CHIEF COUNSEL ADVICE.—In 
the case of Chief Counsel advice which is written with 
respect to a specific taxpayer or group of specific taxpayers, 
the Secretary shall, within 60 days after the issuance of 
the Chief Counsel advice, mail the notice required by sub-
section (f)(1) to each such taxpayer. The notice shall include 
a copy of the Chief Counsel advice on which is indicated 
the information that the Secretary proposes to delete pursu-
ant to subsection (c)(1). The Secretary may also delete 
from the copy of the text of the Chief Counsel advice 
any of the information described in paragraph (3), and 
shall delete the names, addresses, and other identifying 
details of taxpayers other than the person to whom the 
advice pertains, except that the Secretary shall not delete 
from the copy of the Chief Counsel advice that is furnished 
to the taxpayer any information of which that taxpayer 
was the source.". 
(c) CONFORMING AMENDMENTS.— 
(1) Section 6110(f)(1) is amended by striking "The 
Secretary" and inserting "Except as otherwise provided by sub-
section (i), the Secretary". 
(2) Paragraphs (1)(B) and (2) of section 6110(j)(l), as 
redesignated by this section, are amended by striking "sub-
section (g)" each place it appears and inserting "subsection 
(g)or(i)(4)(B)". 
Public 
information. 
Deadline. 
112 STAT. 774 
PUBLIC LAW 105-206—JULY 22, 1998 
26 u s e 6110 
note. 
Applicability. 
Applicability. 
Public 
information. 
(3) Section 6110(k)(l)(B), as so redesignated, is amended 
by striking "subsection (c)" and inserting "subsection (c)(1) or 
(i)(3)». 
(d) EFFECTIVE DATES.— 
(1) IN GENERAL.—Except as otherwise provided in this sub-
section, the amendments made by this section shall apply to 
any Chief Counsel advice issued more than 90 days after the 
date of the enactment of this Act. 
(2) TRANSITION RULES.—^The amendments made by this 
section shall apply to any Chief Counsel advice issued after 
December 31, 1985, and before the 91st day after the date 
of the enactment of this Act by the offices of the associate 
chief counsel for domestic, employee benefits and exempt 
organizations, and international, except that any such Chief 
Counsel advice shall be treated as made available on a timely 
basis if such advice is made available for public inspection 
not later than the following dates: 
(A) One year after the date of the enactment of this 
Act, in the case of all litigation guideline memoranda, 
service center advice, tax litigation bulletins, criminal tax 
bulletins, and general litigation bulletins. 
(B) Eighteen months after such date of enactment, 
in the case of field service advice and technical assistance 
to the field issued on or after January 1, 1994. 
(C) Three years after such date of enactment, in the 
case of field service advice and technical assistance to 
the field issued on or after January 1, 1992, and before 
January 1, 1994. 
(D) Six years after such date of enactment, in the 
case of any other Chief Counsel advice issued after Decem-
ber 31, 1985. 
(3) DOCUMENTS TREATED AS CHIEF COUNSEL ADVICE.—If 
the Secretary of the Treasury by regulation provides pursuant 
to section 6110(i)(2) of the Internal Revenue Code of 1986, 
as added by this section, that any additional advice or instruc-
tion issued by the Office of Chief Counsel shall be treated 
as Chief Counsel advice, such additional advice or instruction 
shall be made available for public inspection pursuant to section 
6110 of such Code, as amended by this section, only in accord-
ance with the effective date set forth in such regulation. 
(4) CHIEF COUNSEL ADVICE TO BE AVAILABLE ELECTRONI-
CALLY.—^The Internal Revenue Service shall make any Chief 
Counsel advice issued more than 90 days after the date of 
the enactment of this Act and made available for public inspec-
tion pursuant to section 6110 of such Code, as amended by 
this section, also available by computer telecommunications 
within 1 year after issuance. 
Subtitle G—Low-Income Taxpayer Clinics 
SEC. 3601. LOW-INCOME TAXPAYER CLINICS. 
(a) IN GENERAL.—Chapter 77 (relating to miscellaneous provi-
sions), as amended by section 3411, is amended by adding at the 
end the following new section: 
'hf^ii 
PUBLIC LAW 105-206-^ULY 22, 1998 
112 STAT. 775 
"SEC. 7526. LOW-INCOME TAXPAYER CLINICS. 
"(a) IN GENERAL.—^The Secretary may, subject to the availabil-
ity of appropriated funds, make grants to provide matching funds 
for the development, expansion, or continuation of qualified low-
income taxpayer clinics. 
"(b) DEFINITIONS.—^For purposes of this section— 
"(1) QUALIFIED LOW-INCOME TAXPAYER CLINIC.— 
"(A) IN GENERAL.—^The term 'qualified low-income tax-
payer clinic' means a clinic that— 
"(i) does not charge more than a nominal fee for 
its services (except for reimbursement of actual costs 
incurred); and 
"(ii)(I) represents low-income taxpayers in con-
troversies with the Internal Revenue Service; or 
"(11) operates programs to inform individuals for 
whom English is a second language about their rights 
and responsibilities under this title. 
"(B) REPRESENTATION OF LOW-INCOME TAXPAYERS.—^A 
clinic meets the requirements of subparagraph (A)(ii)(I) 
if— 
"(i) at least 90 percent of the taxpayers represented 
by the clinic have incomes which do not exceed 250 
percent of the poverty level, as determined in accord-
ance with criteria established by the Director of the 
Office of Management and Budget; and 
"(ii) the amount in controversy for any taxable 
year generally does not exceed the amount specified 
in section 7463. 
"(2) CLINIC—The term 'clinic' includes— 
"(A) a clinical program at an accredited law, business, 
or accounting school in which students represent low-
income taxpayers in controversies arising under this title; 
and 
"(B) an organization described in section 501(c) and 
exempt from tax under section 501(a) which satisfies the 
requirements of paragraph (1) through representation of 
taxpayers or referral of taxpayers to qualified representa-
tives. 
"(3) QUALIFIED REPRESENTATIVE.—The term 'qualified rep-
resentative' means any individual (whether or not an attorney) 
who is authorized to practice before the Internal Revenue Serv-
ice or the applicable court. 
"(c) SPECIAL RULES AND LIMITATIONS.— 
"(1) AGGREGATE LIMITATION.—^Unless otherwise provided 
by specific appropriation, the Secretary shall not allocate more 
than $6,000,000 per year (exclusive of costs of administering 
the program) to grants under this section. 
"(2) LIMITATION ON ANNUAL GRANTS TO A CLINIC.—^The 
aggregate amount of grants which may be made under this 
section to a clinic for a year shall not exceed $100,000. 
"(3) MULTI-YEAR GRANTS.—^Upon application of a qualified 
low-income taxpayer clinic, the Secretary is authorized to award 
a multi-year grant not to exceed 3 years. 
"(4) CRITERIA FOR AWARDS.—^In determining whether to 
make a grant under this section, the Secretary shall consider— 
5fr-194 O - 98 - 26 : QL 3 Part 1 
112 STAT. 776 
PUBLIC LAW 105-206-^JULY 22, 1998 
"(A) the numbers of taxpayers who will be served by 
the clinic, including the number of taxpayers in the geo-
graphical area for whom English is a second language; 
^(B) the existence of other low-income taxpayer clinics 
serving the same population; 
"(C) the quality of the program offered by the low-
income taxpayer clinic, including the qualifications of its 
administrators and qualified representatives, and 
its 
record, if any, in providing service to low-income taxpayers; 
and 
"(D) alternative funding sources available to the clinic, 
including amounts received from other grants and contribu-
tions, and the endowment and resources of the institution 
sponsoring the clinic. 
"(5) REQUIREMENT OF MATCHING FUNDS.—^A low-income tax-
payer clinic must provide matching funds on a dollar-for-dollar 
basis for all grants provided under this section. Matching funds 
may include— 
"(A) the salary (including fringe benefits) of individuals 
performing services for the clinic; and 
"(B) the cost of equipment used in the clinic. 
Indirect expenses, including general overhead of the institution 
sponsoring the clinic, shall not be counted as matching funds.*'. 
(b) CLERICAL AMENDMENT.^The table of sections for chapter 
77, as amended by section 3411, is amended by adding at the 
end the following new item: 
"Sec. 7526. Low-income taxpayer clinics.". 
26 use 7526 
(c) EFFECTIVE DATE.—^The amendments made by this section 
i^ote. 
shall take effect on the date of the enactment of this Act. 
Subtitle H—Other Matters 
26 use 7804 
SEC. 3701. CATALOGING COMPLAINTS. 
In collecting data for the report required under section 1211 
of the Taxpayer Bill of Rights 2 (Public Law 104^168), the Secretary 
of the Treasury or the Secretary's delegate shall, not later than 
January 1, 2000, maintain records of taxpayer complaints of mis-
conduct by Internal Revenue Service employees on an individual 
employee basis. 
SEC. 
3702. 
ARCHIVE 
OF 
RECORDS 
OF 
INTERNAL 
REVENUE 
SERVICE. 
(a) IN GENERAL.—Subsection (1) of section 6103 (relating to 
confidentiality and disclosure of returns and return information) 
is amended by adding at the end the following new paragraph: 
"(17) 
DISCLOSURE TO NATIONAL ARCHIVES AND RECORDS 
ADMINISTRATION.—^The Secretary shall, upon written request 
from the Archivist of the United States, disclose or authorize 
the disclosure of returns and return information to officers 
and employees of the National Archives and Records Adminis-
tration for purposes of, and only to the extent necessary in, 
the appraisal of records for destruction or retention. No such 
officer or employee shall, except to the extent authorized by 
subsection (f), (i)(7), or (p), disclose any return or return 
information disclosed under the preceding sentence to any per-
son other than to the Secretary, or to another officer or 
employee of the National Archives and Records Administration 
PUBLIC LAW 105-206—JULY 22, 1998 
112 STAT. 777 
Applicability. 
26 use 6103 
note. 
Regulations. 
26 use 6311 
note. 
26 use 7801 
note. 
whose official duties require such disclosure for purposes of 
such appraisal.". 
(b) CONFORMING AMENDMENTS.—Section 6103(p) is amended— 
(1) in paragraph (3)(A), by striking "or (16)" and inserting 
"(16), or (17)"; 
(2) in paragraph (4), by striking "or (14)" and inserting 
", (14), or (17)" in the matter preceding subparagraph (A); 
and 
(3) in paragraph (4)(F)(ii), by striking "or (15)" and insert-
ing", (15), or (17)". 
(c) EFFECTIVE DATE.—^The amendments made by this section 
shall apply to requests made by the Archivist of the United States 
after the date of the enactment of this Act. 
SEC. 3703. PAYMENT OF TAXES. 
The Secretary of the Treasury or the Secretary's delegate shall 
establish such rules, regulations, and procedures as are necessary 
to allow payment of taxes by check or money order made payable 
to the United States Treasury. 
SEC. 3704. CLARIFICATION OF AUTHORITY OF SECRETARY RELATING 
TO THE MAKING OF ELECTIONS. 
Subsection (d) of section 7805 is amended by striking "by regu-
lations or forms". 
SEC. 3705. INTERNAL REVENUE SERVICE EMPLOYEE CONTACTS. 
(a) NOTICE.—^The Secretary of the Treasury or the Secretary's 
delegate shall provide that— 
(1) any manually generated correspondence received by 
a taxpayer from the Internal Revenue Service shall include 
in a prominent manner the name, telephone number, and 
unique identifying number of an Internal Revenue Service 
employee the taxpayer may contact with respect to the cor-
respondence; 
(2) any other correspondence or notice received by a tax-
payer from the Internal Revenue Service shall include in a 
prominent manner a telephone number that the taxpayer may 
contact; and 
(3) an Internal Revenue Service employee shall give a 
taxpayer during a telephone or personal contact the employee's 
name and unique identifying number. 
(b) SINGLE CONTACT.—^The Secretary of the Treasury or the Procedures 
Secretary's delegate shall develop a procedure under which, to 
the extent practicable and if advantageous to the taxpayer, one 
Internal Revenue Service employee shall be assigned to handle 
a taxpayer's matter until it is resolved. 
(c) TELEPHONE HELPLINE IN SPANISH.—^The Secretary of the 
Treasury or the Secretary's delegate shall provide, in appropriate 
circumstances, that taxpayer questions on telephone helplines of 
the Internal Revenue Service are answered in Spanish. 
(d) OTHER TELEPHONE HELPLINE OPTIONS.—The Secretary of 
the Treasury or the Secretary's delegate shall provide, in appro-
priate circumstances, on telephone helplines of the Internal Revenue 
Service an option for any taxpayer to talk to an Internal Revenue 
Service employee during normal business hours. The person shall 
direct phone questions of the taxpayer to other Internal Revenue 
Service personnel who can provide assistance to the taxpayer. 
(e) EFFECTIVE DATES.— 
112 STAT. 778 
PUBLIC LAW 105-206-^ULY 22, 1998 
(1) IN GENERAL.—Except as otherwise provided in this sub-
section, this section shall take effect 60 days after the date 
of the enactment of this Act. 
(2) SUBSECTION (O.—Subsection (c) shall take effect on 
January 1, 2000. 
(3) SUBSECTION (d).—Subsection (d) shall take effect on 
January 1, 2000. 
(4) UNIQUE IDENTIFYING NUMBER.—Any requirement under 
this section to provide a unique identifying number shall take 
effect 6 months after the date of the enactment of this Act. 
26 use 7804 
SEC. 3706. USE OF PSEUDONYMS BY INTERNAL REVENUE SERVICE 
note. 
EMPLOYEES. 
(a) IN GENERAL.—^Any employee of the Internal Revenue Service 
may use a pseudonjon only if— 
(1) adequate justification for the use of a pseudonym is 
provided by the employee, including protection of personal 
safety; and 
(2) such use is approved by the employee's supervisor before 
the pseudonym is used. 
Applicability. 
(b) EFFECTIVE DATE.—Subsection (a) shall apply to requests 
made after the date of the enactment of this Act. 
26 use 6651 
SEC. 3707. ILLEGAL TAX PROTESTER DESIGNATION. 
(a) PROHIBITION.—^The officers and employees of the Internal 
Revenue Service— 
(1) shall not designate taxpayers as illegal tax protesters 
(or any similar designation); and 
(2) in the case of any such designation made on or before 
the date of the enactment of this Act— 
(A) shall remove such designation from the individual 
master file; and 
(B) shall disregard any such designation not located 
in the individual master file. 
(b) DESIGNATION OF NONFILERS 
ALLOWED.—^An officer or 
employee of the Internal Revenue Service may designate any appro-
priate taxpayer as a nonfiler, but shall remove such designation 
once the taxpayer has filed income tax returns for 2 consecutive 
taxable years and paid all taxes shown on such returns. 
(c) EFFECTIVE DATE.—^The provisions of this section shall take 
effect on the date of the enactment of this Act, except that the 
removal of any designation under subsection (a)(2)(A) shall not 
be required to begin before January 1, 1999. 
SEC. 3708. PROVISION OF CONFIDENTIAL INFORMATION TO CONGRESS 
BY WHISTLEBLOWERS. 
(a) IN GENERAL.—Section 6103(f) (relating to disclosure to 
committees of Congress) is amended by adding at the end the 
following new paragraph: 
"(5) 
DISCLOSURE BY WHISTLEBLOWER.—^Any person 
who 
otherwise has or had access to any return or return information 
under this section may disclose such return or 
return 
information to a committee referred to in paragraph (1) or 
any individual authorized to receive or inspect information 
under paragraph (4)(A) if such person believes such return 
or return information may relate to possible misconduct, mal-
administration, or taxpayer abuse.". 
PUBLIC LAW 105-206^JULY 22, 1998 
112 STAT. 779 
(b) EFFECTIVE DATE.—^The amendment made by this section 26 use 6103 
shall take effect on the date of the enactment of this Act. 
^°^-
SEC. 3709. USTING OF LOCAL INTERNAL REVENUE SERVICE TELE- 26USC7801 
PHONE NUMBERS AND ADDRESSES. 
note. 
The Secretary of the Treasury or the Secretary's delegate shall, 
as soon as practicable, provide that the local telephone numbers 
and addresses of Internal Revenue Service offices located in any 
particular area be listed in a telephone book for that area. 
SEC. 3710. IDENTIFICATION OF RETURN PREPARERS. 
(a) IN GENERAL.—^The last sentence of section 6109(a) (relating 
to identifying numbers) is amended by striking "For purposes of 
this subsection" and inserting "For purposes of paragraphs (1), 
(2), and (3)". 
(b) EFFECTIVE DATE.—^The amendment made by this section 26 use 6109 
shall take effect on the date of the enactment of this Act. 
^°^-
SEC. 3711. OFFSET OF PAST-DUE, LEGALLY ENFORCEABLE STATE 
INCOME TAX OBLIGATIONS AGAINST OVERPAYMENTS. 
(a) IN GENERAL.—Section 6402 (relating to authority to make 
credits or refunds), as amended by section 3505, is amended by 
redesignating subsections (e) through (j) as subsections (f) through 
(k), respectively, and by inserting after subsection (d) the following 
new subsection: 
"(e) COLLECTION OF PAST-DUE, LEGALLY ENFORCEABLE STATE 
INCOME TAX OBLIGATIONS.— 
"(1) IN GENERAL.—^Upon receiving notice from any State Notification, 
that a named person owes a past-due, legally enforceable State 
income tax obligation to such State, the Secretary shall, under 
such conditions as may be prescribed by the Secretary— 
"(A) reduce the amount of any overpayment payable 
to such person by the amount of such State income tax 
obligation; 
"(B) pay the amount by which such overpayment is 
reduced under subparagraph (A) to such State and notify 
such State of such person's name, taxpayer identification 
number, address, and the amount collected; and 
"(C) notify the person making such overpayment that 
the overpayment has been reduced by an amount necessary 
to satisfy a past-due, legally enforceable State income tax 
obligation. 
If an offset is made pursuant to a joint return, the notice 
under subparagraph (B) shall include the names, taxpayer 
identification numbers, and addresses of each person filing 
such return. 
"(2) OFFSET PERMITTED ONLY AGAINST RESIDENTS OF STATE AppUcaWuty. 
SEEKING OFFSET.—^Paragraph (1) shall apply to an overpayment 
by any person for a taxable year only if the address shown 
on the Federal return for such taxable year of the overpayment 
is an address within the State seeking the offset. 
"(3) PRIORITIES FOR OFFSET.—Any overpajmnent by a person 
shall be reduced pursuant to this subsection— 
"(A) after such overpayment is reduced pursuant to— 
"(i) subsection (a) with respect to any liability for 
any internal revenue tax on the part of the person 
who made the overpajmtient; 
112 STAT. 780 
PUBLIC LAW 105-206—JULY 22, 1998 
"(ii) subsection (c) with respect to past-due support; 
and 
"(iii) subsection (d) with respect to any past-due, 
legally enforceable debt owed to a Federal agency; and 
"(B) before such overpayment is credited to the future 
liability for any Federal internal revenue tax of such person 
pursuant to subsection (b). 
If the Secretary receives notice from one or more agencies 
of the State of more than one debt subject to paragraph (1) 
that is owed by such person to such an agency, any overpajonent 
by such person shall be applied against such debts in the 
order in which such debts accrued. 
"(4) NOTICE; CONSIDERATION OF EVIDENCE.—No State may 
take action under this subsection until such State— 
"(A) notifies by certified mail with return receipt the 
person owing the past-due State income tax liability that 
the State proposes to take action pursuant to this section; 
"(B) gives such person at least 60 days to present 
evidence that all or part of such liability is not past-due 
or not legally enforceable; 
"(C) considers any evidence presented by such person 
and determines that an amount of such debt is past-due 
and legally enforceable; and 
"(D) satisfies such other conditions as the Secretary 
may prescribe to ensure that the determination made under 
subparagraph (C) is valid and that the State has made 
reasonable efforts to obtain payment of such State income 
tax obligation. 
"(5) PAST-DUE, LEGALLY ENFORCEABLE STATE INCOME TAX 
OBLIGATION.—For purposes of this subsection, the term 'past-
due, legally enforceable State income tax obligation' means 
a debt— 
"(A)(i) which resulted from— 
"(I) a judgment rendered by a court of competent 
jurisdiction which has determined an amount of State 
income tax to be due; or 
"(II) a determination after an 
administrative 
hearing which has determined an amount of State 
income tax to be due; and 
"(ii) which is no longer subject to judicial review; or 
"(B) which resulted from a State income tax which 
has been assessed but not collected, the time for redeter-
mination of which has expired, and which has not been 
delinquent for more than 10 years. 
For purposes of this paragraph, the term 'State income tax' 
includes any local income tax administered by the chief tax 
administration agency of the State. 
"(6) REGULATIONS.—^The Secretary shall issue regulations 
prescribing the time and manner in which States must submit 
notices of past-due, legally enforceable State income tax obliga-
tions and the necessary information that must be contained 
in or accompany such notices. The regulations shall specify 
the types of State income taxes and the minimum amount 
of debt to which the reduction procedure established by para-
graph (1) may be applied. The regulations may require States 
to pay a fee to reimburse the Secretary for the cost of applying 
such procedure. Any fee paid to the Secretary pursuant to 
PUBLIC LAW 105-206-^ULY 22, 1998 
112 STAT. 781 
the preceding sentence shall be used to reimburse appropria-
tions which bore all or part of the cost of applying such proce-
dure. 
"(7) ERRONEOUS PAYMENT TO STATE.—Any State receiving 
notice from the Secretary that an erroneous payment has been 
made to such State under paragraph (1) shall pay promptly 
to the Secretary, in accordance with such regulations as the 
Secretary may prescribe, an amount equal to the amount of 
such erroneous payment (without regard to whether any other 
amounts payable to such State under such paragraph have 
been paid to such State).". 
(b) DISCLOSURE OF CERTAIN INFORMATION TO STATES REQUEST-
ING REFUND OFFSETS FOR PAST-DUE, LEGALLY ENFORCEABLE STATE 
INCOME TAX OBLIGATIONS.— 
(1) Paragraph (10) of section 6103(1) is amended by striking 
"(c) or (d)" each place it appears and inserting "(c), (d), or 
(e)". 
(2) The heading for paragraph (10) is amended by striking 
"SECTION 6402 (C) OR 6402 (d)" AND INSERTING "SUBSECTION (C), 
(d), OR (e) OF SECTION 6402". 
(c) CONFORMING AMENDMENTS.— 
(1) Subsection (a) of section 6402 is amended by striking 
"(c) and (d)" and inserting "(c), (d), and (e)". 
(2) Paragraph (2) of section 6402(d) is amended by striking 
"and before such overpajrment" and inserting "and before such 
overpayment is reduced pursuant to subsection (e) and before 
such overpayment". 
(3) Subsection (f) of section 6402, as redesignated by sub-
section (a), is amended— 
(A) by striking "(c) or (d)" and inserting "(c), (d), or 
(e)"; and 
(B) by striking "Federal agency" and inserting "Federal 
agency or State". 
(4) Subsection (h) of section 6402, as redesignated by sub-
section (a), is amended by striking "subsection (c)" and inserting 
"subsection (c) or (e)". 
(d) EFFECTIVE DATE.—^The amendments made by this section Applicability, 
(other than subsection (d)) shall apply to refunds payable under 26USC6103 
section 6402 of the Internal Revenue Code of 1986 after December °°*®' 
31, 1999. 
SEC. 
3712. REPORTING REQUIREMENTS IN CONNECTION WITH 
EDUCATION TAX CREDIT. 
(a) AMOUNTS TO BE REPORTED.—Subparagraph (C) of section 
6050S(b)(2) is amended— 
(1) by redesignating clauses (ii) and (iii) as clauses (iii) 
and (iv), respectively, and by inserting after clause (i) the 
following new clause: 
"(ii) the amount of any grant received by such 
individual for pajonent of costs of attendance and proc-
essed by the person making such return during such 
calendar year,"; 
(2) in clause (iii) (as so redesignated), by inserting "by 
the person making such return" after "year"; and 
(3) in clause (iv) (as so redesignated), by inserting "and" 
at the end. 
(b) CONFORMING AMENDMENTS.— 
112 STAT. 782 
PUBLIC LAW 105-206-JULY 22, 1998 
Applicability. 
26 use 6050S 
note. 
(1) Paragraph (2) of section 6050S(d) is amended by striking 
"aggregate". 
(2) Subsection (e) of section 6050S is amended by inserting 
"(without regard to subsection (g)(2) thereof)" after "section 
25A". 
(c) EFFECTIVE DATE.—^The amendments made by this section 
shall apply to returns required to be filed with respect to taxable 
years beginning after December 31, 1998. 
Subtitle I—Studies 
26 use 6601 
note. 
Deadline. 
26 use 6103 
note. 
Reports. 
Deadline. 
SEC. 3801. ADMINISTRATION OF PENALTIES AND INTEREST. 
The Joint Committee on Taxation and the Secretary of the 
Treasury shall each conduct a separate study— 
(1) reviewing the administration and implementation by 
the Internal Revenue Service of the interest and penalty provi-
sions of the Internal Revenue Code of 1986 (including the 
penalty reform provisions of the Omnibus Budget Reconciliation 
Act of 1989); and 
(2) msiking any legislative and administrative recommenda-
tions the Committee or the Secretary deems appropriate to 
simplify penalty or interest administration and reduce taxpayer 
burden. 
Such studies shall be submitted to the Committee on Ways and 
Means of the House of Representatives and the Committee on 
Finance of the Senate not later than 1 year after the date of 
the enactment of this Act. 
SEC. 3802. CONFIDENTIALITY OF TAX RETURN INFORMATION. 
The Joint Committee on Taxation and the Secretary of the 
Treasury shall each conduct a separate study of the scope and 
use of provisions regarding taxpayer confidentiality, and shall report 
the findings of such study, together with such recommendations 
as the Committee or the Secretary deems appropriate, to the Con-
gress not later than 18 months after the date of the enactment 
of this Act. Such study shall examine— 
(1) the present protections for taxpayer privacy; 
(2) any need for third parties to use tax return information; 
(3) whether greater levels of voluntary compliance may 
be achieved by allowing the public to know who is legally 
required to file tax returns, but does not file tax returns; 
(4) the interrelationship of the taxpayer confidentiality 
provisions in the Internal Revenue Code of 1986 with such 
provisions in other Federal law, including section 552a of title 
5, United States Code (commonly known as the "Freedom of 
Information Act"); 
(5) the impact on taxpayer privacy of the sharing of income 
tax return information for purposes of enforcement of State 
and local tax laws other than income tax laws, and including 
the impact on the taxpayer privacy intended to be protected 
at the Federal, State, and local levels under Public Law 105-
35, the Taxpayer Browsing Protection Act of 1997; and 
(6) whether the public interest would be served by greater 
disclosure of information relating to tax exempt organizations 
described in section 501 of the Internal Revenue Code of 1986. 
PUBLIC LAW 105-206—JULY 22, 1998 
112 STAT. 783 
SEC. 3803. STUDY OF NONCOMPLIANCE WITH INTERNAL REVENUE 
LAWS BY TAXPAYERS. 
Not later than 1 year after the date of the enactment of this 
Act, the Secretary of the Treasury and the Commissioner of Internal 
Revenue shall jointly conduct a study, in consultation with the 
Joint Committee on Taxation, of the noncompliance with internal 
revenue laws by taxpayers (including willful noncompliance and 
noncompliance due to tax law complexity or other factors) and 
report the findings of such study to Congress. 
SEC. 3804. STUDY OF PAYMENTS MADE FOR DETECTION OF UNDERPAY-
MENTS AND FRAUD. 
Not later than 1 year after the date of the enactment of this 
Act, the Secretary of the Treasury shall conduct a study and report 
to Congress on the use of section 7623 of the Internal Revenue 
Code of 1986 including— 
(1) an analysis of the present use of such section and 
the results of such use; and 
(2) any legislative or administrative recommendations 
regarding the provisions of such section and its application. 
TITLE IV—CONGRESSIONAL ACCOUNT-
ABILITY FOR THE INTERNAL REVE-
NUE SERVICE 
Subtitle A—Oversight 
26 use 7801 
note. 
Deadline. 
26 use 7623 
note. 
Deadline. 
Reports. 
SEC. 4001. EXPANSION OF DUTIES OF THE JOINT COMMITTEE ON 
TAXATION. 
(a) IN GENERAL.—Section 8021 (relating to the powers of the 
Joint Committee on Taxation) is amended by adding at the end 
the following new subsections: 
"(e) INVESTIGATIONS.—^The Joint Committee shall review all 
requests (other than requests by the chairman or ranking member 
of a committee or subcommittee) for investigations of the Internal 
Revenue Service by the Greneral Accounting Office, and approve 
such requests when appropriate, with a view towards eliminating 
overlapping investigations, ensuring that the General Accounting 
Office has the capacity to handle the investigation, and ensuring 
that investigations focus on areas of primary importance to tax 
administration. 
"(f) RELATING TO JOINT REVIEWS.— 
"(1) IN GENERAL.—The Chief of Staff, and the staff of the 
Joint Committee, shall provide such assistance as is required 
for joint reviews described in paragraph (2). 
"(2) JOINT REVIEWS.—Before June 1 of each calendar year DeadUne. 
after 1998 and before 2004, there shall be a joint review of 
the strategic plans and budget for the Internal Revenue Service 
and such other matters as the Chairman of the Joint Committee 
deems appropriate. Such joint review shall be held at the 
call of the Chairman of the Joint Committee and shall include 
two members of the majority and one member of the minority 
from each of the Committees on Finance, Appropriations, and 
Grovemmental Affairs of the Senate, and the Committees on 
112 STAT. 784 
PUBLIC LAW 105-206-^ULY 22, 1998 
Ways and Means, Appropriations, and Government Reform and 
Oversight of the House of Representatives.". 
26 use 8021 
(b) EFFECTIVE DATES.— 
A°*®i- uiM. 
(1) Subsection (e) of section 8021 of the Internal Revenue 
Applicability. 
Q^jjjg ^f j^ggg^ g
^
g ^jj^jg^ ^jy subsection (a) of this section, shall 
apply to requests made after the date of the enactment of 
this Act. 
(2) Subsection (f) of such section shall take effect on the 
date of the enactment of this Act. 
SEC. 4002. COORDINATED OVERSIGHT REPORTS. 
(a) IN GENERAL.—Paragraph (3) of section 8022 (relating to 
the duties of the Joint Committee on Taxation) is amended to 
read as follows: 
"(3) REPORTS.— 
"(A) To report, from time to time, to the Committee 
on Finance and the Committee on Ways and Means, and, 
in its discretion, to the Senate or House of Representatives, 
or both, the results of its investigations, together with 
such recommendations as it may deem advisable. 
"(B) Subject to amounts specifically appropriated to 
carry out this subparagraph, to report, at least once each 
Congress, to the Committee on Finance and the Committee 
on Ways and Means on the overall state of the Federal 
tax system, together with recommendations with respect 
to possible simplification proposals and other matters relat-
ing to the administration of the Federal tax system as 
it may deem advisable. 
Deadline. 
"(C) To report, for each calendar year after 1998 and 
before 2004, to the Committees on Finance, Appropriations, 
and Governmental Afiairs of the Senate, and to the 
Committees on Ways and Means, Appropriations, and 
Government Reform and Oversight of the House of Rep-
resentatives, with respect to— 
"(i) strategic and business plans for the Internal 
Revenue Service; 
"(ii) progress of the Internal Revenue Service in 
meeting its objectives; 
"(iii) the budget for the Internal Revenue Service 
and whether it supports its objectives; 
"(iv) progress of the Internal Revenue Service in 
improving taxpayer service and compliance; 
"(v) progress of the Internal Revenue Service on 
technology modernization; and 
"(vi) the annual filing season.". 
26 use 8022 
(b) EFFECTIVE DATE.—^The amendment made by this section 
note. 
shall take effect on the date of the enactment of this Act. 
Subtitle B—Century Date Change 
SEC. 4011. CENTURY DATE CHANGE. 
It is the sense of the Congress that— 
(1) the Internal Revenue Service should place a high prior-
ity on resolving the century date change computing problems; 
and 
.a<»>i- '-'"Jf-^ hjfg 
PUBLIC LAW 105-206-^ULY 22, 1998 
112 STAT. 785 
(2) the Internal Revenue Service efforts to resolve the cen-
tury date change computing problems should be funded fully 
to provide for certain resolution of such problems. 
Subtitle C—^Tax Law Complexity 
SEC. 4021. ROLE OF THE INTERNAL REVENUE SERVICE. 
It is the sense of the Congress that the Internal Revenue 
Service should provide Congress with an independent view of tax 
administration, and that during the legislative process, the tax 
writing committees of Congress should hear from front-line tech-
nical experts at the Internal Revenue Service with respect to the 
administrability of pending amendments to the Internal Revenue 
Code of 1986. 
SEC. 4022. TAX LAW COMPLEXITY ANALYSIS. 
(a) COMMISSIONER STUDY.— 
26 use 780i 
(1) IN GENERAL.—^The Commissioner of Internal Revenue J^ote. 
shall conduct each year after 1998 an analysis of the sources 
of complexity in administration of the Federal tax laws. Such 
analysis may include an analysis of— 
(A) questions frequently asked by taxpayers with 
respect to return filing; 
(B) common errors made by taxpayers in filling out 
their returns; 
(C) areas of law which frequently result in disagree-
ments between taxpayers and the Internal 
Revenue 
Service; 
(D) major areas of law in which there is no (or incom-
plete) published guidance or in which the law is uncertain; 
(E) areas in which revenue officers msike frequent 
errors interpreting or applying the law; 
(F) the impact of recent legislation on complexity; and 
(G) forms supplied by the Internal Revenue Service, 
including the time it takes for taxpayers to complete and 
review forms, the number of taxpayers who use each form, 
and how recent legislation has affected the time it takes 
to complete and review forms. 
(2) REPORT.—^The Commissioner shall not later than March Deadline. 
1 of each year report the results of the analysis conducted 
under paragraph (1) for the preceding year to the Committee 
on Ways and Means of the House of Representatives and the 
Committee on Finance of the Senate. The report shall include 
any recommendations— 
(A) for reducing the complexity of the administration 
of Federal tax laws; and 
(B) for repeal or modification of any provision the 
Commissioner believes adds undue 
and 
unnecessary 
complexity to the administration of the Federal tax laws. 
(b) ANALYSIS TO ACCOMPANY CERTAIN LEGISLATION.— 
26USC8022 
(1) IN GENERAL.—^The Joint Committee on Taxation, in note. 
consultation with the Internal Revenue Service and the Depart-
ment of the Treasury, shall include a tax complexity analysis 
in each report for legislation, or provide such analysis to mem-
bers of the committee reporting the legislation as soon as prac-
ticable after the report is filed, if— 
112 STAT. 786 
PUBLIC LAW 105-206—JULY 22, 1998 
(A) such legislation is reported by the Committee on 
Finance in the Senate, the Committee on Ways and Means 
of the House of Representatives, or any committee of con-
ference; and 
(B) such legislation includes a provision which would 
directly or indirectly amend the Internal Revenue Code 
of 1986 and which has widespread applicability to individ-
uals or small businesses. 
