§ 6044. Returns regarding payments of patronage dividends

Legislative history

Reconstructed from this section’s Code source credit and amendment notes, resolved against the local Statutes at Large. Editorial notes are evidence, not the law that made the change.

1. 1954

   Aug. 16, 1954, ch. 736, 68A Stat. 746 · 68A Stat. 746

   Enacted · 26 U.S.C. § 6044

   Aug. 16, 1954, ch. 736, 68A Stat. 746

   Source evidence

   Code source credit
   Aug. 16, 1954, ch. 736, 68A Stat. 746

2. 1962

   Revenue Act of 1962

   Pub. L. 87–834 § 19(b) · 76 Stat. 960

   1. Substituted · 26 U.S.C. § 6044

      Pub. L. 87–834 substituted “Returns regarding payments of patronage dividends” for “Returns regarding patronage dividends” in section catchline

   2. Amended · 26 U.S.C. § 6044

      Pub. L. 87–834 amended text generally. Prior to amendment, text read as follows:

   Source evidence

   Code amendment note
   Pub. L. 87–834 substituted “Returns regarding payments of patronage dividends” for “Returns regarding patronage dividends” in section catchline and amended text generally. Prior to amendment, text read as follows:

   “(a) Payments of $100 or More.—Any corporation allocating amounts as patronage dividends, rebates, or refunds (whether in cash, merchandise, capital stock, revolving fund certificates, retain certificates, certificates of indebtedness, letters of advice, or in some other manner that discloses to each patron the amount of such dividend, refund, or rebate) shall make a return showing— “(1) The name and address of each patron to whom it has made such allocations amounting to $100 or more during the calendar year; and “(2) The amount of such allocations to each patron. “(b) Payments Regardless of Amount.—If required by the Secretary or his delegate, any such corporation shall make a return of all patronage dividends, rebates, or refunds made during the calendar year to its patrons. “(c) Exceptions.—This section shall not apply in the case of any corporation (including any cooperative or nonprofit corporation engaged in rural electrification) described in section 501(c)(12) or (15) which is exempt from tax under section 501(a), or in the case of any corporation subject to a tax imposed by subchapter L of chapter 1.”

3. 1966

   Pub. L. 89–809 § 211(d)(1) · 80 Stat. 1539

   Added · 26 U.S.C. § 6044(b)(1)

   Pub. L. 89–809, § 211(d)(1), added subpars. (D) and (E)

   Source evidence

   Code amendment note
   Subsec. (b)(1). Pub. L. 89–809, § 211(d)(1), added subpars. (D) and (E).

   Enacted provision · exact public law section
   (1) Amounts subject to reporting.— Section 6044(b)(1) is amended by striking out “and” at the end of subparagraph (B), by striking out the period at the end of subparagraph (C) and inserting in lieu thereof “, and”, and by adding after subparagraph (C) the following new subparagraphs: “(D) the amount of any per-unit retain allocation (as defined in section 1388(f)) which is paid in qualified per-unit retain certificates (as defined in section 1388(h)), and “(E) any amount described in section 1382 (b)(4) (relating to redemption of nonqualified per-unit retain certificates).”

4. 1966

   Pub. L. 89–809 § 211(d)(2) · 80 Stat. 1539

   Inserted · 26 U.S.C. § 6044(d)

   Pub. L. 89–809, § 211(d)(2), inserted references to qualified per-unit retain certificates

   Source evidence

   Code amendment note
   Subsec. (d). Pub. L. 89–809, § 211(d)(2), inserted references to qualified per-unit retain certificates.

   Enacted provision · exact public law section
   (2) Determination of amount paid.— (A) Section 6044(d)(1) is amended by striking out “allocation)” and inserting in lieu thereof “allocation or a qualified per-unit retain certificate)”. (B) Section 6044(d)(2) is amended by striking out “allocation” and inserting in lieu thereof “allocation or a qualified per-unit retain certificate”.

5. 1976

   Pub. L. 94–455 title XIX § 1906(b)(13)(A) · 90 Stat. 1520

   Struck · 26 U.S.C. § 6044

   Pub. L. 94–455 struck out “or his delegate” after “Secretary” wherever appearing

   Source evidence

   Code amendment note
   Pub. L. 94–455 struck out “or his delegate” after “Secretary” wherever appearing.

   Enacted provision · exact public law section
   (A) The Internal Revenue Code of 1954, as amended by this Act, is amended by striking out “Secretary or his delegate” each place it appears and inserting in lieu thereof “Secretary”.

6. 1982

   Pub. L. 97–248 title III · 96 Stat. 324

   1. Added · 26 U.S.C. § 6044(a)(1); 26 U.S.C. § 6044(b)(1); 26 U.S.C. § 6044(a)(e); 26 U.S.C. § 6044(a)(f)

      Pub. L. 97–248 provided that, applicable to payments of interest, dividends, and patronage dividends paid or credited after June 30, 1983, subsecs. (a)(1), (b)(1), and (e) are amended and a new subsec. (f) is added. Section 102(a), (b) of Pub. L. 98–67, title I, Aug. 5, 1983, 97 Stat. 369

   2. Repealed · 26 U.S.C. § 6044(a)(1); 26 U.S.C. § 6044(b)(1); 26 U.S.C. § 6044(a)(e); 26 U.S.C. § 6044(a)(f)

      Pub. L. 97–248 provided that, applicable to payments of interest, dividends, and patronage dividends paid or credited after June 30, 1983, subsecs. (a)(1), (b)(1), and (e) are repealed subtitle A (§§ 301–308) of Pub. L. 97–248 as of the close of June 30, 1983, and provided that the Internal Revenue Code of 1954 [now 1986] [this title] shall be applied and administered (subject to certain exceptions) as if such subtitle A (and the amendments made by such subtitle A) had not been enacted

   Source evidence

   Code amendment note
   Subsecs. (a)(1), (b)(1), (e), (f). Pub. L. 97–248 provided that, applicable to payments of interest, dividends, and patronage dividends paid or credited after June 30, 1983, subsecs. (a)(1), (b)(1), and (e) are amended and a new subsec. (f) is added. Section 102(a), (b) of Pub. L. 98–67, title I, Aug. 5, 1983, 97 Stat. 369, repealed subtitle A (§§ 301–308) of Pub. L. 97–248 as of the close of June 30, 1983, and provided that the Internal Revenue Code of 1954 [now 1986] [this title] shall be applied and administered (subject to certain exceptions) as if such subtitle A (and the amendments made by such subtitle A) had not been enacted.

