S.Amdt. 2628

1. Adds SEC. 504. PENALTY FOR PROMOTING ABUSIVE TAX SHELTERS at the end of subtitle A of title V

   Adds a section

   In S. 2020 · Placed on Calendar Senate

   (f) Effective Date.--The amendments made by this section shall apply to submissions made and issues raised after the date on which the Secretary first prescribes a list under section 6702(c) of the Internal Revenue Code of 1986, as amended by subsection (a).

   Inserted: SEC. 504. PENALTY FOR PROMOTING ABUSIVE TAX SHELTERS.

   Inserted: (a) Penalty for Promoting Abusive Tax Shelters.--Section 6700 (relating to promoting abusive tax shelters, etc.) is amended--

   Inserted: (1) by redesignating subsections (b) and (c) as subsections (d) and (e), respectively,

   Inserted: (2) by striking "a penalty" and all that follows through the period in the first sentence of subsection (a) and inserting "a penalty determined under subsection (b)", and

   Inserted: (3) by inserting after subsection (a) the following new subsections:

   Inserted: "(b) Amount of Penalty; Calculation of Penalty; Liability for Penalty.--

   Inserted: "(1) Amount of penalty.--The amount of the penalty imposed by subsection (a) shall not exceed the greater of--

   Inserted: "(A) 150 percent of the gross income derived (or to be derived) from such activity by the person or persons subject to such penalty, and

   Inserted: "(B) if readily subject to calculation, the total amount of underpayment by the taxpayer (including penalties, interest, and taxes) in connection with such activity.

   Inserted: "(2) Calculation of penalty.--The penalty amount determined under paragraph (1) shall be calculated with respect to each instance of an activity described in subsection (a), each instance in which income was derived by the person or persons subject to such penalty, and each person who participated in such an activity.

   Inserted: "(3) Liability for penalty.--If more than 1 person is liable under subsection (a) with respect to such activity, all such persons shall be jointly and severally liable for the penalty under such subsection.

   Inserted: "(c) Penalty Not Deductible.--The payment of any penalty imposed under this section or the payment of any amount to settle or avoid the imposition of such penalty shall not be considered an ordinary and necessary expense in carrying on a trade or business for purposes of this title and shall not be deductible by the person who is subject to such penalty or who makes such payment.".

   Show 90 more inserted paragraphsShow less

   Inserted: (b) Conforming Amendment.--Section 6700(a) is amended by striking the last sentence.

   Inserted: (c) Effective Date.--The amendments made by this section shall apply to activities after the date of the enactment of this Act.

   Inserted: SEC. 505. PENALTY FOR AIDING AND ABETTING THE UNDERSTATEMENT OF TAX LIABILITY.

   Inserted: (a) In General.--Section 6701(a) (relating to imposition of penalty) is amended--

   Inserted: (1) by striking "preparation or presentation of" and inserting "tax liability reflected in" in paragraph (1),

   Inserted: (2) by inserting "aid, assistance, procurement, or advice with respect to such" before "portion" both places it appears in paragraphs (2) and (3), and

   Inserted: (3) by inserting "instance of aid, assistance, procurement, or advice or each such" before "document" in the matter following paragraph (3).

   Inserted: (b) Amount of Penalty.--Subsection (b) of section 6701 (relating to penalties for aiding and abetting understatement of tax liability) is amended to read as follows:

   Inserted: "(b) Amount of Penalty; Calculation of Penalty; Liability for Penalty.--

   Inserted: "(1) Amount of penalty.--The amount of the penalty imposed by subsection (a) shall not exceed the greater of--

   Inserted: "(A) 150 percent of the gross income derived (or to be derived) from such aid, assistance, procurement, or advice provided by the person or persons subject to such penalty, and

   Inserted: "(B) if readily subject to calculation, the total amount of underpayment by the taxpayer (including penalties, interest, and taxes) in connection with the understatement of the liability for tax.

   Inserted: "(2) Calculation of penalty.--The penalty amount determined under paragraph (1) shall be calculated with respect to each instance of aid, assistance, procurement, or advice described in subsection (a), each instance in which income was derived by the person or persons subject to such penalty, and each person who made such an understatement of the liability for tax.

   Inserted: "(3) Liability for penalty.--If more than 1 person is liable under subsection (a) with respect to providing such aid, assistance, procurement, or advice, all such persons shall be jointly and severally liable for the penalty under such subsection.".