(2) TAX COMPLEXITY ANALYSIS.—For purposes of this sub-
section, the term "tax complexity analysis" means, with respect 
to any legislation, a report on the complexity and administrative 
difficulties of each provision described in paragraph (1)(B) 
which— 
(A) includes— 
(i) an estimate of the number of taxpayers affected 
by the provision; and 
(ii) if applicable, the income level of taxpayers 
affected by the provision; and 
(B) should include (if determinable)— 
(i) the extent to which tax forms supplied by the 
Internal Revenue Service would require revision and 
whether any new forms would be required; 
(ii) the extent to which taxpayers would be 
required to keep additional records; 
(iii) the estimated cost to taxpayers to comply with 
the provision; 
(iv) the extent to which enactment of the provision 
would require the Internal Revenue Service to develop 
or modify regulatory guidance; 
(v) the extent to which the provision may result 
in disagreements between taxpayers and the Internal 
Revenue Service; and 
(vi) any expected impact on the Internal Revenue 
Service from the provision (including the impact on 
internal training, revision of the Internal Revenue 
Manual, reprogramming of computers, and the extent 
to which the Internal Revenue Service would be 
required to divert or redirect resources in response 
to the provision). 
(3) LEGISLATION SUBJECT TO POINT OF ORDER IN HOUSE 
OF REPRESENTATIVES.— 
(A) LEGISLATION REPORTED BY COMMITTEE ON WAYS 
- AND MEANS.—Clause 2(1) of rule XI of the Rules of the 
House of Representatives is amended by adding at the 
end the following new subparagraph: 
"(8) The report of the Committee on Ways and Means on 
any bill or joint resolution containing any provision amending the 
Internal Revenue Code of 1986 shall include a Tax Complexity 
Analysis prepared by the Joint Committee on Taxation in accord-
ance with section 4022(b) of the Internal Revenue Service 
Restructuring and Reform Act of 1998 unless the Committee on 
Ways and Means causes to have such Analysis printed in the 
Congressional Record prior to the consideration of the bill or joint 
resolution.". 
(B) CONFERENCE REPORTS.—^Rule XXVIII of the Rules 
of the House of Representatives is amended by adding 
at the end the following new clause: 
PUBLIC LAW 105-206-^JULY 22, 1998 
112 STAT. 787 
"7. It shall not be in order to consider the report of a committee 
of conference which contains any provision amending the Internal 
Revenue Code of 1986 unless— 
"(a) the accompanying joint explanatory statement contains 
a Tax Complexity Analysis prepared by the Joint Committee 
on Taxation in accordance with section 4022(b) of the Internal 
Revenue Service Restructuring and Reform Act of 1998; or 
"(b) such Analysis is printed in the Congressional Record 
prior to the consideration of the report.". 
(C) RULES OF HOUSE OF REPRESENTATivES.^This para-
graph is enacted by the House of Representatives— 
(i) as an exercise of the rulemaking power of the 
House of Representatives, and as such it is deemed 
a part of the Rules of the House, and it supersedes 
other rules only to the extent that it is inconsistent 
therewith; and 
(ii) with full recognition of the constitutional right 
of the House to change its rules at any time, in the 
same manner and to the same extent as in the case 
of any other rule of the House. 
(4) EFFECTIVE DATE.—^This subsection shall apply to legisla- Applicability, 
tion considered on and after January 1, 1999. 
TITLE V—ADDITIONAL PROVISIONS 
SEC. 5001. LOWER CAPITAL GAINS RATES TO APPLY TO PROPERTY 
HELD MORE THAN 1 YEAR. 
(a) GENERAL RULE.— 
(1) Paragraph (5) of section 1(h) is amended to read as 
follows: 
"(5) 28-PERCENT RATE GAIN.—For purposes of this sub-
section, the term '28-percent rate gain' means the excess (if 
any) of— 
"(A) the sum of— 
"(i) collectibles gain; and 
"(ii) section 1202 gain, over 
"(B) the sum of— 
"(i) collectibles loss; 
"(ii) the net short-term capital loss; and 
"(iii) the amount of long-term capital loss carried 
under section 1212(b)(1)(B) to the taxable year.". 
(2) Subparagraph (A) of section 1(h)(6) is amended by 
striking "18 months" and inserting "1 year". 
(3) Clauses (i) and (ii) of section 1(h)(7)(A) are amended 
to read as follows: 
"(i) the amount of long-term capital gain (not other-
wise treated as ordinary income) which would be treat-
ed as ordinary income if section 1250(b)(1) included 
all depreciation and the applicable percentage under 
section 1250(a) were 100 percent, over 
"(ii) the excess (if any) of— 
* 
"(I) the amount described in paragraph (5)(B); 
over 
"(II) the amount described in paragraph 
(5)(A).". 
112 STAT. 788 
PUBLIC LAW 105-206-^JULY 22, 1998 
(4) So much of paragraph (13) of section 1(h) as precedes 
subparagraph (C) is amended to read as follows: 
"(13) SPECIAL RULES.— 
"(A) 
DETERMINATION OF 28-PERCENT RATE GAIN.—In 
appl3dng paragraph (5)— 
"(i) the amount determined under subparagraph 
(A) of paragraph (5) shall include long-term capital 
gain (not otherwise described in such subparagraph)— 
"(I) which is properly taken into account for 
the portion of the taxable year before May 7, 1997; 
or 
"(II) from property held not more than 18 
months which is properly taken into account for 
the portion of the taxable year after July 28, 1997, 
and before January 1, 1998; 
"(ii) the amount determined under subparagraph 
(B) of paragraph (5) shall include long-term capital 
loss (not otherwise described in such subparagraph)— 
"(I) which is properly taken into account for 
the portion of the taxable year before May 7, 1997; 
or 
"(II) from property held not more than 18 
months which is properly taken into account for 
the portion of the taxable year after July 28, 1997, 
and before January 1, 1998; and 
Applicability. 
"(iii) subparagraph (B) of paragraph (5) (as in effect 
immediately before the enactment of this clause) shall 
apply to amounts properly taken into account before 
January 1, 1998. 
"(B) DETERMINATION OF UNRECAPTURED SECTION 1250 
GAIN.—^The amount determined under paragraph (7)(A) 
shall not include gain— 
"(i) which is properly taken into account for the 
portion of the taxable year before May 7, 1997; or 
"(ii) from property held not more than 18 months 
which is properly taken into account for the portion 
of the taxable year after July 28, 1997, and before 
January 1, 1998.". 
(5) Paragraphs (11) and (12) of section 1223, and section 
1235(a), are each amended by striking "18 months" each place 
it appears and inserting "1 year". 
26 use 1 note. 
(b) EFFECTIVE DATES.— 
Applicability. 
(1) IN GENERAL.—^Except as provided in paragraph (2), the 
amendments made by this section shall apply to taxable years 
ending after December 31, 1997. 
(2) SUBSECTION (aX5).—^The amendments made by sub-
section (a)(5) shall take effect on January 1,1998. 
SEC. 5002. CLArariCATION OF EXCLUSION OF MEALS FOR CERTAIN 
EMPLOYEES. 
(a) IN GENERAL.—Subsection (b) of section 119 (relating to 
meals or lodging furnished for the convenience of the employer) 
is amended by adding at the end the following new paragraph: 
"(4) MEALS FURNISHED TO EMPLOYEES ON BUSINESS PREM-
ISES WHERE MEALS OF MOST EMPLOYEES ARE OTHERWISE 
EXCLUDABLE.—All meals furnished on the business premises 
of an employer to such employer's employees shall be treated 
PUBLIC LAW 105-206—JULY 22, 1998 
112 STAT. 789 
as furnished for the convenience of the employer if, without 
regard to this paragraph, more than half of the employees 
to whom such meals are furnished on such premises are fur-
nished such meals for the convenience of the employer.", 
(b) EFFECTIVE DATE.—^The amendment made by subsection (a) Applicability. 
shall apply to taxable years beginning before, on, or after the 26 USC119 note. 
date of the enactment of this Act. 
SEC. 5003. CLARIFICATION OF DESIGNATION OF NORMAL TRADE 
RELATIONS. 
(a) FINDINGS AND POLICY.— 
i9 use 248i 
(1) FINDINGS.—^The Congress makes the following findings: note. 
(A) Since the 18th century, the principle of non-
discrimination among countries with which the United 
States has trade relations, commonly referred to as "most-
favored-nation" treatment, has been a cornerstone of 
United States trade policy. 
(B) Although the principle remains fiirmly in place 
as a fundamental concept in United States trade relations, 
the term "most-favored-nation" is a misnomer which has 
led to public misunderstanding. 
(C) It is neither the purpose nor the effect of the 
most-favored-nation principle to treat any country as "most 
favored". To the contrary, the principle reflects the 
intention to confer on a country the same trade benefits 
that are conferred on any other country, that is, the 
intention not to discriminate among trading partners. 
(D) The term "normal trade relations" is a more 
accurate description of the principle of nondiscrimination 
as it applies to the tariffs applicable generally to imports 
from United States trading partners, that is, the general 
rates of duty set forth in column 1 of the Harmonized 
Tariff Schedule of the United States. 
(2) POLICY.—It is the sense of the Congress that— 
(A) the language used in United States laws, treaties, 
agreements, executive orders, directives, and regulations 
should more clearly and accurately reflect the underlying 
principles of United States trade policy; and 
(B) accordingly, the term "normal trade relations" 
should, where appropriate, be substituted for the term 
"most-favored-nation". 
(b) CHANGE IN TERMINOLOGY.— 
(1) TRADE EXPANSION ACT OF 1962.—^The heading for section 
251 of the Trade Expansion Act of 1962 (19 U.S.C. 1881) 
is amended to read as follows: "NORMAL TRADE RELATIONS". 
(2) TRADE ACT OF 1974.—(A) Section 402 of the Trade Act 
of 1974 (19 U.S.C. 2432) is amended by striking "(most-favored-
nation treatment)" each place it appears and inserting "(normal 
(B) Section 601(9) of the Trade Act of 1974 (19 U.S.C. 
2481(9)) is amended by striking "most-favored-nation treat-
ment" and inserting "trade treatment based on normal trade 
relations (known under international law as most-favored-
nation treatment)". 
(3) CFTA.—Section 302(a)(3)(C) of the United States Can-
ada Free-Trade Agreement Implementation Act of 1988 (19 
U.S.C. 2112 note) is amended by striking "the most-favored-
112 STAT. 790 
PUBLIC LAW 105-206—JULY 22, 1998 
nation rate of duty" each place it appears and inserting "the 
general subcolumn of the column 1 rate of duty set forth in 
the Harmonized Tariff Schedule of the United States". 
(4) NAFTA.—Section 202(n) of the North American Free 
Trade Agreement Implementation Act (19 U.S.C. 3332(n)) is 
amended by striking "most-favored-nation". 
(5) URUGUAY ROUND AGREEMENTS ACT.—Section 135(a)(2) 
of the Uruguay Round Agreements Act (19 U.S.C. 3555(a)(2)) 
is amended by striking "most-favored-nation" and inserting 
"normal trade relations". 
(6) SEED ACT.—Section 2(c)(ll) of the Support for East 
European 
Democracy 
(SEED) Act of 1989 (22 U.S.C. 
5401(c)(ll)) is amended— 
(A) by striking "(commonly referred to as 'most favored 
nation status')"; and 
(B) by striking "MOST FAVORED NATION TRADE STATUS" 
in the heading and inserting "NORMAL TRADE RELATIONS". 
(7) UNITED STATES-HONG KONG POLICY ACT OF 1992.— 
Section 103(4) of the United States-Hong Kong Policy Act of 
1992 (22 U.S.C. 5713(4)) is amended by striking "(commonly 
referred to as 'most-favored-nation status')". 
1
9 use 2481 
(c) SAVINGS PROVISIONS.—^Nothing in this section shall affect 
note. 
the meaning of any provision of law, Executive order, Presidential 
proclamation, rule, regulation, delegation of authority, other docu-
ment, or treaty or other international agreement of the United 
States relating to the principle of "most-favored-nation" (or "most 
favored nation") treatment. Any Executive order. Presidential 
proclamation, rule, regulation, delegation of authority, other docu-
ment, or treaty or other international agreement of the United 
States that has been issued, made, granted, or allowed to become 
effective and that is in effect on the effective date of this Act, 
or was to become effective on or after the effective date of this 
Act, shall continue in effect according to its terms until modified, 
terminated, superseded, set aside, or revoked in accordance with 
law. 
T
a
x T
e
c
h
n
i
c
a
l 
TITLE VI—TECHNICAL CORRECTIONS 
Corrections Act 
oi i»»o. 
g j , ^ g ^ J SHORT TITLE; COORDINATION WITH OTHER TITLES. 
26 use 1 note. 
(a) SHORT TITLE.—This title may be cited as the 'Tax Technical 
Corrections Act of 1998". 
26 use 1 note. 
(b) COORDINATION WiTH OTHER TITLES.—For purposes of apply-
ing the amendments made by any title of this Act other than 
this title, the provisions of this title shall be treated as having 
been enacted immediately before the provisions of such other titles. 
SEC. 6002. DEFINITIONS. 
For purposes of this title— 
(1) 1986 CODE.—The term "1986 Code" means the Internal 
Revenue Code of 1986. 
(2) 1997 ACT.—The term "1997 Act" means the Taxpayer 
Relief Act of 1997. 
SEC. 6003. AMENDMENTS RELATED TO TITLE I OF 1997 ACT. 
(a) AMENDMENTS RELATED TO SECTION 101(a) OF 1997 ACT.— 
(1) Subsection (d) of section 24 of the 1986 Code is 
amended— 
PUBLIC LAW 105-206—JULY 22, 1998 
112 STAT. 791 
(A) by striking paragraphs (3) and (4); 
(B) by redesignating paragraph (5) as paragraph (3); 
and 
(C) by striking paragraphs (1) and (2) and inserting 
the following new paragraphs: 
"(1) IN GENERAL.—In the case of a taxpayer with three 
or more qualifying children for any taxable year, the aggregate 
credits allowed under subpart C shall be increased by the 
lesser of— 
"(A) the credit which would be allowed under this 
section without regard to this subsection and the limitation 
under section 26(a); or 
"(B) the amount by which the aggregate amount of 
credits allowed by this subpart (without regard to this 
subsection) would increase if the limitation imposed by 
section 26(a) were increased by the excess (if any) of— 
"(i) the taxpayer's Social Security taxes for the 
taxable year, over 
"(ii) the credit allowed under section 32 (deter-
mined without regard to subsection (n)) for the taxable 
year. 
The amount of the credit allowed under this subsection shall 
not be treated as a credit allowed under this subpart and 
shall reduce the amount of credit otherwise allowable under 
subsection (a) without regard to section 26(a). 
"(2) REDUCTION OF CREDIT TO TAXPAYER SUBJECT TO ALTER-
NATIVE MINIMUM TAX.—^The credit determined under this sub-
section for the taxable year shall be reduced by the excess 
(if any) of— 
"(A) the amount of tax imposed by section 55 (relating 
to alternative minimum t£ix) with respect to such taxpayer 
for such taxable year, over 
"(B) the amount of the reduction under section 32(h) 
with respect to such taxpayer for such taxable year.". 
(2) Paragraph (3) of section 24(d) of the 1986 Code (as 
redesignated by paragraph (1)) is amended by striking "para-
graph (3)" and inserting "paragraph (1)". 
(b) AMENDMENTS RELATED TO SECTION 101(b) OF 1997 ACT.— 
(1) The subsection (m) of section 32 of the 1986 Code 
added by section 101(b) of the 1997 Act is amended to read 
as follows: 
"(n) SUPPLEMENTAL CHILD CREDIT.— 
"(1) IN GENERAL.—In the case of a taxpayer with respect 
to whom a credit is allowed under section 24(a) for the taxable 
year, the credit otherwise allowable under this section shall 
be increased by the lesser of— 
"(A) the excess of— 
"(i) the credits allowed under subpart A (deter-
mined after the application of section 26 and without 
regard to this subsection), over 
"(ii) the credits which would be allowed under 
subpart A after the application of section 26, deter-
mined without regard to section 24 and this subsection; 
or 
"(B) the excess of— 
112 STAT. 792 
PUBLIC LAW 105-206^JULY 22, 1998 
"(i) the sum of the credits allowed under this part 
(determined without regard to sections 31, 33, and 
34 and this subsection), over 
"(ii) the sum of the regular tax and the Social 
Security taxes (as defined in section 24(d)). 
The credit determined under this subsection shall be allowed 
without regard to any other provision of this section, including 
subsection (d). 
"(2) COORDINATION WITH OTHER CREDITS.—The amount of 
the credit under this subsection shall reduce the amount of 
the credits otherwise allowable under subpart A for the taxable 
year (determined after the application of section 26), but the 
amount of the credit under this subsection (and such reduction) 
shall not be taken into account in determining the amount 
of £iny other credit allowable under this part.". 
SEC. 6004. AMENDMENTS RELATED TO TITLE U OF 1997 ACT. 
(a) AMENDMENTS RELATED TO SECTION 201 OF 1997 
ACT.— 
(1) The item relating to section 25A in the table of sections 
for subpart A of part IV of subchapter A of chapter 1 of 
the 1986 Code is amended to read as follows: 
"Sec. 25A. Hope and Lifetime Learning credits.". 
(2) Subsection (a) of section 6050S of the 1986 Code is 
amended to read as follows: 
"(a) IN GENERAL.—Any person— 
"(1) which is an eligible educational institution— 
"(A) which receives payments for qualified tuition £ind 
related expenses with respect to any individual for any 
calendar year; or 
"(B) which makes reimbursements or refunds (or simi-
lar amounts) to any individual of qualified tuition and 
related expenses; 
"(2) which is engaged in a trade or business of making 
payments to any individual under an insurance arrangement 
as reimbursements or refunds (or similar amounts) of qualified 
tuition and related expenses; or 
"(3) except as provided in regulations, which is engaged 
in a trade or business £md, in the course of which, receives 
from any individual interest aggregating $600 or more for any 
calendar year on one or more qualified education logins, 
shall make the return described in subsection (b) with respect 
to the individual at such time as the Secretary may by regulations 
prescribe.". 
26 use 6724. 
(3) Subparagraph (A) of section 201(c)(2) of the 1997 Act 
is amended to read as follows: 
"(A) Subparagraph (B) of section 6724(d)(1) (relating 
to definitions) is amended by redesignating clauses (sg 
through (xv) as clauses (xi) through (xvi), respectively, and 
by inserting after clause (ix) the following new clause: 
"*(x) section 6050S (relating to returns relating 
to 
payments 
for 
qualified 
tuition 
and 
related 
expenses),'". 
(b) AMENDMENTS RELATED TO SECTION 202 OF 1997 
ACT.— 
(1) Paragraph (1) of section 221(e) of the 1986 Code is 
amended by inserting "by the taxpayer solely" after "incurred" 
the first place it appears. 
PUBLIC LAW 105-206-^ULY 22, 1998 
112 STAT. 793 
(2) Subsection (d) of section 221 of the 1986 Code 
is amended by adding at the end the following new sen-
tence: "Such 60 months shall be determined in the manner 
prescribed by the Secretary in the case of multiple loans 
which are refinanced by, or serviced as, a single loan and 
in the case of loans incurred before the date of the enact-
ment of this section.". 
(c) AMENDMENTS RELATED TO SECTION 211 OF 1997 
ACT.— 
(1) Paragraph (3) of section 135(c) of the 1986 Code is 
amended to read as follows: 
"(3) 
ELIGIBLE 
EDUCATIONAL 
INSTITUTION.—^The 
term 
'eligible educational institution' has the meaning given such 
term by section 529(e)(5).". 
(2) Subparagraph (A) of section 529(c)(3) of the 1986 Code 
is amended by striking "section 72(b)" and inserting "section 
72". 
(3) Paragraph (2) of section 529(e) of the 1986 Code is 
amended to read as follows: 
"(2) MEMBER OF FAMILY.—^The term 'member of the family' 
means, with respect to any designated beneficiary— 
"(A) the spouse of such beneficiary; 
"(B) an individual who bears a relationship to such 
beneficiary which is described in paragraphs (1) through 
(8) of section 152(a); and 
"(C) the spouse of any individual described in subpara-
graph (B).". 
(d) AMENDMENTS RELATED TO SECTION 213 
OF 1997 
ACT.— 
(1) Section 530(b)(1) of the 1986 Code (defining education 
individual retirement account) is amended by inserting "an 
individual who is" before "the designated beneficiary" in the 
material preceding subparagraph (A). 
(2)(A) Section 530(b)(1)(E) of the 1986 Code (defining edu-
cation individual retirement account) is amended to read as 
follows: 
"(E) Except as provided in subsection (d)(7), any bal-
ance to the credit of the designated beneficiary on the 
date on which the beneficiary attains age 30 shall be 
distributed within 30 days after such date to the beneficiary 
or, if the beneficiary dies before attaining age 30, shall 
be distributed within 30 days after the date of death of 
such beneficiary.". 
(B) Paragraph (7) of section 530(d) of the 1986 Code is 
amended by inserting at the end the following new sentence: 
"In applying the preceding sentence, members of the family 
(as so defined) of the designated beneficiary shall be treated 
in the same manner as the spouse under such paragraph (8).". 
(C) Subsection (d) of section 530 of the 1986 Code is 
amended by adding at the end the following new paragraph: 
"(8) 
DEEMED DISTRIBUTION ON REQUIRED DISTRIBUTION 
DATE.—In any case in which a distribution is required under 
subsection (b)(1)(E), any balance to the credit of a designated 
beneficiary as of the close of the 30-day period referred to 
in such subsection for making such distribution shall be deemed 
distributed at the close of such period.". 
(3)(A) Paragraph (1) of section 530(d) of the 1986 Code 
is amended by striking "section 72(b)" and inserting "section 
72". 
112 STAT. 794 
PUBLIC LAW 105-206^JULY 22, 1998 
Applicability. 
(B) Subsection (e) of section 72 of the 1986 Code is amended 
by inserting after paragraph (8) the following new paragraph: 
"(9) EXTENSION OF PARAGRAPH (2)(B) TO QUALIFIED STATE 
TUITION P R O G R A M S AND EDUCATIONAL INDIVIDUAL RETIREMENT 
ACCOUNTS.—^Notwithstanding any other provision of this sub-
section, paragraph (2)(B) shall apply to amounts received under 
a qualified State tuition program (as defined in section 529(b)) 
or under an education individual retirement account (as defined 
in section 530(b)). The rule of paragraph (8)(B) shall apply 
for purposes of this paragraph.". 
(4) Paragraph (2) of section 135(d) of the 1986 Code is 
amended to read as follows: 
"(2) COORDINATION WITH OTHER HIGHER EDUCATION BENE-
FITS.—^The amount of the qualified higher education expenses 
otherwise taken into account under subsection (a) with respect 
to the education of an individual shall be reduced (before the 
application of subsection (b)) by— 
"(A) the amount of such expenses which are taken 
into account in determining the credit allowable to the 
taxpayer or any other person under section 25A with 
respect to such expenses; and 
"(B) the amount of such expenses which are taken 
into account in determining the exclusion under section 
530(d)(2).". 
(5) Section 530(d)(2) of the 1986 Code (relating to distribu-
tions for qualified higher education expenses) is amended by 
adding at the end the following new subparagraph: 
"(D) DISALLOWANCE OF EXCLUDED AMOUNTS AS CREDIT 
OR DEDUCTION.—No deduction or credit shall be allowed 
to the taxpayer under any other section of this chapter 
for any qualified education expenses to the extent taken 
into account in determining the amount of the exclusion 
under this paragraph.". 
(6) Section 530(d)(4)(B) of the 1986 Code (relating to excep-
tions) is amended by striking "or" at the end of clause (ii), 
by striking the period at the end of clause (iii) and inserting 
"; or", and by adding at the end the following new clause: 
"(iv) an amount which is includible in gross income 
solely because the taxpayer elected under paragraph 
(2)(C) to waive the application of paragraph (2) for 
the taxable year.". 
(7) So much of section 530(d)(4)(C) of the 1986 Code as 
precedes clause (ii) thereof is amended to read as follows: 
"(C) CONTRIBUTIONS RETURNED BEFORE DUE DATE OF 
RETURN.—Subparagraph (A) shall not apply to the distribu-
tion of any contribution made during a taxable year on 
behalf of the designated beneficiary if— 
"(i) such distribution is made on or before the 
day prescribed by law (including extensions of time) 
for filing the beneficiary's return of tax for the taxable 
year or, if the beneficiary is not required to file such 
a return, the 15th day of the 4th month of the taxable 
year following the taxable year; and". 
(8)(A) Paragraph (5) of section 530(d) of the 1986 Code 
is amended by striking the first sentence and inserting the 
following new sentence: "Paragraph (1) shall not apply to any 
PUBLIC LAW 105-206-^ULY 22, 1998 
112 STAT. 795 
amount paid or distributed from an education individual retire-
ment account to the extent that the amount received is paid, 
not later than the 60th day after the date of such payment 
or distribution, into another education individual retirement 
account for the benefit of the same beneficiary or a member 
of the family (within the meaning of section 529(e)(2)) of such 
beneficiary who has not attained age 30 as of such date.". 
(B) Paragraph (6) of section 530(d) of the 1986 Code is 
amended by inserting before the period "and has not attained 
age 30 as of the date of such change". 
(9) Subparagraph (C) of section 135(c)(2) of the 1986 Code 
is amended— 
(A) by inserting "AND EDUCATION INDIVIDUAL RETIRE-
MENT ACCOUNTS" in the heading after "PROGRAM"; and 
(B) by striking "section 529(c)(3)(A)" and inserting 
"section 72". 
(10)(A) Paragraph (1) of section 4973(e) of the 1986 Code 
is amended to read as follows: 
"(1) IN GENERAL.—In the case of education individual retire-
ment accounts maintained for the benefit of any one beneficiary, 
the term 'excess contributions' means the sum of— 
"(A) the amount by which the amount contributed for 
the taxable year to such accounts exceeds $500 (or, if 
less, the sum of the maximum amounts permitted to be 
contributed under section 530(c) by the contributors to 
such accounts for such year); 
"(B) if any amount is contributed (other than a con-
tribution described in section 530(b)(2)(B)) during such year 
to a qualified State tuition program for the benefit of 
such beneficiary, any amount contributed to such accounts 
for such taxable year; and 
"(C) the amount determined under this subsection for 
the preceding taxable year, reduced by the sum of— 
"(i) the distributions out of the accounts for the 
taxable year (other than rollover distributions); and 
"(ii) the excess (if any) of the maximum amount 
which may be contributed to the accounts for the tax-
able year over the amount contributed to the accounts 
for the taxable year.". 
(B) Paragraph (2) of section 4973(e) of the 1986 Code is 
amended by striking subparagraph (B) and by redesignating 
subparagraph (C) as subparagraph (B). 
(e) AMENDMENTS RELATED TO SECTION 224 
OF 1997 
ACT.— 
(1) Clauses (vi) and (vii) of section 170(e)(6)(B) of the 1986 
Code are each amended by striking "entity's" and inserting 
"donee's". 
(2) Clause (iv) of section 170(e)(6)(B) of the 1986 Code 
is amended by striking "organization or entity" and inserting 
"donee". 
(3) Subclause (I) of section 170(e)(6)(C)(ii) of the 1986 Code 
is amended by striking "an entity" and inserting "a donee". 
(4) Section 170(e)(6)(F) of the 1986 Code (relating to termi-
nation) is amended by striking "1999" and inserting "2000". 
(f) AMENDMENTS RELATED TO SECTION 225 
OF 1997 
ACT.— 
(1) The last sentence of section 108(f)(2) of the 1986 Code 
is amended to read as follows: 
112 STAT. 796 
PUBLIC LAW 105-206—JULY 22, 1998 
"The term 'student loan' includes any loan made by an edu-
cational organization described in section 170(b)(l)(A)(ii) or by 
an organization exempt from tax under section 501(a) to 
refinance a loein to an individual to assist the individual in 
attending any such educational organization but only if the 
refinancing loan is pursu£int to a program of the refinancing 
organization which is designed as described in subparagraph 
(D)(ii).". 
(2) Section 108(f)(3) of the 1986 Code is amended by strik-
ing "(or by an organization described in paragraph (2)(E) from 
funds provided by an organization described in paragraph 
(2)(D))". 
(g) AMENDMENTS RELATED TO SECTION 226 OF 1997 ACT.— 
26 use 1397D, 
(1) Section 226(a) of the 1997 Act is amended by striking 
1397F. 
"section 1397E" and inserting "section 1397D". 
(2) Section 1397E(d)(4)(B) of the 1986 Code is amended 
by striking "local education agency as defined" and inserting 
"local educational agency as denned". 
(3) Section 1397E is amended by adding at the end the 
following new subsection: 
"(h) CREDIT TREATED AS ALLOWED UNDER PART IV OF SUB-
CHAPTER A.—For purposes of subtitle F, the credit allowed by 
this section shall be treated as a credit allowable imder part IV 
of subchapter A of this chapter.". 
(4) Subsection (g) of section 1397E of the 1986 Code is 
amended by inserting "(determined without regard to sub-
section (c))" after "section". 
(5) Subparagraph (D) of section 42(j)(4) of the 1986 Code 
is amended by striking "subpart A, B, D, or G of this part" 
and inserting "this chapter". 
(6) Paragraph (4) of section 49(b) of the 1986 Code is 
emaended by striking "subpart A, B, D, or G" and inserting 
"this chapter". 
(7) Subparagraph (C) of section 50(a)(5) of the 1986 Code 
is amended by striking "subpart A, B, D, or G" and inserting 
"this chapter". 
SEC. 6005. AMENDMENTS RELATED TO TITLE HI OF 1997 ACT. 
(a) AMENDMENTS RELATED TO SECTION 301 OF 1997 ACT.— 
(1) Section 219(g) of the 1986 Code is amended— 
(A) by inserting "or the individual's spouse" after 
"individual" in paragraph (1); and 
(B) by striking paragraph (7) and inserting: 
"(7) SPECIAL RULE FOR SPOUSES WHO ARE NOT ACTIVE 
PARTICIPANTS.—If this subsection applies to an individual for 
any taxable year solely because their spouse is an active partici-
pant, then, in applying this subsection to the individual (but 
not their spouse)— 
"(A) the applicable dollar amount under paragraph 
(3)(B)(i) shall be $150,000; and 
"(B) the amount applicable under paragraph (2)(A)(ii) 
shall be $10,000.". 
26 use 219. 
(2) Paragraph (2) of section 301(a) of the 1997 Act is 
amended by inserting "after '$10,000'" before the period. 
(b) AMENDMENTS RELATED TO SECTION 302 OF 1997 ACT.— 
(1) Section 408A(c)(3)(A) of the 1986 Code is amended 
by striking "shall be reduced" and inserting "shall not exceed 
PUBLIC LAW 105-206-^ULY 22, 1998 
112 STAT. 797 
an amount equal to the amount determined under paragraph 
(2)(A) for such taxable year, reduced". 
(2) Section 408A(c)(3) of the 1986 Code (relating to limits 
based on modified adjusted gross income) is amended— 
(A) by inserting "or a married individual filing a sepa-
rate return" after "joint return" in subparagraph (A)(ii), 
(B) in subparagraph (B)— 
(i) by inserting ", for the taxable year of the dis-
tribution to which such contribution relates" after "if"; 
and 
(ii) by striking "for such taxable year" in clause 
(i), and 
(C) by striking "and the deduction under section 219 
shall be taken into account" in subparagraph (C)(i). 
(3)(A) Section 408A(d)(2) of the 1986 Code (defining quali-
fied distribution) is amended by striking subparagraph (B) and 
inserting the following new subparagraph: 
"(B) 
DISTRIBUTIONS WITHIN NONEXCLUSION PERIOD.— 
A pa3mfient or distribution from a Roth IRA shall not be 
treated as a qualified distribution under subparagraph (A) 
if such payment or distribution is made within the 5-
taxable year period beginning with the first taxable year 
for which the individual made a contribution to a Roth 
IRA (or such individual's spouse made a contribution to 
a Roth IRA) established for such individual.". 
(B) Section 408A(d)(2) of the 1986 Code is amended by 
adding at the end the following new subparagraph: 
"(C) 
DISTRIBUTIONS OF EXCESS CONTRIBUTIONS AND 
EARNINGS.—^The term 'qualified distribution' shall not 
include any distribution of any contribution described in 
section 408(d)(4) and any net income allocable to the con-
tribution.". 
(4) Section 408A(d)(3) of the 1986 Code (relating to rollovers 
from IRAs other than Roth IRAs) is amended— 
(A) by striking clause (iii) of subparagraph (A) and 
inserting: 
"(iii) unless the taxpayer elects not to have this 
clause apply for any taxable year, any amount required 
to be included in gross income for such taxable year 
by reason of this paragraph for any distribution before 
January 1, 1999, shall be so included ratably over 
the 4-taxable year period beginning with such taxable 
year. 
Any election under clause (iii) for any distributions during 
a taxable year may not be changed after the due date 
for such taxable year."; and 
(B) by adding at the end the following new subpara-
graph: 
"(F) 
SPECIAL RULES FOR CONTRIBUTIONS TO WHICH 
4-YEAR AVERAGING APPLIES.—In the case of a qualified roll-
over contribution to a Roth IRA of a distribution to which 
subparagraph (A)(iii) applied, the following rules shall 
apply: 
"(i) ACCELERATION OF INCLUSION.— 
"(I) IN GENERAL.^The amount required to be 
included in gross income for each of the first 3 
112 STAT. 798 
PUBLIC LAW 105-206-JULY 22, 1998 
taxable years in the 4-year period under subpara-
graph (AXiii) shall be increased by the aggregate 
distributions from Roth IRAs for such taxable year 
which are allocable under paragraph (4) to the 
portion of such qualified rollover contribution 
required to be included in gross income under 
subparagraph (A)(i). 
"(II) 
LIMITATION 
ON 
AGGREGATE 
AMOUNT 
INCLUDED.—^The amount required to be included 
in gross income for any taxable year under 
subparagraph (A)(iii) shall not exceed the aggre-
gate amount required to be included in gross 
income under subparagraph (A)(iii) for all taxable 
years in the 4-year period (without regard to sub-
clause (I)) reduced by amounts included for all 
preceding taxable years. 