   Enacted provision · exact public law
   TITLE III— TAXPAYER COMPLIANCE Subtitle A— Withholding on Interest and Dividends SEC. 301. WITHHOLDING ON INTEREST AND DIVIDENDS. Chapter 24 (relating to collection of income tax at source on wages) is amended by adding at the end thereof the following new subchapter: “Subchapter B— Withholding From Interest and Dividends “Sec. 3451. Income tax collected at source on interest, dividends, and patronage dividends. “Sec. 3452. Exemptions from withholding. “Sec. 3453. Payor defined. “Sec. 3454. Definitions of interest, dividend, and patronage dividend. “Sec. 3455. Other definitions and special rules. “Sec. 3456. Administrative provisions. “SEC. 3451. INCOME TAX COLLECTED AT SOURCE ON INTEREST, DIVIDENDS. AND PATRONAGE DIVIDENDS. “(a) Requirement of Withholding.— Except as otherwise provided in this subchapter, the payor of any interest, dividend, or patronage dividend shall withhold a tax equal to 10 percent of the amount of the payment. “(b) Special Rules.— “(1) Time of withholding.— Except as otherwise provided in this subchapter, for purposes of this subchapter— “(A) any payment of interest, dividend, or patronage dividend shall be treated as made, and “(B) the tax imposed by this section shall be withheld, at the time such interest, dividend, or patronage dividend is paid or credited. “(2) Payee unknown.— If a payor is unable to determine the person to whom any interest, dividend, or patronage dividend is payable or creditable, the tax under this section shall be withheld at the time withholding would be required under paragraph (1) if the payee were known and were an individual. “(3) Amount of dividend, etc., unknown.— “(A) In general.— If the payor is unable to determine the portion of a distribution which is a dividend, the tax under this section shall be computed on the gross amount of the distribution. To the extent provided in regulations, a similar rule shall apply in the case of interest and patronage dividends. “(B) Distributions which are not dividends.— To the extent provided in regulations, this section shall not apply to the extent that the portion of a distribution which is not a dividend may reasonably be estimated. “(4) Withholding from alternative source.— The Secretary shall prescribe regulations setting forth the circumstances under which the tax imposed by this section may be paid from an account or source other than the payment which gives rise to the liability for tax. “(c) Liability for payment.— “(1) Payor liable.— Except as otherwise provided in this subchapter, the payor— “(A) shall be liable for the payment of the tax imposed by this section which such payor is required to withhold under this section, and “(B) shall not be liable to any person (other than the United States) for the amount of any such payment. “(2) Reliance on exemption certificates.— The payor shall not be liable for the payment of tax imposed by this section which such payor is required to withhold under this section if— “(A) such payor fails to withhold such tax, and “(B) such failure is due to reasonable reliance on an exemption certificate delivered to such payor under section 3452(f) which is in effect with respect to the payee at the time such tax is required to be withheld under this section. “SEC. 3452. EXEMPTIONS FROM WITHHOLDING. “(a) In General.— Section 3451 shall not apply with respect to— “(1) any payment to an exempt individual, “(2) any payment to an exempt recipient, “(3) any minimal interest payment, or “(4) any qualified consumer cooperative payment. “(b) Exempt Individuals.— “(1) In general.— For purposes of this section, the term ‘exempt individual’ means any individual— “(A) who is described in paragraph (2), and “(B) with respect to whom an exemption certificate is in effect. “(2) Individuals described in this paragraph.— An individual is described in this paragraph if— “(A) such individual’s income tax liability for the preceding taxable year did not exceed $600 ($1,000 in the case of a joint return under section 6013), or “(B) (i) such individual is 65 or older, and “(ii) such individual’s income tax liability for the preceding taxable year did not exceed $1,500 ($2,500 in the case of a joint return under section 6013). “(3) Special rule for married persons.— A husband and wife shall each be treated as satisfying the requirements of paragraph (2)(B)(i) if— “(A) either spouse is 65 or older, and “(B) such husband and wife made a joint return under section 6013 for the preceding taxable year. “(4) Special rule for certain trusts distributing currently.— Under regulations, a trust— “(A) the terms of which provide that all of its income is required to be distributed currently, and “(B) all the beneficiaries of which are individuals described in paragraph (2) or organizations described in subsection (c)(2)(B), shall be treated as an individual described in paragraph (2). “(5) Income tax liability.— For purposes of this subsection, the term ‘income tax liability’ means the amount of the tax imposed by subtitle A for the taxable year, reduced by the sum of the credits allowable against such tax (other than credits allowable by sections 31, 39, and 43). 26 USC 31, 39, 43. “(c) Exempt recipients.— “(1) In general.— For purposes of this section, the term ‘exempt recipient’ means any person described in paragraph (2)— “(A) with respect to whom an exemption certificate is in effect, or “(B) who is described in regulations prescribed by the Secretary which permit exemption from withholding without certification. “(2) Persons described in this paragraph.— A person is described in this paragraph if such person is— “(A) a corporation, “(B) an organization exempt from taxation under section 501(a) or an individual retirement plan, “(C) the United States or a State, “(D) a foreign government or international organization, “(E) a foreign central bank of issue, “(F) a dealer in securities or commodities required to register as such under the laws of the United States or a State, “(G) a real estate investment trust (as defined in section 856), “(H) an entity registered at all times during the taxable year under the Investment Company Act of 1940, 15 USC 80a–51. “(I) a common trust fund (as defined in section 584(a)), “(J) a nominee or custodian (except as otherwise provided in regulations), “(K) to the extent provided in regulations— “(i) a financial institution, “(ii) a broker, or “(iii) any other person specified in such regulations, who collects any interest, dividend, or patronage dividend for the payee or otherwise acts as a middleman between the payor and payee, or “(L) any trust which— “(i) is exempt from tax under section 664(c), or “(ii) is described in section 4947(a)(1). “(3) Payor may require certification.— A person described in paragraph (1)(B) shall not be treated as an exempt recipient for purposes of this section with respect to any payment of such payor if— “(A) an exemption certificate is not in effect with respect to such person, and “(B) the payor does not treat such person as an exempt recipient. “(d) Minimal Interest Payments.— “(1) In general.— For purposes of this section, the term ‘minimal interest payment’ means any payment of interest— “(A) with respect to which an election by the payor made under paragraph (3) is in effect, and “(B) which— “(i) does not exceed $150, and “(ii) if determined for a 1-year period would not exceed $150. “(2) Aggregation of payments to same payee.— To the extent provided in regulations prescribed by the Secretary, payments of interest by a payor to the same payee shall be aggregated for purposes of applying paragraph (1)(B). “(3) Election.— “(A) In general.— Any payor may make an election under this paragraph with respect to any type of interest payments. “(B) Effective until revoked.— Except as provided in regulations prescribed by the Secretary, an election made by any person under this paragraph shall remain in effect until revoked by such person. “(C) Time and manner.— Any election or revocation of an election made under this paragraph shall be made at such time and in such manner as the Secretary shall prescribe by regulations. “(e) Qualified consumer cooperative payment.— For purposes of this section, the term ‘qualified consumer cooperative payment’ means any payment by a cooperative which is exempt from reporting requirements under section 6044(a) by reason of section 6044(c). “(f) Exemption Certificates.— “(1) In general.— “(A) Delivery.— An exempt individual or exempt recipient may deliver an exemption certificate to a payor at any time. Such certificate shall be in such form and contain such information as the Secretary shall prescribe. “(B) Change of status.— Any person who ceases to be an exempt individual or exempt recipient shall, not later than the close of the 10th day after the date of such cessation, notify each payor with whom such person has an exemption certificate of such change in status. No notice shall be required under the preceding sentence with respect to any payor if it reasonably appears that the person will not thereafter receive a payment of interest, dividends, or patronage dividends from such payor. “(2) Effectiveness of certificates.— “(A) General rule.— Except as otherwise provided in regulations prescribed by the Secretary, an exemption certificate shall be effective until— “(i) revoked, or “(ii) notice of change in status is provided pursuant to paragraph (1)(B). “(B) When certificate takes effect.— The Secretary shall prescribe regulations setting forth— “(i) the day on which a filed exemption certificate shall be considered effective, and “(ii) the circumstances under which a payor shall treat an exemption certificate as having ceased to be effective where the Secretary has determined that the person described there in is not an exempt individual or exempt recipient. “SEC. 3453. PAYOR DEFINED. “(a) General Rule.— Except as otherwise provided in this subchapter, for purposes of this subchapter , the term ‘payor’ means the person paying or crediting the interest , dividend, or patronage dividend. “(b) Certain middlemen treated as payors.— For purposes of this subchapter— “(1) In general.— To the extent provided in regulations— “(A) any custodian for, or nominee of, the payee, “(B) any corporate trustee of a trust which is the payee, or “(C) any person which collects the payment for the payee or otherwise acts as a middleman between the payor and the payee, shall be treated as a payor with respect to the payment. “(2) Receipt treated as payment.— To the extent provided in regulations, any person treated as a payor under paragraph (1) shall be treated as having paid the interest, dividend, or patronage dividend when such person received such amount. “(c) Agents, Etc.— In the case of— “(1) a fiduciary or agent with respect to the payment or crediting of any interest, dividend, or patronage dividend, or “(2) any other person who has the control, receipt, custody, or disposal of, or pays or credits any interest, dividend, or patronage dividend for any payor, the Secretary, under regulations prescribed by him, may designate such fiduciary, agent, or other person as a payor with respect to such payment or crediting for purposes of this subchapter. “(d) Treatment of persons to whom subsection (b) or (c) applies.— Any person treated as a payor under subsection (b) or (c)— “(1) shall perform such acts as are required of a payor (within the meaning of subsection (a)) and as may be specified by the Secretary, and “(2) shall be treated as a payor for all provisions of law (including penalties) applicable in respect to a payor (within the meaning of subsection (a)). “(e) Relief From Double Withholding.— The Secretary may by regulations provide that where any person is treated as a payor under subsection (b) or (c) with respect to any payment, any other person who (but for this subsection) would be treated as a payor with respect to such payment shall be relieved from the requirements of this subchapter to the extent provided in such regulations. “(f) Liability of Third Parties Paying or Providing Interest, Dividends, or Patronage Dividends.— To the extent provided in regulations prescribed by the Secretary, rules similar to the rules of section 3505 (relating to liability of third parties paying or providing for wages) shall apply for purposes of this subchapter. For purposes of the preceding sentence, the last sentence of subsection (b) of section 3505 shall be applied by substituting ‘10 percent’ for ‘25 percent’. “SEC. 3454. DEFINITIONS OF INTEREST, DIVIDEND, AND PATRONAGE DIVIDEND. “(a) Interest Defined.— For purposes of this subchapter— “(1) General rule.— The term ‘interest’ means— “(A) interest on any obligation in registered form or of a type offered to the public, “(B) interest on deposits with persons carrying on the banking business, “(C) amounts (whether or not designated as interest) paid by a mutual savings bank, savings and loan association. building and loan association, cooperative bank, homestead association, credit union, industrial loan association or bank, or similar organization, in respect of deposits, investment certificates, or withdrawable or repurchasable shares, “(D) interest on amounts held by an insurance company under an agreement to pay interest thereon, “(E) interest on deposits with brokers (as defined in section 6045(c)), and Post, p. 600. “(F) interest paid on amounts held by investment companies (as defined in section 3 of the Investment Company Act of 1940 (15 U.S.C. 80a-3)) and on amounts invested in other pooled funds or trusts. “(2) Exceptions.— The term ‘interest’ does not include— “(A) interest on any obligation issued by a natural person, “(B) interest on any obligation if such interest is exempt from taxation under section 103(a) or if such interest is exempt from tax (without regard to the identity of the holder) under any other provision of law, “(C) any amount paid on a depository institution tax-exempt certificate (as defined in section 128(c)(1) (as in 95 Stat. 267. effect for taxable years beginning before January 1, 1985)), “(D) any amount which is subject to withholding under subchapter A of chapter 3 (relating to withholding of tax on nonresident aliens and foreign corporations) by the person paying such amount, “(E) any amount which would be subject to withholding under subchapter A of chapter 3 by the person paying such amount but for the fact that— “(i) such amount is income from sources outside the United States, “(ii) the payor thereof is excepted from the application of section 1441(a) by reason of section 1441(c) or a tax treaty, or “(iii) such amount is original issue discount (within the meaning of section 1232(b)(1)), “(F) any amount which is exempt from tax under— “(i) section 892 (relating to income of foreign governments and of international organizations), or “(ii) section 895 (relating to income derived by a foreign central bank of issue from obligations of the United States or from bank deposits), “(G) except to the extent otherwise provided in regulations, any amount paid by— “(i) a foreign government or international organization or any agency or instrumentality thereof, “(ii) a foreign central bank of issue, “(iii) a foreign corporation not engaged in trade or business in the United States, “(iv) a foreign corporation, the interest payments of which would be exempt from withholding under subchapter A of chapter 3 if paid to a person who is not a United States person, or “(v) a partnership not engaged in a trade or business in the United States and composed in whole of nonresident aliens, individuals and persons described in clause (i), (ii), or (iii). “(H) any amount on which the person making payment is required to withhold a tax under section 1451 (relating to tax-free covenant bonds), or would be so required but for section 1451(d) (relating to benefit of personal exemptions), and “(I) except to the extent otherwise provided in regulations, any amount not described in the foregoing provisions of this paragraph which is paid outside the United States and is income from sources outside the United States. “(3) Adjustment for penalty because of premature withdrawal of funds from time savings accounts or deposits.— To the extent provided in regulations, the amount of any interest on a time savings account, certificate of deposit, or similar class of deposits shall be appropriately reduced for purposes of this suchapter by the amount of any penalty imposed for the premature withdrawal of funds. “(b) Dividend Defined.— For purposes of this subchapter— “(1) General rule.— The term ‘dividend’ means— “(A) any distribution by a corporation which is a dividend (as defined in section 316), and “(B) any payment made by a stockbroker to any person as a substitute for a dividend (as so defined). “(2) Subchapter s distributions after close of year.— The term ‘dividend’ includes any distribution described in section 1375(f) (relating to distributions by electing small business corporations after the close of the taxable year). “(3) Exceptions.— The term ‘dividend’ shall not include— “(A) any amount paid as a distribution of stock described in section 305(e)(2)(A) (relating to reinvestment of dividends 95 Stat. 287. in stock of public utilities), “(B) any amount which is treated as a taxable dividend by reason of section 302 (relating to redemptions of stock), 306 (relating to disposition of certain stock), 356 (relating to receipt of additional consideration in connection with certain reorganizations), or 1081(e)(2) (relating to certain distributions pursuant to order of the Securities and Exchange Commission), “(C) any amount described in subparagraph (D), (E), or (F) of subsection (a)(2), “(D) to the extent provided in regulations, any amount paid by a foreign corporation not engaged in a trade or business in the United States, “(E) any amount which is a capital gain dividend distributed by— “(i) a regulated investment company (as defined in section 852(b)(3)(C)), or “(ii) a real estate investment trust (as defined in section 857(b)(3)(C)), “(F) any amount which is an exempt-interest dividend of a regulated investment company (as defined in section 852(b)(5)(A)), “(G) any amount paid or treated as paid by a regulated investment company during a year if, under regulations prescribed by the Secretary, it is anticipated that at least 95 percent of the dividends paid or treated as paid during such year (not including capital gain distributions) will be exempt-interest dividends, and “(H) any amount described in section 1373 (relating to undistributed taxable income of electing small business corporations). “(c) Patronage Dividend.— For purposes of this subchapter— “(1) In general.— The term ‘patronage dividend’ means— “(A) the amount of any patronage dividend (as defined in section 1388(a)) which is paid in money, qualified written notice of allocation, or other property (except a nonqualified written notice of allocation), “(B) any amount, described in section 1382(c)(2)(A) (relating to certain nonpatronage distributions), which is paid in money, qualified written notice of allocation, or other property (except nonqualified written notice of allocation) by an organization exempt from tax under section 521 (relating to exemption of farmers’ cooperatives from tax), and “(C) any amount paid in money or other property (except written notice of allocation) in redemption of a nonqualified written notice of allocation attributable to any source described in subparagraph (A) or (B). “(2) Exceptions.— The term ‘patronage dividend’ shall not include any amount described in subparagraph (D), (E), or (F) of subsection (a)(2). “(3) Special rules.— In determining the amount of any patronage dividend— “(A) property (other than a written notice of allocation) shall be taken into account at its fair market value, “(B) a qualified written notice of allocation described in section 1388(c)(1)(A) shall be taken into account at its stated dollar amount, and “(C) a patronage dividend part of which is a qualified written notice of allocation described in section 1388(c)(1)(B) (and not in section 1388(c)(1)(A)) shall be taken into account only if 50 percent or more of such dividend is paid in money or by a qualified check, and any such qualified written notice of allocation which is taken into account after the application of this subparagraph shall be taken into account at its stated dollar amount. “(4) Definitions.— For purposes of this subsection— “(A) Qualified written notice of allocation.— The term ‘qualified written notice of allocation’ has the meaning given to such term by section 1388(c). “(B) Nonqualified written notice of allocation.— The term ‘nonqualified written notice of allocaton’ has the meaning given to such term by section 1388(d). “(C) Qualified check.— The term ‘qualified check’ has the meaning given to such term by section 1388(c)(4). “SEC. 3455. OTHER DEFINITIONS AND SPECIAL RULES. “(a) Definitions.— For purposes of this subchapter— “(1) Person.— The term ‘person’ includes any governmental unit and any agency or instrumentality thereof and any international organization. “(2) State.— The term ‘State’ means a State, the District of Columbia, a possession of the United States, any political subdivision of any of the foregoing, and any wholly owned agency or instrumentality of any one or more of the foregoing. “(3) United states.— The term ‘United States’ means the United States and any wholly owned agency or instrumentality thereof. “(4) Foreign government.— The term ‘foreign government’ means a foreign government, a political subdivision of a foreign government, and any wholly owned agency or instrumentality of any one or more of the foregoing. “(5) International organization.— The term ‘international organization’ means an international organization and any wholly owned agency or instrumentality thereof. “(6) Nonresident alien.— The term ‘nonresident alien individual’ includes an alien resident of Puerto Rico. “(7) Withhold, etc., include deduct.— The terms ‘withhold’, ‘withholding’, and ‘withheld’ include deduct, deducting, and deducted. “(b) Treatment of Original Issue Discount.— “(1) In general.— Except as provided in paragraphs (2) and (3) the tax imposed by section 3451 shall apply to the amount of Ante, p. 576. original issue discount on any obligation which is includible in the gross income of the holder during the calendar year. Any such amount shall be treated as a payment for purposes of this subchapter. “(2) Transferred obligations.— “(A) In general.— In the case of original issue discount on any obligation which has been transferred from the original holder, the tax imposed by section 3451 shall apply to such original issue discount as if the subsequent holder were the original holder. “(B) Special rule for short-term obligations.— In the case of any obligation with a fixed maturity date not exceeding 1 year from the date of issue which has been transferred from the original holder, if any subsequent purchaser establishes the date on which, and the purchase price at which, he acquired such obligation, the amount of original issue discount on such obligation shall be determined (subject to such regulations as the Secretary may prescribe) as if it were issued on the date such subsequent purchaser acquired such obligation for an issue price equal to the purchase price at which such subsequent purchaser acquired such obligation. “(3) LIMITATION ON AMOUNT WITHHELD.— “(A) In general.— The amount of tax imposed by section 3451 on the original issue discount on any obligation which is required to be withheld under section 3451(a) in any calendar year shall not exceed the amount of cash paid with respect to such obligation during such calendar year. “(B) Authority of secretary to eliminate limitation in certain cases.— If the Secretary determines by regulations that a type of obligation is frequently used to avoid the purposes of this subchapter, subparagraph (A) shall not apply with respect to original issue discount on any obligation of such type which is issued more than 30 days after the first date on which such regulations are published in the Federal Register. “(C) Payments from which withholding is to be made.— Except to the extent otherwise provided in regulations, the tax imposed by section 3451 with respect to original issue discount for any calendar year shall be withheld from each cash payment made with respect to such obligation during such calendar year in the proportion which the amount of such payment bears to the aggregate of such payments. “(4) Original issue discount defined.— For purposes of this subsection, the term ‘original issue discount’ has the meaning given such term by section 1232(b)(1). “SEC. 3456. ADMINISTRATIVE PROVISIONS. “(a) Return and Payment by Governmental Units.— If the payor of any payment subject to withholding under section 3451 is the United States or a State, or an agency or instrumentality thereof, the return of the tax withheld under this subchapter shall be made by the officer or employee having control of the payment of the amount subject to withholding or by any officer or employee appropriately designated to make such withholding. “(b) Annual Withholding by Financial Institutions.— “(1) In general.— Under regulations prescribed by the Secretary, a financial institution described in subparagraph (B) or (C) of section 3454(a)(1) may elect to defer withholding of the tax Ante, p. 580. imposed by section 3451 during any calendar year on interest paid on savings accounts, interest-bearing checking accounts, and similar accounts until a date which is not later than the last day of such year. “(2) Condition for election.— The regulations prescribed under paragraph (1) shall provide that an election under such paragraph is conditional on agreement by the person making the election— “(A) that the balance in any account subject to such election shall at no time be less than an amount equal to the tax under section 3451 which would have been withheld as of such time if such election were not in effect, and “(B) that if an account subject to such election is closed before the date on which the tax under section 3451 would (but for this subparagraph) be withheld as a result of such an election, the tax shall be withheld before the time of closing such account. “(c) Tax Paid by Recipient.— If a payor, in violation of the provisions of this subchapter, fails to withhold the tax imposed under section 3451, and thereafter the tax against which such tax may be credited is paid, the tax so required to be withheld shall not be collected from the payor; but this subsection shall in no case relieve the payor from liability for any penalties or additions to the tax otherwise applicable in respect of such failure to withhold. “(d) Regulations.— The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subchapter.” SEC. 302. CREDIT AGAINST TAX. (a) In General.— Section 31 (relating to tax withheld on wages) is 26 USC 31. amended to read as follows: “SEC. 31. TAX WITHHELD ON WAGES, INTEREST, DIVIDENDS, AND PATRONAGE DIVIDENDS. “(a) Wage Withholding.— The amount withheld under section 3402 as tax on the wages of any individual shall be allowed to the recipient of the income as a credit against the tax imposed by this subtitle. “(b) Withholding from Interest, Dividends, and Patronage Dividends.— The amount withheld under section 3451 as tax on interest , dividends, and patronage dividends shall be allowed to the recipient of the income as a credit against the tax imposed by this subtitle. “(c) Credit for Special Refunds of Social Security Tax.— The Secretary may prescribe regulations providing for the crediting against the tax imposed by this subtitle of the amount determined by the taxpayer or the Secretary to be allowable under section 6413(c) as a special refund of tax imposed on wages. The amount allowed as a credit under such regulations shall, for purposes of this subtitle, be considered an amount withheld at source as tax under section 3402. “(d) Year For Which Credit Allowed.— “(1) In general.— Except as otherwise provided in paragraph (2), any credit allowed by this section shall be allowed for the taxable year beginning in the calendar year in which the amount was withheld (or, in the case of subsection (c), in which the wages were received). If more than 1 taxable year begins in a calendar year, such amount shall be allowed as a credit for the last taxable year so beginning. “(2) Special rule for certain distributions of subchapter s corporations.— The amount withheld with respect to a distribution by an electing small business corporation (within the meaning of section 1371(b)) which is treated as a distribution of such corporation’s undistributed taxable income for the preceding year under section 1375(f)(1) shall be allowed as a credit for the taxable year of the recipient beginning in the calendar year in which the preceding year of the corporation ends.” (b) Treatment of Estates and Trusts.— (1) In general.— Section 643 (relating to definitions applicable 26 USC 643. to estates and trusts) is amended by adding at the end thereof the following new subsection: “(d) Coordination With Withholding on Interest and Dividends.— Except to the extent otherwise provided in regulations, this subchapter shall be applied with respect to payments subject to withholding under subchapter B of chapter 24— “(1) by allocating between the estate or trust and its beneficiaries any credit allowable under section 31(b) (on the basis of their respective shares of interest , dividends, and patronage dividends taken into account under this subchapter), “(2) by treating each beneficiary to whom such credit is allocated as if an amount equal to such credit had been paid to him by the estate or trust, and “(3) by allowing the estate or trust a deduction in an amount equal to the credit so allocated to beneficiaries.” (2) Technical amendment.— Subsection (a) of section 661 26 USC 661. (relating to deduction for estates and trusts accumulating income or distributing corpus) is amended by adding at the end thereof the following new sentence: “For purposes of paragraph (1), the amount of distributable net income shall be computed without the deduction allowed by section 642(c).” (c) Conforming amendment.— Paragraph (1) of section 6413(c) 26 USC 6413 is amended by striking out “section 31(b)” and inserting in lieu thereof “section 31(c)”. SEC. 303. RETURNS REGARDING PAYMENTS OF DIVIDENDS AND PAYMENTS OF INTEREST. (a) Dividends.— (1) In general.— Paragraph (1) of subsection 6042(a) (relating 26 USC 6042. to returns regarding payments of dividends) is amended— (A) by striking out “or” at the end of subparagraph (A), (B) by inserting “or” at the end of subparagraph (B), (C) by inserting after subparagraph (B) the following new subparagraph: “(C) who is required to withhold tax under section 3451 Ante, p. 576. on any payment of dividends,”, (D) by striking out the period at the end thereof, and (E) by inserting the following at the end thereof “, and, in the case of a payment upon which tax is withheld, the amount of tax withheld.” (2) Statements.— Section 6042(c) (relating to statements to be furnished to persons with respect to whom information is furnished) is amended— (A) by striking out “and” at the end of paragraph (1), (B) by striking out the period at the end of paragraph (2) and inserting in lieu thereof “, and”, (C) by inserting after paragraph (2) the following paragraph: “(3) the amount of tax withheld under section 3451.”, and (D) by striking out “No statement” in the last sentence thereof and inserting in lieu thereof “Except in the case of are turn required by reason of subparagraph (C) of subsection (a)(1), no statement”. (3) Duplicate filed with secretary.— Section 6042 is amended by adding at the end thereof the following new subsection: “(e) Duplicate of subsection (c) statement may be required to be filed with secretary.— A duplicate of any statement made pursuant to subsection (c) which is required to set forth an amount withheld under section 3451 shall, when required by regulations prescribed by the Secretary, be filed with the Secretary.” (b) Interest.— Section 6049 (relating to returns regarding payments Post, p. 591. of interest) is amended by adding at the end thereof the following new subsection: “(e) Duplicate of subsection (c) statement maybe required to be filed with secretary.— A duplicate of any statement made pursuant to subsection (c) which is required to set forth an amount withheld under section 3451 shall, when required by regulations prescribed by the Secretary, be filed with the Secretary.” SEC. 304. RETURNS REGARDING PAYMENTS OF PATRONAGE DIVIDENDS. (a) In General.— Paragraph (1) of subsection 6044(a) is amended 26 USC 6044. to read as follows: “(1) In general.— Except as otherwise provided in this section, every cooperative to which part I of subchapter T of chapter 1 applies which— “(A) makes payments of amounts described in subsection (b) aggregating $10 or more to any person during any calendar year, or “(B) is required to withhold any tax under section 3451, shall make a return according to the forms or regulations prescribed by the Secretary, setting forth the aggregate amount of such payments, the name and address of the person to whom paid, and the amount of tax withheld.” (b) Amounts Subject to Reporting.