   Inserted: (c) Penalty Not Deductible.--Section 6701 is amended by adding at the end the following new subsection:

   Inserted: "(g) Penalty Not Deductible.--The payment of any penalty imposed under this section or the payment of any amount to settle or avoid the imposition of such penalty shall not be considered an ordinary and necessary expense in carrying on a trade or business for purposes of this title and shall not be deductible by the person who is subject to such penalty or who makes such payment.".

   Inserted: (d) Effective Date.--The amendments made by this section shall apply to activities after the date of the enactment of this Act.

   Inserted: SEC. 506. PREVENTING TAX SHELTER ACTIVITIES BY FINANCIAL INSTITUTIONS.

   Inserted: (a) Examinations.--

   Inserted: (1) Development of examination techniques.--Each of the Federal banking agencies and the Commission shall, in consultation with the Internal Revenue Service, develop examination techniques to detect potential violations of section 6700 or 6701 of the Internal Revenue Code of 1986, by depository institutions, brokers, dealers, and investment advisers, as appropriate.

   Inserted: (2) Frequency.--Not less frequently than once in each 2-year period, each of the Federal banking agencies and the Commission shall implement the examination techniques developed under paragraph (1) with respect to each of the depository institutions, brokers, dealers, or investment advisers subject to their enforcement authority. Such examination shall, to the extent possible, be combined with any examination by such agency otherwise required or authorized by Federal law.

   Inserted: (b) Report to Internal Revenue Service.--In any case in which an examination conducted under this section with respect to a financial institution or other entity reveals a potential violation, such agency shall promptly notify the Internal Revenue Service of such potential violation for investigation and enforcement by the Internal Revenue Service in accordance with applicable provisions of law.

   Inserted: (c) Report to Congress.--The Federal banking agencies and the Commission shall submit a joint written report to Congress in 2007 and 2010 on their progress in preventing violations of sections 6700 and 6701 of the Internal Revenue Code of 1986, by depository institutions, brokers, dealers, and investment advisers, as appropriate.

   Inserted: (d) Definitions.--For purposes of this section--

   Inserted: (1) the terms "broker", "dealer", and "investment adviser" have the same meanings as in section 3 of the Securities Exchange Act of 1934 (15 U.S.C. 78c);

   Inserted: (2) the term "Commission" means the Securities and Exchange Commission;

   Inserted: (3) the term "depository institution" has the same meaning as in section 3(c) of the Federal Deposit Insurance Act (12 U.S.C. 1813(c));

   Inserted: (4) the term "Federal banking agencies" has the same meaning as in section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. 1813(q)); and

   Inserted: (5) the term "Secretary" means the Secretary of the Treasury.

   Inserted: SEC. 507. INFORMATION SHARING FOR ENFORCEMENT PURPOSES.

   Inserted: (a) Promotion of Prohibited Tax Shelters or Tax Avoidance Schemes.--Section 6103(h) (relating to disclosure to certain Federal officers and employees for purposes of tax administration, etc.) is amended by adding at the end the following new paragraph:

   Inserted: "(7) Disclosure of returns and return information related to promotion of prohibited tax shelters or tax avoidance schemes.--

   Inserted: "(A) Written request.--Upon receipt by the Secretary of a written request which meets the requirements of subparagraph (B) from the head of the United States Securities and Exchange Commission, an appropriate Federal banking agency as defined under section 1813(q) of title 12, United States Code, or the Public Company Accounting Oversight Board, a return or return information shall be disclosed to such requestor's officers and employees who are personally and directly engaged in an investigation, examination, or proceeding by such requestor to evaluate, determine, penalize, or deter conduct by a financial institution, issuer, or public accounting firm, or associated person, in connection with a potential or actual violation of section 6700 (promotion of abusive tax shelters), 6701 (aiding and abetting understatement of tax liability), or activities related to promoting or facilitating inappropriate tax avoidance or tax evasion. Such disclosure shall be solely for use by such officers and employees in such investigation, examination, or proceeding.

   Inserted: "(B) Requirements.--A request meets the requirements of this subparagraph if it sets forth--

   Inserted: "(i) the nature of the investigation, examination, or proceeding,

   Inserted: "(ii) the statutory authority under which such investigation, examination, or proceeding is being conducted,

   Inserted: "(iii) the name or names of the financial institution, issuer, or public accounting firm to which such return information relates,

   Inserted: "(iv) the taxable period or periods to which such return information relates, and

   Inserted: "(v) the specific reason or reasons why such disclosure is, or may be, relevant to such investigation, examination or proceeding.