"(ii) DEATH OF DISTRIBUTEE.— 
"(I) IN GENERAL.—If the individual required 
to include amounts in gross income under such 
subparagraph dies before all of such amounts are 
included, all remaining amounts shall be included 
in gross income for the taxable year which includes 
the date of death. 
"(II) SPECIAL RULE FOR SURVIVING SPOUSE.— 
If the spouse of the individual described in sub-
clause (I) acquires the individual's entire interest 
in any Roth IRA to which such qualified rollover 
contribution is properly allocable, the spouse may 
elect to treat the remaining amounts described 
in subclause (I) as includible in the spouse's gross 
income in the taxable years of the spouse ending 
with or within the taxable years of such individual 
in which such amounts would otherwise have been 
includible. Any such election may not be made 
or changed after the due date for the spouse's 
taxable year which includes the date of death. 
"(G) SPECIAL RULE FOR APPLYING SECTION 72.— 
"(i) IN GENERAL.—If— 
"(I) any portion of a distribution from a Roth 
IRA is properly allocable to a qualified rollover 
contribution described in this paragraph; and 
"(II) such distribution is made within the 5-
taxable year period beginning with the taxable 
year in which such contribution was made, 
then section 72(t) shall be applied as if such portion 
were includible in gross income. 
"(ii) LIMITATION.—Clause (i) shall apply only to 
the extent of the amount of the qualified rollover con-
tribution includible in gross income under subpara-
graph (A)(i).". 
(5)(A) Section 408A(d)(4) of the 1986 Code is amended 
to read as follows: 
"(4) AGGREGATION AND ORDERING RULES.— 
"(A) AGGREGATION RULES.—Section 408(d)(2) shall be 
applied separately with respect to Roth IRAs and other 
individual retirement plans. 
PUBLIC LAW 105-206-^ULY 22, 1998 
112 STAT. 799 
"(B) ORDERING RULES.—For purposes of applying this 
section and section 72 to any distribution from a Roth 
IRA, such distribution shall be treated as made— 
"(i) from contributions to the extent that the 
amount of such distribution, when added to all previous 
distributions from the Roth IRA, does not exceed the 
aggregate contributions to the Roth IRA; and 
"(ii) from such contributions in the following order: 
"(I) Contributions other than qualified rollover 
contributions to which paragraph (3) applies. 
"(II) Qualified rollover contributions to which 
paragraph (3) applies on a first-in, first-out basis. 
Any distribution allocated to a qualified rollover contribu-
tion under clause (ii)(II) shall be allocated first to the 
portion of such contribution required to be included in 
gross income.". 
(B) Section 408A(d)(l) of the 1986 Code is amended to 
read as follows: 
"(1) ExcLUSlON.^Any qualified distribution from a Roth 
IRA shall not be includible in gross income.". 
(6)(A) Section 408A(d) of the 1986 Code (relating to dis-
tribution rules) is amended by adding at the end the following 
new paragraph: 
"(6) 
TAXPAYER 
MAY MAKE 
ADJUSTMENTS 
BEFORE DUE 
DATE.— 
"(A) IN GENERAL.—Except as provided by the Secretary, 
if, on or before the due date for any taxable year, a taxpayer 
transfers in a trustee-to-trustee transfer any contribution 
to an individual retirement plan made during such taxable 
year from such plan to any other individual retirement 
plan, then, for purposes of this chapter, such contribution 
shall be treated as having been made to the transferee 
plan (and not the transferor plan). 
"(B) SPECDy;. RULES.— 
"(i) TRANSFER OF EARNINGS.—Subparagraph (A) 
shall not apply to the transfer of any contribution 
unless such transfer is accompanied by any net income 
allocable to such contribution. 
"(ii) No DEDUCTION.—Subparagraph (A) shall 
apply to the transfer of any contribution only to the 
extent no deduction was allowed with respect to the 
contribution to the transferor plan.". 
(B) Section 408A(d)(3) of the 1986 Code, as amended by 
this subsection, is amended by striking subparagraph (D) and 
by redesignating subparagraphs (E), (F), and (G) as subpara-
graphs (D), (E), and (F), respectively. 
(7) Section 408A(d) of the 1986 Code, as amended by para-
graph (6), is amended by adding at the end the following 
new paragraph: 
"(7) DUE DATE.—^For purposes of this subsection, the due 
date for any taxable year is the date prescribed by law (includ-
ing extensions of time) for filing the taxpayer's return for such 
taxable year.". 
(8)(A) Section 4973(f) of the 1986 Code is amended— 
(i) by striking "such accounts" in paragraph (1)(A) and 
inserting "Roth IRAs"; and 
112 STAT. 800 
PUBLIC LAW 105-206-JULY 22, 1998 
(ii) by striking "to the accounts" in paragraph (2)(B) 
and inserting "by the individual to all individual retirement 
plans". 
(B) Section 4973(b) of the 1986 Code is amended— 
(i) by inserting "a contribution to a Roth IRA or" after 
"other than" in paragraph (1)(A); and 
(ii) by inserting "(including the amount contributed 
to a Roth IRA)" after "annuities" in paragraph (2)(C). 
26 use 4973. 
(C) Section 302(b) of the 1997 Act is amended by striking 
"Section 4973(b)" and inserting "Section 4973". 
(9) Section 408A of the 1986 Code is amended by adding 
at the end the following new subsection: 
"(f) 
INDIVIDUAL RETIREMENT PLAN.—For purposes of this 
section— 
"(1) a simplified employee pension or a simple retirement 
account may not be designated as a Roth IRA; and 
"(2) contributions to any such pension or account shall 
not be taken into account for purposes of subsection (c)(2)(B).". 
(c) AMENDMENTS RELATED TO SECTION 303 
OF 1997 
ACT.— 
(1) Section 72(t)(8)(E) of the 1986 Code is amended— 
(A) by striking "120 days" and inserting "120th day"; 
and 
(B) by striking "60 days" and inserting "60th day". 
(2)(A) Section 402(c)(4) of the 1986 Code is amended by 
striking "and" at the end of subparagraph (A), by striking 
the period at the end of subparagraph (B) and inserting ", 
and", by inserting at the end the following new subparagraph: 
"(C) any hardship distribution described in section 
401(k)(2)(B)(i)(IV).". 
(B) Section 403(b)(8)(B) of the 1986 Code is amended by 
inserting "(including paragraph (4)(C) thereof)" after "section 
402(c)". 
Applicability. 
(C) The amendments made by this paragraph shall apply 
26 use 402 note. 
to distributions after December 31, 1998. 
(d) AMENDMENTS RELATED TO SECTION 311 OF 1997 
ACT.— 
(1) Subsection (h) of section 1 of the 1986 Code (relating 
to maximum capital gains rate) is amended to read as follows: 
"(h) MAXIMUM CAPITAL GAINS RATE.— 
"(1) IN GENERAL.—If a taxpayer has a net capital gain 
for any taxable year, the tax imposed by this section for such 
taxable year shall not exceed the sum of— 
"(A) a tax computed at the rates and in the same 
manner as if this subsection had not been enacted on 
the greater of— 
"(i) taxable income reduced by the net capital 
gain; or 
"(ii) the lesser of— 
"(I) the amount of taxable income taxed at 
a rate below 28 percent; or 
"(II) taxable income reduced by the adjusted 
net 
capital 
gain; 
"(B) 10 percent of so much of the adjusted net capital 
gain (or, if less, taxable income) as does not exceed the 
excess (if any) of— 
PUBLIC LAW 105-206-JULY 22, 1998 
112 STAT. 801 
"(i) the amount of taxable income which would 
(without regard to this paragraph) be taxed at a rate 
below 28 percent, over 
"(ii) the taxable income reduced by the adjusted 
net capital gain; 
"(C) 20 percent of the adjusted net capital gain (or, 
if less, taxable income) in excess of the amount on which 
a tax is determined under subparagraph (B); 
"(D) 25 percent of the excess (if any) of— 
"(i) the unrecaptured section 1250 gain (or, if less, 
the net capital gain), over 
"(ii) the excess (if any) of— 
"(I) the sum of the amount on which tax is 
determined under subparagraph (A) plus the net 
capital gain, over 
"(II) taxable income; and 
"(E) 28 percent of the amount of taxable income in 
excess of the sum of the amounts on which tax is deter-
mined under the preceding subparagraphs of this para-
graph. 
"(2) REDUCED CAPITAL GAIN RATES FOR QUALIFIED 5-YEAR 
GAIN.— 
"(A) REDUCTION IN IO-PERCENT RATE.—In the case of 
any taxable year beginning after December 31, 2000, the 
rate under paragraph (1)(B) shall be 8 percent with respect 
to so much of the amount to which the 10-percent rate 
would otherwise apply as does not exceed qualified 5-year 
gain, and 10 percent with respect to the remainder of 
such amount. 
"(B) REDUCTION IN 20-PERCENT RATE.—The rate under 
paragraph (1)(C) shall be 18 percent with respect to so 
much of the amount to which the 20-percent rate would 
otherwise apply as does not exceed the lesser of— 
"(i) the excess of qualified 5-year gain over the 
amount of such gain taken into account under subpara-
graph (A) of this paragraph; or 
"(ii) the amount of qualified 5-year gain (deter-
mined by taking into account only property the holding 
period for which begins after December 31, 2000), 
and 20 percent with respect to the remainder of such 
amount. For purposes of determining under the preceding 
sentence whether the holding period of property begins 
after December 31, 2000, the holding period of property 
acquired pursuant to the exercise of an option (or other 
right or obligation to acquire property) shall include the 
period such option (or other right or obligation) was held. 
"(3) NET CAPITAL GAIN TAKEN INTO ACCOUNT AS INVESTMENT 
INCOME.—For purposes of this subsection, the net capital gain 
for any taxable year shall be reduced (but not below zero) 
by the amount which the taxpayer takes into account as invest-
ment income under section 163(d)(4)(B)(iii). 
"(4) ADJUSTED NET CAPITAL GAIN.—For purposes of this 
subsection, the term 'adjusted net capital gain' means net cap-
ital gain reduced (but not below zero) by the sum of— 
"(A) unrecaptured section 1250 gain; and 
"(B) 28-percent rate gain. 
112 STAT. 802 
PUBLIC LAW 105-206^JULY 22, 1998 
"(5) 28-PERCENT RATE GAIN.—For purposes of this sub-
section— 
"(A) IN GENERAL.—The term *28-percent rate gain' 
means the excess (if any) of— 
"(i) the sum of— 
"(I) the aggregate long-term capital gain from 
property held for more than 1 year but not more 
than 18 months; 
"(II) collectibles gain; and 
"(III) section 1202 gain, over 
"(ii) the sum of— 
"(I) the aggregate long-term capital loss (not 
described in subclause (IV)) from property referred 
to in clause (i)(I); 
"(II) collectibles loss; 
"(III) the net short-term capital loss; and 
"(IV) the amount of long-term capital loss car-
ried under section 1212(bXl)(B) to the taxable 
year. 
AppHcabiUty. 
"(B) SPECIAL RULES.— 
"(i) SHORT SALE GAINS AND HOLDING PERIODS.— 
Rules similar to the rules of section 1233(b) shall apply 
where the substantially identical property has been 
held more than 1 year but not more than 18 months; 
except that, for purposes of such rules— 
"(I) section 1233(b)(1) shall be applied by 
substituting '18 months' for '1 year* each place 
it appears; and 
"(II) the holding period of such property shall 
be treated as being 1 year on the day before the 
earlier of the date of the closing of the short sale 
or the date such property is disposed of. 
"(ii) LONG-TERM LOSSES.—Section 1233(d) shall be 
applied separately by substituting *18 months' for '1 
year' each place it appears. 
"(iii) OPTIONS.—^A rule similar to the rule of section 
1092(f) shall apply where the stock was held for more 
than 18 months. 
"(iv) SECTION 1256 CONTRACTS.—^Amounts treated 
as long-term capital gain or loss under 
section 
1256(a)(3) shall be treated as attributable to property 
held for more than 18 months. 
"(6) COLLECTIBLES GAIN AND LOSS.—For purposes of this 
subsection— 
"(A) IN GENERAL.—^The terms 'collectibles gain' and 
'collectibles loss' mean gain or loss (respectively) from the 
sale or exchange of a collectible (as defined in section 
408(m) without regard to paragraph (3) thereof) which 
is a capital asset held for more than 18 months but only 
to the extent such gain is taken into account in computing 
gross income and such loss is taken into account in comput-
ing taxable income. 
"(B) PARTNERSHIPS, ETC.—For purposes of subpara-
graph (A), any gain from the sale of an interest in a 
partnership, S corporation, or trust which is attributable 
to unrealized appreciation in the value of collectibles shall 
be treated as gain from the sale or exchange of a collectible. 
PUBLIC LAW 105-206-^ULY 22, 1998 
112 STAT. 803 
Rules similar to the rules of section 751 shall apply for Applicability. 
purposes of the preceding sentence. 
"(7) UNRECAPTURED 
SECTION 1250 GAIN.—For purposes of 
this subsection— 
"(A) IN GENERAL.—^The term 'unrecaptured section 
1250 gain' means the excess (if any) of— 
"(i) the amount of long-term capital gain (not 
otherwise treated as ordinary income) which would 
be treated as ordinary income if— 
"(I) section 1250(b)(1) included all depreciation 
and the applicable percentage under 
section 
1250(a) were 100 percent, and 
"(II) only gain from property held for more 
than 18 months were taken into account, over 
"(ii) the excess (if any) of— 
"(I) the amount 
described in 
paragraph 
(5)(A)(ii), over 
"(II) the amount described in paragraph 
(5)(A)(i). 
"(B) LIMITATION WITH RESPECT TO SECTION 1231 PROP-
ERTY.—^The amount described in subparagraph (A)(i) from 
sales, exchanges, and conversions described in section 
1231(a)(3)(A) for any taxable year shall not exceed the 
net section 1231 gain (as defined in section 1231(c)(3)) 
for such year. 
"(8) SECTION 1202 GAIN.—For purposes of this subsection, 
the term 'section 1202 gain' means an amount equal to the 
gain excluded from gross income under section 1202(a). 
"(9) QUALIFIED 5-YEAR GAIN.—For purposes of this sub-
section, the term 'qualified 5-year gain' means the aggregate 
long-term capital gain from property held for more than 5 
years. The determination under the preceding sentence shall 
be made without regard to collectibles gain, gain described 
in paragraph (7)(A)(i), and section 1202 gain. 
"(10) COORDINATION WITH RECAPTURE OF NET ORDINARY 
LOSSES UNDER SECTION 1231.—If any amount is treated as ordi-
nary income under section 1231(c), such amount shall be allo-
cated among the separate categories of net section 1231 gain 
(as defined in section 1231(c)(3)) in such manner as the Sec-
retary may by forms or regulations prescribe. 
"(11) REGULATIONS.—^The Secretary may prescribe such 
regulations as are appropriate (including regulations requiring 
reporting) to apply this subsection in the case of sales and 
exchanges by pass-thru entities and of interests in such entities. 
"(12) PASS-THRU ENTITY DEFINED.—For purposes of this 
subsection, the term 'pass-thru entity* means— 
"(A) a regulated investment company; 
"(B) a real estate investment trust; 
"(C) an S corporation; 
"(D) a partnership; 
"(E) an estate or trust; 
"(F) a common trust fund; 
"(G) a foreign investment company which is described 
in section 1246(b)(1) and for which an election is in effect 
under section 1247; and 
"(H) a qualified electing fund (as defined in section 
1295). 
112 STAT. 804 
PUBLIC LAW 105-206^JULY 22, 1998 
Applicability. 
Applicability. 
Applicability. 
"(13) SPECIAL RULES FOR PERIODS DURING 1997.— 
"(A) 
DETERMINATION OF 28-PERCENT RATE GAIN.—In 
applying paragraph (5)— 
"(i) the amount determined under subclause (I) 
of paragraph (5)(A)(i) shall include long-term capital 
gain (not otherwise described in paragraph (5)(A)(i)) 
which is properly taken into account for the portion 
of the taxable year before May 7, 1997; 
"(ii) the amounts determined under subclause (I) 
of paragraph (5)(A)(ii) shall include long-term capital 
loss (not otherwise described in paragraph (5)(A)(ii)) 
which is properly taken into account for the portion 
of the taxable year before May 7, 1997; and 
"(iii) clauses (i)(I) and (ii)(I) of paragraph (5)(A) 
shall be applied by not taking into account any gain 
and loss on property held for more than 1 year but 
not more than 18 months which is properly taken 
into account for the portion of the taxable year after 
May 6, 1997, and before July 29, 1997. 
"(B) OTHER SPECIAL RULES.— 
"(i) 
DETERMINATION OF UNRECAPTURED SECTION 
1250 GAIN NOT TO INCLUDE PRE-MAY 7, 1997 GAIN.— 
The amount determined under paragraph (7)(A)(i) shall 
not include gain properly taken into account for the 
portion of the taxable year before May 7, 1997. 
"(ii) 
OTHER TRANSITIONAL RULES FOR I8-MONTH 
HOLDING PERIOD.—Paragraphs (6)(A) and (7)(A)(i)(II) 
shall be applied by substituting *1 year' for '18 months' 
with respect to gain properly taken into account for 
the portion of the taxable year after May 6, 1997, 
and before July 29, 1997. 
"(C) 
SPECIAL 
RULES FOR PASS-THRU 
ENTITIES.—^In 
applying this paragraph with respect to any pass-thru 
entity, the determination of when gains and loss are prop-
erly taken into account shall be made at the entity level.". 
(2) Paragraph (3) of section 55(b) of the 1986 Code is 
amended to read as follows: 
"(3) MAXIMUM RATE OF TAX ON NET CAPITAL GAIN OF NON-
CORPORATE TAXPAYERS.—^The amount determined under the 
first sentence of paragraph (l)(A)(i) shall not exceed the sum 
of— 
"(A) the amount determined under such first sentence 
computed at the rates and in the same manner as if this 
paragraph had not been enacted on the taxable excess 
reduced by the lesser of— 
"(i) the net capital gain; or 
"(ii) the sum of— 
"(I) the adjusted net capital gain, plus 
"(II) the unrecaptured section 1250 gain, plus 
"(B) 10 percent of so much of the adjusted net capital 
gain (or, if less, taxable excess) as does not exceed the 
amount on which a tax is determined under section 
1(h)(1)(B), plus 
"(C) 20 percent of the adjusted net capital gain (or, 
if less, taxable excess) in excess of the amount on which 
tax is determined under subparagraph (B), plus 
PUBLIC LAW 105-206-^JULY 22, 1998 
112 STAT. 805 
"(D) 25 percent of the amount of taxable excess in 
excess of the sum of the amounts on which tax is deter-
mined under the preceding subparagraphs of this para-
graph. 
In the case of taxable years beginning after December 31, Applicability. 
2000, rules similar to the rules of section 1(h)(2) shall apply 
for purposes of subparagraphs (B) and (C). Terms used in 
this paragraph which are also used in section 1(h) shall have 
the respective meanings given such terms by section 1(h) but 
computed with the adjustments under this part.". 
(3) Section 57(a)(7) of the 1986 Code is amended by adding Applicability, 
at the end the following new sentence: "In the case of stock 
the holding period of which begins after December 31, 2000 
(determined with the application of the last sentence of section 
1(h)(2)(B)), the preceding sentence shall be applied by substitut-
ing *28 percent' for '42 percent'.". 
(4) Paragraphs (11) and (12) of section 1223, and section 
1235(a), of the 1986 Code are each amended by striking "1 
year" each place it appears and inserting "18 months". 
(e) AMENDMENTS RELATED TO SECTION 312 OF 1997 ACT.— 
(1) Paragraph (2) of section 121(b) of the 1986 Code is 
amended to read as follows: 
"(2) SPECIAL RULES FOR JOINT RETURNS.—In the case of 
a husband and wife who make a joint return for the taxable 
year of the sale or exchange of the property— 
"(A) 
$500,000 
LIMITATION 
FOR CERTAIN 
JOINT Applicability. 
RETURNS.—Paragraph (1) shall be applied by substituting 
'$500,000' for '$250,000' if— 
"(i) either spouse meets the ownership require-
ments of subsection (a) with respect to such property; 
"(ii) both spouses meet the use requirements of 
subsection (a) with respect to such property; and 
"(iii) neither spouse is ineligible for the benefits 
of subsection (a) with respect to such property by rea-
son of paragraph (3). 
"(B) OTHER JOINT RETURNS.—If such spouses do not 
meet the requirements of subparagraph (A), the limitation 
under paragraph (1) shall be the sum of the limitations 
under paragraph (1) to which each spouse would be entitled 
if such spouses had not been married. For purposes of 
the preceding sentence, each spouse shall be treated as 
owning the property during the period that either spouse 
owned the property.". 
(2) Section 121(c)(1) of the 1986 Code is amended to read 
as follows: 
"(1) IN GENERAL.—In the case of a sale or exchange to 
which this subsection applies, the ownership and use require-
ments of subsection (a), and subsection (b)(3), shall not apply; 
but the dollar limitation under paragraph (1) or (2) of subsection 
(b), whichever is applicable, shall be equal to— 
"(A) the amount which bears the same ratio to such 
limitation (determined without regard to this paragraph) 
as "(B)(i) the shorter of— 
"(I) the aggregate periods, during the 5-year period 
ending on the date of such sale or exchange, such 
112 STAT. 806 
PUBLIC LAW 105-206-^ULY 22, 1998 
property has been owned and used by the taxpayer 
as the taxpayer's principal residence; or 
"(II) the period after the date of the most recent 
prior sale or exchange by the taxpayer to which sub-
section (a) applied and before the date of such sale 
or exchange, bears to 
"(ii) 2 years.". 
26 use 121 note. 
(3) Section 312(d)(2) of the 1997 Act (relating to sales 
before date of the enactment) is amended by inserting "on 
or" before "before" each place it appears in the text and heading. 
(f) AMENDMENTS RELATED TO SECTION 313 
OF 1997 
ACT.— 
(1) Subsection (a) of section 1045 of such Code is amended— 
(A) by striking "an individual" and inserting "a tax-
payer other than a corporation"; and 
(B) by striking "such individual" and inserting "such 
taxpayer". 
(2) Subsection (b) of section 1045 of the 1986 Code is 
amended by adding at the end the following new paragraph: 
"(5) CERTAIN RULES TO APPLY.—Rules similar to the rules 
of subsections (f), (g), (h), (i), (j), and (k) of section 1202 
shall apply.". 
SEC. 6006. AMENDMENT RELATED TO TITLE IV OF 1997 ACT. 
(a) AMENDMENT RELATED TO SECTION 401 OF 1997 ACT.—Para-
graph (1) of section 55(e) of the 1986 Code is amended to read 
as follows: 
"(1) IN GENERAL.— 
"(A) $7,500,000 GROSS RECEIPTS TEST.—The tentative 
minimum tax of a corporation shall be zero for any taxable 
year if the corporation's average annual gross receipts for 
all 3-taxable-year periods ending before such taxable year 
does not exceed $7,500,000. For purposes of the preceding 
sentence, only taxable years beginning after December 31, 
1993, shall be taken into account. 
Applicability. 
"(B) $5,000,000 GROSS RECEIPTS TEST FOR FIRST 3-YEAR 
PERIOD.—Subparagraph (A) shall be applied by substituting 
'$5,000,000' for '$7,500,000' for the first 3-taxable-year 
period (or portion thereof) of the corporation which is taken 
into account under subparagraph (A), 
"(C) FIRST TAXABLE YEAR CORPORATION IN EXISTENCE.— 
If such taxable year is the first taxable year that such 
corporation is in existence, the tentative minimum tax 
of such corporation for such year shall be zero. 
Applicability. 
"(D) SPECIAL RULES.—For purposes of this paragraph, 
the rules of paragraphs (2) and (3) of section 448(c) shall 
apply.". 
(b) AMENDMENT RELATED TO SECTION 402 
OF 1997 
ACT.— 
Subsection (c) of section 168 of the 1986 Code is amended— 
(1) by striking paragraph (2), and 
(2) by striking the portion of such subsection preceding 
the table in paragraph (1) and inserting the following: 
"(c) APPLICABLE RECOVERY PERIOD.—For purposes of this sec-
tion, the applicable recovery period shall be determined in accord-
ance with the following table:". 
SEC. 6007. AMENDMENTS RELATED TO TITLE V OF 1997 ACT. 
(a) AMENDMENTS RELATED TO SECTION 501 
OF 1997 
ACT.— 
PUBLIC LAW 105-206-^ULY 22, 1998 
112 STAT. 807 
(1) Subsection (c) of section 2631 of the 1986 Code is 
amended to read as follows: 
"(c) INFLATION ADJUSTMENT.— 
"(1) IN GENERAL.—In the case of any calendar year after 
1998, the $1,000,000 amount contained in subsection (a) shall 
be increased by an amount equal to— 
"(A) $ 1,000,000, multiplied by 
"(B) the cost-of-living adjustment determined under 
section 1(f)(3) for such calendar year by substituting 'cal-
endar year 1997' for 'calendar year 1992' in subparagraph 
(B) thereof. 
If any amount as adjusted under the preceding sentence is 
not a multiple of $10,000, such amount shall be rounded to 
the next lowest multiple of $10,000. 
"(2) ALLOCATION OF INCREASE.—^Any increase under para- Applicability, 
graph (1) for any calendar year shall apply only to generation-
skipping transfers made during or after such calendar year; 
except that no such increase for calendar years after the cal-
endar year in which the transferor dies shall apply to transfers 
by such transferor.". 
(2) Subsection (f) of section 501 of the 1997 Act is amended 
26 USC 2001 
by inserting "(other than the amendment made by subsection ^°'^-
(d))" after "this section". 
(b) AMENDMENTS RELATED TO SECTION 502 
OF 1997 
ACT.— 
(1)(A) Section 2033A of the 1986 Code is hereby moved 
to the end of part IV of subchapter A of chapter 11 of the 
1986 Code and redesignated as section 2057. 
(B) So much of such section 2057 (as so redesignated) 
as precedes subsection (b) thereof is amended to read as follows: 
"SEC. 2057. FAMILY-OWNED BUSINESS INTERESTS. 
"(a) GENERAL RULE.— 
"(1) ALLOWANCE OF DEDUCTION.—^For purposes of the tax 
imposed by section 2001, in the case of an estate of a decedent 
to which this section applies, the value of the taxable estate 
shall be determined by deducting from the value of the gross 
estate the adjusted value of the qualified family-owned business 
interests of the decedent which are described in subsection 
(b)(2). 
"(2) MAXIMUM DEDUCTION.—^The deduction allowed by this 
section shall not exceed $675,000. 
"(3) COORDINATION WITH UNIFIED CREDIT.— 
"(A) IN GENERAL.—^Except as provided in subparagraph 
(B), if this section applies to an estate, the applicable 
exclusion amount under section 2010 shall be $625,000. 
"(B) INCREASE IN UNIFIED CREDIT IF DEDUCTION IS LESS 
THAN $675,000.—If the deduction allowed by this section 
is less than $675,000, the amount of the applicable exclu-
sion amount under section 2010 shall be increased (but 
not above the amount which would apply to the estate 
without regard to this section) by the excess of $675,000 
over the amount of the deduction allowed.". 
(C) Subparagraph (A) of section 2057(b)(2) of the 1986 
Code (as so redesignated) is amended by striking "(without 
regard to this section)". 
68-194 O - 98 - 27: QL 3 Part 1 
112 STAT. 808 
PUBLIC LAW 105-206-^ULY 22, 1998 
(D) Subsection (c) of section 2057 of the 1986 Code (as 
so redesignated) is amended by striking "(determined without 
regard to this section)". 
(E) The table of sections for part III of subchapter A of 
chapter 11 of the 1986 Code is amended by striking the item 
relating to section 2033A. 
(F) The table of sections for part IV of such subchapter 
is amended by adding at the end the following new item: 
"Sec. 2057. Family-owned business interests.". 
(2) Section 2057(b)(3) of the 1986 Code (as so redesignated) 
is amended to read as follows: 
"(3) INCLUDIBLE GIFTS OF INTERESTS.—^The amount of the 
gifts of qualified family-owned business interests determined 
under this paragraph is the sum of— 
"(A) the amount of such gifts from the decedent to 
members of the decedent's family taken into account under 
section 2001(b)(1)(B), plus 
"(B) the amount of such gifts otherwise excluded under 
section 2503(b), 
to the extent such interests are continuously held by members 
of such family (other than the decedent's spouse) between the 
date of the gift and the date of the decedent's death.". 
(3)(A) Section 2057(e)(2)(C) of the 1986 Code (as so redesig-
nated) is amended by striking "(as defined in section 543(a))" 
and inserting "(as defined in section 543(a) without regard 
to paragraph (2)(B) thereof) if such trade or business were 
a corporation". 
(B) Clause (ii) of section 2057(e)(2)(D) of the 1986 Code 
(as so redesignated) is amended by striking "income of which 
is described in section 543(a) or" and inserting "personal holding 
company income (as defined in subparagraph (C)) or income 
described". 
(C) Paragraph (2) of section 2057(e) of the 1986 Code (as 
so redesignated) is amended by adding at the end the following 
new flush sentence: 
"In the case of a lease of property on a net cash basis by 
the decedent to a member of the decedent's family, income 
from such lease shall not be treated as personal holding com-
pany income for purposes of subparagraph (C), and such prop-
erty shall not be treated as an asset described in subparagraph 
(D)(ii), if such income and property would not be so treated 
if the lessor had engaged directly in the activities engaged 
in by the lessee with respect to such property.". 
(4) Paragraph (2) of section 2057(f) of the 1986 Code (as 
so redesignated) is amended— 
(A) by striking "(as determined under rules similar 
to the rules of section 2032A(c)(2)(B))"; and 
(B) by adding at the end the following new subpara-
graph: 
"(C) ADJUSTED TAX DIFFERENCE.—For purposes of 
subparagraph (A)— 
"(i) IN GENERAL.—^The adjusted tax difference 
attributable to a qualified family-owned 
business 
interest is the amount which bears the same ratio 
to the adjusted tax difference with respect to the estate 
(determined under clause (ii)) as the value of such 
PUBLIC LAW 105-206-JULY 22, 1998 
112 STAT. 809 
interest bears to the value of all qualified family-owned 
business interests described in subsection (b)(2). 
"(ii) ADJUSTED TAX DIFFERENCE WITH RESPECT TO 
, THE ESTATE.—For purposes of clause (i), the term 
'adjusted tax difference with respect to the estate' 
means the excess of what would have been the estate 
tax Hability but for the election under this section 
over the estate tax liability. For purposes of this clause, 
the term 'estate tax liabilitj^ means the tax imposed 
by section 2001 reduced by the credits allowable 
against such tax.". 
(5)(A) Paragraph (1) of section 2057(e) of the 1986 Code 
, (as so redesignated) is amended by adding at the end the 
following new flush sentence: 
"For purposes of the preceding sentence, a decedent shall be 
treated as engaged in a trade or business if any member of 
the decedent's family is engaged in such trade or business.". 
(B) Subsection (f) of section 2057 of the 1986 Code (as 
so redesignated) is amended by adding at the end the following 
new pEiragraph: 
"(3) 
USE IN TRADE OR BUSINESS BY FAMILY MEMBERS.— 
A qualified heir shall not be treated as disposing of an interest 
described in subsection (e)(1)(A) by reason of ceasing to be 
engaged in a trade or business so long as the property to 
wluch such interest relates is used in a trade or business 
by any member of such individual's family.". 
(6) Paragraph (1) of section 2057(g) of the 1986 Code (as 
so redesignated) is amended by striking "or (M)". 
(7) Paragraph (3) of section 2057(i) of the 1986 Code (as 
so redesignated) is amended by redesignating subparagraphs 
(L), (M), and (N) as subparagraphs (N), (O), and (P), respec-
tively, and by inserting after subparagraph (K) the following 
new subparagraphs: 
"(L) Section 2032A(g) (relating to application to 
interests in partnerships, corporations, and trusts). 
"(M) Subsections (h) and (i) of section 2032A.". 
(c) AMENDMENTS RELATED TO SECTION 503 OF THE 1997 ACT.— 
(1) Clause (iii) of section 6166(b)(7)(A) of the 1986 Code 
is amended to read as follows: 
"(iii) for purposes of applying section 6601(j), the 
2-percent portion (as defined in such section) shall 
DG iii*6£Lii6d SLQ l^Ginsr ZGITO *
* 
(2) Clause (iii) of section 6166(b)(8)(A) of the 1986 Code 
is amended to read as follows: 
"(iii) 2-PERCENT INTEREST RATE NOT TO APPLY.— 
For purposes of applying section 6601( j), the 2-percent 
portion (as defined in such section) shall be treated 
as being zero.". 
(d) AMENDMENT RELATED TO SECTION 505 OF THE 1997 ACT.— 
Paragraphs (1) and (2) of section 7479(a) of the 1986 Code are 
each amended by striking "an estate," and inserting "an estate 
(or with respect to any property included therein),". 
(e) AMENDMENTS RELATED TO SECTION 506 OF THE 1997 ACT.— 
(1) Paragraph (1) of section 506(e) of the 1997 Act is 26USC2001 
amended by striking "and (c)" and inserting ", (c), and (d)". note. 
(2)(A) Paragraph (9) of section 6501(c) of the 1986 Code 
is amended by striMng the last sentence. 
112 STAT. 810 
PUBLIC LAW 105-206—JULY 22, 1998 
(B) Subsection (f) of section 2001 of the 1986 Code is 
amended to read as follows: 
"(f) VALUATION OF GIFTS.— 
"(1) IN GENERAL—If the time has expired under section 
6501 within which a tax may be assessed under chapter 12 
(or under corresponding provisions of prior laws) on— 
"(A) the transfer of property by gift made during a 
preceding calendar period (as defined in section 2502(b)); 
or 
"(B) an increase in taxable gifts required under section 
2701(d), 
the value thereof shall, for purposes of computing the tax 
under this chapter, be the value as finally determined for 
purposes of chapter 12. 
"(2) FINAL DETERMINATION.—^For purposes of paragraph (1), 
a value shall be treated as finally determined for purposes 
of chapter 12 if— 
"(A) the value is shown on a return under such chapter 
and such value is not contested by the Secretary before 
the expiration of the time referred to in paragraph (1) 
with respect to such return; 
"(B) in a case not described in subparagraph (A), the 
value is specified by the Secretary and such value is not 
timely contested by the taxpayer; or 
"(C) the value is determined by a court or pursuant 
to a settlement agreement with the Secretary,". 