— Paragraph (1) of section 6044(b) (relating to amounts subject to reporting) is amended by 26 USC 6044. striking out “under subsection (a)”, and by inserting “under paragraph (1)(A) or (2) of subsection (a)”. (c) Statements.— Section 6044(e) (relating to statements to be furnished to persons with respect to whom information is furnished) is amended— (1) by striking out “and” at the end of paragraph (1), (2) by striking out the period at the end of paragraph (2), and inserting “, and” in lieu thereof, (3) by inserting after paragraph (2) the following paragraph: “(3) the amount of tax withheld under section 3451.”, and (4) by striking out “No statement” in the last sentence thereof and inserting in lieu thereof “Except in the case of a return required by reason of subparagraph (B) of subsection (a)(1), no statement”. (d) Duplicate Filed With Secretary.— Section 6044 is amended by adding at the end thereof the following new subsection: “(f) Duplicate of Subsection (E) Statement May Be Required to be Filed With Secretary.— A duplicate of any statement made pursuant to subsection (e) which is required to set forth an amount withheld under section 3451 shall, when required by regulations prescribed by the Secretary, be filed with the Secretary.” SEC. 305. DENIAL OF DEDUCTION FOR CERTAIN TAXES. (a) No Deduction for Tax Withheld at Source on Interest, Dividends, and Patronage Dividends.— Paragraph (1) of section 275(a) (relating to denial of deduction for certain taxes) is 26 USC 275. amended— (1) by striking out “and” at the end of subparagraph (B), (2) by striking out the period at the end of subparagraph (C) and inserting in lieu thereof “; and”, and (3) by inserting after subparagraph (C) the following subparagraph: “(D) the tax withheld at source on interest, dividends, and patronage dividends under section 3451.” (b) No Deduction of Taxes Withheld on Interest and Dividends in Determining Taxable Income.— Subsection (b) of section 3502 (relating to the nondeductibility of taxes in computing taxable 26 USC 3502. income) is amended— (1) by striking out “under chapter 24” and inserting in lieu thereof “under subchapter A of chapter 24”, and (2) by adding at the end thereof the following new subsection: “(c) The tax withheld under subchapter B of chapter 24 shall not be allowed as a deduction in computing taxable income under subtitle A either to the person withholding the tax or to the recipient of the amounts subject to withholding.” SEC. 306. PENALTIES. (a) Civil Penalty.— Paragraph (1) of section 6682(a) (relating to 26 USC 6682. false information with respect to withholding) is amended by inserting “or section 3452(f)(1)(A)” after “section 3402”. (b) Criminal Penalty.— Section 7205 (relating to fraudulent withholding 26 USC 7205. exemption certificate or failure to supply information) is amended— (1) by striking out “Any individual” and inserting in lieu thereof “(a) Withholding on Wages.—Any individual”, and (2) by adding at the end thereof the following new subsection: “(b) Withholding of Interest and Dividends.— Any person who— “(1) willfully files an exemption certificate with any payor under section 3452(D(1)(A), which is known by him to be fraudulent Ante, p. 577. or to be false as to any material matter, or “(2) is required to furnish notice under section 3452(f)(1)(B), and willfully fails to furnish such notice in the manner and at the time required pursuant to section 3452(f)(1)(B) or the regulations prescribed thereunder, shall, in lieu of any penalty otherwise provided, upon conviction thereof, be fined not more than $500, or imprisoned not more than 1 year, or both.” SEC. 307. CONFORMING AND CLERICAL AMENDMENTS. (a) Conforming Amendments.— (1) Paragraph (3) of section 274(e) (relating to disallowance of 26 USC 274. certain entertainment, etc., expenses) is amended by inserting “subchapter A of” before “chapter 24”. (2) Section 3403 (relating to liability for tax) is amended by 26 USC 3403. striking out “this chapter” and inserting in lieu thereof “this subchapter”. (3) Paragraph (4) of section 3507(d) (relating to advance payment 26 USC 3507. of earned income credit) is amended by inserting “subchapter A of” before “chapter 24”. (4) Subchapter (B) of section 6013(g)(1) (relating to joint 26 USC 6013. returns of income tax by husband and wife) is amended by striking out “(relating to wage withholding)” and by inserting in lieu thereof “(relating to withholding on wages, interest, dividends, and patronage dividends)” and by striking out “of wages”. (5) Paragraph (1) of section 6013(h) is amended by striking out “(relating to wage withholding)” and inserting in lieu thereof “(relating to withholding on wages, interest, dividends, and patronage dividends)” and by striking out “of wages”. (6) Paragraph (1) of section 6015(j) (relating to declaration of 95 Stat. 345. estimated income tax by individuals) is amended by striking out “, as defined in section 3401(a),” and inserting in lieu thereof “(as defined in section 3401(a)) , or to the interest, dividends, and patronage dividends (as defined in section 3454),”. (7) Subparagraph (A) of section 6051(f)(1) (relating to receipts 26 USC 6051. for employees) is amended by inserting “subchapter A of” before “chapter 24”. (8) Paragraph (2) of section 6365(c) (relating to definitions and 26 USC 6365. special rules for purposes of the collection of State individual income taxes) is amended by inserting “, interest, dividends, and patronage dividends” before “paid on or after such date”. (9) Subsection (b) of section 6401 (relating to amounts treated 26 USC 6401. as overpayments) is amended by inserting “, interest, dividends, and patronage dividends” after “tax withheld on wages”. (10) Paragraph (1) of section 6413(a) (relating to special credit 26 USC 6413. and refund rules applicable to certain employment taxes) is amended by striking out “or 3402 is paid with respect to any payment of remuneration,” and inserting in lieu thereof “3402 or 3451 is paid with respect to any payment of remuneration, interest, dividends, or other amounts,”. (11) Subsection (b) of section 6413 is amended— 26 USC 6413. (A) by striking from the heading of such subsection the words “of Certain Employment Taxes”, and (B) by striking out “or 3402 is paid or deducted with respect to any payment of remuneration” and inserting in lieu thereof “3402 or 3451 is paid or deducted with respect to any payment of remuneration, interest, dividends, or other amount”. (12) The heading for section 6413 is amended to read as follows: “SEC. 6413. SPECIAL RULES APPLICABLE TO CERTAIN TAXES UNDER SUBTITLE C.” (13) The table of sections for subchapter B of chapter 65 is amended by striking out the item relating to section 6413 and inserting in lieu thereof the following: “Sec. 6413. Special rules applicable to certain taxes under subtitle C.” (14) Subsections (e)(1) and (g)(3) of section 6654 (relating to 26 USC 6654. failure by individuals to pay estimated income tax) are amended by inserting “, interest, dividends, and patronage dividends” after “tax withheld at source on wages”. (15) The last sentence of section 7215(b) (relating to offenses 26 USC 7215. with respect to collected taxes) is amended to read as follows: “For purposes of paragraph (2), a lack of funds existing immediately after the payment of wages or amounts subject to withholding under subchapter B of chapter 24 (whether or not created by the payment of such wages or amounts) shall not be considered to be circumstances beyond the control of a person.” (16) Subsection (d) of section 7654 (relating to coordination of 26 USC 7654. United States and Guam individual income taxes) is amended by inserting “subchapter A of” before “chapter 24”. (17) Section 7701(a)(16) (defining the term “withholding 26 USC 7701. agent”) is amended by striking out “or 1461” and inserting in lieu thereof “1461 or 3451”. (b) Clerical Amendments.— (1) The heading of subtitle C is amended to read as follows: “Subtitle C— Employment Taxes and Collection of Income Tax at Source”. (2) The table of subtitles for the Internal Revenue Code of 1954 is amended by striking out the item relating to subtitle C and inserting in lieu thereof the following: “Subtitle C. Employment taxes and collection of income tax at source.” (3) The table of sections for subpart A of part IV of subchapter A of chapter 1 is amended by striking out the item relating to section 31 and inserting in lieu thereof the following: “Sec. 31. Tax withheld on wages, interest, dividends, and patronage dividends.” (4) Chapter 24 is amended by striking out the chapter heading and inserting in lieu thereof the following: “CHAPTER 24— COLLECTION OF INCOME TAX AT SOURCE “Subchapter A. Withholding from wages. “Subchapter B. Withholding from interest and dividends. “Subchapter A— Withholding From Wages”. (5) The heading for chapter 25 is amended to read as follows: “CHAPTER 25— GENERAL PROVISIONS RELATING TO EMPLOYMENT TAXES AND COLLECTION OF INCOME TAXES AT SOURCE”. (6) The table of chapters for subtitle C is amended by striking out the items relating to chapters 24 and 25 and inserting in lieu thereof the following: “Chapter 24. Collection of income tax at source. “Chapter 25. General provisions relating to employment taxes and collection of income taxes at source.” SEC. 308. EFFECTIVE DATES; SPECIAL RULES. (a) In General.— Except as otherwise provided in this section, the amendments made by this part shall apply to payments of interest, dividends, and patronage dividends paid or credited after June 30, 1983. (b) Delay in Application to Certain Payors.— The Secretary of the Treasury shall prescribe such regulations which delay (but not beyond December 31, 1983) the application of some or all of the provisions of subchapter B of chapter 24 of the Internal Revenue Code of 1954 to any payor until such time as such payor is able to comply without undue hardship with the requirements of such provisions. (c) Temporary Rule for Certain Withholding Exemptions.— Until regulations are prescribed by the Secretary of the Treasury or his delegate under section 3452(c)(1)(B) of the Internal Revenue Code of 1954 (as added by this part), the payor may treat any person whose name reasonably indicates that such person is described in paragraph (2) of section 3452(c) of such Code (other than subparagraph (J) or (K) thereof) as an exempt recipient. (d) Delay in Making Deposits.— The time for making deposits under section 6302 of the Internal Revenue Code of 1954 of the tax imposed by section 3451 of such Code which is withheld by any person shall, to the extent provided in regulations, take into account the cost to such person of instituting a withholding system in order to comply with subchapter B of chapter 24 of such Code. Subtitle B— Improved Information Reporting PART I— EXPANDED REPORTING SEC. 309. REPORTING OF INTEREST. (a) General Rule.— Section 6049 (relating to returns regarding 26 USC 6049. payments of interest) is amended to read as follows: “SEC. 6019. RETURNS REGARDING PAYMENTS OF INTEREST. “(a) Requirement of Reporting.— Every person— “(1) who makes payments of interest (as defined in subsection (b)) aggregating $10 or more to any other person during any calendar year, “(2) who receives payments of interest (as so defined) as a nominee and who makes payments aggregating $10 or more during any calendar year to any other person with respect to the interest so received, or “(3) who is required under subchapter B of chapter 24 to withhold tax on the payment of any interest, shall make a return according to the forms or regulations prescribed by the Secretary, setting forth the aggregate amount of such payments, tax deducted and withheld, and the name and address of the person to whom paid or from whom withheld. “(b) Interest Defined.— “(1) General Rule.— For purposes of subsection (a), the term ‘interest’ means— “(A) interest on any obligation— “(i) issued in registered form, or “(ii) of a type offered to the public, other than any obligation with a maturity (at issue) of not more than 1 year which is held by a corporation, “(B) interest on deposits with persons carrying on the banking business, “(C) amounts (whether or not designated as interest) paid by a mutual savings bank, savings and loan association, building and loan association, cooperative bank, homestead association, credit union, industrial loan association or bank, or similar organization, in respect of deposits, investment certificates, or withdrawable or repurchasable shares, “(D) interest on amounts held by an insurance company under an agreement to pay interest thereon, “(E) interest on deposits with brokers (as defined in section 6045 (c)), Post, p. 600. “(F) interest paid on amounts held by investment companies (as defined in section 3 of the Investment Company Act of 1940 (15 U.S.C. 80a–3)) and on amounts invested in other pooled funds or trusts, and “(G) to the extent provided in regulations prescribed by the Secretary, any other interest (which is not described in paragraph (2)). “(2) Exceptions.— For purposes of subsection (a), the term ‘interest’ does not include— “(A) interest on any obligation issued by a natural person, “(B) interest on any obligation if such interest is exempt from tax under section 103(a) or if such interest is exempt from tax (without regard to the identity of the holder) under any other provision of law, “(C) except to the extent otherwise provided in regulations— “(i) any amount paid to any person referred to in paragraph (2) of section 3452(c) (other than subparagraphs Ante, p. 577. (J) and (K) thereof), or “(ii) any amount described in section 3454(a){2)(D) or (E), “(D) except to the extent otherwise provided in regulations, any amount not described in subparagraph (C) of this paragraph which is income from sources outside the United States or which is paid by— “(i) a foreign government or international organization or any agency or instrumentality thereof, “(ii) a foreign central bank of issue, “(iii) a foreign corporation not engaged in a trade or business in the United States, “(iv) a foreign corporation, the interest payments of which would be exempt from withholding under subchapter A of chapter 3 if paid to a person who is not a United States person, or “(v) a partnership not engaged in a trade or business in the United States and composed in whole of nonresident alien individuals and persons described in clause (i), (ii), or (iii), and “(E) any amount on which the person making payment is required to deduct and withhold a tax under section 1451 (relating to tax-free covenant bonds), or would be so required but for section 1451(d) (relating to benefit of personal exemptions). “(3) Payments by united states nominees, etc., of united states person.— If, within the United States, a United States person— “(A) collects interest (or otherwise acts as a middleman between the payor and payee) from a foreign person described in paragraph (2)(D) or collects interest from a United States person which is income from sources outside the United States for a second person who is a United States person, or “(B) makes payments of such interest to such second United States person, notwithstanding paragraph (2)(D), such payment shall be subject to the requirements of subsection (a) with respect to such second United States person. “(c) Statements to be Furnished to Persons With Respect to Whom Information is Furnished.— “(1) In general.— Every person making a return under subsection (a) shall furnish to each person whose name is set forth in such return a written statement showing— “(A) the name and address of the person making such return, “(B) the aggregate amount of payments to, or the aggregate amount includible in the gross income of, the person as shown on such return, and “(C) the aggregate amount of tax deducted and withheld with respect to such person under subchapter B of chapter 24. “(2) Statement must be furnished on or before january 31.— The written statement required under the preceding sentence shall be furnished to the person on or before January 31 of the year following the calendar year for which the return under subsection (a) was made. “(3) No statement required where interest is less than $10.— No statement with respect to payments of interest to any person shall be required to be furnished to any person under this subsection if the aggregate amount of payments to such person shown on the return made with respect to paragraph (1) or (2), as the case may be, of subsection (a) is less than $10, “(d) Definitions and Special Rules.— For purposes of this section— “(1) Person.— The term ‘person’ includes any governmental unit and any agency or instrumentality thereof and any international organization and any agency or instrumentality thereof. “(2) Obligation.— The term ‘obligation’ includes bonds, debentures, notes, certificates, and other evidences of indebtedness. “(3) Payments by governmental units.— In the case of payments made by any governmental unit or any agency or instrumentality thereof, the officer or employee having control of the payment of interest (or the person appropriately designated for purposes of this section) shall make the returns and statements required by this section. “(4) Financial institutions, brokers, etc., collecting interest may be substituted for payor.— To the extent and in the manner provided by regulations, in the case of any obligation— “(A) a financial institution, broker, or other person specified in such regulations which collects interest on such obligation for the payee (or otherwise acts as a middleman between the payor and the payee) shall comply with the requirements of subsections (a) and (c), and “(B) no other person shall be required to comply with the requirements of subsections (a) and (c) with respect to any interest on such obligation for which reporting is required pursuant to subparagraph (A). “(5) Interest on certain obligations may be treated on a transactional basis.— “(A) In general.— To the extent and in the manner provided in regulations, this section shall apply with respect to— “(i) any person described in paragraph (4)(A), and “(ii) in the case of any United States savings bonds, any Federal agency making payments thereon, on any transactional basis rather than on an annual aggregation basis. “(B) Separate returns and statements.— If subparagraph (A) applies to interest on any obligation, the return under subsection (a) and the statement furnished under subsection (c) with respect to such transaction may be made separately, but any such statement shall be furnished to the payee at such time as the Secretary may prescribe by regulations but not later than January 31 of the next calendar year. “(C) Statement to payee required in case of transactions involving $10 or more.— In the case of any transaction to which this paragraph applies which involves the payment of $10 or more of interest, a statement of the transaction may be provided to the payee of such interest in lieu of the statement required under subsection (c). Such statement shall be provided during January of the year following the year in which such payment is made. “(6) Treatment of original issue discount.— “(A) In general.— Original issue discount on any obligation shall be reported— “(i) as if paid at the time it is includible in gross income under section 1232A (except that for such purpose Ante, p. 496. the amount reportable with respect to any subsequent holder shall be determined as if he were the original holder), and “(ii) if section 1232A does not apply to the obligation, at maturity (or, if earlier, on redemption). In the case of any obligation not in registered form issued before January 1, 1983, clause (ii) and not clause (i) shall apply. “(B) Original issue discount.— For purposes of this paragraph, the term ‘original issue discount’ has the meaning given to such term by section 1232(b)(1).”. (b) Technical Amendments.— (1) Subsection (a) of section 6041 (relating to information at 26 USC 6041. source) is amended— (A) by striking out “6049(a)(1)” and inserting in lieu thereof “6049(a)”, and (B) by striking out “6045, 6049(a)(2), or 6049(a)(3)” and inserting in lieu thereof “or 6045”. (2) Subsection (b) of section 6652 (relating to failure to file 95 Stat. 343. certain information returns) is amended by adding “or” at the end of paragraph (1) and by striking out paragraphs (3) and (4). (3) Paragraph (1) of section 6678 is amended by striking out 26 USC 6678. “6049(a)(1)” and inserting in lieu thereof “6049(a)”. (c) Effective Date.— The amendments made by this section shall 26 USC 6049 note. apply to amounts paid (or treated as paid) after December 31, 1982. SEC. 310. OBLIGATIONS REQUIRED TO BE REGISTERED. (a) United States Obligations.— The Second Liberty Bond Act is amended by adding at the end thereof the following new section: “Sec. 28. (a) Every registration-required obligation of the United 31 USC 757c–5. States (or of any agency or instrumentality thereof) shall be in registered form. “(b) For purposes of this section— “(1) Except as provided in paragraph (2), the term ‘registration-required obligation’ means any obligation other than an obligation which— “(A) is not of a type offered to the public, or “(B) has a maturity (at issue) of not more than 1 year. “(2) The term ‘registration-required obligation’ shall not include any obligation if— “(A) there are arrangements reasonably designed to ensure that such obligation will be sold (or resold in connection with the original issue) only to a person who is not a United States person, and “(B) in the case of an obligation not in registered form— “(i) interest on such obligation is payable only outside the United States and its possessions, and “(ii) on the face of such obligation there is a statement that any United States person who holds such obligation will be subject to limitations under the United States income tax laws. “(c) (1) For purposes of subsection (a), a book entry obligation shall be treated as in registered form if the right to principal of, and stated interest on, such obligation may be transferred only through a book entry consistent with regulations prescribed by the Secretary of the Treasury. “(2) The Secretary of the Treasury shall prescribe such regulations as may be necessary to carry out the purpose of subsection (a) where there is a nominee or chain of nominees.”. (b) Other Obligations.— (1) Obligations must be in registered form to be tax-exempt.— Section 103 (relating to interest on certain governmental 95 Stat. 350. obligations) is amended by redesignating subsection (j) as subsection (k) and by inserting after subsection (i) the following new subsection: “(j) Obligations Must Be in Registered Form to be Tax-Exempt.— “(1) In general.— Nothing in subsection (a) or in any other provision of law shall be construed to provide an exemption from Federal income tax for interest on any registration-required obligation unless the obligation is in registered form. “(2) Registration-required obligation.— The term ‘registration-required obligation’ means any obligation other than an obligation which— “(A) is not of a type offered to the public, “(B) has a maturity (at issue) of not more than 1 year, or “(C) is described in section 163(f)(2)(B). “(3) Special rules.— “(A) Book entries permitted.— For purposes of paragraph (1), a book entry obligation shall be treated as in registered form if the right to the principal of, and stated interest on, such obligation may be transferred only through a book entry consistent with regulations prescribed by the Secretary. “(B) Nominees.— The Secretary shall prescribe such regulations as may be necessary to carry out the purpose of paragraph (1) where there is a nominee or chain of nominees.” (2) Denial of deduction for interest if obligation not in registered form.— Section 163 (relating to deduction for interest) Ante, p. 498. is amended by redesignating subsection (f) as subsection (g) and by inserting after subsection (e) the following new subsection: “(f) Denial of Deduction for Interest on Certain Obligations not in Registered Form.— “(1) In general.— Nothing in subsection (a) or in any other provision of law shall be construed to provide a deduction for interest on any registration-required obligation unless such obligation is in registered form. “(2) Registration-required obligation.— For purposes of this section— “(A) In general.— The term ‘registration-required obligation’ means any obligation (including any obligation issued by a governmental entity) other than an obligation which— “(i) is issued by a natural person, “(ii) is not of a type offered to the public, “(iii) has a maturity (at issue) of not more than 1 year, or “(iv) is described in subparagraph (B). “(B) Certain obligations not included.— An obligation is described in this subparagraph if— “(i) there are arrangements reasonably designed to ensure that such obligation will be sold (or resold in connection with the original issue) only to a person who is not a United States person, and “(ii) in the case of an obligation not in registered form— “(I) interest on such obligation is payable only outside the United States and its possessions, and “(II) on the face of such obligation there is a statement that any United States person who holds such obligation will be subject to limitations under the United States income tax laws. “(C) Authority to include other obligations.— Clauses (ii) and (iii) of subparagraph (A), and subparagraph (B), shall not apply to any obligation if— “(i) such obligation is of a type which the Secretary has determined by regulations to be used frequently in avoiding Federal taxes, and “(ii) such obligation is issued after the date on which the regulations referred to in clause (i) take effect. “(3) Book entries permitted, etc.— For purposes of this subsection, rules similar to the rules of section 103(j)(3) shall 95 Stat. 350. apply.” (3) Denial of earnings and profits adjustment for interest on registration-required obligations not in registered form.— Section 312 (relating to earnings and profits) is amended 26 USC 312. by adding at the end thereof the following new subsection: “(m) No Adjustment for Interest Paid on Certain Registration-Required Obligations Not in Registered Form.— The earnings and profits of any corporation shall not be decreased by any interest with respect to which a deduction is not or would not be allowable by reason of section 163(f), unless at the time of issuance the issuer is a foreign corporation that is not a controlled foreign corporation (within the meaning of section 957), a foreign investment company (within the meaning of section 1246(b)), or a foreign personal holding company (within the meaning of section 552) and the issuance did not have as a purpose the avoidance of section 163(f) of this subsection”. (4) Excise tax on issuers of registration-required obligations which are not in registered form.— (A) In general.— Subtitle D (relating to miscellaneous excise taxes) is amended by adding after chapter 38 the following new chapter: “CHAPTER 39— REGISTRATION-REQUIRED OBLIGATIONS “Sec. 4701. Tax on issuer of registration-required obligation not in registered form. “SEC. 4701. TAX ON ISSUER OF REGISTRATION-REQUIRED OBLIGATION NOT IN REGISTERED FORM. “(a) Imposition of Tax.— In the case of any person who issues a registration-required obligation, which is not in registered form, there is hereby imposed on such person on the issuance of such obligation a tax in an amount equal to the product of— “(1) 1 percent of the principal amount of such obligation, multiplied by “(2) the number of calendar years (or portions thereof) during the period beginning on the date of issuance of such obligation and ending on the date of maturity. “(b) Definitions.— For purposes of this section— “(1) Registration-required obligation.— The term ‘registration-required obligation’ has the same meaning as when used in section 163(f), except that such term shall not include any obligation required to be registered under section 103(j). “(2) Registered form.— The term ‘registered form’ has the same meaning as when used in section 163(f).” (B) Conforming amendment.— The table of chapters for subtitle D is amended by inserting after chapter 38 the following: “Chapter 39. Registration-required obligations.” (5) Denial of deduction for losses on certain obligations not in registered form.— Section 165 (as amended by this Act) Ante, p. 422. is amended by redesignating subsection (j) as subsection (k) and by inserting after subsection (i) the following new subsection: “(j) Denial of Deduction for Losses on Certain Obligations Not in Registered Form.— “(1) In general.— Nothing in subsection (a) or in any other provision of law shall be construed to provide a deduction for any loss sustained on any registration-required obligation unless such obligation is in registered form (or the issuance of such obligation was subject to tax under section 4701). “(2) Definitions.— For purposes of this subsection— “(A) Registration-required obligation.— The term ‘registration-required obligation’ has the meaning given to such term by section 163(0(2) except that clause (iv) of subparagraph (A), and subparagraph (B), of such section shall not apply. “(B) Registered form.— The term ‘registered form’ has the same meaning as when used in section 163(f). “(3) Exceptions.— The Secretary may, by regulations, provide that this subsection and subsection (d) of section 1232 shall not apply with respect to obligations held by any person if— “(A) such person holds such obligations in connection with a trade or business outside the United States, “(B) such person holds such obligations as a broker dealer (registered under Federal or State law) for sale to customers in the ordinary course of his trade or business, “(C) such person complies with reporting requirements with respect to ownership, transfers, and payments as the Secretary may require, or “(D) such person promptly surrenders the obligation to the issuer for the issuance of a new obligation in registered form. but only if such obligations are held under arrangements provided in regulations or otherwise which are designed to assure that such obligations are not delivered to any United States person other than a person described in subparagraph (A), (B), or (C).” (6) Denial of capital gain treatment for gains on certain obligations not in registered form.— Section 1232 (relating to 26 USC 1232. bonds and other evidences of indebtedness) is amended by redesignating subsection (d) as subsection (e) and by inserting after subsection (c) the following new subsection: “(d) Denial of Capital Gain Treatment for Gains On Certain Obligations Not in Registered Form.— “(1) In general.— If any registration-required obligation is not in registered form, any gain on the sale or other disposition of such obligation shall be treated as ordinary income (unless the issuance of such obligation was subject to tax under section 4701). “(2) Definitions.— For purposes of this subsection— “(A) Registration-required obligation.— The term ‘registration-required obligation’ has the meaning given to such term by section 163(f)(2) except that clause (iv) of subparagraph (A), and subparagraph (B), of such section shall not apply. “(B) Registered form.— The term ‘registered form’ has the same meaning as when used in section 163(f).” (c) Technical Amendments.— (1) Subparagraph (A) of section 103(b)(4) (relating to certain 26 USC 103. exempt activities) is amended by striking out “if each obligation issued pursuant to the issue is in registered form and”. (2) (A) Paragraph (1) of section 103(h) (relating to certain obligations must be in registered form and not guaranteed or subsidized under an energy program) is amended by striking out subparagraph (A) and by redesignating subparagraphs (B) and (C) as subparagraphs (A) and (B), respectively. (B) The subsection heading for subsection (h) of section 103 is amended by striking out “Must Be in Registered Form and Not” and inserting in lieu thereof “Must Not Be”. (3) (A) Subsection (j) of section 103A (relating to other requirements) 26 USC 103A. is amended by striking out paragraph (1) and by redesignating paragraphs (2) and (3) as paragraphs (1) and (2), respectively. (B) Subparagraph (B) of section 103A(c)(2) (defining qualified mortgage issue) is amended by striking out “and (0 and paragraphs (2) and (3) of subsection (j)” and inserting in lieu thereof “(f), and (J)”. (C) Subparagraph (C) of section 103A(c)(2) is amended by striking out “, and paragraph (1) of subsection (j)”. (D) Subparagraph (C) of section 103A(c)(3) (defining qualified veterans’ mortgage bond) is amended by striking out “subsection (j)(2)” and inserting in lieu thereof “subsection (j)(l)”. (4) Subparagraph (A) of section 103A(c)(3) (defining qualified veterans’ mortgage bond) is amended by striking out “in registered form”. (d) Effective Dates.— (1) In general.— Except as otherwise provided in this subsection, the amendments made by this section shall apply to obligations issued after December 31, 1982. (2) Long-term u.s. obligations.