   Inserted: "(C) Financial institution.--For the purposes of this paragraph, the term 'financial institution' means a depository institution, foreign bank, insured institution, industrial loan company, broker, dealer, investment company, investment advisor, or other entity subject to regulation or oversight by the United States Securities and Exchange Commission or an appropriate Federal banking agency.".

   Inserted: (b) Financial and Accounting Fraud Investigations.--Section 6103(i) (relating to disclosure to Federal officers or employees for administration of Federal laws not relating to tax administration) is amended by adding at the end the following new paragraph:

   Inserted: "(9) Disclosure of returns and return information for use in financial and accounting fraud investigations.--

   Inserted: "(A) Written request.--Upon receipt by the Secretary of a written request which meets the requirements of subparagraph (B) from the head of the United States Securities and Exchange Commission or the Public Company Accounting Oversight Board, a return or return information shall be disclosed to such requestor's officers and employees who are personally and directly engaged in an investigation, examination, or proceeding by such requester to evaluate the accuracy of a financial statement or report or to determine whether to require a restatement, penalize, or deter conduct by an issuer, investment company, or public accounting firm, or associated person, in connection with a potential or actual violation of auditing standards or prohibitions against false or misleading statements or omissions in financial statements or reports. Such disclosure shall be solely for use by such officers and employees in such investigation, examination, or proceeding.

   Inserted: "(B) Requirements.--A request meets the requirements of this subparagraph if it sets forth--

   Inserted: "(i) the nature of the investigation, examination, or proceeding,

   Inserted: "(ii) the statutory authority under which such investigation, examination, or proceeding is being conducted,

   Inserted: "(iii) the name or names of the issuer, investment company, or public accounting firm to which such return information relates,

   Inserted: "(iv) the taxable period or periods to which such return information relates, and

   Inserted: "(v) the specific reason or reasons why such disclosure is, or may be, relevant to such investigation, examination or proceeding.".

   Inserted: (c) Effective Date.--The amendments made by this section shall apply to disclosures and to information and document requests made after the date of the enactment of this Act.

   Inserted: SEC. 508. DISCLOSING PAYMENTS TO PERSONS IN UNCOOPERATIVE TAX HAVENS.

   Inserted: (a) In General.--Subpart A of part III of subchapter A of chapter 61 is amended by inserting after section 6038C the following new section:

   Inserted: "SEC. 6038D. DETERRING UNCOOPERATIVE TAX HAVENS THROUGH LISTING AND REPORTING REQUIREMENTS.

   Inserted: "(a) In General.--Each United States person who transfers money or other property directly or indirectly to any uncooperative tax haven, to any financial institution licensed by or operating in any uncooperative tax haven, or to any person who is a resident of any uncooperative tax haven shall furnish to the Secretary, at such time and in such manner as the Secretary shall by regulation prescribe, such information with respect to such transfer as the Secretary may require.

   Inserted: "(b) Exceptions.--Subsection (a) shall not apply to a transfer by a United States person if the amount of money (and the fair market value of property) transferred is less than $10,000. Related transfers shall be treated as 1 transfer for purposes of this subsection.

   Inserted: "(c) Uncooperative Tax Haven.--For purposes of this section--

   Inserted: "(1) In general.--The term 'uncooperative tax haven' means any foreign jurisdiction which is identified on a list maintained by the Secretary under paragraph (2) as being a jurisdiction--

   Inserted: "(A) which imposes no or nominal taxation either generally or on specified classes of income, and

   Inserted: "(B) has corporate, business, bank, or tax secrecy or confidentiality rules and practices, or has ineffective information exchange practices which, in the judgment of the Secretary, effectively limit or restrict the ability of the United States to obtain information relevant to the enforcement of this title.

   Inserted: "(2) Maintenance of list.--Not later than November 1 of each calendar year, the Secretary shall issue a list of foreign jurisdictions which the Secretary determines qualify as uncooperative tax havens under paragraph (1).

   Inserted: "(3) Ineffective information exchange practices.--For purposes of paragraph (1), a jurisdiction shall be deemed to have ineffective information exchange practices if the Secretary determines that during any taxable year ending in the 12-month period preceding the issuance of the list under paragraph (2)--

   Inserted: "(A) the exchange of information between the United States and such jurisdiction was inadequate to prevent evasion or avoidance of United States income tax by United States persons or to enable the United States effectively to enforce this title, or

   Inserted: "(B) such jurisdiction was identified by an intergovernmental group or organization of which the United States is a member as uncooperative with international tax enforcement or information exchange and the United States concurs in the determination.