(B) Subsection (c) of section 2504 of the 1986 Code is 
amended to read as follows: 
"(c) VALUATION OF GIFTS.—If the time has expired under section 
6501 within which a tax may be assessed under this chapter 12 
(or under corresponding provisions of prior laws) on— 
"(1) the transfer of property by gift made during a preceding 
calendar period (as defined in section 2502(b)); or 
"(2) an increase in taxable gifts required under section 
2701(d), 
the value thereof shall, for purposes of computing the tax under 
this chapter, be the value as finally determined (within the meaning 
of section 2001(f)(2)) for purposes of this chapter.". 
(f) AMENDMENTS RELATED TO SECTION 507 OF 1997 ACT.— 
(1) Paragraph (3) of section 1(g) of the 1986 Code is 
amended by striking subparagraph (C) and by redesignating 
subparagraph (D) as subparagraph (C). 
(2) Section 641 of the 1986 Code is amended by striking 
subsection (c) and by redesignating subsection (d) as subsection 
(0. 
(3) Paragraph (4) of section 1361(e) of the 1986 Code is 
amended by striking "section 641(d)" and inserting "section 
641(c)". 
(4) Subparagraph (A) of section 6103(e)(1) of the 1986 Code 
is amended by striking clause (ii) and by redesignating clauses 
(iii) and (iv) as clauses (ii) and (iii), respectively. 
(g) AMENDMENTS RELATED TO SECTION 508 OF 1997 ACT.— 
(1) Subsection (c) of section 2031 of the 1986 Code is 
amended by redesignating paragraph (9) as paragraph (10) 
and by inserting after paragraph (8) the following new para-
graph: 
PUBLIC LAW 105-206-^ULY 22, 1998 
112 STAT. 811 
"(9) TREATMENT OF EASEMENTS GRANTED AFTER DEATH.— 
In any case in which the quahfied conservation easement is 
granted after the date of the decedent's death and on or before 
the due date (including extensions) for fiUng the return of 
tax imposed by section 2001, the deduction under section 
2055(f) with respect to such easement shall be allowed to 
the estate but only if no charitable deduction is allowed under 
chapter 1 to any person with respect to the grant of such 
easement.". 
(2) The first sentence of paragraph (6) of section 2031(c) 
of the 1986 Code is amended by striking all that follows "shall 
be made" and inserting "on or before the due date (including 
extensions) for filing the return of tax imposed by section 
2001 and shall be made on such return.". 
SEC. 6008. AMENDMENTS RELATED TO TITLE VII OF 1997 ACT. 
(a) AMENDMENT RELATED TO SECTION 1400 OF 1986 
CODE.— 
Section 1400(b)(2)(B) of the 1986 Code is amended by inserting 
"as determined on the basis of the 1990 census" after "percent". 
(b) AMENDMENT RELATED TO SECTION 1400A OF 1986 CODE.— 
Subsection (a) of section 1400A of the 1986 Code is amended by 
inserting before the period "and section 1394(b)(3)(B)(iii) shall be 
applied without regard to the employee residency requirement". 
(c) AMENDMENTS RELATED TO SECTION 1400B OF 1986 CODE.— 
(1) Section 1400B(b) of the 1986 Code is amended by 
inserting after paragraph (4) the following new paragraph: 
"(5) TREATMENT OF DC ZONE TERMINATION.—The termi-
nation of the designation of the DC Zone shall be disregarded 
for purposes of determining whether any property is a DC 
Zone asset.". 
(2) Paragraph (6) of section 1400B(b) of the 1986 Code 
is amended by striking "(4)(A)(ii)" and inserting "(4)(A)(i) or 
(ii)". 
(3) Section 1400B(c) of the 1986 Code is amended by 
striking "entity which is an". 
(4) Section 1400B(d)(2) of the 1986 Code is amended by 
inserting "as determined on the basis of the 1990 census" 
after "percent". 
(d) AMENDMENTS RELATED TO SECTION 1400C OF 1986 CODE.— 
(1) Paragraph (1) of section 1400C(b) of the 1986 Code 
is amended by inserting "and subsection (d)" after "this sub-
section". 
(2) Paragraph (1) of section 1400C(c) of the 1986 Code 
is amended to read as follows: 
"(1) IN GENERAL.—^The term 'first-time homebuyer' means 
any individual if such individual (and if married, such individ-
ual's spouse) had no present ownership interest in a principal 
residence in the District of Columbia during the 1-year period 
ending on the date of the purchase of the principal residence 
to which this section applies.". 
(3) Subparagraph (B) of section 1400C(e)(2) of the 1986 
Code is amended by inserting before the period "on the date 
the taxpayer first occupies such residence". 
(4) Paragraph (3) of section 1400C(e) of the 1986 Code 
is amended by striking all that follows "principal residence" 
and inserting "on the date such residence is purchased.". 
112 STAT. 812 
PUBLIC LAW 105-206-^JULY 22, 1998 
Applicability. 
Applicability. 
26 use 7704 
note. 
26 use 172 note. 
(5) Subsection (i) of section 1400C of the 1986 Code is 
amended to read as follows: 
"(i) APPLICATION OF SECTION.—This section shall apply to 
property purchased after August 4, 1997, and before January 1, 
2001.". 
(6) Subsection (c) of section 23 of the 1986 Code is amended 
. by inserting "and section 1400C" after "other than this section". 
(7) Subparagraph (C) of section 25(e)(1) of the 1986 Code 
is amended by striking "section 23" and inserting "sections 
23 and 1400C". 
SEC. 6009. AMENDMENTS RELATED TO TITLE K OF 1997 ACT. 
(a) AMENDMENT RELATED TO SECTION 908 
OF 1997 
ACT.— 
Paragraph (6) of section 5041(b) of the 1986 Code is amended 
by inserting "which is a still wine" after "hard cider". 
(b) AMENDMENT RELATED TO SECTION 964 OF 1997 ACT.— 
(1) IN GENERAL.—Subparagraph (C) of section 7704(g)(3) 
of the 1986 Code is amended by striking the period at the 
end and inserting "and shall be paid by the partnership. Section 
6655 shall be applied to such partnership with respect to such 
tax in the same manner as if the partnership were a corpora-
tion, such tax were imposed by section 11, and references 
in such section to taxable income were references to the gross 
income referred to in subparagraph (A).". 
(2) EFFECTIVE DATE.—^The second sentence of section 
7704(g)(3)(C) of the 1986 Code (as added by paragraph (1)) 
shall apply to taxable years beginning after the date of the 
enactment of this Act. 
(c) AMENDMENT RELATED TO SECTION 971 OF 1997 ACT.—Clause 
(ii) of section 280F(a)(l)(C) is amended by striking "subparagraph 
(A)" and inserting "subparagraphs (A) and (B)". 
(d) AMENDMENT RELATED TO SECTION 976 OF 1997 ACT.—Sec-
tion 6103(d)(5) of the 1986 Code is amended by striking "section 
967 of the Taxpayer Relief Act of 1997." and inserting "section 
976 of the Taxpayer Relief Act of 1997. 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.". 
(e) AMENDMENT RELATED TO SECTION 977 OF 1997 ACT.—Para-
graph (2) of section 977(e) of the 1997 Act is amended to read 
as follows: 
"(2) NON-AMTRAK STATE.—^The term 'non-Amtrak State' 
means any State which is not receiving intercity passenger 
rail service from the Corporation as of the date of the enactment 
of this Act.". 
SEC. 6010. AMENDMENTS RELATED TO TITLE X OF 1997 ACT. 
(a) AMENDMENTS RELATED TO SECTION 1001 OF 1997 
ACT.— 
(1) Paragraph (2) of section 1259(b) of the 1986 Code is 
amended— 
(A) by striking "debt" each place it appears in clauses 
(i), (ii), and (iii) of subparagraph (A) and inserting "posi-
tion"; 
(B) by striking "and" at the end of subparagraph (A); 
and 
(C) by redesignating subparagraph (B) as subpara-
graph (C) and by inserting after subparagraph (A) the 
following new subparagraph: 
PUBLIC LAW 105-206-JULY 22, 1998 
112 STAT. 813 
"(B) any hedge with respect to a position described 
in subparagraph (A), and". 
(2) Section 1259(d)(1) of the 1986 Code is amended by 
inserting "(including cash)" after "property". 
(3) Subparagraph (D) of section 475(f)(1) of the 1986 Code 
is amended by adding at the end the following new sentence: 
"Subsection (d)(3) shall not apply under the preceding sentence 
for purposes of applying sections 1402 and 7704.". 
(4) Subparagraph (C) of section 1001(d)(3) of the 1997 
Act is amended by striking "within the 30-day period beginning 
26 USC 475 note, 
on" and inserting "before the close of the 30th day after". 
(b) AMENDMENT RELATED TO SECTION 1011 
OF 1997 
ACT.— 
Paragraph (1) of section 1059(g) of the 1986 Code is amended 
by striking "and in the case of stock held by pass-thru entities" 
and inserting ", in the case of stock held by pass-thru entities, 
and in the case of consolidated groups". 
(c) AMENDMENTS RELATED TO SECTION 1012 
OF 1997 
ACT.— 
(1) Paragraph (1) of section 1012(d) of the 1997 Act is 
26 USC 351 note. 
amended by striking "1997, pursuant" and inserting "1997; 
except that the amendment made by subsection (a) shall apply 
to such distributions only if pursuant". 
(2) Subparagraph (A) of section 355(e)(3) of the 1986 Code 
is amended— 
(A) by striking "shall not be treated as described in" 
and inserting "shall not be taken into account in applying"; 
and 
(B) by striking clause (iv) and inserting the following 
new clause: 
"(iv) The acquisition of stock in the distributing 
corporation or any controlled corporation to the extent 
that the percentage of stock owned directly or indirectly 
in such corporation by each person owning stock in 
such corporation immediately before the acquisition 
does not decrease.". 
(3)(A) Subsection (c) of section 351 of the 1986 Code is 
amended to read as follows: 
"(c) SPECIAL RULES WHERE DISTRIBUTION TO SHAREHOLDERS.— 
"(1) IN GENERAL.—In determining control for purposes of 
this section, the fact that any corporate transferor distributes 
part or all of the stock in the corporation which it receives 
in the exchange to its shareholders shall not be taken into 
account. 
"(2) SPECIAL RULE FOR SECTION 355.—If the requirements 
of section 355 (or so much of section 356 as relates to section 
355) are met with respect to a distribution described in para-
graph (1), then, solely for purposes of determining the tax 
treatment of the transfers of property to the controlled corpora-
tion by the distributing corporation, the fact that the sharehold-
ers of the distributing corporation dispose of part or all of 
the distributed stock shall not be taken into account in deter-
mining control for purposes of this section.". 
(B) Clause (ii) of section 368(a)(2)(H) of the 1986 Code 
is amended to read as follows: 
"(ii) in the case of a transaction with respect to 
which the requirements of section 355 (or so much 
of section 356 as relates to section 355) are met, the 
112 STAT. 814 
PUBLIC LAW 105-206-JULY 22, 1998 
fact that the shareholders of the distributing corpora-
tion dispose of part or all of the distributed stock 
shall not be taken into account.". 
(d) AMENDMENTS RELATED TO SECTION 1013 
OF 1997 
ACT.— 
(1) Paragraph (5) of section 304(b) of the 1986 Code is 
amended by striking subparagraph (B) and by redesignating 
subparagraph (C) as subparagraph (B). 
(2) Subsection (b) of section 304 of the 1986 Code is 
amended by adding at the end the following new paragraph: 
Regulations. 
"(6) AVOIDANCE OF MULTIPLE INCLUSIONS, ETC.—In t h e c a s e 
of any acquisition to which subsection (a) applies in which 
the acquiring corporation or the issuing corporation is a foreign 
corporation, the Secretary shall prescribe such regulations as 
are appropriate in order to eliminate a multiple inclusion of 
any item in income by reason of this subpart and to provide 
appropriate basis adjustments (including modifications to the 
application of sections 959 and 961).". 
(e) AMENDMENTS RELATED TO SECTION 1014 
OF 1997 
ACT.— 
(1) Paragraph (1) of section 351(g) of the 1986 Code is 
amended by adding "and" at the end of subparagraph (A) and 
by striking subparagraphs (B) and (C) and inserting the follow-
ing new subparagraph: 
"(B) if (and only if) the transferor receives stock other 
than nonqualified preferred stock— 
"(i) subsection (b) shall apply to such transferor; 
and 
"(ii) such nonqualified preferred stock shall be 
treated as other property for purposes of applying sub-
section (b).". 
(2) Clause (ii) of section 354(a)(2)(C) of 1986 Code is 
amended by adding at the end the following new subclause: 
"(III) 
EXTENSION OF 
STATUTE 
OF 
LIMITA-
TIONS.—^The statutory period for the assessment 
of any deficiency attributable to a corporation fail-
ing to be a family-owned corporation shall not 
expire before the expiration of 3 years after the 
date the Secretary is notified by the corporation 
(in such manner as the Secretary may prescribe) 
of such failure, and such deficiency may be 
assessed before the expiration of such 3-year period 
notwithstanding the provisions of any other law 
or rule of law which would otherwise prevent such 
assessment.". 
(f) AMENDMENT RELATED TO SECTION 1024 
OF 1997 
ACT.— 
Section 6331(h)(1) of the 1986 Code is amended by striking "The 
effect of a levy" and inserting "If the Secretary approves a levy 
under this subsection, the effect of such levy". 
(g) AMENDMENTS RELATED TO SECTION 1031 OF 1997 
ACT.— 
(1) Subsection (1) of section 4041 of the 1986 Code is 
amended by striking "subsection (e) or (f)" and inserting "sub-
section (f) or (g)". 
(2) Subsection (b) of section 9502 of the 1986 Code is 
amended by moving the sentence added at the end of paragraph 
(1) to the end of such subsection. 
(3) Subsection (c) of section 6421 of the 1986 Code is 
amended— 
(A) by striking "(2)(A)" and inserting "(2)"; and 
PUBLIC LAW 105-206-^ULY 22, 1998 
112 STAT. 815 
(B) by adding at the end the following sentence: 
"Subsection (a) shall not apply to gasoline to which this 
subsection applies.", 
(h) AMENDMENTS RELATED TO SECTION 1032 
OF 1997 
ACT.— 
(1) Section 1032(a) of the 1997 Act is amended by striking 26USC4083. 
"Subsection (a) of [section 4083" and inserting "Paragraph (1) 
of section 4083(a)". 
(2) Section 1032(e)( 12)(A) of the 1997 Act shall be apphed 26USC7232. 
as if "gasoline, diesel fuel," were the material proposed to 
V
)
G stficlcGri 
(3) Paragraph (1) of section 4082(d) of the 1986 Code is 
amended to read as follows: 
"(1) AVIATION-GRADE KEROSENE.—Subsection (a)(2) shall Regulations, 
not apply to aviation-grade kerosene (as determined under regu-
lations prescribed by the Secretary) which the Secretary deter-
mines is destined for use as a fuel in an aircraft.". 
(4) Paragraph (3) of section 4082(d) of the 1986 Code is 
amended by striking "a removal, entry, or sale of kerosene 
to" and inserting "kerosene received by". 
(5) Paragraph (1) of section 4101(e) of the 1986 Code is 
amended by striking "dyed diesel fuel and kerosene" and insert-
ing "such fuel in a dyed form". 
(i) AMENDMENT RELATED TO SECTION 1034 
OF 1997 
ACT.— 
Paragraph (3) of section 4251(d) of the 1986 Code is amended 
by striking "other similar arrangement" and inserting "any other 
similar arrangement". 
(j) AMENDMENTS RELATED TO SECTION 1041 OF 1997 
ACT.— 
(1) Subparagraph (A) of section 512(b)(13) of the 1986 
Code is amended by inserting "or accrues" after "receives". 
(2) Subclause (I) of section 512(b)(13)(B)(i) of the 1986 
Code 
is 
amended 
by 
striking 
"(as 
defined 
in 
section 
513A(a)(5)(A))". 
(3) Paragraph (2) of section 1041(b) of the 1997 Act is 26 USC 512 note. 
amended to read as follows: 
"(2) BINDING CONTRACTS.—^The amendments made by this 
section shall not apply to any amount received or accrued 
during the first 2 taxable years beginning on or after the 
date of the enactment of this Act if such amount is received 
or accrued pursuant to a written binding contract in effect 
on June 8, 1997, and at all times thereafter before such amount 
is received or accrued. The preceding sentence shall not apply 
to any amount which would (but for the exercise of an option 
to accelerate payment of such amount) be received or accrued 
after such 2 taxable years.". 
(k) AMENDMENTS RELATED TO SECTION 1053 OF 1997 
ACT.— 
(1) Section 853 of the 1986 Code is amended by redesignat-
ing subsection (e) as subsection (f) and by inserting after 
subsection (d) the following new subsection: 
"(e) TREATMENT OF TAXES NOT ALLOWED AS A CREDIT UNDER 
SECTION 901(k).—^This section shall not apply to any tax with 
respect to which the regulated investment company is not allowed 
a credit under section 901 by reason of section 901(k).". 
(2) Subsection (c) of section 853 of the 1986 Code is 
amended by striking the last sentence. 
(3) Subparagraph (A) of section 901(k)(4) of the 1986 Code 
is amended by striking "securities business" and inserting "busi-
ness as a securities dealer". 
112 STAT. 816 
PUBLIC LAW 105-206-^ULY 22, 1998 
(1) AMENDMENT RELATED TO SECTION 1055 
OF 1997 
ACT.— 
Section 6611(g)(1) of the 1986 Code is amended by striking "(e), 
and (h)" and inserting "and (e)". 
(m) AMENDMENT RELATED TO SECTION 1061 
OF 1997 
ACT.— 
Subsection (c) of section 751 of the 1986 Code is amended by 
striking "731" each place it appears and inserting "731, 732,"., 
(n) AMENDMENT RELATED TO SECTION 1083 
OF 1997 
ACT.— 
26 use 39. 
Section 1083(a)(2) of the 1997 Act is amended— 
(1) by striking "21" and inserting "20"; and 
(2) by striking "22" and inserting "21". 
(o) AMENDMENTS RELATED TO SECTION 1084 
OF 1997 
ACT.— 
(1) Paragraph (3) of section 264(a) of the 1986 Code is 
amended by striking "subsection (c)" and inserting "subsection 
(d)". 
(2) Paragraph (4) of section 264(a) of the 1986 Code is 
amended by striking "subsection (d)" and inserting "subsection 
(e)". 
(3)(A) Paragraph (4) of section 264(f) of the 1986 Code 
is amended by adding at the end the following new subpara-
graph: 
"(E) MASTER CONTRACTS.—If coverage for each insured 
under a master contract is treated as a separate contract 
for purposes of sections 817(h), 7702, and 7702A, coverage 
for each such insured shall be treated as a separate contract 
for purposes of subparagraph (A). For purposes of the 
preceding sentence, the term 'master contract' shall not 
include any group life insurance contract (as defined in 
section 848(e)(2)).". 
(B) The second sentence of section 1084(d) of the 1997 
26 use 101 note. 
Act is amended by striking "but" and all that follows and 
inserting "except that, in the case of a master contract (within 
the meaning of section 264(f)(4)(E) of the Internal Revenue 
Code of 1986), the addition of covered lives shall be treated 
as a new contract only with respect to such additional covered 
lives.". 
(4)(A) Clause (iv) of section 264(f)(5)(A) of the 1986 Code 
is amended by striking the second sentence. 
(B) Subparagraph (B) of section 6724(d)(1) of the 1986 
Code is amended by striking "or" at the end of clause (xv), 
by striking the period at the end of clause (xvi) and inserting 
"; or", and by adding at the end the following new clause: 
"(xvii) section 264(f )(5)(A)(iv) (relating to reporting 
with respect to certain life insurance and annuity con-
tracts).". 
(C) Paragraph (2) of section 6724(d) of the 1986 Code 
is amended by striking "or" at the end of subparagraph (Y), 
by striking the period at the end of subparagraph (Z) and 
inserting "or", and by adding at the end the following new 
subparagraph: 
"(AA) section 264(f )(5)(A)(iv) (relating to reporting with 
respect to certain life insurance and annuity contracts).". 
(5) Subparagraph (A) of section 264(f)(8) of the 1986 Code 
is amended by striking "subsection (d)(5)(B)" and inserting 
"subsection (e)(5)(B)". 
(p) AMENDMENTS RELATED TO SECTION 1085 
OF 1997 
ACT.— 
(1) Paragraph (5) of section 32(c) of the 1986 Code is 
amended— 
PUBLIC LAW 105-206-^JULY 22, 1998 
112 STAT. 817 
(A) by inserting before the period at the end of subpara-
graph (A) "and increased by the amounts described in 
subparagraph (C)"; 
(B) by adding "or" at the end of clause (iii) of subpara-
graph (B); and 
(C) by striking all that follows subclause (II) of 
subparagraph (B)(iv) and inserting the following: 
"(III) other trades or businesses. 
For purposes of clause (iv), there shall not be taken 
into account items which are attributable to a trade 
or business which consists of the performance of serv-
ices by the taxpayer as an employee. 
"(C) CERTAIN AMOUNTS INCLUDED.—An amount is 
described in this subparagraph if it is— 
"(i) interest received or accrued during the taxable 
year which is exempt from tax imposed by this chapter; 
or 
"(ii) amounts received as a pension or annuity, 
and any distributions or payments received from an 
individual retirement plan, by the taxpayer during the 
taxable year to the extent not included in gross income. 
Clause (ii) shall not include any amount which is not 
includible in gross income by reason of a trustee-to-trustee 
transfer or a rollover distribution.". 
(2) Clause (v) of section 32(c)(2)(B) of the 1986 Code is 
amended by inserting "shall be taken into account" before ", 
but only". 
(3) The text of paragraph (3) of section 1085(a) of the 
1997 Act is amended to read as follows: "Paragraph (2) of 26USC6213. 
section 6213(g) (relating to the definition of mathematical or 
clerical errors) is amended by striking "and" at the end of 
subparagraph (I), by striking the period at the end of subpara-
graph (J) and inserting ", and", and by inserting after subpara-
graph (J) the following new subparagraph: 
"(K) an omission of information required by section 
32(k)(2) (relating to taxpayers making improper prior 
claims of earned income credit).". 
(q) AMENDMENT RELATED TO SECTION 1088 OF 1997 
ACT.— 
Section 1088(b)(2)(C) of the 1997 Act is amended by inserting "more 26 USC 453C 
than 1 year" before "after". 
note, 
(r) AMENDMENT RELATED TO SECTION 1089 OF 1997 
ACT.— 
Paragraphs (1)(C) and (2)(C) of section 664(d) of the 1986 Code 
are each amended by adding ", and" at the end. 
SEC. 6011. AMENDMENTS RELATED TO TITLE XI OF 1997 ACT. 
(a) AMENDMENT RELATED TO SECTION 1103 OF 1997 
ACT.— 
Paragraph (3) of section 59(a) added by section 1103 of the 1997 
Act is redesignated as paragraph (4). 
(b) AMENDMENTS RELATED TO SECTION 1121 OF 1997 ACT.— 
(1) Subsection (e) of section 1297 of the 1986 Code is 
amended by adding at the end the following new paragraph: 
"(4) TREATMENT OF HOLDERS OF OPTIONS.—^Paragraph (1) 
shall not apply to stock treated as owned by a person by 
reason of section 1298(a)(4) (relating to the treatment of a 
person that has an option to acquire stock as owning such 
stock) unless such person establishes that such stock is owned 
(within the meaning of section 958(a)) by a United States 
112 STAT. 818 
PUBLIC LAW 105-206-^JULY 22, 1998 
shareholder (as defined in section 951(b)) who is not exempt 
from tax under this chapter.". 
(2) Section 1298(a)(2)(B) of the 1986 Code is amended by 
adding at the end the following new sentence: "Section 1297(e) 
shall not apply in determining whether a corporation is a 
passive foreign investment company for purposes of this 
subparagraph.". 
(c) AMENDMENTS RELATED TO SECTION 1122 
OF 1997 
ACT.— 
(1) Section 672(f)(3)(B) of the 1986 Code is amended by 
striking "section 1296" and inserting "section 1297". 
(2) Paragraph (1) of section 1291(d) of the 1986 Code is 
amended by adding at the end the following new sentence: 
"In the case of stock which is marked to market under section 
475 or any other provision of this chapter, this section shall 
not apply, except that rules similar to the rules of section 
1296(j) shall apply.". 
(3) Subsection (d) of section 1296 of the 1986 Code is 
amended by adding at the end the following new sentence: 
"In the case of a regulated investment company which elected 
to mark to market the stock held by such company as of 
the last day of the taxable year preceding such company's 
first taxable year for which such company elects the application 
of this section, the amount referred to in paragraph (1) shall 
include amounts included in gross income under such mark 
to market with respect to such stock for prior taxable years.". 
(d) AMENDMENT RELATED TO SECTION 1123 
OF 1997 
ACT.— 
Subsection (e) of section 1297 of the 1986 Code added by section 
1123 of the 1997 Act is redesignated as subsection (f). 
(e) AMENDMENTS RELATED TO SECTION 1131 OF 1997 
ACT.— 
(1) Section 991 of the 1986 Code is amended by striking 
"except for the tax imposed by chapter 5". 
(2) Section 6013 of the 1986 Code is amended by striking 
"chapters 1 and 5" each place it appears in paragraphs (1)(A) 
and (5) of subsection (g) and in subsection (h)(1) and inserting 
"chapter 1". 
(f) AMENDMENT RELATED TO SECTION 1142 
OF 1997 
ACT.— 
(1) Paragraph (2) of section 6038(a) of the 1986 Code is 
amended by striking "by regulations". 
(2) Paragraph (3) of section 6038(a) of the 1986 Code is 
amended by striking "such information" and all that follows 
through the period and inserting "the Secretary has prescribed 
the furnishing of such information on or before the first day 
of such annual accounting period.". 
(3) Paragraph (4) of section 6038(e) of the 1986 Code is 
amended by striking "corporation" and inserting "foreign busi-
ness entity" each place it appears. 
(g) AMENDMENT RELATED TO SECTION 1144 
OF 1997 
ACT.— 
26USC6038B. 
Paragraphs (1) and (2) of section 1144(c) of the 1997 Act are 
each amended by striking "6038B(b)" and inserting "6038B(c) (as 
redesignated by subsection (b))". 
SEC. 6012. AMENDMENTS RELATED TO TITLE XII OF 1997 ACT. 
(a) AMENDMENT RELATED TO SECTION 1204 
OF 1997 
ACT.— 
The last sentence of section 162(a) of the 1986 Code is amended 
by striking "investigate" and all that follows and inserting "inves-
tigate or prosecute, or provide support services for the investigation 
or prosecution of, a Federal crime.". 
PUBLIC LAW 105-206-^ULY 22, 1998 
112 STAT. 819 
(b) AMENDMENTS RELATED TO SECTION 1205 OF 1997 ACT.— 
(1) Section 6311(e)(1) of the 1986 Code is amended by 
striking "section 6103(k)(8)" and inserting "section 6103(k)(9)". 
(2) Paragraph (8) of section 6103(k) of the 1986 Code (as 
added by section 1205(c)(1) of the 1997 Act) is redesignated 
as paragraph (9). 
(3) Subsection (g) of section 7431 of the 1986 Code added 
by section 1205 of the 1997 Act is redesignated as subsection 
(h) and is amended by striking "(8)" in the heading and insert-
ing "(9)". 
(4) Section 1205(c)(3) of the 1997 Act shall be applied 26USC6103. 
as if it read as follows: 
"(3) 
Section 
6103(p)(3)(A), 
as 
amended 
by 
section 
1026(b)(1)(A) of the 1997 Act, is amended by striking "or (8)" 
and inserting "(8), or (9)". 
(5) Section 1213(b) of the 1997 Act is amended by striking 26USC6724. 
"section 6724(d)(1)(A)" and inserting "section 6724(d)(1)". 
(c) AMENDMENT RELATED TO SECTION 1221 OF 1997 ACT.— 
Paragraph (2) of section 774(d) of the 1986 Code is amended by 
inserting before the period "or 857(b)(3)(D)". 
(d) AMENDMENT RELATED TO SECTION 1223 OF 1997 ACT.— 
Subsection (c) of section 6724 of the 1986 Code is amended by 
inserting before the period "(more than 100 information returns 
in the case of a partnership having more than 100 partners)". 
(e) AMENDMENT RELATED TO SECTION 1226 OF 1997 ACT.— 
Section 1226 of the 1997 Act is amended by striking "ending on 26 USC 6011 
or" and inserting "beginning". 
note. 
(f) AMENDMENT RELATED TO SECTION 1231 OF 1997 ACT.— 
Subsection (c) of section 6211 of the 1986 Code is amended— 
(1) by striking "SUBCHAPTER C" in the heading and insert-
ing "SUBCHAPTERS C AND D"; and 
(2) by striking "subchapter C" in the text and inserting 
"subchapters C and D". 
(g) AMENDMENT RELATED TO SECTION 1256 OF 1997 ACT.— 
Subparagraph (A) of section 857(d)(3) of the 1986 Code is amended 
by striking "earliest accumulated earnings and profits (other than 
earnings and profits to which subsection (a)(2)(A) applies)" and 
inserting "earliest earnings and profits accumulated in any taxable 
year to which the provisions of this part did not apply". 
(h) AMENDMENT RELATED TO SECTION 1285 OF 1997 ACT.— 
Section 7430(b) of the 1986 Code is amended by redesignating 
paragraph (5) as paragraph (4). 
SEC. 6013. AMENDMENTS RELATED TO TITLE XIII OF 1997 ACT. 
(a) AMENDMENTS RELATED TO SECTION 1305 OF 1997 ACT.— 
(1) Section 646 of the 1986 Code is redesignated as section 
645. 
(2) The item relating to section 646 in the table of sections 
for subpart A of part I of subchapter J of chapter 1 of the 
1986 Code is amended by striking "Sec. 646" and inserting 
"Sec. 645". 
(3) Paragraph (1) of section 2652(b) of the 1986 Code is 
amended by striking "section 646" and inserting "section 645". 
(4)(A) Paragraph (1) of section 2652(b) of the 1986 Code 
is amended by striking the second sentence. 
(B) Subsection (b) of section 2654 of the 1986 Code is 
amended by adding at the end the following new sentence: 
112 STAT. 820 
PUBLIC LAW 105-206^JULY 22, 1998 
"For purposes of this subsection, a trust shall be treated as 
part of an estate during any period that the trust is so treated 
under section 645.". 
(b) AMENDMENTS RELATED TO SECTION 1309 
OF 1997 
ACT.— 
(1) Subsection (b) of section 685 of the 1986 Code is 
amended by adding at the end the following new flush sentence: 
"A trust shall not fail to be treated as meeting the requirement 
of paragraph (6) by reason of the death of an individual but only 
during the 60-day period beginning on the date of such death.". 
(2) Subsection (f) of section 685 of the 1986 Code is 
amended by inserting before the period at the end "and of 
trusts terminated during the year". 
SEC. 6014. AMENDMENTS RELATED TO TITLE XIV OF 1997 ACT. 
(a) AMENDMENTS RELATED TO SECTION 1421 OF 1997 
ACT.— 
(1) Paragraph (1) of section 5054(a) of the 1986 Code is 
amended— 
(A) by inserting ", or imported into the United States 
and transferred to a brewery free of tax under section 
5418," after "produced in the United States" in the text; 
and 
(B) by inserting "; CERTAIN IMPORTED BEER" after "PRO-
DUCED IN THE UNITED STATES" in the heading. 
(2) Paragraph (2) of section 5054(a) of the 1986 Code is 
amended by inserting "and not transferred to a brewery free 
of tax under section 5418" after "United States". 
(3) Section 5056 of the 1986 Code is amended by striking 
"produced in the United States" each place it appears and 
inserting "removed for consumption or sale". 
(b) AMENDMENTS RELATED TO SECTION 1422 
OF 1997 
ACT.— 
(1) Paragraph (2) of section 5043(a) of the 1986 Code is 
amended by inserting "which are not transferred to a bonded 
wine cellar free of tax under section 5364" after "foreign wines". 
(2) Subsection (a) of section 5044 of the 1986 Code is 
amended by striking "produced in the United States" and 
inserting "removed from a bonded wine cellar". 
(3) Section 5364 of the 1986 Code is amended by striking 
"Wine imported or brought into" and inserting "Natural wine 
(as defined in section 5381) imported or brought into". 
(c) AMENDMENT RELATED TO SECTION 1434 
OF 1997 
ACT.— 
Paragraph (2) of section 4052(f) of the 1986 Code is amended 
by striking "this section" and inserting "such section". 
(d) AMENDMENT RELATED TO SECTION 1436 
OF 1997 
ACT.— 
Paragraph (2) of section 4091(a) of the 1986 Code is amended 
by inserting "or on which tax has been credited or refunded" after 
"such paragraph". 
(e) AMENDMENT RELATED TO SECTION 1453 
OF 1997 
ACT.— 
Subparagraph (D) of section 7430(c)(4) of the 1986 Code is amended 
by striking "subparagraph (A)(iii)" and inserting "subparagraph 
(A)(ii)". 
SEC. 6015. AMENDMENTS RELATED TO TITLE XV OF 1997 ACT. 
(a) AMENDMENT RELATED TO SECTION 1501 
OF 1997 
ACT.— 
Paragraph (8) of section 408(p) of the 1986 Code added by section 
1501(b) of the 1997 Act is redesignated as paragraph (9). 
(b) AMENDMENT RELATED TO SECTION 1505 
OF 1997 
ACT.— 
26 use 401 note. Section 1505(d)(2) of the 1997 Act is amended by striking "(bX12)" 
and inserting "(b)(12)(A)(i)". 
PUBLIC LAW 105-206-^JULY 22, 1998 
112 STAT. 821 
(c) AMENDMENTS RELATED TO SECTION 1529 OF 1997 ACT.— 
(1) Section 1529(a) of the 1997 Act is amended to read 26USC1529. 
as follows: 
"(a) GENERAL RULE.—^Amounts to which this section applies 
which are received by an individual (or the survivors of the individ-
ual) as a result of hypertension or heart disease of the individual 
shall be excludable from gross income under section 104(a)(1) of 
the Internal Revenue Code of 1986.". 
(2) Section 1529(b)(1)(B) of the 1997 Act is amended to 
read as follows: 
"(B) under— 
"(i) a State law (as amended on May 19, 1992) 
which irrebuttably presumed that heart disease and 
hypertension are work-related illnesses but only for 
employees hired before July 1, 1992; or 
"(ii) any other statute, ordinance, labor agreement, 
or similar provision as a disability pension payment 
or in the nature of a disability pension pa3mtient attrib-
utable to employment as a police officer or fireman, 
but only if the individual is referred to in the State 
law described in clause (i); and". 
(d) AMENDMENT RELATED TO SECTION 1530 OF 1997 ACT.— 
Subparagraph (C) of section 404(a)(9) of the 1986 Code (as added 
by section 1530 of the 1997 Act) is redesignated as subparagraph 
(D) and is amended by striking "A qualified" and inserting "QUALI-
FIED GRATUITOUS TRANSFERS.—^A qualified". 