— The amendment made by subsection (a) shall apply to obligations issued after the date of the enactment of this Act under the first section of the Second Liberty Bond Act. 31 USC 752. (3) Exception for certain warrants, etc.— The amendments made by subsection (b) shall not apply to any obligations issued after December 31, 1982, on the exercise of a warrant or the conversion of a convertible obligation if such warrant or obligation was offered or sold outside the United States without registration under the Securities Act of 1933 and was issued 15 USC 77a. before August 10, 1982. A rule similar to the rule of the preceding sentence shall also apply in the case of any regulations issued under section 163(f)(2)(C) of the Internal Revenue Code of 1954 (as added by this section) except that the date on which such regulations take effect shall be substituted for “August 10, 1982”. SEC. 311. RETURNS OF BROKERS. (a) General Rule.— (1) Returns.— Section 6045 (relating to returns of brokers) is 26 USC 6045. amended to read as follows: “SEC. 6045. RETURNS OF BROKERS. “(a) General Rule.— Every person doing business as a broker shall, when required by the Secretary, make a return, in accordance with such regulations as the Secretary may prescribe, showing the name and address of each customer, with such details regarding gross proceeds and such other information as the Secretary may by forms or regulations require with respect to such business. “(b) Statements to be Furnished to Customers.— Every person making a return under subsection (a) shall furnish to each customer whose name is set forth in such return a written statement showing— “(1) the name and address of the person making such return, and “(2) the information shown on such return with respect to such customer. The written statement required under the preceding sentence shall be furnished to the customer on or before January 31 of the year following the calendar year for which the return under subsection (a) was made. “(c) Definitions.— For purposes of this section— “(1) Broker.— The term ‘broker’ includes— “(A) a dealer, “(B) a barter exchange, and “(C) any other person who (for a consideration) regularly acts as a middleman with respect to property or services. “(2) Customer.— The term ‘customer’ means any person for whom the broker has transacted any business. “(3) Barter exchange.— The term ‘barter exchange’ means any organization of members providing property or services who jointly contract to trade or barter such property or services.” (2) Penalty.— Paragraph (1) of section 6678 (relating to penalty 26 USC 6678. for failure to furnish certain statements) is amended— (A) by inserting “6045(b),” after “6044(e),”, and (B) by inserting “6045(a),” after “6044(a)(1),”. (b) Barter Exchange Treated as Third-Party Recordkeeper.— Paragraph (3) of section 7609(a) (defining third-party recordkeeper) 26 USC 7609. is amended by striking out “and” at the end of subparagraph (E), by striking out the period at the end of subparagraph (F) and inserting in lieu thereof “; and”, and by adding at the end thereof the following new subparagraph: “(G) any barter exchange (as defined in section 6045(c)(3)).” (c) Effective Dates.— (1) Subsection (a).— The amendments made by subsection (a) shall take effect on the date of the enactment of this Act, except that— (A) regulations relating to reporting by commodities and securities brokers shall be issued under section 6045 of the Internal Revenue Code of 1954 (as amended by this Act) within 6 months after the date of the enactment of this Act, and (B) such regulations shall not apply to transactions occurring before January 1, 1983. (2) Subsection (b).— —The amendments made by subsection (b) 26 USC 7609 note. shall apply to summonses served after December 31, 1982. SEC. 312. INFORMATION REPORTING REQUIREMENTS FOR PAYMENTS OF REMUNERATION FOR SERVICES AND DIRECT SALES. (a) General Rule.— Subpart B of part III of subchapter A of chapter 61 (relating to information concerning transactions with other persons) is amended by inserting after section 6041 the following new section: SEC. 6041A. RETURNS REGARDING PAYMENTS OF REMUNERATION FOR SERVICES AND DIRECT SALES. “(a) Returns Regarding Remuneration for Services.— If— “(1) any service-recipient engaged in a trade or business pays in the course of such trade or business during any calendar year remuneration to any person for services performed by such person, and “(2) the aggregate of such remuneration paid to such person during such calendar year is $600 or more, then the service-recipient shall make a return, according to the forms or regulations prescribed by the Secretary, setting forth the aggregate amount of such payments and the name and address of the recipient of such payments. For purposes of the preceding “Service-recipient.” sentence, the term ‘service-recipient’ means the person for whom the service is performed. “(b) Direct Sales of $5,000 or More.— “(1) In general.— If— “(A) any person engaged in a trade or business in the course of such trade or business during any calendar year sells consumer products to any buyer on a buy-sell basis, a deposit-commission basis, or any similar basis which the Secretary prescribes by regulations, for resale (by the buyer or any other person) in the home or otherwise than in a permanent retail establishment, and “(B) the aggregate amount of the sales to such buyer during such calendar year is $5,000 or more, then such person shall make a return, according to the forms or regulations prescribed by the Secretary, setting forth the name and address of the buyer to whom such sales are made. “(2) Definitions.— For purposes of paragraph (1)— “(A) Buy-sell basis.— A transaction is on a buy-sell basis if the buyer performing the services is entitled to retain part or all of the difference between the price at which the buyer purchases the product and the price at which the buyer sells the product as part or all of the buyer’s remuneration for the services, and “(B) Deposit-commission basis.— A transaction is on a deposit-commission basis if the buyer performing the services is entitled to retain part or all of a purchase deposit paid by the consumer in connection with the transaction as part or all of the buyer’s remuneration for the services. “(c) Certain Services Not Included.— No return shall be required under subsection (a) or (b) if a statement with respect to the services is required to be furnished under section 6051, 6052, or 6053. “(d) Applications to Governmental Units.— “(1) Treated as persons.— The term ‘person’ includes any governmental unit (and any agency or instrumentality thereof). “(2) Special rules.— In the case of any payment by a governmental entity or any agency or instrumentality thereof— “(A) subsection (a) shall be applied without regard to the trade or business requirement contained therein, and “(B) any return under this section shall be made by the officer or employee having control of the payment or appropriately designated for the purpose of making such return. “(e) Statements To Be Furnished to Persons With Respect to Whom Information is Required to Be Furnished.— Every person required to make are turn under subsection (a) or (b) shall furnish to each person whose name is required to be set forth in such return a written statement showing— “(1) the name and address of the person required to make such return, and “(2) in the case of subsection (a), the aggregate amount of payments to the person required to be shown on such return. The written statement required under the preceding sentence shall be furnished to the person on or before January 31 of the year following the calendar year for which the return under subsection (a) was made. “(f) Recipient to Furnish Name, Address, and Identification Number; Inclusion on Return.— “(1) Furnishing of information.— Any person with respect to whom a return or statement is required under this section to be made by another person shall furnish to such other person his name, address, and identification number at such time and in such manner as the Secretary may prescribe by regulations. “(2) Inclusion on return.— The person to whom an identification number is furnished under paragraph (1) shall include such number on any return which such person is required to file under this section and to which such identification number relates.” (b) Penalty for Failure to File Statement.— Section 6678(1) 95 Stat. 344. (relating to failure to file statement) is amended— (1) by inserting “6041A(e),” after “6041(d),”, and (2) by inserting “6041A(a) or (b),” after “6041(a),”. (c) Effective Date.— The amendments made by this section shall 26 USC 6041A note. apply to payments and sales made after December 31, 1982. SEC. 313. STATE AND LOCAL INCOME TAX REFUNDS. (a) In General.— Subpart B of part III of subchapter A of chapter 61 (relating to information concerning transactions with other persons) is amended by adding at the end thereof the following new section: “SEC. 6050E. STATE AND LOCAL INCOME TAX REFUNDS. “(a) Requirement of Reporting.— Every person who, with respect to any individual, during any calendar year makes payments of refunds of State or local income taxes (or allows credits or offsets with respect to such taxes) aggregating $10 or more shall make a return according to forms or regulations prescribed by the Secretary setting forth the aggregate amount of such payments, credits, or offsets, and the name and address of the individual with respect to whom such payment, credit, or offset was made. “(b) Statements to Be Furnished to Individuals With Respect to Whom Information is Furnished.— Every person making a return under subsection (a) shall furnish to each individual whose name is set forth in such return a written statement showing— “(1) the name of the State or political subdivision thereof, and “(2) the aggregate amount shown on the return of refunds, credits, and offsets to the individual. The written statement required under the preceding sentence shall be furnished to the individual during January of the calendar year following the calendar year for which the return under subsection (a) was made. “(c) Person Defined.— For purposes of this section, the term ‘person’ means the officer or employee having control of the payment of the refunds (or the allowance of the credits or offsets) or the person appropriately designated for purposes of this section.” (b) Conforming Amendment.— The table of sections for subpart B of part III of subchapter A of chapter 61 is amended by adding at the end thereof the following new item: “Sec. 6050E. State and local income tax refunds.” (c) Effective Date.— The amendments made by this section shall 26 USC 6050E note. apply to payments of refunds, and credits and offsets made, after December 31, 1982. SEC. 314. EMPLOYER REPORTING WITH RESPECT TO TIPS. (a) In General.— Section 6053 (relating to reporting of tips) is 26 USC 6053. amended by adding at the end thereof the following new subsection: “(c) Reporting Requirements Relating To Certain Large Food Or Beverage Establishments.— “(1) Report to secretary.— In the case of a large food or beverage establishment, each employer shall report to the Secretary, at such time and manner as the Secretary may prescribe by regulation, the following information with respect to each calendar year: “(A) The gross receipts of such establishment from the provision of food and beverages (other than nonallocable receipts). “(B) The aggregate amount of charge receipts (other than nonallocable receipts). “(C) The aggregate amount of charged tips shown on such charge receipts. “(D) The sum of— “(i) the aggregate amount reported by employees to the employer under subsection (a), plus “(ii) the amount the employer is required to report under section 6051 with respect to service charges of 26 USC 6051. less than 10 percent. “(E) With respect to each employee, the amount allocated to such employee under paragraph (3). “(2) Furnishing of statement to employees.— Each employer described in paragraph (1) shall furnish, in such manner as the Secretary may prescribe by regulations, to each employee of the large food or beverage establishment a written statement for each calendar year showing the following information: “(A) The name and address of such employer. “(B) The name of the employee. “(C) The amount allocated to the employee under paragraph (3) for all payroll periods ending within the calendar year. Any statement under this paragraph shall be furnished to the employee during January of the calendar year following the calendar year for which such statement is made. “(3) Employee Allocation of 8 Percent of Gross Receipts.— “(A) In general.— For purposes of paragraphs (1)(E) and (2)(C), the employer of a large food or beverage establishment shall allocate (as tips for purposes of the requirements of this subsection) among employees performing services during any payroll period who customarily receive tip income an amount equal to the excess of— “(i) 8 percent of the gross receipts (other than nonallocable receipts) of such establishment for the payroll period, over “(ii) the aggregate amount reported by such employees to the employer under subsection (a) for such period. “(B) Method of allocation.— The employer shall allocate the amount under subparagraph (A)— “(i) on the basis of a good faith agreement by the employer and the employees, or “(ii) in the absence of an agreement under clause (i), in the manner determined under regulations prescribed by the Secretary. “(C) The secretary may lower the percentage required to be allocated.— The Secretary may reduce (but not below 5 percent) the percentage of gross receipts required to be allocated under subparagraph (A) where he determines that the percentage of gross receipts constituting tips is less than 8 percent. “(4) Large food or beverage establishment.— For purposes of this subsection, the term ‘large food or beverage establishment’ means any trade or business (or portion thereof)— “(A) which provides food or beverages, “(B) with respect to which the tipping of employees serving food or beverages by customers is customary, and “(C) which normally employed more than 10 employees on a typical business day during the preceding calendar year. For purposes of subparagraph (C), rules similar to the rules of subsections (a) and (h) of section 52 shall apply under regulations prescribed by the Secretary. “(5) Employer not to be liable for wrong allocations.— The employer shall not be liable to any person if any amount is improperly allocated under paragraph (3)(B) if such allocation is done in accordance with the regulations prescribed under paragraph (3)(B). “(6) Nonallocable receipts defined.— For purposes of this subsection, the term ‘nonallocable receipts’ means receipts which are allocable to— “(A) carry out sales, or “(B) services with respect to which a service charge of 10 percent or more is added. “(7) Application to new businesses.— The Secretary shall prescribe regulations for the application of this subsection to new businesses.” (b) Penalty for failure to furnish statement.— Subparagraph (D) of section 6678(3) is amended by striking out “section 6053(b)” 95 Stat. 343. and inserting in lieu thereof “subsection (b) or (c) of section 6053(c).” (c) Study of Tip Compliance.— The Secretary of the Treasury or Report to congressional committees. 26 USC 6053 note. his delegate shall submit before January 1, 1987, to the Committee on Ways and Means of the House of Representatives and to the Committee on Finance of the Senate a report with respect to tip compliance in the food and beverage service industry. Such study shall include, but not be limited to, an analysis of tipping patterns, tip-sharing arrangements, and tip compliance patterns. (d) Conforming Amendment.— The last sentence of section 6001 26 USC 6001. (relating to notice or regulations requiring records, statements, and special returns) is amended by inserting “, records necessary to comply with section 6053(c),” after “charge receipts”. (e) Effective Dates.— (1) In general.— The amendments made by this section shall apply to calendar years beginning after December 31, 1982. (2) Special rule for 1983.— For purposes of section 6053(c) of the Internal Revenue Code of 1954, in the case of payroll periods ending before April 1, 1983, an employer must only report with respect to such periods— (A) amounts described in subparagraphs (A), (B), (C), and (D) of section 6053(c)(1) of such Code, and (B) the name, and identification number, wages paid to, and tips reported by, each tipped employee. PART II— PROVISIONS TO IMPROVE REPORTING GENERALLY SEC. 315. INCREASED PENALTIES FOR FAILURE TO FILE INFORMATION RETURN OR TO FURNISH STATEMENT. (a) In General.— Subsection (a) of section 6652 (relating to failure 26 USC 6652. to file certain information returns, etc.) is amended to read as follows: “(a) Returns Relating to Information at Source, Payments of Dividends, Etc., and Certain Transfers of Stock.— “(1) In general.— In the case of each failure— “(A) to file a statement of the amount of payments to another person required by— “(i) section 6041 (a) or (b) (relating to certain information at source), “(ii) section 6042(a)(1) (relating to payments of dividends), “(iii) section 6044(a)(1) (relating to payments of patronage dividends), “(iv) section 6049(a) (relating to payments of interest), Ante, p. 592. “(v) section 6050A(a) (relating to reporting requirements of certain fishing boat operators), or “(vi) section 6042(e), 6044(0, 6049(e), or 6051(d) (relating Ante, pp. 587, 588. to information returns with respect to income tax withheld), or “(B) to make a return required by— “(i) subsection (a) or (b) of section 6041A (relating to Ante, p. 601. returns of direct sellers). “(ii) section 6045 (relating to returns of brokers), Ante, p. 600. “(iii) section 6052(a) (relating to reporting payment of wages in the form of group term life insurance), or “(iv) section 6053(c)(1) (relating to reporting with respect to certain tips), on the date prescribed therefor (determined with regard to any extension of time for filing), unless it is shown that such failure is due to reasonable cause and not to willful neglect, there shall be paid (upon notice and demand by the Secretary and in the same manner as tax), by the person failing to file a statement referred to in subparagraph (A) or failing to make a return referred to in subparagraph (B), $50 for each such failure, but the total amount imposed on the delinquent person for all such failures during any calendar year shall not exceed $50,000. “(2) Penalty in case op intentional disregard.— If 1 or more failures to which paragraph (1) applies are due to intentional disregard of the filing requirement, then with respect to such failures— “(A) the penalty imposed under paragraph (1) shall not be less than an amount equal to— “(i) in the case of a return not described in clauses (ii) and (iii), 10 percent of the aggregate amount of the items required to be reported, “(ii) in the case of a return required to be filed by section 6045, 5 percent of the gross proceeds required to be reported, and “(iii) in the case of a return required to be filed by section 6041A(b), $100 for each such failure, and “(B) the $50,000 limitation under paragraph (1) shall not apply.” (b) Increase in Addition to Tax for Failure to File Certain Returns or Statements in Connection With Plans of Deferred Compensation.— Subsection (0 of section 6652 (relating to information 26 USC 6652. required in connection with certain plans of deferred compensation) is amended— (1) by striking out “$10” and inserting in lieu thereof “$25”, and (2) by striking out “$5,000” and inserting in lieu thereof “$15,000”. (c) Increase in Civil Penalty for Failure to Furnish Certain Statements.— Section 6678 (relating to failure to furnish certain 26 USC 6678. statements) is amended— (1) by striking out “$10” and inserting in lieu thereof “$50”, and (2) by striking out “$25,000” and inserting in lieu thereof “$50,000”. (d) Effective Date.— The amendments made by this section shall 26 USC 6652 note. apply with respect to returns or statements the due date for the filing of which (without regard to extensions) is after December 31, 1982. SEC. 316. INCREASE IN CIVIL PENALTY ON FAILURE TO SUPPLY IDENTIFYING NUMBERS. (a) In General.— Subsection (a) of section 6676 (relating to failure 26 USC 6676. to supply identifying numbers) is amended to read as follows: “(a) Civil Penalties.— “(1) In general.— If any person who is required by regulations prescribed under section 6109— “(A) to include his taxpayer identification number in any return, statement, or other document, “(B) to furnish his taxpayer identification number to another person, or “(C) to include in any return, statement, or other document made with respect to another person the taxpayer identification number of such other person, fails to comply with such requirement at the time prescribed by such regulations, such person shall, unless it is shown that such failure is due to reasonable cause and not to willful neglect, pay a penalty of $5 for each such failure described in subparagraph (A) and $50 for each such failure described in subparagraph (B) or (C), except that the total amount imposed on such person for all such failures during any calendar year shall not exceed $50,000. “(2) Taxpayer identification number defined.— The term ‘taxpayer identification number’ means the identifying number assigned to a person under section 6109.” (b) Effective Date.— The amendments made by this section shall 26 USC 6676 note. apply with respect to returns the due date for the filing of which (without regard to extensions) is after December 31, 1982. SEC. 317. EXTENSION OF WITHHOLDING TO CERTAIN PAYMENTS WHERE IDENTIFYING NUMBER NOT FURNISHED OR INACCURATE. (a) In General.— Section 3402 (relating to withholding at source) 26 USC 3402. is amended by adding at the end thereof the following new subsection: “(s) Extension of Withholding to Certain Payments Where Identifying Number Not Furnished or Inaccurate.— “(1) In general.— If, in the case of any backup withholding payment— “(A) the payee fails to furnish his taxpayer identification number to the payor, or “(B) the Secretary notifies the payor that the number furnished by the payee is incorrect, then the payor shall deduct and withhold from such payment a tax equal to 15 percent of such payment. “(2) Period for which withholding is in effect.— “(A) Failure to Furnish Number.— In the case of any failure described in subparagraph (A) of paragraph (1), paragraph (1) shall apply to any backup withholding payment made during the period during which the taxpayer identification number has not been furnished. “(B) Notification of Incorrect Number.— In any case where there is a notification described in subparagraph (B) of paragraph (1), pa ragraph (1) shall apply to any backup withholding payment made— “(i) after the close of the 15th day after the day on which the payor was so notified, and “(ii) before the payee furnishes another taxpayer identification number. “(C) 15-day grace periods.— “(i) After correction.— Unless the payor otherwise elects, pa ragraph (1) shall also apply to any backup withholding payment made after the close of the period described in subparagraph (A) or (B) (as the case may be) and before the 16th day after the close of such period. “(ii) After notification.— If the payor so elects, paragraph (1) shall also apply to any backup withholding payment made during the 15-day period described in clause (i) of subparagraph (B). “(3) Backup withholding payments.— “(A) In general.— For purposes of this subsection, the term ‘backup withholding payment’ means any payment of a kind, and to a payee, required to be shown on a return required under— “(i) section 6041 (a) or (b) (relating to certain information at source), “(ii) section 6041A(a) (relating to returns regarding payments to nonemployees), “(iii) section 6042(a) (relating to payments of dividends), “(iv) section 6044 (relating to returns regarding patronage dividends) but only to the extent of payments of money. “(v) section 6045 (relating to returns of brokers), Ante, p. 600. “(vi) section 6049(a) (relating to payments of interest), Ante, p. 592. or “(vii) section 6050A (relating to reporting requirements of certain fishing boat operators), but only to the extent of payments of the proceeds of the catch. “(B) Special rule.— For purposes of this subsection, the determination of whether any payment is of a kind required to be shown on a return described in subparagraph (A) shall be made without regard to any minimum amount which must be paid before a return is required. “(4) Payments must aggregate $ 600 before withholding required from payments described in section 6041(a) or 6041 a.— In the case of any payment which is of a kind required to be shown on a return required under section 6041(a) or 6041A(a) and which is made during any calendar year, no Ante, p. 601. amount shall be deducted and withheld with respect to such payment unless— “(A) the aggregate amount of such payment and all previous such payments to the payee involved during such calendar year equals or exceeds $600, “(B) the payor was required under section 6041(a) or 6041A(a) to file a return for the preceding calendar year with respect to payments to the payee involved, or “(C) during the preceding calendar year the payor made backup withholding payments to the payee with respect to which amounts were required to be deducted and withheld under paragraph (1). “(5) Definitions and special rules.— For purposes of this subsection— “(A) Obviously incorrect number.— A payee shall be treated as failing to furnish his taxpayer identification number if the number furnished does not contain the proper number of digits. “(B) Payee furnishes 2 incorrect numbers.— If the payee furnishes a payor 2 incorrect numbers, the payor shall, after receiving notice of the second incorrect number, treat the payee as not having furnished another taxpayer identification number under paragraph (2)(B)(ii) until the day on which the payor receives notification from the Secretary that a correct taxpayer identification number has been furnished. “(C) Exception for payments to certain payees.— Paragraph (1) shall not apply to any payment made to— “(i) the United States (as defined in section 3455(a)(3)), Ante, p. 583. “(ii) any State (as defined in section 3455(a)(2)), “(iii) an organization which is exempt from taxation under section 501(a), “(iv) any foreign government (as defined in section 3455(a)(4)) or international organization (as defined in section 3455(a)(5)), or “(v) any other person specified in regulations. “(D) Taxpayer identification number.— The term ‘taxpayer identification number’ means the identifying number assigned to a person under section 6109. “(E) Amounts for which withholding otherwise required.— No tax shall be deducted or withheld under this subsection with respect to any amount for which withholding is otherwise required by this title. “(F) Exemption while waiting for number.— The Secretary shall prescribe regulations for exemptions from the tax imposed by paragraph (1) during periods during which a person is waiting for receipt of a taxpayer identification number. “(G) Nominees.— In the case of a backup withholding payment described in clause (i) or (v) of paragraph (3)(A) to a nominee, in the manner provided in regulations, both the nominee and the ultimate payee shall be treated as the payee. “(H) Requirement of notice to payee.— Whenever the Secretary notifies a payor under paragraph (1)(B) that the taxpayer identification number furnished by any payee is incorrect, the Secretary shall at the same time furnish a copy of such notice to the payor, and the payor shall promptly furnish such copy to the payee. “(I) Requirement of notice to secretary.— If the Secretary notifies a payor under paragraph (1)(B) that the taxpayer identification number furnished by any payee is incorrect and such payee subsequently furnishes another taxpayer identification number to the payor, the payor shall promptly notify the Secretary of the other taxpayer identification number so furnished. “(J) Coordination with other sections.— For purposes of section 31, this chapter (other than subsection (n) of this section), and so much of subtitle F (other than section 7205) as relates to this chapter, payments which are subject to withholding under this subsection shall be treated as if they were wages paid by an employer to an employee.” (b) Effective Date.— The amendments made by subsection (a) 26 USC 3402 note. shall apply to payments made after December 31, 1983. SEC. 318. MINIMUM PENALTY FOR EXTENDED FAILURE TO FILE. (a) In General.— Subsection (a) of section 6651 (relating to failure 26 USC 6651. to file tax return or to pay tax) is amended by adding at the end thereof the following new sentence: “In the case of a failure to file a return of tax imposed by chapter 1 within 60 days of the date prescribed for filing of such return (determined with regard to any extensions of time for filing), unless it is shown that such failure is due to reasonable cause and not due to willful neglect, the addition to tax under paragraph (1) shall not be less than the lesser of $100 or 100 percent of the amount required to be shown as tax on such return.” (b) Conforming Amendments.— Section 6651(c)(1) (relating to additions under more than one paragraph) is amended— (1) by adding at the end of subparagraph (A) the following new sentence: “In any case described in the last sentence of subsection (a), the amount of the addition under paragraph (1) of subsection (a) shall not be reduced under the preceding sentence below the amount provided in such last sentence.”, and (2) by inserting “(determined without regard to the last sentence of such subsection)” after “paragraph (1) of subsection (a)” in subparagraph (B). (c) Effective Date.— The amendments made by this section shall 26 USC 6651 note. apply to returns the due date for filing of which (including extensions) is after December 31, 1982. SEC. 319. INFORMATION RETURNS. Section 6011 (relating to general requirement of return, statement, 26 USC 6011. or list) is amended by redesignating subsection (e) as subsection (f) and by inserting after subsection (d) the following new subsection: “(e) Regulations Requiring Returns on Magnetic Tape, Etc.— The Secretary shall prescribe regulations providing standards for determining which returns must be filed on magnetic media or in other machine-readable form. The Secretary may not require returns of any tax imposed by subtitle A on individuals, estates, and trusts to be other than on paper forms supplied by the Secretary. In prescribing such regulations, the Secretary shall take into account (among other relevant factors) the ability of the taxpayer to comply at a reasonable cost with such a filing requirement.” Subtitle C— Abusive Tax Shelters, Etc.; Substantial Underpayments; False Documents; Frivolous Returns PART I— ABUSIVE TAX SHELTERS, ETC. SEC. 320. PENALTY FOR PROMOTING ABUSIVE TAX SHELTERS, ETC. (a) General Rule.— Subchapter B of chapter 68 (relating to assessable penalties) is amended by adding at the end thereof the following new section: “SEC. 6700. PROMOTING ABUSIVE TAX SHELTERS, ETC. “(a) Imposition of Penalty.— Any person who— “(1) (A) organizes (or assists in the organization of)— “(i) a partnership or other entity, “(ii) any investment plan or arrangement, or “(iii) any other plan or arrangement, or “(B) participates in the sale of any interest in an entity or plan or arrangement referred to in subparagraph (A), and “(2) makes or furnishes (in connection with such organization or sale)— “(A) a statement with respect to the allowability of any deduction or credit, the excludability of any income, or the securing of any other tax benefit by reason of holding an interest in the entity or participating in the plan or arrangement which the person knows or has reason to know is false or fraudulent as to any material matter, or “(B) a gross valuation overstatement as to any material matter, shall pay a penalty equal to the greater of $1,000 or 10 percent of the gross income derived or to be derived by such person from such activity. “(b) Rules Relating to Penalty for Gross Valuation Over-Statements.— “(1) Gross valuation overstatement defined.— For purposes of this section, the term ‘gross valuation overstatement’ means any statement as to the value of any property or services if— “(A) the value so stated exceeds 200 percent of the amount determined to be the correct valuation, and “(B) the value of such property or services is directly related to the amount of any deduction or credit allowable under chapter 1 to any participant. “(2) Authority to waive.— The Secretary may waive all or any part of the penalty provided by subsection (a) with respect to any gross valuation overstatement on a showing that there was a reasonable basis for the valuation and that such valuation was made in good faith. “(c) Penalty in addition to other penalties.— The penalty imposed by this section shall be in addition to any other penalty provided by law.” (b) Clerical Amendment.