   Inserted: "(d) Penalty for Failure to File Information.--If a United States person fails to furnish the information required by subsection (a) with respect to any transfer within the time prescribed therefor (including extensions), such United States person shall pay (upon notice and demand by the Secretary and in the same manner as tax) an amount equal to 20 percent of the amount of such transfer.

   Inserted: "(e) Simplified Reporting.--The Secretary may by regulations provide for simplified reporting under this section for United States persons making large volumes of similar payments.

   Inserted: "(f) Regulations.--The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section.".

   Inserted: (b) Clerical Amendment.--The table of sections for such subpart A is amended by inserting after the item relating to section 6038C the following new item:

   Inserted: "Sec. 6038D. Deterring uncooperative tax havens through listing and reporting requirements.".

   Inserted: (c) Effective Date.--The amendments made by this section shall apply to transfers after the date which is 180 days after the date of the enactment of this Act.

   Inserted: SEC. 509. DETERRING UNCOOPERATIVE TAX HAVENS BY RESTRICTING ALLOWABLE TAX BENEFITS.

   Inserted: (a) Limitation on Deferral.--

   Inserted: (1) In general.--Subsection (a) of section 952 (defining subpart F income) is amended by striking "and" at the end of paragraph (4), by striking the period at the end of paragraph (5) and inserting ", and", and by inserting after paragraph (5) the following new paragraph:

   Inserted: "(6) an amount equal to the applicable fraction (as defined in subsection (e)) of the income of such corporation other than income which--

   Inserted: "(A) is attributable to earnings and profits of the foreign corporation included in the gross income of a United States person under section 951 (other than by reason of this paragraph or paragraph (3)(A)(i)), or

   Inserted: "(B) is described in subsection (b).".

   Inserted: (2) Applicable fraction.--Section 952 is amended by adding at the end the following new subsection:

   Inserted: "(e) Identified Tax Haven Income Which Is Subpart F Income.--

   Inserted: "(1) In general.--For purposes of subsection (a)(6), the term 'applicable fraction' means the fraction--

   Inserted: "(A) the numerator of which is the aggregate identified tax haven income for the taxable year, and

   Inserted: "(B) the denominator of which is the aggregate income for the taxable year which is from sources outside the United States.

   Inserted: "(2) Identified tax haven income.--For purposes of paragraph (1), the term 'identified tax haven income' means income for the taxable year which is attributable to a foreign jurisdiction for any period during which such jurisdiction has been identified as an uncooperative tax haven under section 6038D(c).

   Inserted: "(3) Regulations.--The Secretary shall prescribe regulations similar to the regulations issued under section 999(c) to carry out the purposes of this subsection.".

   Inserted: (b) Denial of Foreign Tax Credit.--Section 901 (relating to taxes of foreign countries and of possessions of United States) is amended by redesignating subsection (m) as subsection (n) and by inserting after subsection (l) the following new subsection:

   Inserted: "(m) Reduction of Foreign Tax Credit, Etc., for Identified Tax Haven Income.--

   Inserted: "(1) In general.--Notwithstanding any other provision of this part--

   Inserted: "(A) no credit shall be allowed under subsection (a) for any income, war profits, or excess profits taxes paid or accrued (or deemed paid under section 902 or 960) to any foreign jurisdiction if such taxes are with respect to income attributable to a period during which such jurisdiction has been identified as an uncooperative tax haven under section 6038D(c), and

   Inserted: "(B) subsections (a), (b), (c), and (d) of section 904 and sections 902 and 960 shall be applied separately with respect to all income of a taxpayer attributable to periods described in subparagraph (A) with respect to all such jurisdictions.

   Inserted: "(2) Taxes allowed as a deduction, etc.--Sections 275 and 78 shall not apply to any tax which is not allowable as a credit under subsection (a) by reason of this subsection.

   Inserted: "(3) Regulations.--The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subsection, including regulations which treat income paid through 1 or more entities as derived from a foreign jurisdiction to which this subsection applies if such income was, without regard to such entities, derived from such jurisdiction.".

   Inserted: (c) Effective Date.--The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

   Original wording

   At the end of subtitle A of title V, add the following:

Read automatically from the Congressional Record. Check the original before relying on it.

As printed