(e) AMENDMENT RELATED TO SECTION 1531 OF 1997 ACT.— 
Subsection (f) of section 9811 of the 1986 Code (as added by section 
1531 of the 1997 Act) is redesignated as subsection (e). 
SEC. 6016. AMENDMENTS RELATED TO TITLE XVI OF 1997 ACT. 
(a) AMENDMENTS RELATED TO SECTION 1601(d) OF 1997 ACT.— 
(1) AMENDMENTS RELATED TO SECTION 1601(d)(1)— 
(A) Section 408(p)(2)(D)(i) of the 1986 Code is amended 
by striking "or (B)" in the last sentence. 
(B) Section 408(p) of the 1986 Code is amended by 
adding at the end the following new paragraph: 
"(10) SPECIAL RULES FOR ACQUISITIONS, DISPOSITIONS, AND 
SIMILAR TRANSACTIONS.— 
"(A) IN GENERAL.—^An employer which fails to meet 
any applicable requirement by reason of an acquisition, 
disposition, or similar transaction shall not be treated as 
failing to meet such requirement during the transition 
period if— 
"(i) the employer satisfies requirements similar to 
the requirements of section 410(b)(6)(C)(i)(II); and 
"(ii) the qualified salary reduction arrangement 
maintained by the employer would satisfy the require-
ments of this subsection after the transaction if the 
employer which maintained the arrangement before 
the transaction had remained a separate employer, 
"(B) APPLICABLE REQUIREMENT.—For purposes of this 
paragraph, the term 'applicable requirement' means— 
"(i) the requirement under paragraph (2)(A)(i) that 
an employer be an eligible employer; 
"(ii) the requirement under paragraph (2)(D) that 
an arrangement be the only plan of an employer; and 
112 STAT. 822 
PUBLIC LAW 105-206-^nJLY 22, 1998 
"(iii) the participation requirements under para-
graph (4). 
"(C) TRANSITION PERIOD.—For purposes of this para-
graph, the term 'transition period' means the period begin-
ning on the date of any transaction described in subpara-
graph (A) and ending on the last day of the second calendar 
year following the calendar year in which such transaction 
occurs.". 
(C) Section 408(p)(2) of the 1986 Code is amended— 
(i) by striking "the preceding sentence shall apply 
only in accordance with rules similar to the rules of 
section 410(b)(6)(C)(i)" in the last sentence of subpara-
graph (C)(i)(II) and inserting "the preceding sentence 
shall not apply"; and 
(ii) by striking clause (iii) of subparagraph (D). 
(2) 
AMENDMENT 
TO 
SECTION 
leoi 
(d)(4).—Section 
26 use 403 note. 
1601(d)(4)(A) of the 1997 Act is amended— 
(A) by striking "Section 403(b)(ll)" and inserting 
"Paragraphs (7)(A)(ii) and (11) of section 403(b)"; and 
(B) by striking "403(b)(1)" in clause (ii) and inserting 
"403(b)(10)". 
(b) AMENDMENT RELATED TO SECTION 1601(f)(4) OF 1997 ACT.— 
Subsection (d) of section 6427 of the 1986 Code is amended— 
(1) by striking "HELICOPTERS" in the heading and inserting 
"OTHER AIRCRAFT USES"; and 
(2) by inserting "or a fixed-wing aircraft" after "helicopter". 
SEC. 6017. AMENDMENT RELATED TO TRANSPORTATION EQUITY ACT 
FOR THE 21ST CENTURY. 
(a) IN GENERAL.—Subparagraph (B) of section 6427(i)(2) of 
the 1986 Code is amended to read as follows: 
"(B) TIME FOR FILING CLAIM.—No claim filed under 
this paragraph shall be allowed unless filed during the 
first quarter following the last quarter included in the 
claim.". 
26 use 6427 
(b) EFFECTIVE DATE.—^The amendment made by subsection (a) 
note. 
shall take effect as if included in the amendments made by section 
9009 of the Transportation Equity Act for the 21st Century. 
SEC. 6018. AMENDMENTS RELATED TO SMALL BUSINESS JOB PROTEC-
TION ACT OF 1996. 
(a) AMENDMENT RELATED TO SECTION 1116.—Subparagraph (C) 
of section 1116(b)(2) of the Small Business Job Protection Act of 
110 Stat. 1764. 
1996 is amended by striking "chapter 68" and inserting "chapter 
61". 
(b) AMENDMENT RELATED TO SECTION 1421.—Section 408(d)(7) 
of the 1986 Code is amended— 
(1) by inserting "or 402(k)" after "section 402(h)" in 
subparagraph (B) thereof; and 
(2) by inserting "OR SIMPLE RETIREMENT ACCOUNTS" after 
"PENSIONS" in the heading thereof. 
(c) AMENDMENT RELATED TO SECTION 1431.—Subparagraph (E) 
of section 1431(c)(1) of the Small Business Job Protection Act of 
26 use 414. 
1996 is amended to read as follows: 
"(E) Section 414(q)(5), as redesignated by subparagraph 
(A), is amended by striking 'under paragraph (4) or the number 
of officers taken into account under paragraph (5)'". 
PUBLIC LAW 105-206-^JULY 22, 1998 
112 STAT. 823 
(d) AMENDMENT RELATED TO SECTION 1604.—Paragraph (3) 
of section 1604(b) of such Act is amended— 
26 USC 167 note. 
(1) by striking "such Code" and inserting "the Internal 
Revenue Code of 1986"; and 
(2) by striking "such date of enactment" and inserting 
"the date of the enactment of this Act". 
(e) AMENDMENT RELATED TO SECTION 1609.—^Paragraph (1) 
of section 1609(h) of such Act is amended by striking "paragraph 
26 USC 4091 
(3)(A)(i)" and inserting "paragraph (3)(A)". 
note. 
(f) AMENDMENTS RELATED TO SECTION 1807.— 
(1) Subparagraph (A) of section 23(b)(2) of the 1986 Code 
(relating to income limitation on credit for adoption expenses) 
is amended by inserting "(determined without regard to sub-
section (c))" after "for any taxable year". 
(2) Paragraph (3) of section 1807(c) of the Small Business 
Job Protection Act of 1996 is amended by striking "Clause 26 USC 219. 
(i)" and inserting "Clause (ii)". 
(g) AMENDMENT RELATED TO SECTION 1903.—Subsection (b) 26 use 679. 
of section 1903 of such Act shall be applied as if "or" in the 
material proposed to be stricken were capitalized. 
(h) EFFECTIVE DATE.—^The amendments made by this section 26 use 23 note, 
shall take effect as if included in the provisions of the Small 
Business Job Protection Act of 1996 to which they relate. 
SEC. 6019. AMENDMENTS RELATED TO TAXPAYER BILL OF RIGHTS 2. 
(a) IN GENERAL.—Subsection (b) of section 6104 of the 1986 
Code is amended by adding at the end the following new sentence: 
"In the case of an organization described in section 501(d), this 
subsection shall not apply to copies referred to in section 6031(b) 
with respect to such organization.". 
(b) PUBLIC INSPECTION.—Subparagraph (C) of section 6104(e)(1) 
of the 1986 Code is amended by adding at the end the following 
new sentence: "In the case of an organization described in section 
501(d), subparagraph (A) shall not require the disclosure of the 
copies referred to in section 6031(b) with respect to such organiza-
tion.". 
(c) 
DISCLOSURE TO AUTHORIZED REPRESENTATIVES OF THE 
TAXPAYER.—Paragraph (6) of section 6103(e) of the 1986 Code is 
amended by striking "or (5)" and inserting "(5), (8), or (9)". 
(d) EFFECTIVE DATE.—^The amendments made by this section 26 USC 6103 
shall take effect on the date of the enactment of this Act. 
note. 
SEC. 6020. AMENDMENT RELATED TO OMNIBUS BUDGET RECONCIU-
ATIONACTOF1993. 
(a) IN GENERAL.—Section 196(c) of the 1986 Code is amended 
by striking "and" at the end of paragraph (6), by striking the 
period at the end of paragraph (7), and insert ", and", and by 
adding at the end the following new paragraph: 
"(8) the employer Social Security credit determined under 
section 45B(a).". 
(b) EFFECTIVE DATE.—^The amendment made by this section 
26 use 196 note, 
shall take effect as if included in the amendments made by section 
13443 of the Revenue Reconciliation Act of 1993. 
SEC. 6021. AMENDMENT RELATED TO REVENUE RECONCILIATION ACT 
OF 1990. 
(a) IDENTIFICATION REQUIREMENT FOR INDIVIDUALS ELIGIBLE 
FOR EARNED INCOME CREDIT.—Subparagraph (F) of section 32(c)(1) 
112 STAT. 824 
PUBLIC LAW 105-206—JULY 22, 1998 
of the 1986 Code is amended by striking "The term 'ehgible individ-
ual' does not include any individual who does not include on the 
return of tax for the taxable year—" and inserting "No credit 
shall be allowed under this section to an eligible individual who 
does not include on the return of tax for the taxable year—". 
(b) IDENTIFICATION REQUIREMENT FOR QUALIFYING CHILDREN 
UNDER EARNED INCOME CREDIT.— 
(1) IN GENERAL.—Clause (i) of section 32(c)(3)(D) of the 
1986 Code is amended to read as follows: 
"(i) IN GENERAL.—A qualifying child shall not be 
taken into account under subsection (b) unless the 
taxpayer includes the name, age, and TIN of the 
qualifying child on the return of tax for the taxable 
year.". 
(2) INDIVIDUALS WHO DO NOT INCLUDE TIN, ETC., OF ANY 
QUALIFYING CHILD.—Paragraph (1) of section 32(c) of the 1986 
Code is amended by adding at the end the following new 
subparagraph: 
"(G) INDIVIDUALS WHO DO NOT INCLUDE TIN, ETC., OF 
ANY QUALIFYING CHILD.—No credit shall be allowed under 
this section to any eligible individual who has one or more 
qualifying children if no qualifying child of such individual 
is taken into account under subsection (b) by reason of 
paragraph (3)(D).". 
(3) CONFORMING AMENDMENT.—Subparagraph (A) of section 
32(c)(3) is amended by inserting "and" at the end of clause 
(ii), by striking ", and" at the end of clause (iii) and inserting 
a period, and by striking clause (iv). 
26 u s e 32 note. 
(c) EFFECTIVE DATES.— 
(1) ELIGIBLE INDIVIDUALS.—^The amendment made by sub-
section (a) shall take effect as if included in the amendments 
made by section 451 of the Personal Responsibility and Work 
Opportunity Reconciliation Act of 1996. 
(2) QUALIFYING CHILDREN.—The amendments made by sub-
section (b) shall take effect as if included in the amendments 
made by section 11111 of Revenue Reconciliation Act of 1990. 
SEC. 6022. AMENDMENT RELATED TO TAX REFORM ACT OF 1986. 
(a) IN GENERAL.—Section 6401(b)(1) of the 1986 Code is 
amended by striking "and D" and inserting "D, and G". 
26 use 6401 
(b) EFFECTIVE DATE.—^The amendment made by subsection (a) 
note. 
shall take effect as if included in the amendments made by section 
701(!>) of the Tax Reform Act of 1986. 
SEC. 6023. MISCELLANEOUS CLERICAL AND DEADWOOD CHANGES. 
(1) The heading for subparagraph (B) of section 45A(b)(l) 
of the 1986 Code is amended by striking "TARGETED JOBS 
CREDIT" and inserting "WORK OPPORTUNITY CREDIT". 
(2) The subsection heading for section 59(b) of the 1986 
Code is amended by striking "SECTION 936 CREDIT" and insert-
ing "CREDITS UNDER SECTION 30A OR 936". 
(3) Subsection (n) of section 72 of the 1986 Code is amended 
by inserting "(as in effect on the day before the date of the 
enactment of the Small Business Job Protection Act of 1996)" 
after "section 101(b)(2)(D)". 
(4) Subparagraph (A) of section 72(t)(3) of the 1986 Code 
is amended by striking "(A)(v)," and inserting "(A)(v)". 
. ? 
'^'•^^f^, 
PUBLIC LAW 105-206^JULY 22, 1998 
112 STAT. 825 
(5) Clause (ii) of section 142(f)(3)(A) of the 1986 Code 
is amended by striking "1997, (" and inserting "1997 (". 
(6) The last sentence of paragraph (3) of section 501(n) 
of the 1986 Code is amended by striking "subparagraph (C)(ii)" 
and inserting "subparagraph (E)(ii)". 
(7) Subsection (o) of section 501 of the 1986 Code is 
amended by striking "section 1853(e)" and inserting "section 
1855(d)". 
(8) The heading for subclause (II) of section 512(b)(17)(B)(ii) 
of the 1986 Code is amended by striking "RULE" and inserting 
"RULE". 
(9) Clause (ii) of section 543(d)(5)(A) of the 1986 Code 
is amended by striking "section 563(c)" and inserting "section 
563(d)". 
(10) Subparagraph (B) of section 871(f)(2) of the 1986 Code 
is amended by striking "(19 U.S.C. 2462)" and inserting "19 
U.S.C. 2461 et seq.)". 
(11) Paragraph (2) of section 1017(a) of the 1986 Code 
is amended by striking "(b)(2)(D)" and inserting "(b)(2)(E)". 
(12) Subparagraph (D) of section 1250(d)(4) of the 1986 
Code is amended by striking "the last sentence of section 
1033(b)" and inserting "section 1033(b)(2)". 
(13) Paragraph (5) of section 3121(a) of the 1986 Code 
is amended— 
(A) by striking the semicolon at the end of subpara-
graph (F) and inserting a comma; 
(B) by striking "or" at the end of subparagraph (G); 
and 
(C) by striking the period at the end of subparagraph 
(I) and inserting a semicolon. 
(14) Paragraph (19) of section 3401(a) of the 1986 Code 
is amended by inserting "for" before "any benefit provided to". 
(15) Paragraph (21) of section 3401(a) of the 1986 Code 
is amended by inserting "for" before "any pa5mient made". 
(16) Sections 4092(b) and 6427(q)(2) of the 1986 Code are 
each amended by striking "section 4041(c)(4)" and inserting 
"section 4041(c)(2)". 
(17) Sections 4221(c) and 4222(d) of the 1986 Code are 
each amended by striking "4053(a)(6)" and inserting "4053(6)". 
(18)(A) The heading of section 4973 of the 1986 Code is 
amended to read as follows: 
"SEC. 4973. TAX ON EXCESS CONTRIBUTIONS TO CERTAIN TAX-
FAVORED ACCOUNTS AND ANNUITIES.". 
(B) The item relating to section 4973 in the table of sections 
for chapter 43 of the 1986 Code is amended to read as follows: 
"Sec. 4973. Tax on excess contributions to certain tax-favored accounts and 
annuities.". 
(19) Section 4975 of the 1986 Code is amended— 
(A) in subsection (c)(3) by striking "exempt for the 
tax" and inserting "exempt from the tax"; and 
(B) in subsection (i) by striking "Secretary of Treasury" 
and inserting "Secretary of the Treasury". 
(20) Paragraph (1) of section 6039(a) of the 1986 Code 
is amended by inserting "to any person" after "transfers". 
112 STAT. 826 
PUBLIC LAW 105-206-^JULY 22, 1998 
(21) Subparagraph (A) of section 6050R(b)(2) of the 1986 
Code is amended by striking the semicolon at the end thereof 
and inserting a comma. 
(22) Subparagraph (A) of section 6103(h)(4) of the 1986 
Code is amended by inserting "if" before "the taxpayer is a 
party to". 
(23) Paragraph (5) of section 6416(b) of the 1986 Code 
is amended by striking "section 4216(e)(1)" each place it appears 
and inserting "section 4216(d)(1)". 
(24)(A) Section 6421 of the 1986 Code is amended by 
redesignating subsections (j) and (k) as subsections (i) and 
(j), respectively. 
(B) Subsection (b) of section 34 of the 1986 Code is amended 
by striking "section 642 l(j)" and inserting "section 642 l(i)". 
(C) Subsections (a) and (b) of section 6421 of the 1986 
Code are each amended by striking "subsection (j)" and insert-
ing "subsection (i)". 
(25) Paragraph (3) of section 6427(f) of the 1986 Code 
is amended by striking ", (e),". 
(26)(A) Section 6427 of the 1986 Code, as amended by 
paragraph (16), is amended by redesignating subsections (n), 
(p)j (q). and (r) as subsections (m), (n), (o), and (p), respectively. 
(B) Paragraphs (1) and (2)(A) of section 6427(i) of the 
1986 Code are each amended by striking "(q)" and inserting 
"(o)". 
(27) Subsection (m) of section 6501 of the 1986 Code is 
amended by striking "election under" and all that follows 
through "(or any" and inserting "election under section 30(d)(4), 
40(f), 43, 45B, 45C(d)(4), or 51( j) (or any". 
(28) The paragraph heading of paragraph (2) of section 
7702B(e) of the 1986 Code is amended by inserting "SECTION" 
after "APPLICATION OF". 
(29) Paragraph (3) of section 7434(b) of the 1986 Code 
is amended by striking "attorneys fees" and inserting "attor-
neys' fees". 
(30) Subparagraph (B) of section 7872(f)(2) of the 1986 
Code is amended by striking "foregone" and inserting "forgone". 
(31) Subsection (e) of section 9502 of the 1986 Code is 
amended to read as follows: 
"(e) 
CERTAIN TAXES ON ALCOHOL MIXTURES TO REMAIN IN 
GENERAL FUND.—^For purposes of this section, the amounts which 
would (but for this subsection) be required to be appropriated 
under subparagraphs (A), (C), and (D) of subsection (b)(1) shall 
be reduced by— 
"(1) 0.6 cent per gallon in the case of taxes imposed on 
any mixture at least 10 percent of which is alcohol (as defined 
in section 4081(c)(3)) if any portion of such alcohol is ethanol; 
and 
"(2) 0.67 cent per gallon in the case of fuel used in produc-
ing a mixture described in paragraph (1).". 
Effective date. 
(32) The afoiendments made by this section shall take effect 
26 use 34 note. 
on the date of the enactment of this Act. 
26 u s e 1 note. 
SEC. 6024. EFFECTIVE DATE. 
Except as otherwise provided in this title, the amendments 
made by this title shall take effect as if included in the provisions 
of the Taxpayer Relief Act of 1997 to which they relate. 
PUBLIC LAW 105-206—JULY 22, 1998 
112 STAT. 827 
TITLE VII—REVENUE PROVISIONS 
SEC. 7001. CLARIFICATION OF DEDUCTION FOR DEFERRED COM-
PENSATION. 
(a) IN GENERAL.—Section 404(a) (relating to deduction for con-
tributions of an employer to an employee's trust or annuity plan 
and compensation under a deferred-pajrment plan) is amended by 
adding at the end the following new paragraph: 
"(11) DETERMINATIONS RELATING TO DEFERRED COMPENSA-
TION.—For purposes of determining under this section— 
"(A) whether compensation of an employee is deferred 
compensation; and 
"(B) when deferred compensation is paid, 
no amount shall be treated as received by the employee, or 
paid, until it is actually received by the employee.". 
(b) EFFECTIVE DATE.— 
(1) IN GENERAL.—^The amendment made by subsection (a) 
shall apply to taxable years ending after the date of the enact-
ment of this Act. 
(2) CHANGE IN METHOD OF ACCOUNTING.—In the case of 
any taxpayer required by the amendment made by subsection 
(a) to change its method of accounting for its first taxable 
year ending after the date of the enactment of this Act— 
(A) such change shall be treated as initiated by the 
taxpayer, 
(B) such change shall be treated as made with the 
consent of the Secretary of the Treasury; and 
(C) the net amount of the adjustments required to 
be taken into account by the taxpayer under section 481 
of the Internal Revenue Code of 1986 shall be taken into 
account ratably over the 3-taxable year period beginning 
with such first taxable year. 
SEC. 7002. TERMINATION OF EXCEPTION FOR CERTAIN REAL ESTATE 
INVESTMENT 
TRUSTS 
FROM 
THE 
TREATMENT 
OF 
STAPLED ENTITIES, 
(a) IN GENERAL.—^Notwithstanding paragraph (3) of section 
136(c) of the Tax Reform Act of 1984 (relating to stapled stock; 
stapled entities), the REIT gross income provisions shall be applied 
by treating the activities and gross income of members of the 
stapled REIT group properly allocable to any nonqualified real 
property interest held by the exempt REIT or any stapled entity 
which is a member of such group (or treated under subsection 
(c) as held by such REIT or stapled entity) as the activities and 
gross income of the exempt REIT in the same manner as if the 
exempt REIT and such group were one entity. 
(b) NONQUALIFIED REAL PROPERTY INTEREST.—^For purposes 
of this section— 
(1) IN GENERAL.—^The term "nonqualified real property 
interest" means, with respect to any exempt REIT, any interest 
in real property acquired after March 26, 1998, by the exempt 
REIT or any stapled entity. 
(2) EXCEPTION FOR BINDING CONTRACTS, ETC.—Such term 
shall not include any interest in real property acquired after 
March 26, 1998, by the exempt REIT or any stapled entity 
if— 
26 u s e 404 note. 
Applicability. 
26 u s e 269B 
note. 
Applicability. 
112 STAT. 828 
PUBLIC LAW 105-206-^ULY 22, 1998 
(A) the acquisition is pursuant to a written agreement 
(including a put option, buy-sell agreement, and an agree-
ment relating to a third party default) which was binding 
on such date and at all times thereafter on such REIT 
or stapled entity; or 
(B) the acquisition is described on or before such date 
in a public announcement or in a filing with the Securities 
and Exchange Commission. 
(3) IMPROVEMENTS AND LEASES.— 
(A) IN GENERAL.—Except as otherwise provided in this 
paragraph, the term "nonqualified real property interest" 
shall not include— 
(i) any improvement to land owned or leased by 
the exempt REIT or any member of the stapled REIT 
group; and 
(ii) any repair to, or improvement of, any improve-
ment owned or leased by the exempt REIT or any 
member of the stapled REIT group, 
if such ownership or leasehold interest is a qualified real 
property interest. 
(B) LEASES.—^The term "nonqualified real property 
interest" shall not include— 
(i) any lease of a qualified real property interest 
if such lease is not otherwise such an interest; or 
(ii) any renewal of a lease which is a qualified 
real property interest, 
but only if the rent on any lease referred to in clause 
(i) or any renewal referred to in clause (ii) does not exceed 
an arm's length rate. 
(C) TERMINATION WHERE CHANGE IN USE.— 
(i) IN GENERAL.—Subparagraph (A) shall not apply 
to any improvement placed in service after December 
31, 1999, which is part of a change in the use of 
the property to which such improvement relates unless 
the cost of such improvement does not exceed 200 
percent of— 
(I) the cost of such property; or 
(II) if such property is substituted basis prop-
erty (as defined in section 7701(a)(42) of the 
Internal Revenue Code of 1986), the fair market 
value of the property at the time of acquisition. 
(ii) BINDING CONTRACTS.—^For purposes of clause 
(i), an improvement shall be treated as placed in serv-
ice before January 1, 2000, if such improvement is 
placed in service before January 1, 2004, pursuant 
to a binding contract in effect on December 31, 1999, 
and at all times thereafter. 
(4) EXCEPTION FOR PERMITTED TRANSFERS, ETC.—^The term 
"nonqualified real property interest" shall not include any 
interest in real property acquired solely as a result of a direct 
or indirect contribution, distribution, or other transfer of such 
interest from the exempt REIT or any member of the stapled 
REIT group to such REIT or any such member, but only to 
the extent the aggregate of the interests of the exempt E^IT 
and all stapled entities in such interest in real property (deter-
mined in accordance with subsection (c)(1)) is not increased 
by reason of the transfer. 
PUBLIC LAW 105-206—JULY 22, 1998 
112 STAT. 829 
(5) TREATMENT OF ENTITIES WHICH ARE NOT STAPLED, ETC. 
ON MARCH 26, 1998.—Notwithstanding any other provision of 
this section, all interests in real property held by an exempt 
REIT or any stapled entity with respect to such REIT (or 
treated under subsection (c) as held by such REIT or stapled 
entity) shall be treated as nonqualified real property interests 
unless— 
(A) such stapled entity was a stapled entity with 
respect to such REIT as of March 26, 1998, and at all 
times thereafter; and 
(B) as of March 26, 1998, and at all times thereafter, 
such REIT was a real estate investment trust. 
(6) QUALIFIED REAL PROPERTY INTEREST.—^The term "quali-
fied real property interest" means any interest in real property 
other than a nonqualified real property interest. 
(c) 
TREATMENT OF PROPERTY HELD BY 10-PERCENT 
SUB-
SIDIARIES.—For purposes of this section— 
(1) IN GENERAL.—^Any exempt REIT and any stapled entity 
shall be treated as holding their proportionate shares of each 
interest in real property held by any 10-percent subsidiary 
entity of the exempt REIT or stapled entity, as the case may 
be. 
(2) PROPERTY HELD BY IO-PERCENT SUBSIDIARIES TREATED 
AS NONQUALIFIED.— 
(A) IN GENERAL.—Except as provided in subparagraph 
(B), any interest in real property held by a 10-percent 
subsidiary entity of an exempt REIT or stapled entity 
shall be treated as a nonqualified real property interest. 
(B) EXCEPTION FOR INTERESTS IN REAL PROPERTY HELD 
ON MARCH 26, 1998, ETC.—In the case of an entity which 
was a 10-percent subsidiary entity of an exempt REIT 
or stapled entity on March 26, 1998, and at all times 
thereafter, an interest in real property held by such subsidi-
ary entity shall be treated as a qualified real property 
interest if such interest would be so treated if held or 
acquired directly by the exempt REIT or the stapled entity. 
(3) REDUCTION IN QUALIFIED REAL PROPERTY INTERESTS IF 
INCREASE IN OWNERSHIP OF SUBSIDIARY.—If, after March 26, 
1998, an exempt REIT or stapled entity increases its ownership 
y 
interest in a subsidiary entity to which paragraph (2)(B) applies 
above its ownership interest in such subsidiary entity as of 
such date, the additional portion of each interest in real prop-
erty which is treated as held by the exempt REIT or stapled 
entity by reason of such increased ownership shall be treated 
as a nonqualified real property interest. 
(4) 
SPECIAL RULES FOR DETERMINING OWNERSHIP.—For 
purposes of this subsection— 
(A) percentage ownership of an entity shall be 
determined in accordance with subsection (e)(4); 
(B) interests in the entity which are acquired by an 
exempt REIT or a member of the stapled REIT group 
in any acquisition described in an agreement, announce-
ment, or filing described in subsection (b)(2) shall be treated 
as acquired on March 26, 1998; and 
(C) except as provided in guidance prescribed by the 
Secretary, any change in proportionate ownership which 
is attributable solely to fluctuations in the relative fair 
112 STAT. 830 
PUBLIC LAW 105-206-^ULY 22, 1998 
market values of different classes of stock shall not be 
taken into account. 
(5} TREATMENT OF GO-PERCENT PARTNERSHIPS.— 
(A) IN GENERAL.—If, as of March 26,1998— 
(i) an exempt REIT or stapled entity held directly 
or indirectly at least 60 percent of the capital or profits 
interest in a partnership; and 
(ii) 90 percent or more of the capital interests 
and 90 percent or more of the profits interests in 
such partnership (other than interests held directly 
or indirectly by the exempt REIT or stapled entity) 
are, or will be, redeemable or exchangeable for consid-
eration the amount of which is determined by reference 
to the value of shares of stock in the exempt REIT 
or stapled entity (or both), 
paragraph (3) shall not apply to such partnership, and 
such REIT or entity shall be treated for all purposes of 
this section as holding all of the capital and profits interests 
in such partnership. 
(B) LIMITATION TO ONE PARTNERSHIP.—If, as of January 
1, 1999, more than one partnership owned by any exempt 
REIT or stapled entity meets the requirements of subpara-
graph (A), only the largest such partnership on such date 
(determined by aggregate asset bases) shall be treated 
as meeting such requirements. 
(C) MIRROR ENTITY.—For purposes of subparagraph 
(A), an interest in a partnership formed after March 26, 
1998, shall be treated as held by an exempt REIT or 
stapled entity on March 26, 1998, if such partnership is 
formed to mirror the stapling of an exempt REIT and 
a stapled entity in connection with an acquisition agreed 
to or announced on or before March 26, 1998. 
(d) TREATMENT OF PROPERTY SECURED BY MORTGAGE HELD 
BY EXEMPT REIT OR MEMBER OF STAPLED REIT GROUP.— 
(1) IN GENERAL.—In the case of any nonqualified obligation 
held by an exempt REIT or any member of the stapled REIT 
group, the REIT gross income provisions shall be applied by 
treating the exempt REIT as having impermissible tenant 
service income equal to— 
(A) the interest income from such obligation which 
is properly allocable to the property described in paragraph 
(2); and 
(B) the income of any member of the stapled REIT 
group from services described in paragraph (2) with respect 
to such property. 
If the income referred to in subparagraph (A) or (B) is of 
a 10-percent subsidiary entity, only the portion of such income 
which is properly allocable to the exempt REIT's or the stapled 
entity's interest in the subsidiary entity shall be taken into 
account. 
(2) NONQUALIFIED OBLIGATION.—Except as otherwise pro-
vided in this subsection, the term "nonqualified obligation" 
means any obligation secured by a mortgage on an interest 
in real property if the income of any member of the stapled 
REIT group for services furnished with respect to such property 
PUBLIC LAW 105-206-^JULY 22, 1998 
112 STAT. 831 
would be impermissible tenant service income were such prop-
erty held by the exempt REIT and such services furnished 
by the exempt REIT. 
(3) EXCEPTION FOR CERTAIN MARKET RATE OBLIGATIONS.— 
Such term shall not include any obligation— 
(A) payments under which would be treated as interest 
if received by a REIT; and 
(B) the rate of interest on which does not exceed an 
arm's length rate, 
(4) EXCEPTION FOR EXISTING OBLIGATIONS.—Such term shall 
not include any obligation— 
(A) which is secured on March 26, 1998, by an interest 
in real property; and 
(B) which is held on such date by the exempt REIT 
or any entity which is a member of the stapled REIT 
group on such date and at all times thereafter, 
but only so long as such obligation is secured by such interest, 
and the interest payable on such obligation is not changed 
to a rate which exceeds an arm's length rate unless such 
change is pursuant to the terms of the obligation in effect 
on March 26, 1998. The preceding sentence shall not cease 
to apply by reason of the refinancing of the obligation if (imme-
diately after the refinancing) the principal amount of the obliga-
tion resulting from the refinancing does not exceed the principal 
amount of the refinanced obligation (immediately before the 
refinancing) and the interest payable on such refinanced obliga-
tion does not exceed an arm's length rate. 
(5) TREATMENT OF ENTITIES WHICH ARE NOT STAPLED, ETC. 
ON MARCH 26, 1998.—^A rule similar to the rule of subsection 
(b)(5) shall apply for purposes of this subsection. 
(6) INCREASE IN AMOUNT OF NONQUALIFIED OBLIGATIONS 
IF INCREASE IN OWNERSHIP OF SUBSIDIARY.—^A r u l e s i m i l a r tO 
the rule of subsection (c)(3) shall apply for purposes of this 
subsection. 
(7) COORDINATION WITH SUBSECTION (a).—^This subsection 
shall not apply to the portion of any interest in real property 
that the exempt REIT or stapled entity holds or is treated 
as holding under this section without regard to this subsection, 
(e) DEFINITIONS.—^For purposes of this section— 
(1) REIT GROSS INCOME PROVISIONS.—^The term "REIT 
gross income provisions" means— 
(A) paragraphs (2), (3), and (6) of section 856(c) of 
the Internal Revenue Code of 1986; and 
(B) section 857(b)(5) of such Code. 
(2) EXEMPT REIT.—^The term "exempt REIT" means a real 
estate investment trust to which section 269B of the Internal 
Revenue Code of 1986 does not apply by reason of paragraph 
(3) of section 136(c) of the Tax Reform Act of 1984. 
(3) STAPLED REIT GROUP.—^The term "stapled REIT group" 
means, with respect to an exempt REIT, the group consisting 
of— 
(A) all entities which are stapled entities with respect 
to the exempt REIT; and 
(B) all entities which are 10-percent subsidiary entities 
of the exempt REIT or any such stapled entity. 
(4) 10-PERCENT SUBSIDIARY ENTITY.— 
Applicability. 
Applicability. 
112 STAT. 832 
PUBLIC LAW 105-206—JULY 22, 1998 
(A) IN GENERAL.—^The term "10-percent subsidiary 
entity" means, with respect to any exempt REIT or stapled 
entity, any entity in which the exempt REIT or stapled 
entity (as the case may be) directly or indirectly holds 
at least a 10-percent interest. 
(B) EXCEPTION FOR CERTAIN C CORPORATION SUBSIDI-
ARIES OF REITS.—^A corporation which would, but for this 
subparagraph, be treated as a 10-percent subsidiary of 
an exempt REIT shall not be so treated if such corporation 
is taxable under section 11 of the Internal Revenue Code 
of 1986. 
(C) 
10-PERCENT INTEREST.—^The term 
"10-percent 
interest" means— 
(i) in the case of an interest in a corporation, 
ownership of 10 percent (by vote or value) of the stock 
in such corporation; 
(ii) in the case of an interest in a partnership, 
ownership of 10 percent of the capital or profits interest 
in the partnership; and 
(iii) in any other case, ownership of 10 percent 
of the beneficial interests in the entity. 
(5) OTHER DEFINITIONS.—^Terms used in this section which 
are used in section 269B or section 856 of such Code shall 
have the respective meanings given such terms by such section, 
(f) GUIDANCE.—^The Secretary may prescribe such guidance 
as may be necessary or appropriate to carry out the purposes 
of this section, including guidance to prevent the avoidance of 
such purposes and to prevent the double counting of income. 
Applicability. 
(g) EFFECTIVE DATE.—^This section shall apply to taxable years 
ending after March 26, 1998. 
SEC. 7003. CERTAIN CUSTOMER RECEIVABLES INELIGIBLE FOR MARK 
TO MARKET TREATMENT. 
(a) CERTAIN RECEIVABLES NOT ELIGIBLE FOR MARK TO MAR-
KET.—Section 475(c) (relating to definitions) is amended by adding 
at the end the following new paragraph: 
"(4) SPECIAL RULES FOR CERTAIN RECEIVABLES.— 
"(A) IN GENERAL.—^Paragraph (2)(C) shall not include 
any nonfinancial customer paper. 