— The table of sections for subchapter B of chapter 68 is amended by adding at the end thereof the following new item: “Sec. 6700. Promoting abusive tax shelters, etc.” (c) Effective Date.— The amendments made by this section shall 26 USC 6700 note. take effect on the day after the date of the enactment of this Act. SEC. 321. ACTION TO ENJOIN PROMOTERS OF ABUSIVE TAX SHELTERS, ETC. (a) General Rule.— Subchapter A of chapter 76 (relating to civil actions by the United States) is amended by redesignating section 7408 as section 7409 and by inserting after section 7407 the following 26 USC 7409. new section: “SEC. 7408. ACTION TO ENJOIN PROMOTERS OF ABUSIVE TAX SHELTERS. ETC. “(a) Authority to Seek Injunction.— A civil action in the name of the United States to enjoin any person from further engaging in conduct subject to penalty under section 6700 (relating to penalty for promoting abusive tax shelters, etc.) may be commenced at the request of the Secretary, Any action under this section shall be brought in the district court of the United States for the district in which such person resides, has his principal place of business, or has engaged in conduct subject to penalty under section 6700. The court may exercise its jurisdiction over such action (as provided in section 7402(a)) separate and apart from any other action brought by the United States against such person. “(b) Adjudication and Decree.— In any action under subsection (a), if the court finds— “(1) that the person has engaged in any conduct subject to penalty under section 6700 (relating to penalty for promoting abusive tax shelters, etc.), and “(2) that injunctive relief is appropriate to prevent recurrence of such conduct, the court may enjoin such person from engaging in such conduct or in any other activity subject to penalty under section 6700. “(c) Citizens and Residents Outside The United States.— If any citizen or resident of the United States does not reside in, and does not have his principal place of business in, any United States judicial district, such citizen or resident shall be treated for purposes of this section as residing in the District of Columbia.” (b) Clerical Amendment.— The table of sections for subchapter A of chapter 76 is amended by striking out the last item and inserting in lieu thereof the following: “Sec. 7408. Action to enjoin promoters of abusive tax shelters, etc. “Sec. 7409. Cross references.” (c) Effective Date.— The amendments made by this section shall 26 USC 7408 note. take effect on the day after the date of the enactment of this Act. SEC. 322. PROCEDURAL RULES APPLICABLE TO PENALTIES UNDER SECTIONS 6700. 6701, AND 6702. (a) General Rule.— Subchapter B of chapter 68 (relating to assessable penalties) is amended by adding at the end thereof the following new section: “SEC. 6703. RULES APPLICABLE TO PENALTIES UNDER SECTIONS 6700, 6701, AND 6702. “(a) Burden of Proof.— In any proceeding involving the issue of whether or not any person is liable for a penalty under section 6700, 6701, or 6702, the burden of proof with respect to such issue shall be on the Secretary. “(b) Deficiency Procedures Not to Apply.— Subchapter B of chapter 63 (relating to deficiency procedures) shall not apply with respect to the assessment or collection of the penalties provided by sections 6700, 6701, and 6702. “(c) Extension of Period of Collection Where Person Pays 15 Percent of Penalty.— “(1) In general.— If, within 30 days after the day on which notice and demand of any penalty under section 6700, 6701, or 6702 is made against any person, such person pays an amount which is not less than 15 percent of the amount of such penalty and files a claim for refund of the amount so paid, no levy or proceeding in court for the collection of the remainder of such penalty shall be made, begun, or prosecuted until the final resolution of a proceeding begun as provided in paragraph (2). Notwithstanding the provisions of section 7421(a), the beginning of such proceeding or levy during the time such prohibition is in force may be enjoined by a proceeding in the proper court. “(2) Person must bring suit in district court to determine his liability for penalty.— If, within 30 days after the day on which his claim for refund of any partial payment of any penalty under section 6700, 6701, or 6702 is denied (or, if earlier, within 30 days after the expiration of 6 months after the day on which he filed the claim for refund), the person fails to begin a proceeding in the appropriate United States district court for the determination of his liability for such penalty, paragraph (1) shall cease to apply with respect to such penalty, effective on the day following the close of the applicable 30-day period referred to in this paragraph. “(3) Suspension of running of period of limitations on collection.— The running of the period of limitations provided in section 6502 on the collection by levy or by a proceeding in court in respect of any penalty described in paragraph (1) shall be suspended for the period during which the Secretary is prohibited from collecting by levy or a proceeding in court.” (b) Clerical Amendment.— The table of sections for subchapter B of chapter 68 is amended by adding at the end thereof the following new section: “Sec. 6703. Rules applicable to penalties under sections 6700, 6701, and 6702.” (c) Effective Date.— The amendments made by this section shall 26 USC 6703 note. take effect on the day after the date of the enactment of this Act. PART II— SUBSTANTIAL UNDERPAYMENT; FALSE DOCUMENTS; FRIVOLOUS RETURNS; ETC. SEC. 323. PENALTY FOR SUBSTANTIAL UNDERSTATEMENT. (a) In General.— Subchapter A of chapter 68 (relating to additions to tax and additional amounts) is amended by redesignating section 6661 as section 6662 and by inserting after section 6660 the 26 USC 6662. following new section: “SEC. 6661. SUBSTANTIAL UNDERSTATEMENT OF LIABILITY. “(a) Addition to Tax.— If there is a substantial understatement of income tax for any taxable year, there shall be added to the tax an amount equal to 10 percent of the amount of any underpayment attributable to such understatement. “(b) Definition and Special Rule.— “(1) Substantial understatement.— “(A) In general.— For purposes of this section, there is a substantial understatement of income tax for any taxable year if the amount of the understatement for the taxable year exceeds the greater of— “(i) 10 percent of the tax required to be shown on the return for the taxable year, or “(ii) $5,000. “(B) Special rule for corporations.— In the case of a corporation other than an electing small business corporation (as defined in section 1371(b)) or a personal holding company (as defined in section 542), paragraph (1) shall be applied by substituting ‘$10,000’ for ‘$5,000’. “(2) Understatement.— “(A) In general.— For purposes of paragraph (1), the term ‘understatement’ means the excess of— “(i) the amount of the tax required to be shown on the return for the taxable year, over “(ii) the amount of the tax imposed which is shown on the return. “(B) Reduction for understatement due to position of taxpayer or disclosed item.— The amount of the understatement under subparagraph (A) shall be reduced by that portion of the understatement which is attributable to— “(i) the tax treatment of any item by the taxpayer if there is or was substantial authority for such treatment, or “(ii) any item with respect to which the relevant facts affecting the item’s tax treatment are adequately disclosed in the return or in a statement attached to the return. “(C) Special rules in cases involving tax shelters.— “(i) In general.— In the case of any item attributable to a tax shelter— “(I) subparagraph (B)(ii) shall not apply, and “(II) subparagraph (B)(i) shall not apply unless (in addition to meeting the requirements of such subparagraph) the taxpayer reasonably believed that the tax treatment of such item by the taxpayer was more likely than not the proper treatment. “(ii) Tax shelter.— For purposes of clause (i), the term ‘tax shelter’ means— “(I) a partnership or other entity, “(II) any investment plan or arrangement, or “(III) any other plan or arangement, if the principal purpose of such partnership, entity, plan, or arrangement is the avoidance or evasion of Federal income tax. “(3) Coordination with penalty imposed by section 6659.— For purposes of determining the amount of the addition to tax assessed under subsection (a), there shall not be taken into account that portion of the substantial understatement on which a penalty is imposed under section 6659 (relating to 95 Stat. 341. addition to tax in the case of valuation overstatements). “(c) Authority to Waive.— The Secretary may waive all or any part of the addition to tax provided by this section on a showing by the taxpayer that there was reasonable cause for the understatement (or part thereof) and that the taxpayer acted in good faith.” (b) Conforming Amendment.— The table of sections for subchapter A of chapter 68 is amended by striking out the last item and inserting in lieu thereof the following: “Sec. 6661. Substantial understatement of liability. “Sec. 6662. Applicable rules.” (c) Effective Date.— The amendments made by this section shall 26 USC 6661 note. apply to returns the due date (determined without regard to extension) for filing of which is after December 31, 1982. SEC. 324. PENALTIES FOR DOCUMENTS UNDERSTATING TAX LIABILITY. (a) General Rule.— Subchapter B of chapter 68 (relating to assessable penalties) is amended by inserting after section 6700 the following new section: “SEC. 6701. PENALTIES FOR AIDING AND ABETTING UNDERSTATEMENT OF TAX LIABILITY. “(a) Imposition of Penalty.— Any person— “(1) who aids or assists in, procures, or advises with respect to, the preparation or presentation of any portion of a return, affidavit, claim, or other document in connection with any matter arising under the internal revenue laws, “(2) who knows that such portion will be used in connection with any material matter arising under the internal revenue laws, and “(3) who knows that such portion (if so used) will result in an understatement of the liability for tax of another person, shall pay a penalty with respect to each such document in the amount determined under subsection (b). “(b) Amount of Penalty.— “(1) In general.— Except as provided in paragraph (2), the amount of the penalty imposed by subsection (a) shall be $1,000. “(2) Corporations.— If the return, affidavit, claim, or other document relates to the tax liability of a corporation, the amount of the penalty imposed by subsection (a) shall be $10,000. “(3) Only 1 penalty per person per period.— If any person is subject to a penalty under subsection (a) with respect to any document relating to any taxpayer for any taxable period (or where there is no taxable period, any taxable event), such person shall not be subject to a penalty under subsection (a) with respect to any other document relating to such taxpayer for such taxable period (or event). “(c) Activities of Subordinates.— “(1) In general.— For purposes of subsection (a), the term ‘procures’ includes— “(A) ordering (or otherwise causing) a subordinate to do an act, and “(B) knowing of, and not attempting to prevent, participation by a subordinate in an act. “(2) Subordinate.— For purposes of paragraph (1), the term ‘subordinate’ means any other person (whether or not a director, officer, employee, or agent of the taxpayer involved) over whose activities the person has direction, supervision, or control. “(d) Taxpayer Not Required to Have Knowledge.— Subsection (a) shall apply whether or not the understatement is with the knowledge or consent of the persons authorized or required to present the return, affidavit, claim, or other document. “(e) Certain Actions Not Treated as Aid or Assistance.— For purposes of subsection (a)(1), a person furnishing typing, reproducing, or other mechanical assistance with respect to a document shall not be treated as having aided or assisted in the preparation of such document by reason of such assistance. “(f) Penalty in Addition to Other Penalties.— “(1) In general.— Except as provided by paragraph (2), the penalty imposed by this section shall be in addition to any other penalty provided by law. “(2) Coordination with return preparer penalties.— No penalty shall be assessed under subsection (a) or (b) of section 6694 on any person with respect to any document for which a penalty is assessed on such person under subsection (a).” (b) Clerical Amendment.— The table of sections for subchapter B of chapter 68 is amended by inserting after the item relating to section 6700 the following new item: “Sec. 6701. Penalties for aiding and abetting understatement of tax liability.” (c) Effective Date.— The amendments made by this section shall 26 USC 6701 note. take effect on the day after the date of the enactment of this Act. (d) Cross Reference.— For provisions relating to burden of proof and prepayment forum, see section 6703 of the Internal Revenue Code of 1954, as added by section 333 of this Act. SEC. 325. FRAUD PENALTY. (a) General Rule.— Subsection (b) of section 6653 (relating to 26 USC 6653. fraud penalty) is amended to read as follows: “(b) Fraud.— “(1) In general.— If any part of any underpayment (as defined in subsection (c)) of tax required to be shown on a return is due to fraud, there shall be added to the tax an amount equal to 50 percent of the underpayment. “(2) Additional amount for portion attributable to fraud.— There shall be added to the tax (in addition to the amount determined under paragraph (1)) an amount equal to 50 percent of the interest payable under section 6601— “(A) with respect to the portion of the underpayment described in paragraph (1) which is attributable to fraud, and “(B) for the period beginning on the last day prescribed by law for payment of such underpayment (determined without regard to any extension) and ending on the date of the assessment of the tax (or, if earlier, the date of the payment of the tax). “(3) No negligence addition when there is addition for fraud.— The addition to tax under this subsection shall be in lieu of any amount determined under subsection (a). “(4) Special rule for joint returns.— In the case of a joint return under section 6013, this subsection shall not apply with respect to the tax of the spouse unless some part of the underpayment is due to the fraud of such spouse.” (b) Effective Date.— The amendment made by subsection (a) 26 USC 6653 note. shall apply with respect to taxes the last day prescribed by law for payment of which (determined without regard to any extension) is after the date of enactment of this Act. SEC. 326. PENALTY FOR FRIVOLOUS RETURNS. (a) General Rule.— Subchapter B of chapter 68 (relating to assessable penalties) is amended by inserting after section 6701 the following new section: “SEC. 6702. FRIVOLOUS INCOME TAX RETURN. “(a) Civil Penalty.— If— “(1) any individual files what purports to be a return of the tax imposed by subtitle A but which— “(A) does not contain information on which the substantial correctness of the self-assessment may be judged, or “(B) contains information that on its face indicates that the self-assessment is substantially incorrect; and “(2) the conduct referred to in paragraph (1) is due to— “(A) a position which is frivolous, or “(B) a desire (which appears on the purported return) to delay or impede the administration of Federal income tax laws, then such individual shall pay a penalty of $500. “(b) Penalty in Addition to Other Penalties.— The penalty imposed by subsection (a) shall be in addition to any other penalty provided by law.” (b) Clerical Amendment.— The table of sections for subchapter B of chapter 68 is amended by inserting after the item relating to section 6701 the following new item: “Sec. 6702. Frivolous income tax return.” (c) Effective Date.— The amendments made by this section shall 26 USC 6702 note. apply with respect to documents filed after the date of the enactment of this Act. (d) Cross Reference.— For provisions relating to burden of proof and prepayment forum, see section 6703 of the Internal Revenue Code of 1954 as added by section 333 of this Act. SEC. 327. RELIEF FROM CRIMINAL PENALTY FOR FAILURE TO FILE ESTIMATED TAX WHERE TAXPAYER FALLS WITHIN STATUTORY EXCEPTIONS. Section 7203 (relating to willful failure to file return, supply 26 USC 7203. information, or pay tax) is amended by adding at the end thereof the following new sentence: “In the case of any person with respect to whom there is a failure to pay any estimated tax, this section shall not apply to such person with respect to such failure if there is no addition to tax under section 6654 or 6655 with respect to such failure.” SEC. 328. ADJUSTMENTS TO ESTIMATED TAX PROVISIONS. (a) Waiver of Penalty Where Individual Did Not Have Tax Liabilities for Preceding Taxable Year.— (1) Section 6654 (relating to failure by individual to pay 95 Stat. 346. estimated tax) is amended by redesignating subsection (h) as subsection (i) and by inserting after subsection (g) the following new subsection: “(h) Exception Where No Tax Liability for Preceding Taxable Year.— No addition to tax shall be imposed under subsection (a) for any taxable year if— “(1) the individual did not have any liability for tax for the preceding taxable year, “(2) the preceding taxable year was a taxable year of 12 months, and “(3) the individual was a citizen or resident of the United States throughout the preceding taxable year.” (2) Subsection (g) of section 6654 is amended by striking out “and (f)” and inserting in lieu thereof “(f), and (h)”. (b) Elimination of Requirements to File Declarations of Estimated Tax.— (1) Section 6015 (relating to declaration of estimated income 95 Stat. 345. tax by individuals) is amended by adding at the end thereof the following new subsection: “(k) Termination.— No declaration shall be required under this section for any taxable year beginning after December 31, 1982.” (2) Section 6073 (relating to time for filing declarations of 26 USC 6073. estimated income tax by individuals) is amended by adding at the end thereof the following new subsection: “(f) Termination.— This section shall not apply to any taxable year beginning after December 31, 1982.” (3) Section 6153 (relating to installment payments of estimated 26 USC 6153. income tax by individuals) is amended by striking out subsection (g) and inserting in lieu thereof the following: “(g) Special Rules for Taxable Years Beginning After 1982.— In the case of taxable years beginning after 1982— “(1) this section shall be applied as if the requirements of sections 6015 and 6073 remained in effect, and “(2) the amount of the estimated tax taken into account under this section shall be determined under rules similar to the rules of subsections (b) and (d) of section 6654.” (c) Effective Date.— The amendments made by this section 26 USC 6015 note. shall apply to taxable years beginning after December 31, 1982. SEC. 329. INCREASES IN CERTAIN CRIMINAL FINES. (a) Attempt to Evade or Defeat Tax.— Section 7201 (relating to 26 USC 7201. attempt to evade or defeat tax) is amended by striking out “$10,000” and inserting in lieu thereof “$100,000 ($500,000 in the case of a corporation)”. (b) Willful Failure to File Return, Supply Information, or Pay Tax.— Section 7203 (relating to willful failure to file return, 26 USC 7203. supply information, or pay tax) is amended by striking out “$10,000” and inserting in lieu thereof “$25,000 ($100,000 in the case of a corporation)”. (c) Fraud and False Statements.— Section 7206 (relating to fraud 26 USC 7206. and false statements) is amended by striking out “$5,000” and inserting in lieu thereof “$100,000 ($500,000 in the case of a corporation)”. (d) Fraudulent Returns, Statements, or Other Documents.— Section 7207 (relating to fraudulent returns, statements, or other 26 USC 7207. documents) is amended by striking out “$1,000” each place it appears and inserting in lieu thereof “$10,000 ($50,000 in the case of a corporation)”. (e) Effective Date.— The amendments made by this section shall 26 USC 7201 note. apply to offenses committed after the date of the enactment of this Act. SEC. 330. SPECIAL RULES WITH RESPECT TO CERTAIN CASH. (a) In General.— Subchapter A of chapter 70 (relating to jeopardy) is amended by adding at the end thereof the following new part: “PART III— SPECIAL RULES WITH RESPECT TO CERTAIN CASH “Sec. 6867. Presumptions where owner of large amount of cash is not identified. “SEC. 6867. PRESUMPTIONS WHERE OWNER OF LARGE AMOUNT OF CASH IS NOT IDENTIFIED. “(a) General Rule.— If the individual who is in physical possession of cash in excess of $10,000 does not claim such cash— “(1) as his, or “(2) as belonging to another person whose identity the Secretary can readily ascertain and who acknowledges ownership of such cash, then, for purposes of sections 6851 and 6861, it shall be presumed that such cash represents gross income of a single individual for the taxable year in which the possession occurs, and that the collection of tax will be jeopardized by delay. “(b) Rules for Assessing.— In the case of any assessment resulting from the application of subsection (a)— “(1) the entire amount of the cash shall be treated as taxable income for the taxable year in which the possession occurs, “(2) such income shall be treated as taxable at a 50-percent rate, and “(3) except as provided in subsection (c), the possessor of the cash shall be treated (solely with respect to such cash) as the taxpayer for purposes of chapters 63 and 64 and section 7429(a)(1). “(c) Effect of Later Substitution of True Owner.— If, after an assessment resulting from the application of subsection (a), such assessment is abated and replaced by an assessment against the owner of the cash, such later assessment shall be treated for purposes of all laws relating to lien, levy and collection as relating back to the date of the original assessment. “(d) Definitions.— For purposes of this section— “(1) Cash.— The term ‘cash’ includes any cash equivalent. “(2) Cash equivalent.— The term ‘cash equivalent’ means— “(A) foreign currency, “(B) any bearer obligation, and “(C) any medium of exchange which— “(i) is of a type which has been frequently used in illegal activities, and “(ii) is specified as a cash equivalent for purposes of this part in regulations prescribed by the Secretary. “(3) Value of Cash Equivalent.— Any cash equivalent shall be taken into account— “(A) in the case of a bearer obligation, at its face amount, and “(B) in the case of any other cash equivalent, at its fair market value.” (b) Clerical Amendment.— The table of parts for such subchapter A is amended by adding at the end thereof the following new item: “Part III. Special rules with respect to certain cash.” (c) Effective Date.— The amendments made by subsections (a) 26 USC 6867 note. and (b) shall take effect on the day after the date of the enactment of this Act. Subtitle D— Administrative Summons SEC. 331. SPECIAL PROCEDURES FOR THIRD-PARTY SUMMONSES. (a) Proceeding to Quash.— Paragraph (2) of section 7609(b) (relating 26 USC 7609. to right to intervene; right to stay compliance) is amended to read as follows: “(2) Proceeding to quash.— “(A) In general.— Notwithstanding any other law or rule of law, any person who is entitled to notice of a summons under subsection (a) shall have the right to begin a proceeding to quash such summons not later than the 20th day after the day such notice is given in the manner provided in subsection (a)(2). In any such proceeding, the Secretary may seek to compel compliance with the summons. “(B) Requirement of notice to person summoned and to secretary.— If any person begins a proceeding under subparagraph (A) with respect to any summons, not later than the close of the 20-day period referred to in subparagraph (A) such person shall mail by registered or certified mail a copy of the petition to the person summoned and to such office as the Secretary may direct in the notice referred to in subsection (a)(1). “(C) Intervention; etc.— Notwithstanding any other law or rule of law, the person summoned shall have the right to intervene in any proceeding under subparagraph (A). Such person shall be bound by the decision in such proceeding (whether or not the person intervenes in such proceeding).” (b) Restriction on Examination.— Subsection (d) of section 7609 (relating to restriction on examination of records) is amended to read as follows: “(d) Restriction on Examination of Records.— No examination of any records required to be produced under a summons as to which notice is required under subsection (a) may be made— “(1) before the close of the 23rd day after the day notice with respect to the summons is given in the manner provided in subsection (a)(2), or “(2) where a proceeding under subsection (b)(2)(A) was begun within the 20-day period referred to in such subsection and the requirements of subsection (b)(2)(B) have been met, except in accordance with an order of the court having jurisdiction of such proceeding or with the consent of the person beginning the proceeding to quash.” (c) Jurisdiction.— Subsection (h) of section 7609 (relating to jurisdiction 26 USC 7609. of district court) is amended to read as follows: “(h) Jurisdiction of District Court; Etc.— “(1) Jurisdiction.— The United States district court for the district within which the person to be summoned resides or is found shall have jurisdiction to hear and determine any proceeding brought under subsection (b)(2), (f), or (g). An order denying the petition shall be deemed a final order which may be appealed. “(2) Special rule for proceedings under subsections (f) and (g).— The determinations required to be made under subsections (f) and (g) shall be made ex parte and shall be made solely on the petition and supporting affidavits. “(3) Priority.— Except as to cases the court considers of greater importance, a proceeding brought for the enforcement of any summons, or a proceeding under this section, and appeals, takes precedence on the docket over all other cases and shall be assigned for hearing and decided at the earliest practicable date .” (d) Conforming Amendments.— (1) Paragraph (1) of section 7609(a) is amended— (A) by striking out “14th day” and inserting in lieu thereof “23rd day”, and (B) by striking out the last sentence and inserting in lieu thereof the following: “Such notice shall be accompanied by a copy of the summons which has been served and shall contain an explanation of the right under subsection (b)(2) to bring a proceeding to quash the summons.” (2) The subsection heading for subsection (b) of section 7609 is amended to read as follows: “(b) Right to Intervene; Right to Proceeding To Quash.—”. (e) Effective Date.— The amendments made by this section shall 26 USC 7609 note. apply to summonses served after December 31, 1982. SEC. 332. DUTY OF THIRD-PARTY RECORDKEEPER. (a) General Rule.— Section 7609 (relating to special procedures Supra. for third-party summonses) is amended by adding at the end thereof the following new subsection: “(i) Duty of Third-Party Recordkeeper.— “(1) Recordkeeper must assemble records and be prepared to produce records.— On receipt of a summons described in subsection (c), the third-party recordkeeper shall proceed to assemble the records requested, or such portion thereof as the Secretary may prescribe, and shall be prepared to produce the records pursuant to the summons on the day on which the records are to be examined. “(2) Secretary may give recordkeeper certificate.— The Secretary may issue a certificate to the third-party recordkeeper that the period prescribed for beginning a proceeding to quash a summons has expired and that no such proceeding began within such period, or that the taxpayer consents to the examination. “(3) Protection for recordkeeper who discloses.— Any third-party recordkeeper, or agent or employee thereof, making a disclosure of records pursuant to this section in good-faith reliance on the certificate of the Secrtetary or an order of a court requiring production of records shall not be liable to any customer or other person for such disclosure” (b) Effective Date.— The amendment made by subsection (a) 26 USC 7609 note. shall apply to summonses served after December 31, 1982. SEC. 333. LIMITATION ON USE OF ADMINISTRATIVE SUMMONS. (a) In general.— Section 7602 (relating to examination of books 26 USC 7602. and witnesses) is amended by striking out “For the purpose” and inserting in lieu thereof “(a) Authority To Summon, Etc.—For the purpose” and by adding at the end thereof the following new subsections: “(b) Purpose May Include Inquiry Into Offense.— The purposes for which the Secretary may take any action described in paragraph (1), (2), or (3) of subsection (a) include the purpose of inquiring into any offense connected with the administration or enforcement of the internal revenue laws. “(c) No Administrative Summons When There is Justice Department Referral.— “(1) Limitation of Authority.— No summons may be issued under this title, and the Secretary may not begin any action under section 7604 to enforce any summons, with respect to any person if a Justice Department referral is in effect with respect to such person. “(2) Justice department referral in effect.— For purposes of this subsection— “(A) In general.— A Justice Department referral is in effect with respect to any person if— “(i) the Secretary has recommended to the Attorney General a grand jury investigation of, or the criminal prosecution of, such person for any offense connected with the administration or enforcement of the internal revenue laws, or “(ii) any request is made under section 6103(h)(3)(B) for the disclosure of any return or return information (within the meaning of section 6103(b)) relating to such person. “(B) Termination.— A Justice Department referral shall cease to be in effect with respect to a person when— “(i) the Attorney General notifies the Secretary, in writing, that— “(I) he will not prosecute such person for any offense connected with the administration or enforcement of the internal revenue laws, “(II) he will not authorize a grand jury investigation of such person with respect to such an offense, or “(III) he will discontinue such a grand jury investigation, “(ii) a final disposition has been made of any criminal proceeding pertaining to the enforcement of the internal revenue laws which was instituted by the Attorney General against such person, or “(iii) the Attorney General notifies the Secretary, in writing, that he will not prosecute such person for any offense connected with the administration or enforce-ment of the internal revenue laws relating to the request described in subparagraph (A)(ii). “(3) Taxable years, etc., treated separately.— For purposes of this subsection, each taxable period (or, if there is no taxable period, each taxable event) and each tax imposed by a separate chapter of this title shall be treated separately.” (b) Effective Date.— The amendments made by subsection (a) 6 USC 7602 note. shall take effect on the day after the date of the enactment of this Act. Subtitle E— Withholding on Pensions and Other Retirement Income SEC. 334. WITHHOLDING ON PENSIONS. ANNUITIES, AND CERTAIN OTHER DEFERRED INCOME. (a) In General.— Chapter 24 (relating to collection of income tax at source on wages) is amended by adding at the end thereof the following new section: “SEC. 3405. SPECIAL RULES FOR PENSIONS, ANNUITIES. AND CERTAIN OTHER DEFERRED INCOME. “(a) Pensions, Annuities, Etc.— “(1) Withholding as if payment were wages.— The payor of any periodic payment (as defined in subsection (d)(2)) shall withhold from such payment the amount which would be required to be withheld from such payment if such payment were a payment of wages by an employer to an employee for the appropriate payroll period. “(2) Election of no withholding.— An individual may elect to have paragraph (1) not apply with respect to periodic payments made to such individual. Such an election shall remain in effect until revoked by such individual. “(3) When election takes effect.— Any election under this subsection (and any revocation of such an election) shall take effect as provided by subsection (f)(3) of section 3402 for withholding exemption certificates. “(4) Amount withheld where no withholding exemption certificate in effect.— In the case of any payment with respect to which a withholding exemption certificate is not in effect, the amount withheld under paragraph (1) shall be determined by treating the payee as a married individual claiming 3 withholding exemptions. “(b) Nonperiodic Distribution.— “(1) Withholding.— The payor of any nonperiodic distribution (as defined in subsection (d)(3)) shall withhold from such distribution the amount determined under paragraph (2). “(2) Amount of withholding.— “(A) Distributions which are not qualified total distributions.— In the case of any nonperiodic distribution which is not a qualified total distribution, the amount withheld under paragraph (1) shall be the amount determined by multiplying such distribution by 10 percent. “(B) Qualified total distributions.