"(B) NONFINANCIAL CUSTOMER PAPER.—For purposes 
of subparagraph (A), the term 'nonfinancial customer paper' 
means any receivable which— 
"(i) is a note, bond, debenture, or other evidence 
of indebtedness; 
"(ii) arises out of the sale of nonfinancial goods 
or services by a person the principal activity of which 
is the selling or providing of nonfinancial goods or 
services; and 
"(iii) is held by such person (or a person who 
bears a relationship to such person described in section 
267(b) or 707(b)) at all times since issue.". 
(b) REGULATIONS.—Section 475(g) is amended by striking "and" 
at the end of paragraph (1), by striking the period at the end 
of paragraph (2) and inserting ", and", and by adding at the end 
the following new paragraph: 
"(3) to prevent the use by taxpayers of subsection (c)(4) 
to avoid the application of this section to a receivable that 
•5iM%»-" 
PUBLIC LAW 105-206-^ULY 22, 1998 
112 STAT. 833 
is inventory in the hands of the taxpayer (or a person who 
bears a relationship to the taxpayer described in sections 267(b) 
of 707(b)).". 
(c) EFFECTIVE DATE.— 
26 use 475 note. 
(1) IN GENERAL.—^The amendments made by this section Applicability, 
shall apply to taxable years ending after the date of the enact-
ment of this Act. 
(2) CHANGE IN METHOD OF ACCOUNTING.—In the case of 
any taxpayer required by the amendments made by this section 
to change its method of accounting for its first taxable year 
ending after the date of the enactment of this Act— 
(A) such change shall be treated as initiated by the 
taxpayer; 
(B) such change shall be treated as made with the 
consent of the Secretary of the Treasury; and 
(C) the net amount of the adjustments required to 
be taken into account by the taxpayer under section 481 
of the Internal Revenue Code of 1986 shall be taken into 
account ratably over the 4-taxable-year period beginning 
with such first taxable year. 
SEC. 7004. MODIFICATION OF AGI LIMIT FOR CONVERSIONS TO ROTH 
IRAs. 
(a) IN GENERAL.—Section 408A(c)(3)(C)(i) (relating to limits 
based on modified adjusted gross income) is amended to read as 
follows: 
"(i) adjusted gross income shall be determined in 
the same manner as under section 219(g)(3), except 
t h a t -
'll) any amount included in gross income 
under subsection (d)(3) shall not be taken into 
account; and 
"(II) any amount included in gross income by 
reason of a required distribution under a provision 
described in paragraph (5) shall not be taken into 
account for purposes of subparagraph (B)(i).". 
(b) EFFECTIVE DATE.—^The amendment made by this section Applicability. 
shall apply to taxable years beginning after December 31, 2004. 26USC408A 
note. 
TITLE VIII—IDENTIFICATION OF LIM-
ITED TAX BENEFITS SUBJECT TO 
LINE ITEM VETO 
SEC. 8001. IDENTIFICATION OF LIMITED TAX BENEFITS SUBJECT TO 
LINE ITEM VETO. 
Section 1021(a)(3) of the Congressional Budget and Impound-
ment Control Act of 1974 shall only apply to— 
(1) section 3105 (relating to administrative appeal of 
adverse IRS determination of tax-exempt status of bond issue); 
and 
(2) section 3445(c) (relating to State fish and wildlife 
permits). 
112 STAT. 834 
PUBLIC LAW 105-206-JULY 22, 1998 
TEA 21 
Restoration Act. 
Grants. 
Inter-
governmental 
relations. 
Loans. 
23 u s e 101 note. 
Ante, p. 111. 
Ante, p. 115. 
Ante, p. 118. 
TITLE IX—TECHNICAL CORRECTIONS 
TO TRANSPORTATION EQUITY ACT 
FOR THE 21ST CENTURY 
SEC. 9001. SHORT TITLE. 
This title may be cited as the "TEA 21 Restoration Act". 
SEC. 9002. AUTHORIZATION AND PROGRAM SUBTITLE. 
(a) AUTHORIZATION OF APPROPRIATIONS.—Section 1101(a) of the 
Transportation Equity Act for the 21st Century is amended— 
(1) in paragraph (13)— 
(A) 
by 
striking 
"$1,025,695,000" 
and 
inserting 
"$1,029,583,500"; 
(B) 
by 
striking 
"$1,398,675,000" 
and 
inserting 
"$1,403,977,500"; 
(C) by striking "$1,678,410,000" the first place it 
appears and inserting "$1,684,773,000"; 
(D) by striking "$1,678,410,000" the second place it 
appears and inserting "$1,684,773,000"; 
(E) by striking "$1,771,655,000" the first place it 
appears and inserting "$1,778,371,500"; and 
(F) by striking "$1,771,655,000" the second place it 
appears and inserting "$1,778,371,500"; and 
(2) in paragraph (14)— 
(A) by striking "1998" and inserting "1999"; and 
(B) by inserting before "$5,000,000" the following: 
"$10,000,000 for fiscal year 1998 and". 
(b) OBLIGATION LIMITATIONS.— 
(1) GENERAL LIMITATION.—Section 1102(a) of such Act is 
amended— 
(A) in paragraph (2) by striking "$25,431,000,000" and 
inserting "$25,511,000,000"; 
(B) in paragraph (3) by striking "$26,155,000,000" and 
inserting "$26,245,000,000"; 
(C) in paragraph (4) by striking "$26,651,000,000" and 
inserting "$26,761,000,000"; 
(D) in paragraph (5) by striking "$27,235,000,000" and 
inserting "$27,355,000,000"; and 
(E) in paragraph (6) by striking "$27,681,000,000" and 
inserting "$27,811,000,000". 
(2) TRANSPORTATION RESEARCH PROGRAMS.—Section 1102(e) 
of such Act is amended— 
(A) by striking "3" and inserting "5"; 
(B) by striking "VI" and inserting "V"; and 
(C) by inserting before the period at the end the 
following: "; except that obligation authority made available 
for such programs under such limitations shall remain 
available for a period of 3 fiscal years". 
(3) 
REDISTRIBUTION OF CERTAIN AUTHORIZED FUNDS.— 
Section 1102(f) of such Act is amended by striking "(other 
than the program under section 160 of title 23, United States 
Code)". 
(c) APPORTIONMENTS.—Section 1103 of such Act is amended— 
(1) in subsection (1) by adding at the end the following: 
PUBLIC LAW 105-206-JULY 22, 1998 
112 STAT. 835 
"(5) Section 150 of such title, and the item relating to 
such section in the analysis for chapter 1 of such title, are 
repealed."; 
(2) in subsection (n) by inserting "of title 23, United States 
Code" after "206"; and 
(3) by adding at the end the following: 
"(o) TECHNICAL ADJUSTMENTS.—Section 104 of title 23, United 
States Code, is amended— 
"(1) in subsection (a)(1) (as amended by subsection (a) 
of this section) by striking 'under section 103'; 
"(2) in subsection (b) (as amended by subsection (b) of 
this section)— 
"(A) in paragraph (1)(A) by striking '1999 through 2003' 
and inserting '1998 through 2002'; and 
"(B) in paragraph (4)(B)(i) by striking 'on lanes on 
Interstate System' and all that follows through 'in each 
State' and inserting 'on Interstate System routes open to 
traffic in each State'; and 
"(3) in subsection (e)(2) (as added by subsection (d)(6) of 
this section) by striking '104, 144, or 157' and inserting '104, 
105, or 144'.". 
(d) MINIMUM GUARANTEE.—Section 1104 of such Act is amended Ante, p. 127. 
by adding at the end the following: 
"(c) TECHNICAL ADJUSTMENTS.—Section 105 of title 23, United 
States Code (as amended by subsection (a) of this section), is 
amended— 
"(1) in subsection (a) by adding at the end the following: 
'The minimum amount allocated to a State under this section 
for a fiscal year shall be $1,000,000.'; 
"(2) in subsection (c)(1) by striking *50 percent of; 
"(3) in subsection (c)(1)(A) by inserting '(other than metro-
politan planning, minimum guarantee, high priority projects, 
Appalachian development highway system, and recreational 
trails programs)' after 'subsection (a)'; 
"(4) in subsection (c)(1)(B) by striking 'all States' and 
inserting 'each State'; 
"(5) in subsection (c)(2)— 
"(A) by striking 'apportion' and inserting 'administer'; 
and 
"(B) by striking 'apportioned' and inserting 'adminis-
tered'; and 
"(6) in subsection (f)— 
"(A) by inserting 'percentage' before 'return' each place 
it appears; 
"(B) in paragraph (2) by striking 'for the preceding 
fiscal year was equal to or less than' and inserting 'in 
the table in subsection (b) was equal to'; and 
"(C) in paragraph (3)— 
"(i) by inserting 'proportionately* before 'adjust'; 
"(ii) by striking 'set forth'; and 
"(iii) by striking 'do not exceed' and inserting 'is 
equal to'.". 
(e) REVENUE ALIGNED BUDGET AUTHORITY.—Section 1105 
of 
such Act is amended by adding at the end the following: 
Ante, p. 130. 
"(c) TECHNICAL CORRECTIONS.—Section 110 of such title (as 
amended by subsection (a)) is amended— 
"(1) by striking subsection (a) and inserting the following: 
112 STAT. 836 
PUBLIC LAW 105-206-^JULY 22, 1998 
'(a) IN GENERAL.— 
'(1) ALLOCATION.—On October 15 of fiscal year 2000 and 
each fiscal year thereafter, the Secretary shall allocate for 
such fiscal year an amount of funds equal to the amount 
determined pursuant to section 251(b)(l)(B)(ii)(I)(cc) of the Bal-
anced Budget and Emergency Deficit Control Act of 1985 (2 
U.S.C 901(b)(2)(B)(ii)(I)(cc)) if the amount determined pursuant 
to such section for such fiscal year is greater than zero. 
'(2) REDUCTION.—If the amount determined pursuant to 
section 251(b)(l)(B)(ii)(I)(cc) of the Balanced Budget and Emer-
gency Deficit Control Act of 1985 (2 U.S.C 901(b)(2)(B)(ii)(I)(cc)) 
for fiscal year 2000 or any fiscal year thereafter is less than 
zero, the Secretary on October 1 of the succeeding fiscal year 
shall reduce proportionately the amount of sums authorized 
to be appropriated from the Highway Trust Fund (other than 
the Mass Transit Account) to carry out each of the Federal-
aid highway and highway safety construction programs (other 
than emergency relief) by an aggregate amount equal to the 
amount determined pursuant to such section.'; 
"(2) in subsections (b)(2) and (b)(4) by striking 'subsection 
(a)' and inserting 'subsection (a)(1)*; and 
"(3) in subsection (c) by striking 'Maintenance program, 
the' and inserting 'and'.". 
(f) INTERSTATE MAINTENANCE PROGRAM.—Section 1107 of such 
Ante, p. 137. 
Act is amended by adding at the end the following: 
"(d) TECHNICAL AMENDMENTS.—Section 119 of such title (as 
amended by subsection (a)) is amended— 
"(1) in subsection (b)— 
"(A) by striking '104(b)(5)(B)' and inserting '104(b)(4)'; 
and 
"(B) by striking '104(b)(5)(A)' each place it appears 
and inserting '104(b)(5)(A) (as in effect on the date before 
the date of enactment of the Transportation Equity Act 
for the 21st Century)'; and 
"(2) in subsection (c) by striking '104(b)(5)(B)' each place 
it appears and inserting '104(b)(4)'.". 
(g) CONGESTION MITIGATION AND AIR QUALITY IMPROVEMENT 
Ante, p. 142. 
PROGRAM.—Section 1110(d)(2) of such Act is amended— 
(1) by striking " 149(c)" and inserting " 149(e)"; and 
(2) by striking "that reduce" and inserting "reduce". 
(h) HIGHWAY USE TAX EVASION PROJECTS.—Section 1114 
of 
Ante, p. 152. 
such Act is amended by adding at the end the following: 
"(c) TECHNICAL ADJUSTMENTS.—Section 143 of title 23, United 
States Code (as amended by subsection (a) of this section), is 
amended— 
"(1) in subsection (c)(1) by striking 'April 1' and inserting 
'August 1'; 
"(2) in subsection (c)(3) by inserting 'PRIORITY' after 
'FUNDING'; and 
"(3) in subsection (c)(3) by inserting 'and prior to funding 
any other activity under this section,' after '2003,'.". 
(i) FEDERAL LANDS HIGHWAYS PROGRAM.—Section 1115 of the 
Ante, p. 154. 
Transportation Equity Act for the 21st Century is amended by 
adding at the end the following: 
"(f) CONFORMING AMENDMENTS.— 
"(1) FEDERAL SHARE.—Subsections (j) and (k) of section 
120 of title 23, United States Code (as added by subsection 
'V%*^= 
PUBLIC LAW 105-206-^JULY 22, 1998 
112 STAT. 837 
(a) of this section), are redesignated as subsections (k) and 
(1), respectively. 
"(2) RESERVATION OF FUNDS.—Section 202(d)(4)(B) of such 
title (as added by subsection (b)(4) of this section) is amended 
by striking 'to, apply sodium acetate/formate de-icer to,' and 
inserting ', sodium acetate/formate, or other environmentally 
acceptable, minimally corrosive anti-icing and de-icing composi-
tions'. 
"(3) 
ELIMINATION OF DUPLICATIVE 
PROVISION.—Section 
144(g) of such title is amended by striking paragraph (4).". 
(j) WooDROW WILSON MEMORIAL BRIDGE CORRECTION.—Section 
1116 of such Act is amended by adding at the end the following: Ante, p. 158. 
"(e) 
TECHNICAL 
CORRECTION.—Sections 
404(5) 
and 
407(c)(2)(C)(iii) of such Act (as amended by subsections (a)(2) and 
(b)(2), respectively) are amended by striking 'the record of decision' 
each place it appears and inserting *a record of decision'.". 
(k) TECHNICAL CORRECTION.—Section 1117 of such Act is Ante, p. 160. 
amended in subsections (a) and (b) by striking "section 102" each 
place it appears and inserting "section 1101(a)(6)". 
SEC. 9003. RESTORATIONS TO GENERAL PROVISIONS SUBTITLE. 
(a) IN GENERAL.—Subtitle B of title I of the Transportation 
Equity Act for the 21st Century is amended by adding at the Ante, p. 164. 
end the following: 
"SEC. 1224. NATIONAL HISTORIC COVERED BRIDGE PRESERVATION. 
"(a) HISTORIC COVERED BRIDGE DEFINED.—In this section, the 
term 'historic covered bridge' means a covered bridge that is listed 
or eligible for listing on the National Register of Historic Places. 
"(b) HISTORIC COVERED BRIDGE PRESERVATION.—Subject to the 
availability of appropriations under subsection (d), the Secretary 
shall— 
"(1) collect and disseminate information concerning historic 
covered bridges; 
"(2) foster educational programs relating to the history 
and construction techniques of historic covered bridges; 
"(3) conduct research on the history of historic covered 
bridges; and 
"(4) conduct research, and study techniques, on protecting 
historic covered bridges from rot, fire, natural disasters, or 
weight-related damage. 
"(c) DIRECT FEDERAL ASSISTANCE.— 
"(1) IN GENERAL.—Subject to the availability of appropria-
tions, the Secretary shall make a grant to a State that submits 
an application to the Secretary that demonstrates a need for 
assistance in carrying out 1 or more historic covered bridge 
projects described in paragraph (2). 
"(2) TYPES OF PROJECT.—^A grant under paragraph (1) may 
be made for a project— 
"(A) to rehabilitate or repair a historic covered bridge; 
and 
"(B) to preserve a historic covered bridge, including 
through— 
"(i) installation of a fire protection system, includ-
ing a fireproofing or fire detection system and sprin-
klers; 
"(ii) installation of a system to prevent vandalism 
and arson; or 
112 STAT. 838 
PUBLIC LAW 105-206-^JULY 22, 1998 
District of 
Columbia. 
"(iii) relocation of a bridge to a preservation site. 
"(3) AUTHENTICITY.—A grant under paragraph (1) may be 
made for a project only if— 
"(A) to the maximum extent practicable, the project— 
"(i) is carried out in the most historically appro-
priate manner; and 
"(ii) preserves the existing structure of the historic 
covered bridge; and 
"(B) the project provides for the replacement of wooden 
components with wooden components, unless the use of 
wood is impracticable for safety reasons. 
"(4) FEDERAL SHARE.—The Federal share of the cost of 
a project carried out with a grant under this subsection shall 
be 80 percent. 
"(d) FUNDING.—There is authorized to be appropriated to carry 
out this section $10,000,000 for each of fiscal years 1999 through 
2003. Such funds shall remain available until expended. 
"SEC. 1225. SUBSTITUTE PROJECT. 
"(a) APPROVAL OF PROJECT.—Notwithstanding any other provi-
sion of law, upon the request of the Mayor of the District of 
Columbia, the Secretary may approve substitute highway and tran-
sit projects under section 103(e)(4) of title 23, United States Code 
(as in effect on the day before the date of enactment of this Act), 
in lieu of construction of the Barney Circle Freeway project in 
the District of Columbia, as identified in the 1991 Interstate Cost 
Estimate. 
"(b) ELIGIBILITY FOR FEDERAL ASSISTANCE.—Upon approval of 
any substitute project or projects under subsection (a)— 
"(1) the cost of construction of the Barney Circle Freeway 
Modification project shall not be eligible for funds authorized 
under section 108(b) of the Federal-Aid Highway Act of 1956; 
and 
"(2) substitute projects approved pursuant to this section 
shall be funded from interstate construction funds apportioned 
or allocated to the District of Columbia that are not expended 
and not subject to lapse on the date of enactment of this 
Act. 
"(c) FEDERAL SHARE.—^The Federal share payable on account 
of a project or activity approved under this section shall be 85 
percent of the cost thereof; except that the exception set forth 
in section 120(b)(2) of title 23, United States Code, shall apply. 
"(d) 
LIMITATION 
ON 
ELIGIBILITY.—^Any substitute 
project 
approved pursuant to subsection (a) (for which the Secretary finds 
that sufficient Federal funds are available) must be under contract 
for construction, or construction must have commenced, before the 
last day of the 4-year period beginning on the date of enactment 
of this Act. If the substitute project is not under contract for 
construction, or construction has not commenced, by such last day, 
the Secretary shall withdraw approval of the substitute project. 
"SEC. 1226. FISCAL, ADMINISTRATIVE, AND OTHER AMENDMENTS. 
"(a) ADVANCED CONSTRUCTION.—Section 115 of title 23, United 
States Code, is amended— 
"(1) in subsection (b)— 
"(A) by moving the text of paragraph (1) (including 
subparagraphs (A) and (B)) 2 ems to the left; 
PUBLIC LAW 105-206—JULY 22, 1998 
112 STAT. 839 
"(B) by striking 'PROJECTS' and all that follows through 
'When a State' and inserting 'PROJECTS.—^When a State'; 
"(C) by striking paragraphs (2) and (3); 
"(D) by striking '(A) prior' and inserting '(1) prior'; 
and 
"(E) by striking '(B) the project' and inserting '(2) the 
project'; 
"(2) by striking subsection (c); and 
"(3) by redesignating subsection (d) as subsection (c). 
"(b) AVAILABILITY OF FUNDS.—Section 118 of such title is 
amended— 
"(1) in the subsection heading of subsection (b) by striking 
'; DISCRETIONARY PROJECTS'; and 
"(2) by striking subsection (e) and inserting the following: 
'(e) EFFECT OF RELEASE OF FUNDS.—^Any Federal-aid highway 
funds released by the final pa5anent on a project, or by the modifica-
tion of the project agreement, shall be credited to the same program 
funding category previously apportioned to the State and shall 
be immediately available for expenditure.'.". 
"(c) ADVANCES TO STATES.—Section 124 of such title is 
amended— 
"(1) by striking '(a)' the first place it appears; and 
"(2) by striking subsection (b). 
"(d) DIVERSION.—Section 126 of such title, and the item relating 
to such section in the analysis for chapter 1 of such title, are 
repealed.". 
(b) CONFORMING AMENDMENT.—^The table of contents contained 
in section Kb) of such Act is amended by inserting after the item 
relating to section 1222 the following: 
"Sec. 1223. Transportation assistance for Olympic cities. 
"Sec. 1224. National historic covered bridge preservation. 
"Sec. 1225. Substitute project. 
"Sec. 1226. Fiscal, administrative, and other amendments.". 
(c) METROPOLITAN PLANNING TECHNICAL ADJUSTMENT.—Section 
1203 of such Act is amended by adding at the end the following: Ante, p. 170. 
"(o) TECHNICAL ADJUSTMENT.—Section 134(h)(5)(A) of title 23, 
United States Code (as amended by subsection (h) of this section), 
is amended by striking 'for implementation'.". 
(d) AMENDMENTS TO PRIOR SURFACE TRANSPORTATION LAWS.— 
Section 1211 of such Act is amended— 
Ante, p. 188. 
(1) in subsection (i)(3)(E) by striking "subparagraph (D)" 
and inserting "subparagraph (C)"; 
(2) in subsection (i) by adding at the end the following: 
"(4) TECHNICAL AMENDMENTS.—Section 1105(e)(5)(B)(i) of 
such Act (as amended by paragraph (3) of this subsection) 
is amended— 
"(A) by striking 'subsection (c)(18)(B)(i)' and inserting 
'subsection (c)(18)(D)(i)'; 
"(B) by striking 'subsection (c)(18)(B)(ii)' and inserting 
'subsection (c)(18)(D)(ii)'; and 
"(C) by adding at the end the following: 'The portion 
of the route referred to in subsection (c)(36) is designated 
as Interstate Route 1-86.'."; 
/ 
(3) by striking subsection (j); 
(4) in subsection (k)— 
(A) by striking "along" in paragraph (1) and inserting 
"from"; and 
59-194 O - 98 - 28: QL 3 Part 1 
112 STAT. 840 
PUBLIC LAW 105-206-JULY 22, 1998 
(B) by adding at the end the following: 
"(4) TEXAS STATE HIGHWAY 99.—^Texas State Highway 99 
(also known as 'Grand Parkway') shall be considered as one 
option in the 1-69 route studies performed by the Texas Depart-
ment of Transportation for the designation of 1-69 Bypass 
in Houston, Texas."; and 
(5) by redesignating subsections (g) through (i) and (k) 
through (n) as subsections (f) through (h) and (i) through 
(1), respectively. 
Ante, p. 193. 
(e) MISCELLANEOUS.—Section 1212 of such Act is amended— 
(1) in the second sentence of subsection (q)(l) by striking 
"advance curriculum" and inserting "advanced curriculum"; 
(2) in subsection (r)— 
(A) by redesignating paragraph (2) as paragraph (3); 
and 
(B) by inserting after paragraph (1) the following: 
"(2) 
AUTHORIZATION 
OF APPROPRIATIONS.—^There 
are 
authorized to be appropriated from the Highway Trust Fund 
(other than the Mass Transit Account) to carry out paragraph 
(1) $2,000,000 for fiscal year 1999 and $2,500,000 for fiscal 
year 2000."; 
(3) in subsection (s)— 
(A) by redesignating paragraph (2) as paragraph (3); 
and 
(B) by inserting after paragraph (1) the following: 
"(2) AUTHORIZATION OF APPROPRIATIONS.—^There is author-
ized to be appropriated from the Highway Trust Fund (other 
than the Mass Transit Account) to carry out paragraph (1) 
$23,000,000 for fiscal year 1999."; 
(4) in subsection (u)— 
(A) by inserting "the Secretary shall approve, and" 
before "the Commonwealth"; 
(B) by inserting a comma after "with"; and 
(C) by inserting "(as redefined by this Act)" after "80"; 
and 
(5) by redesignating subsections (k) through (z) as sub-
sections (e) through (t), respectively. 
(f) PUERTO RICO HIGHWAY PROGRAM.—Section 1214(r) of the 
Ante, p. 204. 
Transportation Equity Act for the 21st Century is amended by 
adding at the end the following: 
"(3) TREATMENT OF FUNDS.—^Amounts made available to 
carry out this subsection for a fiscal year shall be administered 
as follows: 
"(A) For purposes of this subsection, such amounts 
shall be treated as being apportioned to Puerto Rico under 
sections 104(b), 144, and 206 of title 23, United States 
Code, for each program funded under such sections in 
an amount determined by multiplying— 
"(i) the aggregate of such amounts for the fiscal 
year; by 
"(ii) the ratio that— 
"(I) the amount of funds apportioned to Puerto 
Rico for each such program for fiscal year 1997; 
bears to 
"(II) the total amount of funds apportioned 
to Puerto Rico for all such programs for fiscal 
year 1997. 
PUBLIC LAW 105-206-JULY 22, 1998 
112 STAT. 841 
"(B) The amounts treated as being apportioned to 
Puerto Rico under each section referred to in subparagraph 
(A) shall be deemed to be required to be apportioned to 
Puerto Rico under such section for purposes of the imp|0si-
-^ 
tion of any penalty provisions in titles 23 and 49, United 
States Code. 
"(C) Subject to subparagraph (B), nothing in this sub-
section shall be construed as affecting any allocation under 
section 105 of title 23, United States Code, and any appor-
tionment under sections 104 and 144 of such title.", 
(g) DESIGNATED TRANSPORTATION ENHANCEMENT ACTIVITIES.— 
Section 1215 of such Act— 
Ante, p. 209. 
(1) is amended in each of subsections (d), (e), (f), 
and (g)— 
(A) by redesignating paragraph (2) as paragraph (3); 
and 
(B) by inserting after paragraph (1) the following: 
"(2) 
AUTHORIZATION 
OF 
APPROPRIATIONS.—There 
are 
authorized to be appropriated from the Highway Trust Fund 
(other than the Mass Transit Account) to carry out paragraph 
(1) the amounts specified in such paragraph for the fiscal 
years specified in such paragraph."; and 
(2) in subsection (d)(1) by inserting "on Route 50" after 
"measures". 
(h) ELIGIBILITY.—Section 1217 of such Act is amended— 
Ante, p. 214. 
(1) in subsection (d) by striking "104(b)(4)" and inserting 
^ 
"104(b)(5)(A)"; 
(2) in subsection (i) by striking "120(1)(1)" and inserting 
"120(j)(l)";and 
(3) in subsection (j) by adding at the end the following: 
"$3,000,000 of the amounts made available for item 164 of 
the table contained in section 1602 shall be made available 
on October 1, 1998, to the Pennsylvania Turnpike Commission 
to carry out this subsection.". 
(i) 
MAGNETIC 
LEVITATION 
TRANSPORTATION 
TECHNOLOGY 
DEPLOYMENT PROGRAM.—Section 1218 of such Act is amended by Ante, p. 216. 
adding at the end the following: 
"(c) TECHNICAL AMENDMENTS.—Section 322 of title 23, United 
States Code (as added by subsection (a) of this section), is 
amended— 
"(1) in subsection (a)(3) by striking 'or under 50 miles 
per hour*; 
"(2) in subsection (d)— 
"(A) in paragraph (1) by striking 'or low-speed'; and 
"(B) in paragraph (2)— 
"(i) in subparagraph (A) by striking '(h)(1)(A)' and 
inserting '(h)( 1)'; and 
"(ii) in subparagraph (B) by striking '(h)(4)' and 
inserting'(h)(3)'; 
"(3) in subsection (h)(l)(B)(i) by inserting '(other than 
subsection (i))' after 'this section'; and 
"(4) by adding at the end the following: 
'(i) LOW-SPEED PROJECT.— 
'(1) IN GENERAL.—Notwithstanding any other provision of 
this section, of the fiinds made available by subsection (h)(1)(A) 
to carry out this section, $5,000,000 shall be made available 
112 STAT. 842 
PUBLIC LAW 105-206-JULY 22, 1998 
Ante, p. 224. 
Ante, p. 225. 
to the Secretary to make grants for the research and develop-
ment of low-speed superconductivity magnetic levitation tech-
nology for public transportation purposes in urban areas to 
demonstrate energy efficiency, congestion mitigation, and safety 
benefits. 
'(2) NONCONTRACT AUTHORITY AUTHORIZATION OF APPRO-
PRIATIONS.— 
'(A) IN GENERAL.—^There are authorized to be appro-
priated from the Highway Trust Fund (other than the 
Mass Transit Account) to carry out this subsection such 
sums as are necessary for each of fiscal years 2000 through 
2003. 
'(B) AVAILABILITY.—^Notwithstanding section 118(a), 
funds made available under subparagraph (A)— 
'(i) shall not be available in advance of an annual 
appropriation; and 
'(ii) shall remain available until expended.'.". 
(j) TRANSPORTATION ASSISTANCE FOR OLYMPIC CITIES.—Section 
1223(f) of such Act is amended by inserting before the period 
at the end the following: "or Special Olympics International". 
SEC. 9004. RESTORATIONS TO PROGRAM STREAMLINING AND FLEXI-
BIUTY SUBTITLE. 
(a) IN GENERAL.—Subtitle C of title I of the Transportation 
Equity Act for the 21st Century is amended by adding at the 
end the following: 
"SEC. 1311. DISCRETIONARY GRANT SELECTION CRITERIA AND 
PROCESS. 
"(a) ESTABLISHMENT OF CRITERIA.—^The Secretary shall estab-
lish criteria for all discretionary programs funded from the Highway 
Trust Fund (other than the Mass Transit Account). To the extent 
practicable, such criteria shall conform to the Executive Order 
No. 12893 (relating to infrastructure investment). 
"(b) SELECTION PROCESS.— 
PubUcation. 
"(1) LIMITATION ON ACCEPTANCE OF APPLICATIONS.—Before 
accepting applications for grants under any discretionary pro-
gram for which funds are authorized to be appropriated from 
the Highway Trust Fund (other than the Mass Transit Account) 
by this Act (including the amendments made by this Act), 
the Secretary shall publish the criteria established under sub-
section (a). Such publication shall identify all statutory criteria 
and any criteria established by regulation that will apply to 
the program. 
Records. 
"(2) EXPLANATION.—^Not less often than quarterly, the Sec-
retary shall submit to the Committee on Environment and 
Public Works of the Senate and the Committee on Transpor-
tation and Infrastructure of the House of Representatives a 
list of the projects selected under discretionary programs funded 
from the Highway Trust Fund (other than the Mass Transit 
Account) and an explanation of how the projects were selected 
based on the criteria established under subsection (a). 
Applicability. 
"(c) MINIMUM COVERED PROGRAMS.—At a minimum, the criteria 
established under subsection (a) and the selection process estab-
lished by subsection (b) shall apply to the following programs: 
"(1) The intelligent transportation system deplo3mient pro-
gram under title V. 
PUBLIC LAW 105-206^JULY 22, 1998 
112 STAT. 843 
"(2) The national corridor planning and development 
program. 
"(3) The coordinated border infrastructure and safety 
program. 
"(4) The construction of ferry boats and ferry terminal 
facilities. 
"(5) The national scenic byways program. 
^ 
"(6) The Interstate discretionary program. 
"(7) The discretionary bridge program.". 
(b) CONFORMING AMENDMENTS.—^The table of contents con-
tained in section 1(b) of such Act is amended— 
Ante, p. 107. 
(1) by striking the following: 
"Sec. 1309. Major investment study integration.". 
and inserting the following: 
"Sec. 1308. Major investment study integration."; 
and 
(2) by inserting after the item relating to section 1310 
the following: 
"Sec. 1311. Discretionary grant selection criteria and process.". 
(c) REVIEW PROCESS.—Section 1309 of the Transportation 
Equity Act for the 21st Century is amended— 
Ante, p. 232. 
(1) in subsection (a)( 1) by inserting after "highway construc-
tion" the following: "and mass transit"; 
(2) in subsection (d) by inserting after "Code," the following: 
"or chapter 53 of title 49, United States Code,"; and 
(3) in subsection (e)( 1)— 
(A) by inserting "or recipient" after "a State"; 
(B) by inserting after "provide funds" the following: 
"for a highway project"; and 
(C) by inserting after "Code," the following: "or for 
a mass transit project made available under chapter 53 
of title 49, United States Code,". 
SEC. 9005. RESTORATIONS TO SAFETY SUBTITLE. 
(a) IN GENERAL.—Subtitle D of title I of the Transportation 
Equity Act for the 21st Century is amended by adding at the Ante, p. 235. 
end the following: 
"SEC. 1405. OPEN CONTAINER LAWS. 
"(a) ESTABLISHMENT.—Chapter 1 of title 23, United States Code, 
is amended by inserting after section 153 the following: 
*§ 154. Open container requirements 
*(a) DEFINITIONS.—In this section, the following definitions 
apply: 
*(1) ALCOHOLIC BEVERAGE.—The term "alcoholic beverage" 
has the meaning given the term in section 158(c). 
*(2) MOTOR VEHiCLE.^The term "motor vehicle" means a 
vehicle driven or drawn by mechanical power and manufactured 
primarily for use on public highways, but does not include 
a vehicle operated exclusively on a rail or rails. 
*(3) OPEN ALCOHOLIC BEVERAGE CONTAINER.—The term 
"open alcoholic beverage container" means any bottle, can, or 
other receptacle— 
XA) that contains any amount of alcoholic beverage; 
and 
112 STAT. 844 
PUBLIC LAW 105-206-^JULY 22, 1998 
Regulation. 
Effective dates. 
Effective date. 
*(B)(i) that is open or has a broken seal; or 
'(ii) the contents of which are partially removed. 
*(4) PASSENGER AREA.—The term "passenger area" shall 
have the meaning given the term by the Secretary by regula-
tion. 
*(b) OPEN CONTAINER LAWS.— 
*(1) IN GENERAL.—For the purposes of this section, each 
State shall have in effect a law that prohibits the possession 
of any open alcoholic beverage container, or the consumption 
of any alcoholic beverage, in the passenger area of any motor 
vehicle (including possession or consumption by the driver of 
the vehicle) located on a public highway, or the right-of-way 
of a public highway, in the State. 
'(2) MOTOR VEHICLES DESIGNED TO TRANSPORT MANY PAS-
SENGERS.—For the purposes of this section, if a State has 
in effect a law that makes unlawful the possession of any 
open alcoholic beverage container by the driver (but not by 
a passenger)— 
*(A) in the passenger area of a motor vehicle designed, 
maintained, or used primarily for the transportation of 
persons for compensation; or 
*(B) in the living quarters of a house coach or house 
trailer, 
the State shall be deemed to have in effect a law described 
in this subsection with respect to such a motor vehicle for 
each fiscal year during which the law is in effect. 
'(c) TRANSFER OF FUNDS.— 
*(1) FISCAL YEARS 2001 AND 2002.—On October 1, 2000, and 
October 1, 2001, if a State has not enacted or is not enforcing 
an open container law described in subsection (b), the Secretary 
shall transfer an amount equal to IV2 percent of the funds 
apportioned to the State on that date under each of paragraphs 
(1), (3), and (4) of section 104(b) to the apportionment of the 
State under section 402— 
'(A) to be used for alcohol-impaired driving counter-
measures; or 
'(B) to be directed to State and local law enforcement 
agencies for enforcement of laws prohibiting driving while 
intoxicated or driving under the influence and other related 
laws (including regulations), including the purchase of 
equipment, the training of officers, and the use of additional 
personnel for specific alcohol-impaired driving counter-
measures, dedicated to enforcement of the laws (including 
regulations). 
'(2) FISCAL YEAR 2003 AND FISCAL YEARS THEREAFTER.— 
On October 1, 2002, and each October 1 thereafter, if a State 
has not enacted or is not enforcing an open container law 
described in subsection (b), the Secretary shall transfer an 
amount equal to 3 percent of the funds apportioned to the 
State on that date under each of paragraphs (1), (3), and 
(4) of section 104(b) to the apportionment of the State under 
section 402 to be used or directed as described in subparagraph 
(A) or (B) of paragraph (1). 
'(3) USE FOR HAZARD ELIMINATION PROGRAM.—^A State may 
elect to use all or a portion of the funds transferred under 
paragraph (1) or (2) for activities eligible under section 152. 
PUBLIC LAW 105-206-^ULY 22, 1998 
112 STAT. 845 
'(4) FEDERAL SHARE.—^The Federal share of the cost of 
a project carried out with funds transferred under paragraph 
(1) or (2), or used under paragraph (3), shall be 100 percent. 
'(5) DERIVATION OF AMOUNT TO BE TRANSFERRED.—The 
amount to be transferred under paragraph (1) or (2) may be 
derived from one or more of the following: 
*(A) The apportionment of the State under section 
104(b)(1). 
f 
'(B) The apportionment of the State under section 
104(b)(3). 
'(C) The apportionment of the State under section 
104(b)(4). 
'(6) TRANSFER OF OBLIGATION AUTHORITY.— 
'(A) IN GENERAL.—^If the Secretary transfers under this 
subsection any funds to the apportionment of a State under 
section 402 for a fiscal year, the Secretary shall transfer 
an amount, determined under subparagraph (B), of obliga-
tion authority distributed for the fiscal year to the State 
for Federal-aid highways and highway safety construction 
programs for carrying out projects under section 402. 
'(B) AMOUNT.—^The amount of obligation authority 
referred to in subparagraph (A) shall be determined by 
multiplying— 
'(i) the amount of funds transferred under subpara-
graph (A) to the apportionment of the State under 
section 402 for the fiscal year, by 
'(ii) the ratio that— 
*(I) the 
amount 
of obligation 
authority 
distributed for the fiscal year to the State for Fed-
eral-aid highways and highway safety construction 
programs, bears to 
*(II) the total of the sums apportioned to the 
State for Federal-aid highways and highway safety 
construction programs (excluding sums not subject 
to any obligation limitation) for the fiscal year. 
'(7) 
LIMITATION 
ON 
APPLICABILITY 
OF 
OBLIGATION 
LIMITATION.—^Notwithstanding any other provision of law, no 
limitation on the total of obligations for highway safety pro-
grams under section 402 shall apply to funds transferred under 
this subsection to the apportionment of a State under such 
section.'. 
"(b) CONFORMING AMENDMENT.—^The analysis for chapter 1 of 
such title is amended by inserting after the item relating to section 
153 the following: 
'154. Open container requirements.'. 
"SEC. 1406. MINIMUM PENALTIES FOR REPEAT OFFENDERS FOR DRIV-
ING 
WHILE INTOXICATED OR DRIVING UNDER THE 
INFLUENCE. 
"(a) IN GENERAL.—Chapter 1 of title 23, United States Code, 
is amended by adding at the end the following: 
*§164. Minimum penalties for repeat offenders for driving 
while intoxicated or driving under the influence 
'(a) DEFINITIONS.—^In this section, the following definitions 
apply: 
112 STAT. 846 
PUBLIC LAW 105-206-JULY 22, 1998 
Effective dates. 
*(1) ALCOHOL CONCENTRATION.—The term "alcohol con-
centration" means grams of alcohol per 100 milliliters of blood 
or grams of alcohol per 210 liters of breath. 
'(2) 
DRIVING WHILE INTOXICATED; DRIVING UNDER THE 
INFLUENCE.—^The terms "driving while intoxicated" and "driving 
under the influence" mean driving or being in actual physical 
control of a motor vehicle while having an alcohol concentration 
above the permitted limit as established by each State. 
'(3) LICENSE SUSPENSION.—The term "license suspension" 
means the suspension of all driving privileges. 
'(4) MOTOR VEHICLE.—^The term "motor vehicle" means a 
vehicle driven or drawn by mechanical power and manufactured 
primarily for use on public highways, but does not include 
a vehicle operated solely on a rail line or a commercial vehicle. 
*(5) REPEAT INTOXICATED DRIVER LAW.—The term "repeat 
intoxicated driver law" means a State law that provides, as 
a minimum penalty, that an individual convicted of a second 
or subsequent offense for driving while intoxicated or driving 
under the influence after a previous conviction for that offense 
shall— 
'(A) receive a driver's license suspension for not less 
than 1 year; 
*(B) be subject to the impoundment or immobilization 
of each of the individual's motor vehicles or the installation 
of an ignition interlock system on each of the motor 
vehicles; 
*(C) receive an assessment of the individual's degree 
of abuse of alcohol and treatment as appropriate; and 
*(D) receive— 
*(i) in the case of the second offense— 
*(I) an assignment of not less than 30 days 
of community service; or 
'(II) not less than 5 days of imprisonment; 
and 
*(ii) in the case of the third or subsequent offense— 
*(I) an assignment of not less than 60 days 
ofcommunity service; or 
'(II) not less than 10 days of imprisonment. 
'(b) TRANSFER OF FUNDS.— 
'(1) FISCAL YEARS 2001 AND 2002.—On October 1, 2000, and 
October 1, 2001, if a State has not enacted or is not enforcing 
a repeat intoxicated driver law, the Secretary shall transfer 
an amount equal to 1^2 percent of the funds apportioned to 
the State on that date under each of paragraphs (1), (3), and 
(4) of section 104(b) to the apportionment of the State under 
section 402— 
'(A) to be used for alcohol-impaired driving counter-
measures; or 
*(B) to be directed to State and local law enforcement 
agencies for enforcement of laws prohibiting driving while 
intoxicated or driving under the influence and other related 
laws (including regulations), including the purchase of 
equipment, the training of officers, and the use of additional 
personnel for specific alcohol-impaired driving counter-
measures, dedicated to enforcement of the laws (including 
regulations). 
PUBLIC LAW 105-206-^ULY 22, 1998 
112 STAT. 847 
X2) FISCAL YEAR 2003 AND FISCAL YEARS THEREAFTER.— Effective date. 
On October 1, 2002, and each October 1 thereafter, if a State 
has not enacted or is not enforcing a repeat intoxicated driver 
law, the Secretary shall transfer an amount equal to 3 percent 
of the funds apportioned to the State on that date under each 
of paragraphs (1), (3), and (4) of section 104(b) to the apportion-
ment of the State under section 402 to be used or directed 
as described in subparagraph (A) or (B) of paragraph (1). 
'(3) USE FOR HAZARD ELIMINATION PROGRAM.—A State may 
elect to use all or a portion of the funds transferred under 
paragraph (1) or (2) for activities eligible under section 152. 
'(4) FEDERAL SHARE.—The Federal share of the cost of 
a project carried out with funds transferred under paragraph 
(1) or (2), or used under paragraph (3), shall be 100 percent. 
'(5) 
DERIVATION OF AMOUNT TO BE TRANSFERRED.—The 
amount to be transferred under paragraph (1) or (2) may be 
derived from one or more of the following: 
'(A) The apportionment of the State under section 
104(b)(1). 
'(B) The apportionment of the State under section 
104(b)(3). 
*(C) The apportionment of the State under section 
104(b)(4). 
*(6) TRANSFER OF OBLIGATION AUTHORITY.— 
'(A) IN GENERAL.—If the Secretary transfers under this 
subsection any fiinds to the apportionment of a State under 
section 402 for a fiscal year, the Secretary shall transfer 
an amount, determined under subparagraph (B), of obliga-
tion authority distributed for the fiscal year to the State 
for Federal-aid highways and highway safety construction 
programs for carrying out projects under section 402. 
'(B) AMOUNT.—^The amount of obligation authority 
referred to in subparagraph (A) shall be determined by 
multiplying— 
'(i) the amount of funds transferred under subpara-
graph (A) to the apportionment of the State under 
section 402 for the fiscal year, by 
'(ii) the ratio that— 
'(I) 
the 
amount 
of 
obligation 
authority 
distributed for the fiscal year to the State for Fed-
eral-aid highways and highway safety construction 
programs, bears to 
'(II) the total of the sums apportioned to the 
State for Federal-aid highways and highway safety 
construction programs (excluding sums not subject 
to any obligation limitation) for the fiscal year. 
'(7) 
LIMITATION 
ON 
APPLICABILITY 
OF 
OBLIGATION 
LIMITATION.—^Notwithstanding any other provision of law, no 
limitation on the total of obligations for highway safety pro-
grams under section 402 shall apply to funds transferred under 
this subsection to the apportionment of a State under such 
section.'. 
112 STAT. 848 
PUBLIC LAW 105-206^JULY 22, 1998 
"(b) CONFORMING AMENDMENT.—The analysis for chapter 1 of 
such title is amended by adding at the end the following: 
'164. Minimum penalties for repeat ofTenders for driving while intoxicated or driving 
under the influence.'.". 
(b) CONFORMING AMENDMENT.—The table of contents contained 
Ante, p. 107. 
in section 1(b) of such Act is amended by inserting after the item 
relating to section 1403 the following: 
"Sec. 1404. Safety incentives to prevent operation of motor vehicles by intoxicated 
persons. 
"Sec. 1405. Open container laws. 
"Sec. 1406. Minimum penalties for repeat offenders for driving while intoxicated or 
driving under the influence.". 
(c) ROADSIDE SAFETY TECHNOLOGIES.—Section 1402(a)(2) of 
Ante, p. 236. 
such Act is amended by striking "directive" and inserting "redirec-
tive". 
SEC. 9006. ELIMINATION OF DUPUCATE PROVISIONS. 
(a) SAN MATEO COUNTY, CALIFORNIA.—Section 1113 of the 
Ante, p. 151. 
Transportation Equity Act for the 21st Century is amended— 
(1) by striking subsection (c); and 
(2) by redesignating subsection (d) as subsection (c). 
(b) VALUE PRICING PILOT PROGRAM.—Section 1216(a) of such 
Ante, p. 211. 
Act is amended by adding at the end the following: 
"(8) CONFORMING AMENDMENTS.— 
"(A) Section 1012(b)(6) of such Act (as amended by 
paragraph (5) of this subsection) is amended by striking 
'146(c)' and inserting '102(a)'. 
"(B) Section 1012(b)(8) of such Act (as added by para-
graph (7) of this subsection) is amended— 
"(i) in subparagraph (C) by striking 'under this 
subsection' and inserting 'to carry out this subsection'; 
"(ii) in subparagraph (D)— 
"(I) by striking 'under this paragraph' and 
inserting 'to carry out this subsection'; and 
"(II) by striking 'by this paragraph' and insert-
ing 'to carry out this subsection'; 
"(iii) by striking subparagraph (A); and 
"(iv) by redesignating subparagraphs (B), (C), and 
(D) as subparagraphs (A), (B), and (C), respectively.". 
(c) 
NATIONAL 
DEFENSE 
HIGHWAYS 
OUTSIDE 
THE UNITED 
Ante, p. 204. 
STATES.—Section 1214(e) of such Act is amended to read as follows: 
"(e) MINNESOTA TRANSPORTATION HISTORY NETWORK.— 
"(1) IN GENERAL.—^The Secretary shall award a grant to 
the Minnesota Historical Society for the establishment of the 
Minnesota Transportation History Network to include major 
exhibits, interpretive programs at national historic landmark 
sites, and outreach programs with county and local historical 
organizations. 
"(2) COORDINATION.—In carrying out subsection (a), the 
Secretary shall coordinate with officials of the Minnesota 
Historical Society. 
"(3) AUTHORIZATION OF APPROPRIATIONS.—^There is author-
ized to be appropriated out of the Highway Trust Fund (other 
than the Mass Transit Account) $1,000,000 for each of fiscal 
years 1998 through 2003 to carry out this subsection. 
"(4) APPLICABILITY OF TITLE 23.—Funds authorized by this 
subsection shall be available for obligation in the same manner 
PUBLIC LAW 105-206—JULY 22, 1998 
112 STAT. 849 
as if such funds were apportioned under chapter 1 of title 
23, United States Code; except that such funds shall remain 
available until expended.". 
(d) 
ENTRANCE 
PAVING 
AT NINIGRET NATIONAL WILDLIFE 
REFUGE.—Section 1214(i) of such Act is amended by striking Ante, p. 204. 
"$750,000" each place it appears and inserting "$75,000". 
SEC. 9007. HIGHWAY FINANCE. 
(a) IN GENERAL.—Section 1503 of the Transportation Equity 
Act for the 21st Century is amended by adding at the end the Ante, p. 241. 
following: 
"(c) TECHNICAL AMENDMENTS.—Section 188 of title 23, United 
States Code (as added by subsection (a) of this section), is 
amended— 
"(1) in subsection (a)(2) by striking '1998' and inserting 
'1999'; and 
"(2) in subsection (c)— 
"(A) by striking '1998' and inserting '1999'; and 
"(B) by striking the table and inserting the following: 
Maximum amount 
'Fiscal year: 
of credit: 
1999 
$1,600,000,000 
2000 
$1,800,000,000 
2001 
$2,200,000,000 
2002 
$2,400,000,000 
2003 
^2,600,000,000.'.". 
(b) CONFORMING AMENDMENTS.—^The table of contents con-
tained in section 1(b) of the Transportation Equity Act for the 
21st Century is amended— 
Ante, p. 107. 
(1) in the item relating to section 1119 by striking "and 
safety"; and 
(2) by striking the items relating to subtitle E of title 
I and inserting the following: 
"Subtitle E—Finance 
"CHAPTER 1—TRANSPORTATION INFRASTRUCTURE FINANCE AND INNOVATION 
"Sec. 1501. Short title. 
"Sec. 1502. Findings. 
"Sec. 1503. Establishment of program. 
"Sec. 1504. Duties of the Secretary. 
"CHAPTER 2—STATE INFRASTRUCTURE BANK PILOT PROGRAM 
"Sec. 1511. State infrastructure bank pilot program.". 
SEC. 9008. HIGH PRIORITY PROJECTS TECHNICAL CORRECTIONS. 
The table contained in section 1602 of the Transportation 
Equity Act for the 21st Century is amended— 
Ante, p. 256. 
(1) in item 1 by striking "1.275" and inserting "1.7"; 
(2) in item 82 by striking "30.675" and inserting "32.4"; 
(3) in item 107 by striking "1.125" and inserting "1.44"; 
(4) in item 121 by striking " 10.5" and inserting "5.0'^ 
(5) in item 140 by inserting "-VFHS Center*^ after "Park"; 
(6) in item 151 by striking "5.666" and inserting "8.666"; 
(7) in item 164— 
(A) by inserting ", and $3,000,000 for the period of 
fiscal years 1998 and 1999 shall be made available to 
carry out section 1217( j)" after "Pennsylvania"; and 
(B) by striking "25" and inserting "24.78"; 
(8) by striking item 166 and inserting the following: 
112 STAT. 850 
PUBLIC LAW 105-206—JULY 22, 1998 
"166. Michigan 
Improve Tenth Street, Port Huron 
1.8"; 
(9) by striking item 242 and inserting the following: 
"242. Minnesota 
Construct Third Street North, CSAH 81, 
Waite Park and St. Cloud 
1.0" 
(10) by striking item 250 and inserting the following: 
"250. Indiana 
Reconstruct Old Merridan Corridor from 
Pennsylvania Avenue to Gilford Road ... 
1.35"; 
(11) in item 255 by striking "2.25" and inserting "3.0"; 
(12) in item 263 by striking "Upgrade Highway 99 between 
State Highway 70 and Lincoln Road, Sutter County" and insert-
ing "Upgrade Highway 99, Sutter County"; 
(13) in item 288 by striking "3.75" and inserting "5.0"; 
(14) in item 290 by striking "3.5" and inserting "3.0"; 
(15) in item 345 by striking "8" and inserting "19.4"; 
(16) in item 418 by striking "2" and inserting "2.5"; 
(17) in item 421 by striking "11" and inserting "6"; 
(18) in item 508 by striking "1.8" and inserting "2.4"; 
(19) by striking item 525 and inserting the following: 
"525. Alaska 
Construct Bradfleld Canal Road 
1"; 
(20) in item 540 by striking "1.5" and inserting "2.0"; 
(21) in item 576 by striking "0.52275" and inserting 
"0.69275"; 
(22) in item 588 by striking "2.5" and inserting "3.0"; 
(23) in item 591 by striking "10" and inserting "5"; 
(24) in item 635 by striking "1.875" and inserting "2.15"; 
(25) in item 669 by striking "3" and inserting "3.5"; 
(26) in item 702 by striking "10.5" and inserting "10"; 
(27) in item 746 by inserting ", and for the purchase of 
the Block House in Scott County, Virginia" after "Forest"; 
(28) in item 755 by striking "1.125" and inserting "1.5"; 
(29) in item 769 by striking "Construct new 1-95 inter-
change with Highway 99W, Tehama County" and inserting 
"Construct new 1-5 interchange with Highway 99W, Tehama 
County"; 
(30) in item 770 by striking "1.35" and inserting "1.0"; 
(31) in item 789 by striking "2.0625" and inserting "1.0"; 
(32) in item 803 by striking "Tomahark" and inserting 
"Tomahawk"; 
(33) in item 836 by striking "Construct" and all that follows 
through "for" and inserting "To the National Park Service for 
construction of the"; 
(34) in item 854 by striking "0.75" and inserting "1"; 
(35) in item 863 by striking "9" and inserting "4.75"; 
(36) in item 887 by striking "0.75" and inserting "3.21"; 
(37) in item 891 by striking "19.5" and inserting "25.0"; 
(38) in item 902 by striking "10.5" and inserting "14.0"; 
(39) by striking item 1065 and inserting the following: 
PUBLIC LAW 105-206—JULY 22, 1998 
112 STAT. 851 
'1065. 
Texas 
Construct a 4-lane divided highway on 
Artcraft Road from I-10 to Route 375 in 
El Paso 
5"; 
(40) in item 1192 by striking "24.97725" and inserting 
"24.55725"; 
(41) in item 1200 by striking "Upgrade (all weather) on 
U.S. 2, U.S. 41, and M 35" and inserting "Upgrade (all weather) 
on Delta County's reroute of U.S. 2, U.S. 41, and M 35"; 
(42) in item 1245 by striking "3" and inserting "3.5"; 
(43) in item 1271 by striking "Spur" and all that follows 
through "U.S. 59" and inserting "rail-grade separations (Rosen-
berg Bypass) at U.S. 59(S)"; 
(44) in item 1278 by striking "28.18" and inserting "22.0"; 
(45) in item 1288 by inserting "30" after "U.S."; 
(46) in item 1338 by striking "5.5" and inserting "3.5"; 
(47) in item 1383 by striking "0.525" and inserting "0.35"; 
(48) in item 1395 by striking "Construct" and all that 
follows through "Road" and inserting "Upgrade Route 219 
between Meyersdale and Somerset"; 
(49) in item 1468 by striking "Reconstruct" and all that 
follows through "U.S. 23" and inserting "Conduct engineering 
and design and improve 1-94 in Calhoun and Jackson 
Counties"; 
(50) in item 1474^ 
(A) by striking "in Euclid" and inserting "and London 
Road in Cleveland"; and 
(B) by striking "3.75" and inserting "8.0"; 
(51) in item 1535 by striking "Stanford" and inserting 
"Stamford"; 
(52) in item 1538 by striking "and Winchester" and 
inserting ", Winchester, and Torrington"; 
(53) by striking item 1546 and inserting the following: 
"1546. 
Michigan 
Construct Bridge-to-Bay bike path, 
Clair County 
St. 
0.450" 
(54) by striking item 1549 and inserting the following: 
'1549. 
New York 
Center 
for Advanced 
Simulation 
and 
Technology at Dowling College 
0.6"; 
(55) in item 1663 by striking "26.5" and inserting "27.5"; 
(56) in item 1703 by striking "1-80" and inserting 
"1-180"; 
(57) in item 1726 by striking "1-179" and inserting 
"1-79"; 
(58) by striking item 1770 and inserting the following: 
'1770. Virginia 
Operate and conduct research on the 
'Smart Road' in Blacksburg 
6.025"; 
(59) in item 1810 by striking "Construct Rio Rancho High-
way" and inserting "Northwest Albuquerque/Rio Rancho high 
priority roads"; 
112 STAT. 852 
PUBLIC LAW 105-206-^IULY 22, 1998 
(60) in item 1815 by striking "High" and all that follows 
through "projects" and inserting "Highway and bridge projects 
that Delaware provides for by law"; 
(61) in item 1844 by striking "Prepare" and inserting 
"Repair"; 
(62) by striking item 1850 and inserting the following: 
'1850. Missouri 
Resurface and maintain roads located in 
Missouri State parks 
5": 
Pittsburgh," after "Road"; 
*, Bethlehem" after "site"; 
(63) in item 661 by striking "SR 800" and inserting 
"SR78"; 
(64) in item 1704 by inserting " 
(65) in item 1710 by inserting 
and 
(66) in item 1626 by striking "1" and inserting "2". 
SEC. 9009. FEDERAL TRANSIT ADMINISTRATION PROGRAMS. 
(a) DEFINITIONS.—Section 3003 of the Federal Transit Act of 
Ante, p. 338. 
1998 is amended— 
(1) by inserting "(a) IN GENERAL.—" before "Section 5302"; 
and 
(2) by adding at the end the following: 
"(b) CONFORMING AMENDMENTS.—Section 5302 (as amended 
by subsection (a) of this section) is amended in subsection (a)(l)(G)(i) 
by striking 'daycare and' and inserting 'daycare or'.". 
(b) METROPOLITAN PLANNING.—Section 3004 of the Federal 
Ante, p. 341. 
Transit Act of 1998 is amended— 
(1) in subsection (b)— 
(A) in paragraph (1) by striking subparagraph (A) and 
inserting the following: 
"(A) by striking 'general local government representing' 
and inserting 'general purpose local government that 
together represent'; and"; 
(B) in paragraph (3) by striking "and" at the end; 
(C) in paragraph (4) by striking subparagraph (A) and 
inserting the following: 
"(A) by striking 'general local government representing' 
and inserting 'general purpose local government that 
together represent'; and"; 
(D) by redesignating paragraph (4) as paragraph (5); 
and 
(E) by inserting after paragraph (3) the following: 
"(4) in paragraph (4)(A) by striking '(3)' and inserting '(5)'; 
and"; 
(2) in subsection (d) by striking the closing quotation marks 
and the final period at the end and inserting the following: 
"(5) COORDINATION.—If a project is located within the 
boundaries of more than one metropolitan planning organiza-
tion, the metropolitan planning organizations shall coordinate 
plans regarding the project. 
"(6) LAKE TAHOE REGION.— 
"(A) DEFINITION.—In this paragraph, the term 'Lake 
Tahoe region' has the meaning given the term 'region' 
in subdivision (a) of article II of the Tahoe Regional Plan-
ning Compact, as set forth in the first section of Public 
Law 96-551 (94 Stat. 3234). 
PUBLIC LAW 105-206—JULY 22, 1998 
112 STAT. 853 
"(B) 
TRANSPORTATION 
PLANNING 
PROCESS.—The 
Secretary shall— 
"(i) establish with the Federal land management 
agencies that have jurisdiction over land in the Lake 
Tahoe region a transportation planning process for the 
region; and 
"(ii) coordinate the transportation planning process 
with the planning process required of State and local 
governments under this chapter and sections 134 and 
135 of title 23, United States Code. 
"(C) INTERSTATE COMPACT.— 
California. 
"(i) IN GENERAL.—Subject to clause (ii) and not- Nevada, 
withstanding subsection (b), to carry out the transpor-
tation planning process required by this section, the 
consent of Congress is granted to the States of Califor-
nia and Nevada to designate a metropolitan planning 
organization for the Lake Tahoe region, by agreement 
between the Governors of the States of California and 
Nevada and units of general purpose local government 
that together represent at least 75 percent of the 
affected population (including the central city or cities 
(as defined by the Bureau of the Census)), or in accord-
ance with procedures established by applicable State 
or local law. 
"(ii) INVOLVEMENT OF FEDERAL LAND MANAGEMENT 
AGENCIES.— 
"(I) REPRESENTATION.—^The policy board of a 
metropolitan planning organization 
designated 
under clause (i) shall include a representative of 
each Federal land management agency that has 
jurisdiction over land in the Lake Tahoe region. 
"(II) FUNDING.—In addition to funds made 
available to the metropolitan planning organiza-
tion under other provisions of this chapter and 
under title 23, not more than 1 percent of the 
funds allocated under section 202 of title 23 may 
be used to carry out the transportation planning 
process for the Lake Tahoe region under this 
subparagraph. 
"(D) 
ACTIVITIES.—^Highway 
projects 
included in 
transportation plans developed under this paragraph— 
"(i) shall be selected for funding in a manner that 
facilitates the participation of the Federal 
land 
management agencies that have jurisdiction over land 
in the Lake Tahoe region; and 
"(ii) may, in accordance with chapter 2 of title 
23, be funded using funds allocated under section 202 
of title 23, United States Code."; and 
(3) by adding at the end the following: 
"(f) TECHNICAL ADJUSTMENTS.—Section 5303(f) is amended— 
"(1) in paragraph (1) (as amended by subsection (e)(1) of 
this subsection)— 
"(A) in subparagraph (C) by striking 'and' at the end; 
"(B) in subparagraph (D) by striking the period at 
the end and inserting'; and'; and 
"(C) by adding at the end the following: 
112 STAT. 854 
PUBLIC LAW 105-206-^JULY 22, 1998 
*(E) the financial plan may include, for illustrative pur-
poses, additional projects that would be included in the adopted 
long-range plan if reasonable additional resources beyond those 
identified in the financial plan were available, except that, 
for the purpose of developing the long-range plan, the metropoli-
tan planning organization and the State shall cooperatively 
develop estimates of funds that will be available to support 
plan implementation.'; and 
"(2) by adding at the end the following: 
'(6) SELECTION OF PROJECTS FROM ILLUSTRATIVE LIST.—Notwith-
standing paragraph (1)(E), a State or metropolitan planning 
organization shall not be required to select any project from the 
illustrative list of additional projects included in the financial plan 
under paragraph (1)(B).'.". 
(c) METROPOLITAN TRANSPORTATION IMPROVEMENT PROGRAM.— 
Ante, p. 345. 
Section 3005 of the Federal Transit Act of 1998 is amended— 
(1) in the section heading by inserting "METROPOLITAN" 
before "TRANSPORTATION"; and 
(2) by adding at the end the following: 
"(d) TECHNICAL ADJUSTMENTS.—Section 5304 is amended— 
"(1) in subsection (a) (as amended by subsection (a) of 
this section)— 
"(A) by striking I n cooperation with' and inserting 
the following: 
*(1) IN GENERAL.—In cooperation with'; and 
"(B) by adding at the end the following: 
'(2) FUNDING ESTIMATE.—^For the purpose of developing 
the transportation improvement program, the metropolitan 
planning organization, public transit agency, and the State 
shall cooperatively develop estimates of mnds that are reason-
ably expected to be available to support program implementa-
tion.'; 
"(2) in subsection (b)(2)— 
"(A) in subparagraph (B) by striking 'and' at the end; 
and 
"(B) in subparagraph (C) (as added by subsection (b) 
of this section) by striking 'strategies which may include' 
and inserting the following: 'strategies; and 
*(D) may include'; and 
"(3) in subsection (c) by striking paragraph (4) (as amended 
by subsection (c) of this section) and inserting the following: 
'(4) SELECTION OF PROJECTS FROM ILLUSTRATIVE LIST.— 
'(A) 
IN 
GENERAL.—^Notwithstanding 
subsection 
(b)(2)(D), a State or metropolitan planning organization 
shall not be required to select any project from the illus-
trative list of additional projects included in the financial 
plan under subsection (b)(2)(D). 
'(B) ACTION BY SECRETARY.—^Action by the Secretary 
shall be required for a State or metropolitan planning 
organization to select any project from the illustrative list 
of additional projects included in the plan under subsection 
(b)(2) for inclusion in an approved transportation improve-
ment plan.'.". 
(d) TRANSPORTATION MANAGEMENT AREAS.—Section 3006(d) of 
Ante, p. 346. 
the Federal Transit Act of 1998 is amended to read as follows: 
"(d) PROJECT SELECTION.—Section 5305(d)(1) is amended to 
read as follows: '(1)(A) All federally funded projects carried out 
PUBLIC LAW 105-206-^ULY 22, 1998 
112 STAT. 855 
within the boundaries of a transportation management area under 
title 23 (excluding projects carried out on the National Highway 
System and projects carried out under the bridge and interstate 
maintenance program) or under this chapter shall be selected from 
the approved transportation improvement program by the metro-
politan planning organization designated for the area in consulta-
tion with the State and any affected public transit operator, 
*(B) Projects carried out within the boundaries of a transpor-
tation management area on the National Highway System and 
projects carried out within such boundaries under the bridge pro-
gram or the interstate maintenance program shall be selected from 
the approved transportation improvement program by the State 
in cooperation with the metropolitan planning organization des-
ignated for the area.'.". 
(e) URBANIZED AREA FORMULA GRANTS.—Section 3007 of the 
Federal Transit Act of 1998 is amended by adding at the end Ante, p. 347. 
the following: 
"(h) TECHNICAL ADJUSTMENTS.— 
"(1) GENERAL AUTHORITY.—Section 5307(b) (as amended 
by subsection (c)(1)(B) of this section) is amended by adding 
at the end the following: The Secretary may make grants 
under this section from fiinds made available for fiscal year 
1998 to finance the operating costs of equipment and facilities 
for use in mass transportation in an urbanized area with a 
population of at least 200,000.'. 
"(2) REPORT.—Section 5307(k)(3) (as amended by subsection 
(f) of this section) is amended by inserting 'preceding* before 
'fiscal year*.". 
(f) CLEAN FUELS FORMULA GRANT PROGRAM.—Section 3008 
of the Federal Transit Act of 1998 is amended by adding at the Ante, p. 348. 
end the following: 
"(c) TECHNICAL ADJUSTMENTS.—Section 5308(e)(2) (as added 
by subsection (a) of this section) is amended by striking '$50,000,000' 
and inserting '35 percent'.". 
(g) CAPITAL INVESTMENT GRANTS AND LOANS.—Section 3009 
of the Federal Transit Act of 1998 is amended by adding at the Ante, p. 352. 
end the following: 
"(k) TECHNICAL ADJUSTMENTS.— 
"(1) CRITERIA.—Section 5309(e) (as amended by subsection 
(e) of this section) is amended— 
"(A) in paragraph (3)(C) by striking 'urban' and insert-
ing'suburban'; 
"(B) in the second sentence of paragraph (6) by striking 
'or not' and all that follows through ', based' and inserting 
'or "not recommended", based'; and 
"(C) in the last sentence of paragraph (6) by inserting 
'of the'before'criteria established'. 
"(2) LETTERS OF INTENT AND FULL FUNDING GRANT AGREE-
MENTS.—Section 5309(g) (as amended by subsection (f) of this 
section) is amended in paragraph (4) by striking '5338(a)' and 
all that follows through '2003' and inserting '5338(b) of this 
title for new fixed guideway systems and extensions to existing 
fixed guideway systems and the amount appropriated under 
section 5338(h)(5) or an amount equivalent to the last 2 fiscal 
years of funding authorized under section 5338(b) for new fixed 
* guideway systems and extensions to existing fixed guideway 
systems'. 
112 STAT. 856 
PUBLIC LAW 105-206-JULY 22, 1998 
"(3) ALLOCATING AMOUNTS.—Section 5309(m) (as amended 
by subsection (g) of this section) is amended— 
"(A) in paragraph (1) by inserting '(b)' after '5338'; 
"(B) by striking paragraph (2) and inserting the 
following: 
*(2) NEW FIXED GUIDEWAY GRANTS.— 
'(A) LIMITATION ON AMOUNTS AVAILABLE FOR ACTIVITIES 
OTHER THAN FINAL DESIGN AND CONSTRUCTION.—^Not m o r e 
than 8 percent of the amounts made available in each 
fiscal year by paragraph (1)(B) shall be available for activi-
ties other than final design and construction. 
'(B) FUNDING FOR FERRY BOAT SYSTEMS.— 
'(i) AMOUNTS UNDER (IXB).—Of the amounts made 
available under paragraph (1)(B), $10,400,000 shall 
be available in each of fiscal years 1999 through 2003 
for capital projects in Alaska or Hawaii, for new fixed 
guideway systems and extensions to existing fixed 
guideway systems that are ferry boats or ferry terminal 
facilities, or that are approaches to ferry terminal facili-
ties. 
*(ii) AMOUNTS UNDER 5338(HX5).—Of the amounts 
appropriated under section 5338(h)(5), $3,600,000 shall 
be available in each of fiscal years 1999 through 2003 
for capital projects in Alaska or Hawaii, for new fixed 
guideway systems and extensions to existing fixed 
guideway systems that are ferry boats or ferry terminal 
facilities, or that are approaches to ferry terminal facili-
ties.'; 
"(C) by redesignating paragraph (4) as paragraph 
(3)(C); 
"(D) in paragraph (3) by adding at the end the 
following: 
'(D) OTHER THAN URBANIZED AREAS.—Of amounts made 
available by paragraph (1)(C), not less than 5.5 percent 
shall be available in each fiscal year for other than urban-
ized areas.'; 
"(E) by striking paragraph (5); and 
"(F) by inserting after paragraph (3) the following: 
'(4) ELIGIBILITY FOR ASSISTANCE FOR MULTIPLE PROJECTS.— 
A person applying for or receiving assistance for a project 
described in subparagraph (A), (B), or (C) of paragraph (1) 
may receive assistance for a project described in any other 
of such subparagraphs.'.". 
(h) REFERENCES TO FULL FUNDING GRANT AGREEMENTS.— 
Ante, p. 352. 