— In the case of any nonperiodic distribution which is a qualified total distribution, the amount withheld under paragraph (1) shall be determined under tables (or other computational procedures) prescribed by the Secretary which are based on the amount of tax which would be imposed on such distribution under section 402(e) if the recipient elected to treat such distribution as a lump-sum distribution (within the meaning of section 402(e)(4)(A)). “(C) Special rule for distributions by reasons of death.— In the case of any distribution described in subparagraph (B) from or under any plan or contract described in section 401(a), 403(a), or 403(b) which is made by reason of a participant ’s death, the Secretary, in prescribing tables or procedures under paragraph (1), shall take into account the exclusion from gross income provided by section 101(b) (whether or not allowable). “(3) Election of no withholding.— “(A) In general.— An individual may elect not to have paragraph (1) apply with respect to any nonperiodic distribution. “(B) Scope of election.— An election under subparagraph (A)— “(i) except as provided in clause (ii), shall be on a distribution-by-distribution basis, or “(ii) to the extent provided in regulations, may apply to subsequent nonperiodic distributions made by the payor to the payee under the same arrangement. “(c) Liability for Withholding.— “(1) In general.— Except as provided in paragraph (2), the payor of a designated distribution (as defined in subsection (d)(1)) shall withhold, and be liable for, payment of the tax required to be withheld under this section. “(2) Plan administrator liable in certain cases.— “(A) In general.— In the case of any plan to which this paragraph applies, paragraph (1) shall not apply and the plan administrator shall withhold, and be liable for, payment of the tax unless the plan administrator— “(i) directs the payor to withhold such tax, and “(ii) provides the payor with such information as the Secretary may require by regulations. “(B) Plans to which paragraph applies.— This paragraph applies to any plan described in, or which at any time has been determined to be described in— “(i) section 401(a), “(ii) section 403(a), or “(iii) section 301(d) of the Tax Reduction Act of 1975. 26 USC 46 note. “(d) Definitions and Special Rules.— For purposes of this section— “(1) Designated distribution.— “(A) In general.— Except as provided in subparagraph (B), the term ‘designated distribution’ means any distribution or payment from or under— “(i) an employer deferred compensation plan, “(ii) an individual retirement plan (as defined in section 7701(a)(37)), or “(iii) a commercial annuity. “(B) Exceptions.— The term ‘designated distribution’ shall not include— “(i) any amount which is wages without regard to this section, and “(ii) the portion of a distribution or payment which it is reasonable to beheve is not includible in gross income. “(2) Periodic payment.— The term ‘periodic payment’ means a designated distribution which is an annuity or similar periodic payment. “(3) Nonperiodic distribution.— The term ‘nonperiodic distribution’ means any designated distribution which is not a periodic payment. “(4) Qualified total distribution.— “(A) In general.— The term ‘qualified total distribution’ means any distribution which— “(i) is a designated distribution, “(ii) it is reasonable to believe is made within 1 taxable year of the recipient, “(iii) is made under a plan described in section 401(a), or 403(a), and “(iv) consists of the balance to the credit of the employee under such plan. “(B) Special rule for accumulated deductible employee contributions.— For purposes of subparagraph (A), accumulated deductible employee contributions (within the meaning of section 72(o)(5)(B)) shall be treated separately 95 Stat. 278. in determining if there has been a qualified total distribution. “(5) Employer deferred compensation plan.— The term ‘employer deferred compensation plan’ means any pension, annuity, profit-sharing, or stock bonus plan or other plan deferring the receipt of compensation. “(6) Commercial annuity.— The term ‘commercial annuity’ means an annuity, endowment, or life insurance contract issued by an insurance company licensed to do business under the laws of any State. “(7) Plan administrator.— The term ‘plan administrator’ has the meaning given such term by section 414(g). “(8) Maximum amount withheld.— The maximum amount to be withheld under this section on any designated distribution shall not exceed the sum of the amount of money and the fair market value of other property (other than employer securities of the employer corporation (within the meaning of section 402(a)(3))) received in the distribution. “(9) Separate arrangements to be treated separately.— If the payor has more than 1 arrangement under which designated distributions may be made to any individual, each such arrangement shall be treated separately. “(10) Time and manner of election.— “(A) In general.— Any election and any revocation under this section shall be made at such time and in such manner as the Secretary shall prescribe. “(B) Payor required to notify payee of rights to elect.— “(i) Periodic payments.— The payor of any periodic payment— “(I) shall transmit to the payee notice of the right to make an election under subsection (a) not earlier than 6 months before the first of such payments and not later than when making the first of such payments, “(II) if such a notice is not transmitted under subclause (I) when making such first payment, shall transmit such a notice when making such first payment, and “(III) shall transmit to payees, not less frequently than once each calendar year, notice of their rights to make elections under subsection (a) and to revoke such elections, “(ii) Nonperiodic distributions.— The payor of any nonperiodic distribution shall transmit to the payee notice of the right to make any election provided in subsection (b) at the time of the distribution (or at such earlier time as may be provided in regulations). “(iii) Notice.— Any notice transmitted pursuant to this subparagraph shall be in such form and contain such information as the Secretary shall prescribe. “(11) Withholding includes deduction.— The terms ‘withholding’, ‘withhold’, and ‘withheld’ include ‘deducting’, ‘deduct’, and ‘deducted’. “(e) Withholding to be Treated as Wage Withholding Under Section 3402 for Other Purposes.— For purposes of this chapter (and so much of subtitle F as relates to this chapter)— “(1) any designated distribution (whether or not an election under this section applies to such distribution) shall be treated as if it were wages paid by an employer to an employee with respect to which there has been withholding under section 3402, and “(2) in the case of any designated distribution not subject to withholding under this section by reason of an election under this section, the amount withheld shall be treated as zero.” (b) Filing of Reports.— Section 6047 (relating to information 26 USC 6047. concerning certain trusts and annuity and bond purchase plans) is amended by redesignating subsection (e) as subsection (f) and by inserting after subsection (d) the following new subsection: “(e) Reports by Employers, Plan Administrators, Etc.— “(1) In general.— The Secretary shall by forms or regulations require that— “(A) the employer maintaining, or the plan administrator (within the meaning of section 414(g)) of, a plan from which designated distributions (as defined in section 3405(d)(1)) may be made, and “(B) any person issuing any contract under which designated distributions (as so defined) may be made, make returns and reports regarding such plan (or contract) to the Secretary, to the participants and beneficiaries of such plan (or contract), and to such other persons as the Secretary may by regulations prescribe. “(2) Form, Etc., of Reports.— Such reports shall be in such form, made at such time, and contain such information as the Secretary may prescribe by forms or regulations.” (c) Penalty for Failure to Keep Records Necessary to Comply With Reporting Requirements of Section 6047(e).— (1) In general.— Subchapter B of chapter 68 (relating to assessable penalties) is amended by adding at the end thereof the following new section: “SEC. 6704. FAILURE TO KEEP RECORDS NECESSARY TO MEET REPORTING REQUIREMENTS UNDER SECTION 6047(e). “(a) Liability for Penalty.— Any person who— “(1) has a duty to report or may have a duty to report any information under section 6047(e), and “(2) fails to keep such records as may be required by regulations prescribed under section 6047(e) for the purpose of providing the necessary data base for either current reporting or future reporting, shall pay a penalty for each calendar year for which there is any failure to keep such records. “(b) Amount of Penalty.— “(1) In general.— The penalty of any person for any calendar year shall be $50, multiplied by the number of individuals with respect to whom such failure occurs in such year. “(2) Maximum amount.— The penalty under this section of any person for any calendar year shall not exceed $50,000. “(c) Exceptions.— “(1) Reasonable cause.— No penalty shall be imposed by this section on any person for any failure which is shown to be due to reasonable cause and not to willful neglect. “(2) Inability to correct previous failure.— No penalty shall be imposed by this section on any failure by a person if such failure is attributable to a prior failure which has been penalized under this section and with respect to which the person has made all reasonable efforts to correct the failure. “(3) Pre-1983 failures.— No penalty shall be imposed by this section on any person for any failure which is attributable to a failure occurring before January 1, 1983, if the person has made all reasonable efforts to correct such pre-1983 failure.” (2) Clerical amendment.— The table of sections for subchapter B of chapter 68 is amended by adding at the end thereof the following new section: “Sec. 6704. Failure to keep records necessary to meet reporting requirements under section 6047(e).” (d) Coordination with voluntary withholding on certain payments other than wages.— Subsection (o) of section 3402 26 USC 3402. (relating to extension of withholding to certain payments other than wages) is amended by adding at the end thereof the following new paragraph: “(6) Coordination with withholding on designated distributions under section 3405.— This subsection shall not apply to any amount which is a designated distribution (within the meaning of section 3405(d)(1)).” (e) Effective Dates.— (1) Amendment made by subsections (a) and (b).— Except as provided in paragraph (4), the amendment made by subsections (a) and (d) shall apply to payments or other distributions made after December 31, 1982. (2) Amendments made by subsection (b).— Except as provided in paragraph (4), the amendments made by subsection (b) shall take effect on January 1, 1983. (3) Amendments made by subsection (c).— The amendments made by subsection (c) shall take effect on January 1, 1985. (4) Periodic payments beginning before january 1, 1983.— For purposes of section 3405(a) of the Internal Revenue Code of 1954, in the case of periodic payments beginning before January 1, 1983, the first periodic payment after December 31, 1982, shall be treated as the first such periodic payment. (5) Delay in application.— The Secretary of the Treasury Regulations. shall prescribe such regulations which delay (but not beyond June 30, 1983) the application of some or all of the amendments made by this section with respect to any payor until such time as such payor is able to comply without undue hardship with the requirements of such provisions. (6) Waiver of penalty.— No penalty shall be assessed under section 6672 with respect to any failure to withhold as required by the amendments made by this section if such failure was before July 1, 1983, and if the person made a good faith effort to comply with such withholding requirements. SEC. 335. PARTIAL ROLLOVERS OF IRA DISTRIBUTIONS PERMITTED. (a) General Rule.— (1) Paragraph (3) of section 408(d) is amended by adding at the 26 USC 408. end thereof the following new subparagraph: “(C) Partial rollovers permitted.— “(i) In general.— If any amount paid or distributed out of an individual retirement account or individual retirement annuity would meet the requirements of subparagraph (A) but for the fact that the entire amount was not paid into an eligible plan as required by clause (i), (ii), or (iii) of subparagraph (A), such amount shall be treated as meeting the requirements of subparagraph (A) to the extent it is paid into an eligible plan referred to in such clause not later than the 60th day referred to in such clause. “(ii) Eligible plan.— For purposes of clause (i), the term ‘eligible plan’ means any account, annuity, bond, contract, or plan referred to in subparagraph (A).” (2) Paragraph (3) of section 409(b) is amended by adding at the 26 USC 409. end thereof the following new subparagraph: “(D) Partial rollovers permitted.— Rules similar to the rules of section 408(d)(3)(C) shall apply for purposes of subparagraph (C).” (b) Effective date.— The amendments made by subsection (a) 26 USC 408 note. shall apply to distributions made after December 31, 1982, in taxable years ending after such date. Subtitle F— Transactions Outside the United States or Involving Foreign Persons SEC. 336. JURISDICTION OF COURT AND ENFORCEMENT OF SUMMONS IN CASE OF PERSONS RESIDING OUTSIDE THE UNITED STATES. (a) General Rule.— Subsection (a) of section 7701 (relating to 26 USC 7701. definitions) is amended by adding at the end thereof the following new paragraph: “(38) Persons residing outside united states.— If any citizen or resident of the United States does not reside in (and is not found in) any United States judicial district, such citizen or resident shall be treated as residing in the District of Columbia for purposes of any provision of this title relating to— “(A) jurisdiction of courts, or “(B) enforcement of summons.” (b) Effective Date.— The amendment made by subsection (a) 26 USC 7701 note. shall take effect on the day after the date of the enactment of this Act. SEC. 337. ADMISSIBILITY OF EVIDENCE MAINTAINED IN FOREIGN COUNTRIES. (a) General Rule.— Part III of subchapter N of chapter 1 (relating to income from sources without the United States) is amended by adding at the end thereof the following new subpart: “Subpart I— Admissibility of Documentation Maintained in Foreign Countries “Sec. 982. Admissibility of documentation maintained in foreign countries. “SEC. 982. ADMISSIBILITY OF DOCUMENTATION MAINTAINED IN FOREIGN COUNTRIES. “(a) General Rule.— If the taxpayer fails to substantially comply with any formal document request arising out of the examination of the tax treatment of any item (hereinafter in this section referred to as the ‘examined item’) before the 90th day after the date of the mailing of such request on motion by the Secretary, any court having jurisdiction of a civil proceeding in which the tax treatment of the examined item is an issue shall prohibit the introduction by the taxpayer of any foreign-based documentation covered by such request. “(b) Reasonable Cause Exception.— “(1) In general.— Subsection (a) shall not apply with respect to any documentation if the taxpayer establishes that the failure to provide the documentation as requested by the Secretary is due to reasonable cause. “(2) Foreign nondisclosure law not reasonable cause.— For purposes of paragraph (1), the fact that a foreign jurisdiction would impose a civil or criminal penalty on the taxpayer (or any other person) for disclosing the requested documentation is not reasonable cause. “(c) Formal Document Request.— For purposes of this section— “(1) Formal document request.— The term ‘formal document request’ means any request (made after the normal request procedures have failed to produce the requested documentation) for the production of foreign-based documentation which is mailed by registered or certified mail to the taxpayer at his last known address and which sets forth— “(A) the time and place for the production of the documentation, “(B) a statement of the reason the documentation previously produced (if any) is not sufficient, “(C) a description of the documentation being sought, and “(D) the consequences to the taxpayer of the failure to produce the documentation described in subparagraph (C). “(2) Proceeding to quash.— “(A) In general.— Notwithstanding any other law or rule of law, any person to whom a formal document request is mailed shall have the right to begin a proceeding to quash such request not later than the 90th day after the day such request was mailed. In any such proceeding, the Secretary may seek to compel compliance with such request. “(B) Jurisdiction.— The United States district court for the district in which the person (to whom the formal document request is mailed) resides or is found shall have jurisdiction to hear any proceeding brought under subparagraph (A). An order denying the petition shall be deemed a final order which may be appealed. “(C) Suspension of 90-day period.— The running of the 90-day period referred to in subsection (a) shall be suspended during any period during which a proceeding brought under subparagraph (A) is pending. “(d) Definitions and special rules.— For purposes of this section— “(1) Foreign-based documentation.— The term ‘foreign-based documentation’ means any documentation which is outside the United States and which may be relevant or material to the tax treatment of the examined item. “(2) Documentation.— The term ‘documentation’ includes books and records. “(3) Foreign-connected.— An item shall be treated as foreign-connected if— “(A) such item is directly or indirectly from a source outside the United States, or “(B) such item (in whole or in part)— “(i) purports to arise outside the United States, or “(ii) is otherwise dependent on transactions occurring outside the United States. “(4) Authority to extend 90-day period.— The Secretary, and any court having jurisdiction over a proceeding under subsection (c)(2), may extend the 90-day period referred to in subsection (a). “(e) Suspension of statute of limitations.— If any person takes any action as provided in subsection (c)(2), the running of any period of limitations under section 6501 (relating to the assessment and collection of tax) or under section 6531 (relating to criminal prosecutions) with respect to such person shall be suspended for the period during which the proceeding under such subsection, and appeals therein, are pending.” (b) Clerical Amendment.— The table of subparts for part III of subchapter N of chapter 1 is amended by adding at the end thereof the following new item: “Subpart I. Admissibility of documentation maintained in foreign countries.” (c) Effective Date.— The amendments made by this section shall 26 USC 982 note. apply with respect to formal document requests (as defined in section 982(c)(1) of the Internal Revenue Code of 1954, as added by this section) mailed after the date of the enactment of this Act. SEC. 338. PENALTY FOR FAILURE TO FURNISH INFORMATION WITH RESPECT TO CERTAIN FOREIGN CORPORATIONS. (a) In General.— Section 6038 (relating to information with 26 USC 6038. respect to certain foreign corporations) is amended by redesignating subsections (b), (c), and (d) as subsections (c), (d), and (e), respectively, and by inserting after subsection (a) the following new subsection: “(b) Dollar Penalty For Failure To Furnish Information.— “(1) In general.— If any person fails to furnish, within the time prescribed under paragraph (2) of subsection (a), any information with respect to any foreign corporation required under paragraph (1) of subsection (a), such person shall pay a penalty of $1,000 for each annual accounting period with respect to which such failure exists. “(2) Increase in penalty where failure continues after notification.— If any failure described in paragraph (1) continues for more than 90 days after the day on which the Secretary mails notice of such failure to the United States person, such person shall pay a penalty (in addition to the amount required under paragraph (1)) of $1,000 for each 30-day period (or fraction thereof) during which such failure continues with respect to any annual accounting period after the expiration of such 90-day period. The increase in any penalty under this paragraph shall not exceed $24,000.” (b) Coordination with existing reduction in foreign tax credit.— Subsection (c) of section 6038 (as redesignated by subsection (a)) is amended— (1) by inserting “and subsection (b)” after “subsection” in paragraph (3)(B), and (2) by redesignating paragraph (3) as paragraph (4) and by inserting after paragraph (2) the following new paragraph: “(3) Coordination with subsection (b).— The amount of the reduction which (but for this paragraph) would be made under paragraph (1) with respect to any annual accounting period shall be reduced by the amount of the penalty imposed by subsection (b) with respect to such period.” (c) Technical Amendments.— (1) The subsection heading of subsection (c) of section 6038 (as redesignated by subsection (a)) is amended to read as follows: “(c) Penalty of Reducing Foreign Tax Credit.—”. (2) Paragraph (1) of section 6038(a) is amended by striking out “within the meaning of subsection (d)(1)” and inserting in lieu thereof “within the meaning of subsection (e)(1)”. (3) The last sentence of paragraph (1) of section 6038(c) (as redesignated by subsection (a)) is amended by inserting “of such failure” after “notice”. (d) Effective Date.— The amendments made by this section shall 26 USC 6038 note. apply with respect to information for annual accounting periods ending after the date of the enactment of this Act. SEC. 339. INFORMATION REQUIREMENTS WITH RESPECT TO CERTAIN FOREIGN-OWNED CORPORATIONS. (a) General Rule.— Subpart A of part III of subchapter A of chapter 61 is amended by inserting after section 6038 the following new section: “SEC. 6038A. INFORMATION WITH RESPECT TO CERTAIN FOREIGN-OWNED CORPORATIONS. “(a) Requirement.— If, at any time during a taxable year, a corporation (hereinafter in this section referred to as the ‘reporting corporation’)— “(1) is a domestic corporation or is a foreign corporation engaged in trade or business within the United States, and “(2) is controlled by a foreign person, such corporation shall furnish, at such time and in such manner as the Secretary shall by regulations prescribe, the information described in subsection (b). “(b) Required Information.— For purposes of subsection (a), the information described in this subsection is such information as the Secretary may prescribe by regulations relating to— “(1) the name, principal place of business, nature of business, and country or countries in which organized or resident, of each corporation which— “(A) is a member of the same controlled group as the reporting corporation, and “(B) had any transaction with the reporting corporation during its taxable year, “(2) the manner in which the reporting corporation is related to each corporation referred to in paragraph (1), and “(3) transactions between the reporting corporation and each foreign corporation which is a member of the same controlled group as the reporting corporation. “(c) Definitions.— For purposes of this section— “(1) Control.— The term ‘control’ has the meaning given to such term by section 6038(d)(1); except that ‘at least 50 percent’ shall be substituted for ‘more than 50 percent’ each place it appears in such section. “(2) Controlled group.— The term ‘controlled group’ means any controlled group of corporations within the meaning of section 1563(a); except that— “(A) ‘at least 50 percent’ shall be substituted— “(i) for ‘at least 80 percent’ each place it appears in section 1563(a)(1), and “(ii) for ‘more than 50 percent’ each place it appears in section 1563(a)(2)(B), and “(B) the determination shall be made without regard to subsections (a)(4) and (e)(3)(C) of section 1563. “(3) Foreign person.— The term ‘foreign person’ means any person who is not a United States person. For purposes of the preceding sentence, the term ‘United States person’ has the meaning given to such term by section 7701(a)(30); except that any individual who is a citizen of any possession of the United States (but not otherwise a citizen of the United States) and who is not a resident of the United States shall not be treated as a United States person. “(d) Penalty for Failure to Furnish Information.— “(1) In general.— If a reporting corporation fails to furnish (within the time prescribed by regulations) any information described in subsection (b), such corporation shall pay a penalty of $1,000 for each taxable year with respect to which such failure occurs. “(2) Increase in penalty where failure continues after notification.— If any failure described in paragraph (1) continues for more than 90 days after the day on which the Secretary mails notice of such failure to the reporting corporation, such corporation shall pay a penalty (in addition to the amount required under paragraph (1)) of $1,000 for each 30-day period (or fraction thereof) during which such failure continues after the expiration of such 90-day period. The increase in any penalty under this paragraph shall not exceed $24,000. “(3) Reasonable cause.— For purposes of this subsection, the time prescribed by regulations to furnish information (and the beginning of the 90-day period after notice by the Secretary) shall be treated as not earlier than the last day on which (as shown to the satisfaction of the Secretary) reasonable cause existed for failure to furnish the information. “(e) Cross Reference.— “For provisions relating to criminal penalties for violation of this section, see section 7203.” (b) Clerical Amendment.— The table of sections for subpart A of part III of subchapter A of chapter 61 is amended by inserting the following new item after the item relating to section 6038: “Sec. 6038A. Information with respect to certain foreign-owned corporations.” (c) Effective Date.— The amendments made by this section shall 26 USC 6038A note. apply to taxable years beginning after December 31, 1982. SEC. 340. RETURNS WITH RESPECT TO FOREIGN PERSONAL HOLDING COMPANIES. (a) General Rule.— Section 6035 (relating to returns of officers, 26 USC 6035. directors, and shareholders of foreign personal holding companies) is amended to read as follows: “SEC. 6035. RETURNS OF OFFICERS, DIRECTORS, AND SHAREHOLDERS OF FOREIGN PERSONAL HOLDING COMPANIES. “(a) General Rule.— Each United States citizen or resident who is an officer, director, or 10-percent shareholder of a corporation which was a foreign personal holding company (as defined in section 552) for any taxable year shall file a return with respect to such taxable year setting forth— “(1) the shareholder information required by subsection (b), “(2) the income information required by subsection (c), and “(3) such other information with respect to such corporation as the Secretary shall by forms or regulations prescribe as necessary for carrying out the purposes of this title. “(b) Shareholder Information.— The shareholder information required by this subsection with respect to any taxable year shall be— “(1) the name and address of each person who at any time during such taxable year held any share in the corporation, “(2) a description of each class of shares and the total number of shares of such class outstanding at the close of the taxable year, “(3) the number of shares of each class held by each person, and “(4) any changes in the holdings of shares during the taxable year. For purposes of paragraphs (1), (3), and (4), the term ‘share’ includes any security convertible into a share in the corporation and any option granted by the corporation with respect to any share in the corporation. “(c) Income Information.— The income information required by this subsection for any taxable year shall be the gross income, deductions, credits, taxable income, and undistributed foreign personal holding company income of the corporation for the taxable year. “(d) Time and Manner for Furnishing Information.— The information required under subsection (a) shall be furnished at such time and in such manner as the Secretary shall by forms and regulations prescribe. “(e) Definition and Special Rules.— “(1) 10-percent shareholder.— For purposes of this section, the term ‘10-percent shareholder’ means any individual who owns directly or indirectly (within the meaning of section 554) 10 percent or more in value of the outstanding stock of a foreign corporation. “(2) Time for making determinations.— “(A) In general.— Except as provided in subparagraph (B), the determination of whether any person is an officer, director, or 10-percent shareholder with respect to any foreign corporation shall be made as of the date on which the return is required to be filed. “(B) Special rule.— If after the application of subparagraph (A) no person is required to file a return under subsection (a) with respect to any foreign corporation for any taxable year, the determination of whether any person is an officer, director, or 10-percent shareholder with respect to such foreign corporation shall be made on the last day of such taxable year on which there was such a person who was a United States citizen or resident. “(3) 2 or more persons required to furnish information with respect to same foreign corporation.— If, but for this paragraph, 2 or more persons would be required to furnish information under subsection (a) with respect to the same foreign corporation for the same taxable year, the Secretary may by regulations provide that such information shall be required only from 1 person.” (b) Application of Penalty.— (1) Subsection (a) of section 6679 is amended by striking out 26 USC 6679. “section 6046” and inserting in lieu thereof “section 6035 or 6046”. (2) The section heading for section 6679 is amended to read as follows: “SEC. 6679. FAILURE TO FILE RETURNS OR SUPPLY INFORMATION UNDER SECTION 6035 OR 6046.” (3) The item relating to section 6679 in the table of sections for subchapter B of chapter 68 is amended to read as follows: “Sec. 6679. Failure to file returns or supply information under section 6035 or 6046.” (c) Effective Date.— The amendment made by this section shall 26 USC 6035 note. apply to taxable years of foreign corporations beginning after the date of the enactment of this Act. SEC. 341. AUTHORITY TO DELAY DATE FOR FILING CERTAIN RETURNS RELATING TO FOREIGN CORPORATIONS AND FOREIGN TRUSTS. (a) Foreign Corporations.— Subsection (d) of section 6046 (relating 26 USC 6046. to time for filing returns as to organization or reorganization of foreign corporations and as to acquisitions of their stock) is amended by inserting before the period at the end thereof the following: “(or on or before such later day as the Secretary may by forms or regulations prescribe)”. (b) Foreign Trusts.— Subsection (a) of section 6048 (relating to 26 USC 6048. returns as to certain foreign trusts) is amended by inserting “(or on or before such later day as the Secretary may by regulations prescribe)” after “the 90th day”. (c) Effective Date.— The amendments made by this section shall 26 USC 6046 note. apply to returns filed after the date of the enactment of this Act. SEC. 342. WITHHOLDING OF TAX ON NONRESIDENT ALIENS AND FOREIGN CORPORATIONS. Not later than 2 years after the date of the enactment of this Act, the Secretary of the Treasury or his delegate shall prescribe regulations establishing certification procedures, refund procedures, or other procedures which ensure that any benefit of any treaty relating to withholding of tax under sections 1441 and 1442 of the Internal Revenue Code of 1954 is available only to persons entitled to such benefit. SEC. 343. TECHNICAL AMENDMENT RELATING TO PENALTY UNDER SECTION 905(c). (a) General Rule.— Subsection (c) of section 905 (relating to 26 USC 905. adjustments on payment of accrued taxes) is amended by striking out the last sentence. (b) Effective Date.— The amendment made by subsection (a) 26 USC 905 note. shall have the same effect as if the last sentence of section 905(c) had never been enacted. Subtitle G— Modification of Interest Provisions SEC. 344. INTEREST COMPOUNDED DAILY. (a) In General.— Subchapter C of chapter 67 (relating to determination of rate of interest) is amended by adding at the end thereof the following new section: “SEC. 6622. INTEREST COMPOUNDED DAILY. “(a) General Rule.— In computing the amount of any interest required to be paid under this title or sections 1961(c)(1) or 2411 of title 28, United States Code, by the Secretary or by the taxpayer, or any other amount determined by reference to such amount of interest, such interest and such amount shall be compounded daily. “(b) Exception for Penalty for Failure to File Estimated Tax.— Subsection (a) shall not apply for purposes of computing the amount of any addition to tax under section 6654 or 6655.” (b) Conforming Amendments.