Section 3009(h)(3) of the Federal Transit Act of 1998 is amended— 
(1) by striking "and" at the end of subparagraph (A)(ii); 
(2) by striking the period at the end of subparagraph (B) 
and inserting a semicolon; and 
(3) by adding at the end the following: 
"(C) in section 5328(a)(4) by striking 'section 5309(m)(2) 
of this title' and inserting '5309(o)( 1)'; and 
"(D) in section 5309(n)(2) by striking 'in a way' and 
inserting 'in a manner'.", 
(i) 
DOLLAR 
VALUE OF MOBILITY 
IMPROVEMENTS.—Section 
Ante, p. 357. 
3010(b)(2) of the Federal Transit Act of 1998 is amended by striking 
"Secretary" and inserting "Comptroller General". 
PUBLIC LAW 105-206-^nJLY 22, 1998 
112 STAT. 857 
(j) 
INTELLIGENT TRANSPORTATION SYSTEM APPLICATIONS.— 
Section 3012 of the Federal Transit Act of 1998 is amended by A«te,p. 358. 
moving paragraph (3) of subsection (a) to the end of subsection 
(b) and by redesignating such paragraph (3) as paragraph (4). 
(k) ADVANCED TECHNOLOGY PILOT PROJECT.—Section 3015 of 
the Federal Transit Act of 1998 is amended— 
Ante, p. 359. 
(1) in subsection (c)(2) by adding at the end the following: 
"Financial assistance made available under this subsection and 
projects assisted with the assistance shall be subject to section 
5333(a) of title 49, United States Code."; and 
(2) by adding at the end the following: 
"(d) TRAINING AND CURRICULUM DEVELOPMENT.— 
"(1) IN GENERAL.—^Any funds made available by section 
' 
5338(e)(2)(C)(iii) of title 49, United States Code, shall be avail-
able in equal amounts for transportation research, training, 
and curriculum development at institutions identified in sub-
paragraphs (E) and (F) of section 5505(j)(3) of such title. 
"(2) SPECIAL RULE.—If the institutions identified in para-
graph (1) are selected pursuant to 5505(i)(3)(B) of such title 
in fiscal year 2002 or 2003, the funds made available to carry 
out this subsection shall be available to those institutions to 
carry out the activities 
required 
pursuant 
to section 
5505(i)(3)(B) of such title for that fiscal year.". 
(1) NATIONAL TRANSIT INSTITUTE.—Section 3017(a) of the 
Federal Transit Act of 1998 is amended to read as follows: 
Ante, p. 361. 
"(a) IN GENERAL.—Section 5315 is amended— 
"(1) in the section heading by striking 'mass transpor-
tation' and inserting 'transit'; 
"(2) in subsection (a)— 
"(A) by striking 'mass transportation' in the first sen-
tence and inserting 'transit'; 
"(B) in paragraph (5) by inserting 'and architectural 
design' before the semicolon at the end; 
"(C) in paragraph (7) by striking 'carrying out' and 
inserting 'delivering'; 
"(D) in paragraph (11) by inserting ', construction 
management, insurance, and risk management' before the 
semicolon at the end; 
"(E) in paragraph (13) by striking 'and' at the end; 
"(F) in paragraph (14) by striking the period at the 
end and inserting a semicolon; and 
"(G) by adding at the end the following: 
'(15) innovative finance; and 
'(16) workplace safety.'.", 
(m) PILOT PROGRAM.^Section 3021(a) of the Federal Transit 
Act of 1998 is amended by inserting "single-State" before "pilot Ante, p. 363. 
program". 
(n) ARCHITECTURAL, ENGINEERING, AND DESIGN CONTRACTS.— 
Section 3022 of the Federal Transit Act of 1998 is amended by Ante, p. 363. 
adding at the end the following: 
"(b) CONFORMING AMENDMENT.—Section 5325(b) (as redesig-
nated by subsection (a)(2) of this section) is amended— 
"(1) by inserting 'or requirement' after 'A contract'; and 
"(2) by inserting before the last sentence the following: 
'When awarding such contracts, recipients of assistance under 
^
^ this chapter shall maximize efficiencies of administration by 
accepting nondisputed audits conducted by other governmental 
112 STAT. 858 
PUBLIC LAW 105-206—JULY 22, 1998 
agencies, as provided in subparagraphs (C) through (F) of 
section 112(b)(2) of title 23, United States Code.'.". 
(o) CONFORMING AMENDMENT.—Section 3027 of the Federal 
Ante, p. 366. 
Transit Act of 1998 is amended— 
(1) in subsection (c) by striking "600,000" each place it 
appears and inserting "900,000"; and 
(2) by adding at the end the following: 
"(d) CONFORMING AMENDMENT.—^The item relating to section 
5336 in the table of sections for chapter 53 is amended by striking 
*block grants' and inserting 'formula grants'.". 
(p) APPORTIONMENT FOR FIXED GUIDEWAY MODERNIZATION.— 
Ante, p. 366. 
Section 3028 of the Federal Transit Act of 1998 is amended by 
adding at the end the following: 
"(c) CONFORMING AMENDMENTS.—Section 5337(a) (as amended 
by subsection (a) of this section) is amended— 
"(1) in paragraph (2)(B) by striking '(e)' and inserting 
'(e)(1)'; 
"(2) in paragraph (3)(D)— 
"(A) by striking '(ii)'; and 
"(B) by striking '(e)' and inserting '(e)( 1)'; 
"(3) in paragraph (4) by striking '(e)' and inserting '(e)(1)'; 
"(4) in paragraph (5)(A) by striking '(e)' and inserting 
'(e)(2)'; 
"(5) in paragraph (5)(B) by striking '(e)' and inserting 
'(e)(2)'; 
"(6) in paragraph (6) by striking '(e)' each place it appears 
and inserting '(eX2)'; and 
"(7) in paragraph (7) by striking '(e)' each place it appears 
and inserting '(e)(2)'.". 
(q) AUTHORIZATIONS.—Section 3029 of the Federal Transit Act 
Ante, p. 368. 
of 1998 is amended by adding at the end the following: 
"(c) TECHNICAL ADJUSTMENTS.—Section 5338 (as amended by 
subsection (a) of this section) is amended— 
"(1) in subsection (c)(2)(A)(i) by striking '$43,200,000' and 
inserting '$42,200,000'; 
"(2) in subsection (c)(2)(A)(ii) by striking '$46,400,000' and 
inserting '$48,400,000'; 
"(3) in subsection (c)(2)(A)(iii) by striking '$51,200,000' and 
inserting '$50,200,000'; 
"(4) in subsection (c)(2)(A)(iv) by striking '$52,800,000' and 
inserting '$53,800,000'; 
"(5) in subsection (c)(2)(A)(v) by striking '$57,600,000' and 
inserting '$58,600,000'; 
"(6) in subsection (d)(2)(C)(iii) by inserting before the semi-
colon ', including not more than $1,000,000 shall be available 
to carry out section 5315(a)(16)'; 
"(7) in subsection (e>— 
"(A) by striking '5317(b)' each place it appears and 
inserting '5505'; 
"(B) in paragraph (1) by striking 'There are' and 
inserting 'Subject to paragraph (2)(C), there are'; 
"(C) in paragraph (2)— 
"(i) in subparagraph (A) by striking "There shall' 
and inserting 'Subject to subparagraph (C), there shall'; 
"(ii) in subparagraph (B) by striking 'In addition' 
and inserting 'Subject to subparagraph (C), in addition'; 
and 
PUBLIC LAW 105-206-^JULY 22, 1998 
112 STAT. 859 
"(iii) by adding at the end the following: 
*(C) FUNDING OF CENTERS.— 
'(i) Of the amounts made available under subpara-
graph (A) and paragraph (1) for each fiscal year— 
V 
*(I) $2,000,000 shall be available for the center 
identified in section 5505( j)(4)(A); and 
'(II) $2,000,000 shall be available for the center 
identified in section 5505( j)(4)(F). 
'(ii) For each of fiscal years 1998 through 2001, 
. t, 
of the amounts made available under this paragraph 
and paragraph (1)— 
*(I) $400,000 shall be available from amounts 
made available under subparagraph (A) of this 
paragraph and under paragraph (1) for each of 
the centers identified in subparagraphs (E) and 
. : 
... 
J (F)ofsection5505(j)(3);and 
'(II) $350,000 shall be available from amounts 
made available under subparagraph (B) of this 
paragraph and under paragraph (1) for each of 
the centers identified in subparagraphs (E) and 
(F) of section 5505(j)(3). 
'(iii) Any amounts made available under this para-
graph or paragraph (1) for any fiscal year that remain 
after distribution under clauses (i) and (ii), shall be 
available for the purposes identified in section 3015(d) 
of the Federal Transit Act of 1998.'; and 
"(D) by adding at the end the following: 
*(3) SPECIAL RULE.—^Nothing in this subsection shall be 
construed to limit the transportation research conducted by 
the centers funded by this section.'; 
"(8) in subsection (g)(2) by striking '(c)(2)(B),' and all that 
follows through '(f)(2)(B),' and inserting '(c)(1), (c)(2)(B), (d)(1), 
(d)(2)(B), (e)(1), (e)(2)(B), (f)(1), (f)(2)(B),'; 
"(9) in subsection (h) by inserting 'under the Transportation 
Discretionary Spending Guarantee for the Mass Transit Cat-
egory* after 'through (f)'; and 
"(10) in subsection (h)(5) by striking subparagraphs (A) 
through (E) and inserting the following: 
'(A) for fiscal year 1999 $400,000,000; 
'(B) for fiscal year 2000 $410,000,000; 
'(C) for fiscal year 2001 $420,000,000; 
'(D) for fiscal year 2002 $430,000,000; and 
'(E) for fiscal year 2003 $430,000,000;'.". 
(r) PROJECTS FOR FIXED GUIDEWAY SYSTEMS.—Section 3030 
of the Federal Transit Act of 1998 is amended— 
Ante, p. 373. 
(1) in subsection (a)— 
(A) in paragraph (8) by inserting "North-" before 
"South"; 
(B) in paragraph (42) by striking "Maryland" and 
inserting "Baltimore"; 
(C) in paragraph (103) by striking "busway" and 
inserting "Boulevard transitway"; 
(D) in paragraph (106) by inserting "CTA" before 
"Douglas"; 
(E) by striking paragraph (108) and inserting the 
« 
following: 
"(108) Greater Albuquerque Mass Transit Project."; and 
112 STAT. 860 
PUBLIC LAW 105-206-^ULY 22, 1998 
(F) by adding at the end the following: 
"(109) Hartford City Light Rail Connection to Central 
Business District. 
"(110) Providence-Boston Commuter Rail. 
"(Ill) New York-St. CJeorge's Ferry Intermodal Terminal. 
"(112) New York-Midtown West Ferry Terminal. 
"(113) Pinellas County-Mobility Initiative Project. 
"(114) Atlanta-MARTA Extension (S. De Kalb-Lindbergh)."; 
(2) in subsection (b)— 
(A) by striking paragraph (2) and inserting the 
following: 
"(2) Sioux City-Light Rail."; 
(B) by striking paragraph (40) and inserting the 
following: 
"(40) Santa Fe-El Dorado Rail Link."; 
(C) by striking paragraph (44) and inserting the 
following: 
"(44) Albuquerque-High Capacity Corridor."; 
(D) by striking paragraph (53) and inserting the 
following: 
"(53) San Jacinto-Branch Line (Riverside County)."; and 
(E) by adding at the end the following: 
"(69) Chicago-Northwest Rail Transit Corridor. 
"(70) Vermont-Burlington-Essex Commuter Rail."; and 
(3) in subsection (c)— 
(A) in paragraph (1)(A)— 
(i) in the matter preceding clause (i) by inserting 
"(even if the project is not listed in subsection (a) 
or (b))" before the colon; 
(ii) by striking clause (ii) and inserting the 
following: 
"(ii) San Diego Mission Valley and Mid-Coast 
Corridor, $325,000,000."; 
(iii) by striking clause (v) and inserting the 
following: 
"(v) Hartford City Light Rail Connection to Central 
Business District, $33,000,000."; 
(iv) by striking clause (xxiii) and inserting the 
following: 
"(xxiii) 
Kansas 
City—1-35 
Commuter 
Rail, 
$30,000,000."; 
(v) in clause (xxxii) by striking "Whitehall Ferry 
Terminal" and inserting "Staten Island Ferry-White-
hall Intermodal Terminal"; 
(vi) by striking clause (xxxv) and inserting the 
following: 
"(xxxv) New York-Midtown West Ferry Terminal, 
$16,300,000."; 
(vii) in clause (xxxix) by striking "Allegheny 
County" and inserting "Pittsburgh"; 
(viii) by striking clause (xvi) and inserting the 
following: 
"(xvi) 
Northeast 
Indianapolis 
Corridor, 
$10,000,000."; 
(ix) by striking clause (xxix) and inserting the 
following: 
PUBLIC LAW 105-206-^JULY 22, 1998 
112 STAT. 861 
"(xxix) Greater Albuquerque Mass Transit Project, 
$90,000,000."; 
(x) by striking clause (xliii) and inserting the 
following: 
"(xliii) 
Providence-Boston 
Commuter 
Rail, 
$10,000,000."; and 
(xi) by striking clause (li) and inserting the 
following: 
"(li) Dallas-Ft. Worth 
RAILTRAN 
(Phase-II), 
$12,000,000."; 
(B) by striking the heading for subsection (c)(2) and 
inserting "ADDITIONAL AMOUNTS"; and 
(C) in paragraph (3) by inserting after the first sen-
tence the following: "The project shall also be exempted 
from all requirements relating to criteria for grants and 
loans for fixed guideway systems under section 5309(e) 
of such title and from regulations required under that 
section.". 
(s) NEW JERSEY URBAN CORE PROJECT.—Section 3030(e) of 
the Federal Transit Act of 1998 is amended by adding at the Ante, p. 373. 
end the following: 
"(4) 
TECHNICAL ADJUSTMENT.—Section 3031(d) of the 
Intermodal Surface Transportation Efficiency Act of 1991 (as 
amended by paragraph (3)(B) of this subsection) is amended— 
"(A) by striking 'of the West Shore Line' and inserting 
'or the West Shore Line'; and 
"(B) by striking 'directly connected to' and all that 
follows through 'Newark International Airport' the first 
place it appears.". 
(t) 
BALTIMORE-WASHINGTON 
TRANSPORTATION 
IMPROVE-
MENTS.—Section 3030 of the Federal Transit Act of 1998 is amended 
by adding at the end the following: 
"(h) TECHNICAL ADJUSTMENT.—Section 3035(nn) of the Inter-
modal Surface Transportation Efficiency Act of 1991 (105 Stat. 
2134) (as amended by subsection (g)(1)(C) of this section) is amended 
by inserting after 'expenditure of the following: 'section 5309 funds 
to the aggregate expenditure of.". 
(u) BUS PROJECTS.—Section 3031 of the Federal Transit Act 
of 1998 is amended— 
Ante, p. 381. 
(1) in the table contained in subsection (a)— 
(A) by striking item 64; 
(B) in item 69 by striking "Rensslear" each place it 
appears and inserting "Rensselaer"; 
(C) in item 103 by striking "facilities and"; and 
(D) by striking item 150; 
(2) by striking the heading for subsection (b) and inserting 
"ADDITIONAL AMOUNTS"; 
(3) in subsection (b) by inserting after "2000" the first 
place it appears "with funds made available under section 
5338(h)(6) of such title"; and 
(4) in item 2 of the table contained in subsection (b) by 
striking "Rensslear" each place it appears and inserting 
"Rensselaer". 
(v) CONTRACTING OUT STUDY.—Section 3032 of the Federal 
Transit Act of 1998 is amended— 
Ante, p. 385. 
(1) in subsection (a) by striking "3" and inserting "6"; 
112 STAT. 862 
PUBLIC LAW 105-206^JULY 22, 1998 
(2) in subsection (d) by striking "the Mass Transit Account 
of the Highway Trust Fund" and inserting "funds made avail-
able under section 5338(f)(2) of title 49, United States Code,"; 
(3) in subsection (d) by striking "1998" and inserting "1999"; 
and 
(4) in subsection (e) by striking "subsection (c)" and insert-
ing "subsection (d)". 
(w) JOB ACCESS AND REVERSE COMMUTE GRANTS.—Section 3037 
Ante, p. 387. 
of the Federal Transit Act of 1998 is amended— 
(1) in subsection (b)(4)(A)— 
(A) by inserting "designated recipients under section 
5307(a)(2) of title 49, United States Code," after "from 
among"; and 
(B) by inserting a comma after "and agencies"; 
(2) in subsection (b)(4)(B)— 
(A) by striking "at least" and inserting "less than"; 
(B) by inserting "designated recipients under section 
5307(a)(2) of title 49, United States Code," after "from 
among"; and 
(C) by inserting "and agencies," after "authorities"; 
(3) in subsection (f)(2)— 
(A) by striking "(including bicycling)"; and 
(B) by inserting "(including bicycling)" after "additional 
services" 
* 
(4) in subsection (h)(2)(B) by striking "403(a)(5)(C)(ii)" and 
inserting "403(a)(5)(C)(vi)"; 
(5) in the heading for subsection (1)(1)(C) by striking "FROM 
THE GENERAL FUND"; 
(6) in subsection (1)(1)(C) by inserting "under the Transpor-
tation Discretionary Spending Guarantee for the Mass Transit 
Category" after "(B)"; and 
(7) in subsection (1)(3)(B) by striking "at least" and inserting 
"less than". 
(x) 
RURAL 
TRANSPORTATION 
ACCESSIBILITY 
INCENTIVE 
Ante, p. 392. 
PROGRAM.—Section 3038 of the Federal Transit Act of 1998 is 
amended— 
(1) in subsection (a)(1)(A) by inserting before the semicolon 
"or connecting 1 or more rural communities with an urban 
area not in close proximity"; 
(2) in subsection (g)(l>— 
(A) by inserting "over-the-road buses used substantially 
or exclusively in" after "operators of"; and 
(B) by inserting at the end the following: 
"Such sums shall remain available until expended,"; and 
(3) in subsection (g)(2)— 
(A) by striking "each of"; and 
(B) by adding at the end the following: "Such sums 
shall remain available until expended.". 
(y) STUDY OF TRANSIT NEEDS IN NATIONAL PARKS AND RELATED 
Ante, p. 393. 
PUBLIC LANDS.—Section 3039(b) of the Federal Transit Act of 1998 
is amended— 
(1) in paragraph (1) by striking "in order to carry" and 
inserting "assist in carrying"; and 
(2) by adding at the end the following: 
"(3) DEFINITION.—^For purposes of this subsection, the term 
'Federal land management agencies' means the National Park 
PUBLIC LAW 105-206—JULY 22, 1998 
112 STAT. 863 
Service, the United States Fish and WildUfe Service, and the 
Bureau of Land Management.". 
(z) OBLIGATION CEILING.—Section 3040 of the Federal Transit 
Act of 1998 is amended— 
Ante, p. 394. 
(1) by striking paragraph (2) and inserting the following: 
"(2) $5,797,000,000 in fiscal year 2000;"; and 
(2) in paragraph (4) by striking "$6,746,000,000" and 
inserting "$6,747,000,000". 
SEC. 9010. MOTOR CARRIER SAFETY TECHNICAL CORRECTION. 
Section 4011 of the Transportation Equity Act for the 21st 
Century is amended by adding at the end the following: 
Ante, p. 394. 
"(h) TECHNICAL AMENDMENTS.—Section 31314 (as amended by 
subsection (g) of this section) is amended— 
"(1) in subsections (a) and (b) by striking '(3), and (5)' 
each place it appears and inserting '(3), and (4)'; and 
"(2) by striking subsection (d).". 
SEC. 9011. RESTORATIONS TO RESEARCH TITLE. 
(a) UNIVERSITY TRANSPORTATION RESEARCH FUNDING.—Section 
5001(a)(7) of the Transportation Equity Act for the 21st Century Ante, p. 419. 
is amended— 
(1) by striking "$31,150,000" each place it appears and 
inserting "$25,650,000"; 
(2) by striking "$32,750,000" each place it appears and 
inserting "$27,250,000"; and 
(3) by striking "$32,000,000" each place it appears and 
inserting "$26,500,000". 
(b) OBLIGATION CEILING.—Section 5002 of such Act is amended Ante, p. 421. 
by 
striking 
"$403,150,000" and all that 
follows 
through 
"$468,000,000" and inserting "$397,650,000 for fiscal year 1998, 
$403,650,000 for fiscal year 1999, $422,450,000 for fiscal year 2000, 
$437,250,000 for fiscal year 2001, $447,500,000 for fiscal year 2002, 
and $462,500,000". 
(c) USE OF FUNDS FOR ITS.—Section 5210 of the Transportation 
Equity Act for the 21st Century is amended by adding at the Ante, p. 461. 
end the following: 
"(d) USE OF INNOVATIVE FINANCING.— 
"(1) IN GENERAL.—^The Secretary may use up to 25 percent 
of the funds made available to carry out this subtitle to make 
available loans, lines of credit, and loan guarantees for projects 
that are eligible for assistance under this subtitle and that 
have significant intelligent transportation system elements. 
"(2) CONSISTENCY WITH OTHER LAW.—Credit assistance 
described in paragraph (1) shall be made available in a manner 
consistent with the Transportation Infrastructure Finance and 
Innovation Act of 1998.". 
(d) UNIVERSITY TRANSPORTATION RESEARCH.—Section 5110 of 
such Act is amended by adding at the end the following: 
Ante, p. 441. 
"(d) TECHNICAL ADJUSTMENTS.—Section 5505 of title 49, United 
States Code (as added by subsection (a) of this section), is 
amended— 
"(1) in subsection (g)(2) by striking 'section 5506,' and 
inserting 'section 508 of title 23, United States Code,'; 
"(2) in subsection (i>^ 
i.i 
"(A) by inserting 'Subject to section 5338(e):' after '(i) 
NUMBER AND AMOUNT OF GRANTS.—'; and 
112 STAT. 864 
PUBLIC LAW 105-206—JULY 22, 1998 
"(B) by striking 'institutions' each place it appears 
and inserting 'institutions or groups of institutions'; and 
"(3) in subsection (j)(4)(B) by striking 'on behalf of and 
all that follows before the period and inserting 'on behalf of 
a consortium which may also include West Virginia University 
Institute of Technology, the College of West Virginia, and Blue-
field State College'.". 
Ante, p. 446. 
(e) TECHNICAL CORRECTIONS.—Section 5115 of such Act is 
amended— 
(1) in subsection (a) by striking "Director" and inserting 
"Director of the Bureau of Transportation Statistics"; 
(2) in subsection (b) by striking "Bureau" and inserting 
"Bureau of Transportation Statistics,"; and 
(3) in subsection (c) by striking "paragraph (1)" and 
inserting "subsection (a)". 
(f) CORRECTIONS TO CERTAIN OKLAHOMA PROJECTS.—Section 
Ante, p. 446. 
5116 of such Act is amended— 
(1) in subsection (e)(2) by striking "$1,000,000 for fiscal 
year 1999, $1,000,000 for fiscal year 2000, and $500,000 for 
fiscal year 2001" and inserting "$1,000,000 for fiscal year 1999, 
$1,000,000 for fiscal year 2000, $1,000,000 for fiscal year 2001, 
and $500,000 for fiscal year 2002"; and 
(2) in subsection (f)(2) by striking "$1,000,000 for fiscal 
year 1999, $1,000,000 for fiscal year 2000, $1,000,000 for fiscal 
year 2001, and $500,000 for fiscal year 2002" and inserting 
"$1,000,000 for fiscal year 1999, $1,000,000 for fiscal year 2000, 
and $500,000 for fiscal year 2001". 
(g) 
INTELLIGENT 
TRANSPORTATION 
INFRASTRUCTURE REF-
Ante.p. 448. 
ERENCE.—Section 5117(b)(3)(B)(ii) of such Act is amended by 
striking "local departments of transportation" and inserting "the 
Department of Transportation". 
(h) FUNDAMENTAL PROPERTIES OF ASPHALTS AND MODIFIED 
ASPHALTS.—Section 5117(b)(5)(B) of such Act is amended— 
(1) by striking "1999" and inserting "1998"; and 
(2) by striking "$3,000,000 per fiscal year" and inserting 
"$1,000,000 for fiscal year 1998 and $3,000,000 for each of 
fiscal years 1999 through 2003". 
SEC. 9012. AUTOMOBILE SAFETY AND INFORMATION. 
(a) REFERENCE.—Section 7104 of the Transportation Equity 
Ante, p. 466. 
Act for the 21st Century is amended by adding at the end the 
following: 
"(c) CONFORMING AMENDMENT.—Section 30105(a) of title 49, 
United States Code (as amended by subsection (a) of this section), 
is amended by inserting after 'Secretary' the following: 'for the 
National Highway Traffic Safety Administration'.". 
Ante, p. 435. 
(b) CLEAN VESSEL ACT FUNDING.—Section 7403 of such Act 
is amended— 
(1) by inserting "(a) IN GENERAL.—" before "Section 4(b)"; 
and 
(2) by adding at the end the following: 
"(b) TECHNICAL AMENDMENT.—Section 4(b)(3)(B) of the 1950 
Act (as amended by subsection (a) of this section) is amended 
by striking '6404(d)' and inserting '7404(d)'.". 
Ante, p. 486. 
(c) BOATING INFRASTRUCTURE.—Section 7404(b) of such Act is 
amended by striking "6402" and inserting "7402". 
PUBLIC LAW 105-206-^JULY 22, 1998 
112 STAT. 865 
SEC. 9013. TECHNICAL CORRECTIONS REGARDING SUBTITLE A OF 
TITLE VIIL 
(a) 
AMENDMENT TO OFFSETTING ADJUSTMENT FOR DISCRE-
TIONARY SPENDING LIMIT.—Section 8101(b) of the Transportation 
Equity Act for the 21st Century is amended— 
Ante, p. 488. 
(1) in paragraph (1) by striking "$25,173,000,000" and 
inserting "$25,144,000,000"; and 
(2) in paragraph (2) by striking "$26,045,000,000" and 
inserting "$26,009,000,000". 
(b) AMENDMENTS FOR HIGHWAY CATEGORY.—Section 8101 
of 
the Transportation Equity Act for the 21st Century is amended 
by adding at the end the following: 
"(f) 
TECHNICAL AMENDMENTS.—Section 250(c)(4)(C) of the 
Balanced Budget and Emergency Deficit Control Act of 1985 (as 
amended by subsection (c) of this Act) is amended— 
"(1) by striking 'Century and' and inserting 'Century or*; 
"(2) by striking 'as amended by this section,' and inserting 
'as amended by the Transportation Equity Act for the 21st 
Century,'; and 
"(3) by adding at the end the following new flush sentence: 
'Such term also refers to the Washington Metropolitan Transit 
Authority account (69-1128-0-1-401) only for fiscal year 1999 
only for appropriations provided pursuant to authorizations 
contained in section 14 of Public Law 96-184 and Public Law 
101-551.'.". 
(c) TECHNICAL AMENDMENT.—Section 8102 
of the Transpor-
tation Equity Act for the 21st Century is amended by inserting Ante, p. 492. 
before the period at the end the following: "or from section 1102 
of this Act". 
SEC. 9014. CORRECTIONS TO VETERANS SUBTITLE. 
(a) TOBACCO-RELATED ILLNESSES IN VETERANS.—Section 8202 
of the Transportation Equity Act for the 21st Century is amended Ante, p. 492. 
to read as follows (and the amendments made by that section 
as originally enacted shall be treated for all purposes as not having 
been made): 
"SEC. 8202. TREATMENT OF TOBACCO-RELATED ILLNESSES OF 
VETERANS. 
"(a) IN GENERAL.—(1) Chapter 11 of title 38, United States 
Code, is amended by inserting after section 1102 the following 
new section: 
*§ 1103. Special provisions relating to claims based upon 
effects of tobacco products 
'(a) Notwithstanding any other provision of law, a veteran's 
disability or death shall not be considered to have resulted from 
personal injury suffered or disease contracted in the line of duty 
in the active military, naval, or air service for purposes of this 
title on the basis that it resulted from injury or disease attributable 
to the use of tobacco products by the veteran during the veteran's 
service. 
'(b) Nothing in subsection (a) shall be construed as precluding 
the establishment of service connection for disability or death from 
a disease or injury which is otherwise shown to have been incurred 
or aggravated in active military, naval, or air service or which 
became manifest to the requisite degree of disability during any 
112 STAT. 866 
PUBLIC LAW 105-206—JULY 22, 1998 
applicable presumptive period specified in section 1112 or 1116 
of this title.'. 
"(2) The table of sections at the beginning of such chapter 
is amended by inserting after the item relating to section 1102 
the following new item: 
'1103. Special provisions relating to claims based upon effects of tobacco products.'. 
ApplicabiUty. 
"(b) EFFECTIVE DATE.—Section 1103 of title 38, United States 
Code, as added by subsection (a), shall apply with respect to claims 
received by the Secretary of Veterans Affairs after the date of 
the enactment of this Act.". 
(b) GI BILL EDUCATIONAL ASSISTANCE FOR SURVIVORS AND 
DEPENDENTS OF VETERANS.—Subtitle B of title VIII of the Transpor-
Ante, p. 492. 
tation Equity Act for the 21st Century is amended by adding 
at the end the following new section: 
"SEC. 8210. TWENTY PERCENT INCREASE IN RATES OF SURVIVORS 
AND DEPENDENTS EDUCATIONAL ASSISTANCE. 
"(a) SURVIVORS AND DEPENDENTS EDUCATIONAL ASSISTANCE.— 
Section 3532 of title 38, United States Code, is amended— 
"(1) in subsection (a)(1)— 
"(A) by striking out '$404' and inserting in lieu thereof 
'$485'; 
"(B) by striking out '$304' and inserting in lieu thereof 
'$365'; and 
"(C) by striking out '$202' and inserting in lieu thereof 
'$242'; 
"(2) in subsection (a)(2), by striking out '$404' and inserting 
in lieu thereof'$485'; 
"(3) in subsection (b), by striking out '$404' and inserting 
in lieu thereof'$485'; and 
"(4) in subsection (c)(2)— 
"(A) by striking out '$327' and inserting in lieu thereof 
'$392'; 
"(B) by striking out '$245' and inserting in lieu thereof 
'$294'; and 
"(C) by striking out '$163' and inserting in lieu thereof 
'$196'. 
"(b) CORRESPONDENCE COURSE.—Section 3534(b) of such title 
is amended by striking out '$404' and inserting in lieu thereof 
'$485'. 
"(c) SPECIAL RESTORATIVE TRAINING.—Section 3542(a) of such 
title is amended— 
"(1) by striking out '$404' and inserting in lieu thereof 
'$485'; 
"(2) by striking out '$127' each place it appears and 
inserting in lieu thereof'$152'; and 
"(3) by striking out '$13.46' and inserting in lieu thereof 
'$16.16'. 
"(d) APPRENTICESHIP TRAINING.—Section 3687(b)(2) of such title 
is amended— 
"(1) by striking out '$294' and inserting in lieu thereof 
'$353'; 
"(2) by striking out '$220' and inserting in lieu thereof 
'$264'; 
"(3) by striking out '$146' and inserting in lieu thereof 
'$175'; and 
"(4) by striking out '$73' and inserting in lieu thereof '$88'. 
PUBLIC LAW 105-206-^ULY 22, 1998 
112 STAT. 867 
"(e) EFFECTIVE DATE.—^The amendments made by this section Applicability, 
shall take effect on October 1, 1998, and shall apply with respect 
to educational assistance allowances paid for months after Septem-
ber 1998.". 
SEC. 9015. TECHNICAL CORRECTIONS REGARDING TITLE DL 
(a) HIGHWAY TRUST FUND.—Subsection (f) of section 9002 of 
the Transportation Equity Act for the 21st Century is amended Ante, p. 499. 
by adding at the end the following new paragraphs: 
"(4) The last sentence of section 9503(c)(1), as amended 
by subsection (d), is amended by striking 'the date of enactment 
of the Transportation Equity Act for the 21st Century' and 
inserting 'the date of the enactment of the TEA 21 Restoration 
Act'. 
"(5) Paragraph (3) of section 9503(e), as amended by sub-
section (d), is amended by striking 'the date of enactment 
of the Transportation Equity Act for the 21st Century' and 
inserting 'the date of the enactment of the TEA 21 Restoration 
Act'.". 
(b) 
BOAT SAFETY ACCOUNT AND SPORT FISH RESTORATION 
ACCOUNT.—Section 9005 of the Transportation Equity Act for the 
21st Century is amended by adding at the end the following new Ante, p. 504. 
subsection: 
"(f) CLERICAL AMENDMENTS.— 
"(1) Subparagraph (A) of section 9504(b)(2), as amended 
by subsection (b)(1), is amended by striking 'the date of the 
enactment of the Transportation Equity Act for the 21st Cen-
tury' and inserting 'the date of the enactment of the TEA 
21 Restoration Act'. 
"(2) Subparagraph (B) of section 9504(b)(2), as added by 
subsection (b)(3), is amended by striking 'such Act' and inserting 
'the TEA 21 Restoration Act'. 
"(3) Subparagraph (C) of section 9504(b)(2), as amended 
by subsection (b)(2) and redesignated by subsection (b)(3), is 
amended by striking 'the date of the enactment of the Transpor-
tation Equity Act for the 21st Century' and inserting 'the date 
of the enactment of the TEA 21 Restoration Act'. 
"(4) Subsection (c) of section 9504, as amended by sub-
section (c)(2), is amended by striking 'the date of enactment 
of the Transportation Equity Act for the 21st Century' and 
inserting 'the date of the enactment of the TEA 21 Restoration 
Act'.". 
112 STAT. 868 
PUBLIC LAW 105-206-^ULY 22, 1998 
23 u s e 101 note. 
SEC. 9016. EFFECTIVE DATE. 
This title and the amendments made by this title shall take 
effect simultaneously with the enactment of the Transportation 
Equity Act for the 21st Century. For purposes of all Federal laws, 
the amendments made by this title shall be treated as being 
included in the Transportation Equity Act for the 21st Century 
at the time of the enactment of such Act, and the provisions of 
such Act (including the amendments made by such Act) (as in 
effect on the day before the date of enactment of this Act) that 
are amended by this title shall be treated as not being enacted. 
Approved July 22, 1998. 
LEGISLATIVE HISTORY—H.R. 2676: 
HOUSE REPORTS: Nos. 105-364, Pt. 1 (Coram, on Ways and Means) and 105-599 
(Comm. of Conference). 
SENATE REPORTS: No. 105-174 (Comm. on Finance). 
CONGRESSIONAL RECORD: 
Vol. 143 (1997): Nov. 5, considered and passed House. 
Vol. 144 (1998): May 4-7, considered and passed Senate, amended. 
June 25, House agreed to conference report. 
July 7-9, Senate considered and agreed to conference report. 
WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 34 (1998): 
July 22, Presidential remarks.