— (1) Section 6601(e) (relating to applicable rules) is amended by 26 USC 6601. striking out paragraph (2) and redesignating paragraphs (3) and (4) as paragraphs (2) and (3), respectively. (2) The table of sections for subchapter C of chapter 67 is amended by inserting after section G621 the following new item: “Sec. 6622. Interest compounded daily.” (3) (A) The heading for subchapter C of chapter 67 is amended by inserting “; Compounding of Interest” after “Rate”. (B) The item relating to subchapter C in the table of subchapters for chapter 67 is amended by inserting “; compounding of interest” after “rate”. (c) Effective Date.— The amendments made by this section shall 26 USC 6622 note. apply to interest accruing after December 31, 1982. SEC. 345. DETERMINATION OF RATE OF INTEREST TO BE MADE SEMI-ANNUALLY. (a) In General.— Subsection (b) of section 6621 (relating to determination 26 USC 6621. of rate of interest) is amended to read as follows: “(b) Adjustment of Interest Rate.— “(1) Establishment of adjusted rate.— If the adjusted prime rate charged by banks (rounded to the nearest full percent)— “(A) during the 6-month period ending on September 30 of any calendar year, or “(B) during the 6-month period ending on March 31 of any calendar year, differs from the interest rate in effect under this section on either such date, respectively, then the Secretary shall establish, within 15 days after the close of the applicable 6-month period, an adjusted rate of interest equal to such adjusted prime rate. “(2) Effective date of adjustment.— Any adjusted rate of interest established under paragraph (1) shall become effective— “(A) on January 1 of the succeeding year in the case of an adjustment attributable to paragraph (1)(A), and “(B) on July 1 of the same year in the case of an adjustment attributable to paragraph(l)(B).” (b) Effective Date.— The amendment made by this section shall 26 USC 6621 note. apply to adjustments taking effect on January 1, 1983. SEC. 346. RESTRICTIONS ON PAYMENT OF INTEREST FOR CERTAIN PERIODS. (a) Interest With Respect to Delinquent Returns.— Section 6611(b) (relating to period for which interest on refunds is paid) is 26 USC 6611. amended by adding at the end thereof the following new paragraph: “(3) Late returns.— Notwithstanding paragraph (1) or (2) in the case of a return of tax which is filed after the last date prescribed for filing such return (determined with regard to extensions), no interest shall be allowed or paid for any day before the date on which the return is filed.” (b) No Interest if Return Not in Processible Form.— Section 6611 (relating to interest on overpayments) is amended by redesignating subsection (i) as subsection (j) and by adding after subsection (h) the following new subsection: “(i) No Interest Until Return in Processible Form.— “(1) For purposes of subsections (b)(3), (e), and (h), a return shall not be treated as filed until it is filed in processible form. “(2) For purposes of paragraph (1), a return is in a processible form if— “(A) such return is filed on a permitted form, and “(B) such return contains— “(i) the taxpayer’s name, address, and identifying number and the required signature, and “(ii) sufficient required information (whether on the return or on required attachments) to permit the mathematical verification of tax liability shown on the return.” (c) Modification of Interest in the Case of Carrybacks.— (1) Overpayments.— (A) Paragraph (1) of section 6611(f) (relating to refund of 26 USC 6611. income tax caused by carryback or adjustment for unused deductions) is amended by striking out “the close of the taxable year” and inserting in lieu thereof “the filing date for the taxable year”. (B) Subparagraph (A) of section 6611(0(2) is amended by striking out “the close of” each place it appears and inserting in lieu thereof “the filing date for”. (C) Subsection (D of section 6611 is amended by redesignating paragraph (3) as paragraph (4) and by inserting after paragraph (2) the following new paragraph: “(3) Special rules for paragraphs (1) and (2).— “(A) Filing date.— For purposes of this subsection, the term ‘filing date’ means the last date prescribed for filing the return of tax imposed by subtitle A for the taxable year (determined without regard to extensions). “(B) Coordination with subsection (e).— “(i) In general.— FOR PURPOSES OF SUBSECTION (e)— “(I) any overpayment described in paragraph (1) or (2) shall be treated as an overpayment for the loss year, and “(II) such subsection shall be applied with respect to such overpayment by treating the return for the loss year as not filed before claim for such overpayment is filed. “(ii) Loss year.— For purposes of this subparagraph, the term ‘loss year’ means— “(I) in the case of a carryback of a net operating loss or net capital loss, the taxable year in which such loss arises, and “(II) in the case of a credit carryback, the taxable year in which such credit carryback arises (or, with respect to any portion of a credit carryback from a taxable year attributable to a net operating loss carryback, a capital loss carryback, or other credit carryback from a subsequent taxable year, such subsequent taxable year).” (D) Subsection (g) of section 6611 is amended by striking out “the close of the taxable year” and inserting in lieu thereof “the filing date (as defined in subsection (f)(3)) for the taxable year”. (2) Underpayments.— (A) Paragraph (1) of section 6601(d) (relating to income 26 USC 6601. tax reduced by carryback for adjustment for certain unused deductions) is amended by striking out “the last day of the taxable year” and inserting in lieu thereof “the filing date for the taxable year”. (B) Subparagraph (A) of section 6601(d)(2) is amended by striking out “the last day of the” each place it appears and inserting in lieu thereof “the filing date for”. (C) Subsection (d) of section 6601 is amended by adding at the end thereof the following new paragraph: “(4) Filing date.— For purposes of this subsection, the term ‘filing date’ has the meaning given to such term by section 6611(f)(3)(A).” (d) Effective Dates.— (1) In General.— The amendments made by subsections (a) and (b) shall apply to returns filed after the 30th day after the date of the enactment of this Act. (2) Subsection (C).— The amendments made by subsection (c) shall apply to interest accruing after the 30th day after the date of the enactment of this Act. Subtitle H— Taxpayer Safeguard Amendments SEC. 347. INCREASE IN CERTAIN EXEMPTIONS FROM LEVY. (a) General Rule.— (1) Fuel, provisions, furniture, and personal effects.— Paragraph (2) of section 6334(a) (relating to property exempt 26 USC 6334. from levy) is amended by striking out “$500” and inserting in lieu thereof “$1,500”. (2) Books and tools of a trade, business, or profession.— Paragraph (3) of section 6334(a) is amended by striking out “$250” and inserting in lieu thereof “$1,000”. (3) Wages, salary, or other income.— Paragraph (1) of section 6334(d) (relating to exempt amount of wages, salary, or other income) is amended— (A) by striking out “$50” and inserting in lieu thereof “$75”, and (B) by striking out “$15” and inserting in lieu thereof “$25”. (b) Effective Date.— The amendments made by subsection (a) 26 USC 6334 note. shall apply to levies made after December 31, 1982. SEC. 348. REQUIRED RELEASE OF LIEN. (a) General Rule.— So much of subsection (a) of section 6325 26 USC 6325. (relating to release of lien) as precedes paragraph (1) thereof is amended to read as follows: “(a) Release of Lien.— Subject to such regulations as the Secretary may prescribe, the Secretary shall issue a certificate of release of any lien imposed with respect to any internal revenue tax not later than 30 days after the day on which—”. (b) Effective Date.— The amendment made by subsection (a) 26 USC 6325 note. shall apply with respect to liens— (1) which are filed after December 31, 1982, (2) which are satisfied after December 31, 1982, or (3) with respect to which the taxpayer after December 31, 1982, requests the Secretary of the Treasury or his delegate to issue a certificate of release on the grounds that the liability was satisfied or legally unenforceable. SEC. 349. REQUIREMENT OF TIMELY NOTICE OF LEVY. (a) General Rule.— Section 6331 (relating to levy and distraint) is 26 USC 6331. amended by redesignating subsection (e) as subsection (f) and by striking out subsection (d) and inserting in lieu thereof the following new subsections: “(d) Requirement of Notice Before Levy.— “(1) In general.— Levy may be made under subsection (a) upon the salary or wages or other property of any person with respect to any unpaid tax only after the Secretary has notified such person in writing of his intention to make such levy. “(2) 10-day requirement.— 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, no less than 10 days before the day of the levy. “(3) Jeopardy.— Paragraph (1) shall not apply to a levy if the Secretary has made a finding under the last sentence of subsection (a) that the collection of tax is in jeopardy. “(e) Continuing Levy on Salary and Wages.— “(1) Effect of Levy.— The effect of a levy on salary or wages payable to or received by a taxpayer shall be continuous from the date such levy is first made until the liability out of which such levy arose is satisfied or becomes unenforceable by reason of lapse of time. “(2) Release and Notice of Release.— With respect to a levy described in paragraph (1), the Secretary shall promptly release the levy when the liability out of which such levy arose is satisfied or becomes unenforceable by reason of lapse of time, and shall promptly notify the person upon whom such levy was made that such levy has been released.” (b) Effective Date.— The amendment made by subsection (a) 26 USC 6331 note. shall apply to levies made after December 31, 1982. SEC. 349A. EXTENSION OF PERIOD FOR REDEMPTION OF REAL PROPERTY. (a) General Rule.— Paragraph (1) of section 6337(b) (relating to 26 USC 6337. period for redemption of real estate after sale) is amended by striking out “120 days” and inserting in lieu thereof “180 days”. (b) Effective Date.— The amendment made by subsection (a) 26 USC 6337 note. shall apply with respect to property sold after the date of the enactment of this Act. SEC. 350. AMOUNT OF DAMAGES IN CASE OF WRONGFUL LEVY. (a) General Rule.— Subparagraph (C) of section 7426(b)(2) (relating 26 USC 7426. to amount of damages) is amended to read as follows: “(C) if such property was sold, grant a judgment for an amount not exceeding the greater of— “(i) the amount received by the United States from the sale of such property, or “(ii) the fair market value of such property immediately before the levy.” (b) Effective Date.— The amendment made by subsection (a) 26 USC 7426 note. shall apply with respect to levies made after December 31, 1982. Subtitle I— Other Provisions SEC. 351. DISALLOWANCE OF DEDUCTIONS RELATING TO NARCOTICS TRAFFICKING. (a) In General.— Part IX of subchapter B of chapter 1 (relating to items not deductible) is amended by adding at the end thereof the following new section: “SEC. 280E. EXPENDITURES IN CONNECTION WITH THE ILLEGAL SALE OF DRUGS. “No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law or the law of any 21 USC 812. State in which such trade or business is conducted.” (b) Conforming Amendment.— The table of sections for part IX of subchapter B of chapter 1 of such Code is amended by adding at the end thereof the following new item: “Sec. 280E. Expenditures in connection with the illegal sale of drugs.” (c) Effective Date.— The amendments made by this section shall 26 USC 280E note. apply to amounts paid or incurred after the date of the enactment of this Act in taxable years ending after such date. SEC. 352. SENSE OF CONGRESS WITH RESPECT TO PROVIDING OF ADDITIONAL FUNDS TO INTERNAL REVENUE SERVICE. It is the sense of the Congress that there be appropriated for the use of the Internal Revenue Service to provide additional staff— (1) for fiscal year 1983, the amounts proposed in the President’s budget for fiscal year 1983, and (2) such amounts in excess of the amount requested for such purpose in the President’s proposed budgets as may be necessary to provide sufficient improved enforcement to increase revenues by $1 billion in fiscal year 1984 and $2 billion in fiscal year 1985. SEC. 353. REPORT ON FORMS. Not later than June 30, 1983, the Secretary of the Treasury or his delegate shall study and report to the Congress methods of modifying the design of the forms used by the Internal Revenue Service to achieve greater accuracy in the reporting of income and the matching of information reports and returns with the returns of tax imposed by chapter 1 of the Internal Revenue Code of 1954. SEC. 354. EXEMPTION OF VETERANS’ ORGANIZATIONS. (a) In General.— Paragraph (19) of section 501(c) (relating to 26 USC 501. exemption of veterans’ organizations) is amended— (1) by striking out “war veterans” the first place it appears and inserting in lieu thereof “past or present members of the Armed Forces of the United States” , and (2) by amending subparagraph (B) to read as follows: “(B) at least 75 percent of the members of which are past or present members of the Armed Forces of the United States and substantially all of the other members of which are individuals who are cadets or are spouses, widows, or widowers of past or present members of the Armed Forces of the United States or of cadets, and”. (b) Associations Organized Before 1880.— Subsection (c) of section 501 (relating to exempt organizations) is amended by adding at 26 USC 501. the end thereof the following new paragraph: “(23) any association organized before 1880 more than 25 percent of the members of which are present or past members of the Armed Forces and a principal purpose of which is to provide insurance and other benefits to veterans or their dependents.” (c) Effective Date.— The amendments made by subsections (a) 26 USC 501 note. and (b) shall apply to taxable years beginning after the date of the enactment of this Act. SEC. 355. AMENDMENT TO COMMUNICATIONS ACT OF 1934. Title III of the Communications Act of 1934 is amended by inserting immediately after section 330 therein the following new section: “very high frequency stations “Sec. 331. It shall be the policy of the Federal Communications 47 USC 331. Commission to allocate channels for very high frequency commercial television broadcasting in a manner which ensures that not less than one such channel shall be allocated to each State, if technically feasible. In any case in which licensee of a very high frequency commercial television broadcast station notifies the Commission to the effect that such licensee will agree to the reallocation of its channel to a community within a State in which there is allocated no very high frequency commercial television broadcast channel at the time such notification, the Commission shall, notwithstanding any other provision of law, order such reallocation and issue a license to such licensee for that purpose pursuant to such notification for a term of not to exceed 5 years as provided in section 307(d) of the Communications Act of 1934.” 47 USC 307. SEC. 356. CONFIDENTIALITY AND DISCLOSURE OF RETURNS AND RETURN INFORMATION. (a) In General.— Subsection (i) of section 6103 (relating to disclosure 26 USC 6103. to Federal officers or employees for administration of Federal laws not relating to tax administration) is amended by redesignating paragraph (6) as paragraph (7) and by striking out paragraphs (1), (2), (3), (4), and (5) and inserting in lieu thereof the following: “(1) Disclosure of returns and return information for use in criminal investigations.— “(A) In general.— Except as provided in paragraph (6), any return or return information with respect to any specified taxable period or periods shall, pursuant to and upon the grant of an ex parte order by a Federal district court judge or magistrate under subparagraph (B), be open (but only to the extent necessary as provided in such order) to inspection by, or disclosure to, officers and employees of any Federal agency who are personally and directly engaged in— “(i) preparation for any judicial or administrative proceeding pertaining to the enforcement of a specifically designated Federal criminal statute (not involving tax administration) to which the United States or such agency is or may be a party. “(ii) any investigation which may result in such a proceeding, or “(iii) any Federal grand jury proceeding pertaining to enforcement of such a criminal statute to which the United States or such agency is or may be a party, solely for the use of such officers and employees in such preparation, investigation, or grand jury proceeding. “(B) Application for order.— The Attorney General, the Deputy Attorney General, the Associate Attorney General, any Assistant Attorney General, any United States attorney, any special prosecutor appointed under section 593 of title 28, United States Code, or any attorney in charge of a criminal division organized crime strike force established pursuant to section 510 of title 28, United States Code, may authorize an application to a Federal district court judge or magistrate for the order referred to in subparagraph (A). Upon such application, such judge or magistrate may grant such order if he determines on the basis of the facts submitted by the applicant that— “(i) there is reasonable cause to believe, based upon information believed to be reliable, that a specific criminal act has been committed, “(ii) there is reasonable cause to believe that the return or return information is or may be relevant to a matter relating to the commission of such act, and “(iii) the return or return information is sought exclusively for use in a Federal criminal investigation or proceeding concerning such act, and the information sought to be disclosed cannot reasonably be obtained, under the circumstances, from another source. “(2) Disclosure of return information other than taxpayer return information for use in criminal investigations.— “(A) In General.— Except as provided in paragraph (6), upon receipt by the Secretary of a request which meets the requirements of subparagraph (B) from the head of any Federal agency or the Inspector General thereof, or, in the case of the Department of Justice, the Attorney General, the Deputy Attorney General, the Associate Attorney General, any Assistant Attorney General, the Director of the Federal Bureau of Investigation, the Administrator of the Drug Enforcement Administration, any United States attorney, any special prosecutor appointed under section 593 of title 28, United States Code, or any attorney in charge of a criminal division organized crime strike force established pursuant to section 510 of title 28, United States Code, the Secretary shall disclose return information (other than taxpayer return information) to officers and employees of such agency who are personally and directly engaged in— “(i) preparation for any judicial or administrative proceeding described in paragraph (1)(A)(i), “(ii) any investigation which may result in such a proceeding, or “(iii) any grand jury proceeding described in paragraph (1)(A)(iii), solely for the use of such officers and employees in such preparation, investigation, or grand jury proceeding. “(B) Requirements.— A request meets the requirements of this subparagraph if the request is in writing and sets forth— “(i) the name and address of the taxpayer with respect to whom the requested return information relates; “(ii) the taxable period or periods to which such return information relates; “(iii) the statutory authority under which the proceeding or investigation described in subparagraph (A) is being conducted; and “(iv) the specific reason or reasons why such disclosure is, or may be, relevant to such proceeding or investigation. “(C) Taxpayer Identity.— For purposes of this paragraph, a taxpayer’s identity shall not be treated as taxpayer return information. “(3) Disclosure of return in formation to apprise appropriate officials of criminal activities or emergency circumstances.— “(A) Possible violations of federal criminal law.— “(i) In general.— Except as provided in paragraph (6), the Secretary may disclose in writing return information (other than taxpayer return information) which may constitute evidence of a violation of any Federal criminal law (not involving tax administration) to the extent necessary to apprise the head of the appropriate Federal agency charged with the responsibility of enforcing such law. The head of such agency may disclose such return information to officers and employees of such agency to the extent necessary to enforce such law. “(ii) Taxpayer identity.— If there is return information (other than taxpayer return information) which may constitute evidence of a violation by any taxpayer of any Federal criminal law (not involving tax administration), such taxpayer’s identity may also be disclosed under clause (i). “(B) Emergency Circumstances.— “(i) Danger of death or physical injury.— Under circumstances involving an imminent danger of death or physical injury to any individual, the Secretary may disclose return information to the extent necessary to apprise appropriate officers or employees of any Federal or State law enforcement agency of such circumstances. “(ii) Flight from federal prosecution.— Under circumstances involving the imminent flight of any individual from Federal prosecution, the Secretary may disclose return information to the extent necessary to apprise appropriate officers or employees of any Federal law enforcement agency of such circumstances. “(4) Use of certain disclosed returns and return information in judicial or administrative proceedings.— “(A) Returns and taxpayer return information.— Except as provided in subparagraph (C), any return or taxpayer return information obtained under paragraph (1) may be disclosed in any judicial or administrative proceeding pertaining to enforcement of a specifically designated Federal criminal statute or related civil forfeiture (not involving tax administration) to which the United States or a Federal agency is a party— “(i) if the court finds that such return or taxpayer return information is probative of a matter in issue relevant in establishing the commission of a crime or the guilt or liability of a party, or “(ii) to the extent required by order of the court pursuant to section 3500 of title 18, United States Code, or rule 16 of the Federal Rules of Criminal Procedure. 18 USC app. “(B) Return information (other than taxpayer return information).— Except as provided in subparagraph (C), any return information (other than taxpayer return information) obtained under paragraph (1), (2), or (3)(A) may be disclosed in any judicial or administrative proceeding pertaining to enforcement of a specifically designated Federal criminal statute or related civil forfeiture (not involving tax administration) to which the United States or a Federal agency is a party. “(C) Confidential informant; impairment of investigations.— No return or return information shall be admitted into evidence under subparagraph (A)(i) or (B) if the Secretary determines and notifies the Attorney General or his delegate or the head of the Federal agency that such admission would identify a confidential informant or seriously impair a civil or criminal tax investigation. “(D) Consideration of confidentiality policy.— In ruling upon the admissibility of returns or return information, and in the issuance of an order under subparagraph (A)(ii), the court shall give due consideration to congressional policy favoring the confidentiality of returns and return information as set forth in this title. “(E) Reversible error.— The admission into evidence of any return or return information contrary to the provisions of this paragraph shall not, as such, constitute reversible error upon appeal of a judgment in the proceeding. “(5) Disclosure to locate fugitives from justice.— “(A) In general.— Except as provided in paragraph (6), the return of an individual or return information with respect to such individual shall, pursuant to and upon the grant of an ex parte order by a Federal district court judge or magistrate under subparagraph (B), be open (but only to the extent necessary as provided in such order) to inspection by, or disclosure to, officers and employees of any Federal agency exclusively for use in locating such individual. “(B) Application for order.— Any person described in paragraph (1)(B) may authorize an application to a Federal district court judge or magistrate for an order referred to in subparagraph (A). Upon such application, such judge or magistrate may grant such order if he determines on the basis of the facts submitted by the applicant that— “(i) a Federal arrest warrant relating to the commission of a Federal felony offense has been issued for an individual who is a fugitive from justice, “(ii) the return of such individual or return information with respect to such individual is sought exclusively for use in locating such individual, and “(iii) there is reasonable cause to believe that such return or return information may be relevant in determining the location of such individual. “(6) Confidential informants; impairment of investigations.— The Secretary shall not disclose any return or return information under paragraph (1), (2), (3)(A), (5), or (7) if the Secretary determines (and, in the case of a request for disclosure pursuant to a court order described in paragraph (1)(B) or (5)(B), certifies to the court) that such disclosure would identify a confidential informant or seriously impair a civil or criminal tax investigation.”. (b) Conforming Amendments.— (1) Subsection (p) of section 6103 (relating to procedure and 26 USC 6103. recordkeeping) is amended— (A) by striking out “(6)(A)(ii)” in paragraph (3)(A) and inserting in lieu thereof “(7)(A)(ii)”, (B) by striking out “(d)” in paragraph (3)(C)(i) and inserting in lieu thereof “(d), (i)(3)(B)(i),”, (C) by striking out “such requests” in paragraph (3)(C)(i)(II) and inserting in lieu thereof “such requests or otherwise”, (D) by striking out “(i)(1), (2), or (5)” each place it appears in paragraph (4) and inserting in lieu thereof “(i)(1), (2), (3), or (5)”, (E) by striking out “(d)” each place it appears in paragraph (4) and inserting in lieu thereof “(d), (i)(3)(B)(i),”, and (F) by striking out “subsection (i)(6)(A)(ii)” in paragraph (6)(B)(i) and inserting in lieu thereof “subsection (i)(7)(A)(ii)”. (2) Paragraph (2) of section 7213(a) (relating to unauthorized 26 USC 7213. disclosure of information) is amended by striking out “(d)” and inserting in lieu thereof “(d), (i)(3)(B)(i),”. (c) Effective Date.— The amendments made by this section shall 26 USC 6103 note. take effect on the day after the date of the enactment of this Act. SEC. 357. CIVIL DAMAGES AGAINST UNITED STATES FOR UNAUTHORIZED DISCLOSURES BY AN EMPLOYEE. (a) In General.— Subchapter B of chapter 76 (relating to proceedings by taxpayers and third parties) is amended by redesignating section 7431 as section 7432 and inserting after section 7430 the 26 USC 7432. following new section: “SEC. 7431. CIVIL DAMAGES FOR UNAUTHORIZED DISCLOSURE OF RETURNS AND RETURN INFORMATION. “(a) In General.— “(1) Disclosure by employee of united states.— If any officer or employee of the United States knowingly, or by reason of negligence, discloses any return or return information with respect to a taxpayer in violation of any provision of section 6103, such taxpayer may bring a civil action for damages against the United States in a district court of the United States. “(2) Disclosure by a person who is not an employee of united states.— If any person who is not an officer or employee of the United States knowingly, or by reason of negligence, discloses any return or return information with respect to a taxpayer in violation of any provision of section 6103, such taxpayer may bring a civil action for damages against such person in a district court of the United States. “(b) No Liability for Good Faith But Erroneous Interpretation.— No liability shall arise under this section with respect to any disclosure which results from a good faith, but erroneous, interpretation of section 6103. “(c) Damages.— In any action brought under subsection (a), upon a finding of liability on the part of the defendant, the defendant shall be liable to the plaintiff in an amount equal to the sum of— “(1) the greater of— “(A) $1,000 for each act of unauthorized disclosure of a return or return information with respect to which such defendant is found liable, or “(B) the sum of— “(i) the actual damages sustained by the plaintiff as a result of such unauthorized disclosure, plus “(ii) in the case of a willful disclosure or a disclosure which is the result of gross negligence, punitive damages, plus “(2) the costs of the action. “(d) Period for bringing action.— Notwithstanding any other provision of law, an action to enforce any liability created under this section may be brought, without regard to the amount in controversy, at any time within 2 years after the date of discovery by the plaintiff of the unauthorized disclosure. “(e) Return; Return Information.— For purposes of this section, the terms ‘return’ and ‘return information’ have the respective meanings given such terms in section 6103(b).” (b) Conforming Amendments.— (1) Section 7217 (relating to civil damages for unauthorized Repeal. 26 USC 7217. disclosure of returns and return information) is hereby repealed. (2) The table of sections for part I of subchapter A of chapter 75 is amended by striking out the item relating to section 7217. (3) The table of sections for subchapter B of chapter 76 is amended by striking out the item relating to section 7431 and inserting in lieu thereof the following: “Sec. 7431. Civil damages for unauthorized disclosure of returns and return information. “Sec. 7432. Cross references.” (c) Effective Date.— The amendments made by this section shall 26 USC 7431 note. apply with respect to disclosures made after the date of enactment of this Act. SEC. 358. DISCLOSURE FOR USE IN CERTAIN AUDITS BY GENERAL ACCOUNTING OFFICE. (a) In General.— Paragraph (7) of section 6103(i) (relating to Ante, p. 641. disclosure to Comptroller General), as redesignated by section 396(a), is amended by redesignating subparagraph (B) as subparagraph (C) and by inserting after subparagraph (A) the following new subparagraph: “(B) Audits of other agencies.— “(i) In general.— Nothing in this section shall prohibit any return or return information obtained under this title by any Federal agency (other than an agency referred to in subparagraph (A)) for use in any program or activity from being open to inspection by, or disclosure to, officers and employees of the General Accounting Office if such inspection or disclosure is— “(I) for purposes of, and to the extent necessary in, making an audit authorized by law of such program or activity, and “(II) pursuant to a written request by the Comptroller General of the United States to the head of such Federal agency, “(ii) Information from secretary.— If the Comptroller General of the United States determines that the returns or return information available under clause (i) are not sufficient for purposes of making an audit of any program or activity of a Federal agency (other than an agency referred to in subparagraph (A)), upon written request by the Comptroller General to the Secretary, returns and return information (of the type authorized by subsection (1) or (m) to be made available to the Federal agency for use in such program or activity) shall be open to inspection by, or disclosure to, officers and employees of the General Accounting Office for the purpose of, and to the extent necessary in, making such audit. “(iii) Requirement of notification upon completion of audit.— Within 90 days after the completion of an audit with respect to which returns or return information were opened to inspection or disclosed under clause (i) or (ii), the Comptroller General of the United States shall notify in writing the Joint Committee on Taxation of such completion. Such notice shall include— “(I) a description of the use of the returns and return information by the Federal agency involved, “(II) such recommendations with respect to the use of returns and return information by such Federal agency as the Comptroller General deems appropriate, and “(III) a statement on the impact of any such recommendations on confidentiality of returns and return information and the administration of this title. “(iv) Certain restrictions made applicable.— The restrictions contained in subparagraph (A) on the disclosure of any returns or return information open to inspection or disclosed under such subparagraph shall also apply to returns and return information open to inspection or disclosed under this subparagraph.” (b) Conforming Amendments.— (1) Subparagraph (A) of section 6103(i)(7) of such Code (as 26 USC 6103. redesignated by this Act) is amended by striking out “subparagraph (B)” and inserting in lieu thereof “subparagraph (C)”. (2) Subparagraph (C) of section 6103(i)(7) of such Code (as redesignated by this Act) is amended by striking out “subparagraph (A)” and inserting in lieu thereof “subparagraph (A) or (B)”. (c) Effective Date.— The amendments made by this section shall 26 USC 6103 note. take effect on the day after the date of the enactment of this Act.

7. 1983

   Interest and Dividend Tax Compliance Act of 1983

   Pub. L. 98–67 title I · 97 Stat. 369

   1. Substituted · 26 U.S.C. § 6044

      Pub. L. 98–67 substituted in subsec. (e) “The written statement required under the preceding sentence shall be furnished (either in person or in a separate mailing by first-class mail) to the person on or before January 31 of the year following the calendar year for which the return under subsection (a) was made, and shall be in such form as the Secretary may prescribe by regulations” for “The written statement required under the preceding sentence shall be furnished to the person on or before January 31 of the year following the calendar year for which the return under subsection (a)(1) was made”

   2. Repealed · 26 U.S.C. § 6044

      Pub. L. 98–67 repealed amendments made by Pub. L. 97–248. See 1982 Amendment note below

   Source evidence

   Code amendment note
   Pub. L. 98–67 substituted in subsec. (e) “The written statement required under the preceding sentence shall be furnished (either in person or in a separate mailing by first-class mail) to the person on or before January 31 of the year following the calendar year for which the return under subsection (a) was made, and shall be in such form as the Secretary may prescribe by regulations” for “The written statement required under the preceding sentence shall be furnished to the person on or before January 31 of the year following the calendar year for which the return under subsection (a)(1) was made” and repealed amendments made by Pub. L. 97–248. See 1982 Amendment note below.

   Enacted provision · exact public law
   TITLE I— INTEREST AND DIVIDEND TAX COMPLIANCE SEC. 101. SHORT TITLE: AMENDMENT OF 1954 CODE. (a) Short Title.— This title may be cited as the “Interest and Dividend Tax Compliance Act of 1983”. (b) Amendment of 1954 Code.— Except as otherwise expressly provided, whenever in this title an amendment is expressed in terms of an amendment to 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 1954. SEC. 102. REPEAL OF WITHHOLDING ON INTEREST AND DIVIDENDS. (a) In General.— Subtitle A of title III of the Tax Equity and Effective date. 26 USC 3451 note. 96 Stat. 576. Fiscal Responsibility Act of 1982 (relating to withholding of tax from interest and dividends) is hereby repealed as of the close of June 30, 1983. (b) Conforming Amendment.— Except as provided in this section, the Internal Revenue Code of 1954 shall be applied and administered as if such subtitle A (and the amendments made by such subtitle A) had not been enacted. (c) Repeal Not To Apply to Amounts Deducted and Withheld Before September 2, 1983.— (1) In general.— If, notwithstanding the repeal made by subsection (a) (and the provisions of subsection (b)), an amount is deducted and withheld before September 2, 1983, under subchapter B of chapter 24 of the Internal Revenue Code of 1954 (as 96 Stat. 576. 26 USC 3451. in effect before its repeal by subsection (a)), the repeal made by subsection (a) (and the provisions of subsection (b)) shall not apply to the amount so deducted and withheld. (2) Election to have paragraph (1) not apply.— Paragraph (1) shall not apply with respect to any payor who elects (at the time and in the manner prescribed by the Secretary of the Treasury or his delegate) to have paragraph (1) not apply. (d) Estimated Tax Payments.— For purposes of determining the amount of any addition to tax under section 6654 of the Internal Revenue Code of 1954 with respect to any installment required to be 26 USC 6654. paid before July 1, 1983, the amount of the credit allowed by section 31 of such Code for any taxable year which includes any portion of 96 Stat. 585. 26 USC 31. the period beginning July 1, 1983, and ending December 31, 1983, shall be increased by an amount equal to 10 percent of the aggregate amount of payments— (1) which are received during the portion of such taxable year after June 30, 1983, and before January 1, 1984, and (2) which (but for the repeal made by subsection (a)) would have been subject to withholding under subchapter B of chapter 96 Stat. 576. 96 Stat. 577. 26 USC 3452. 24 of such Code (determined without regard to any exemption described in section 3452 of such subchapter B). (e) Technical Amendments.— (1) Subsection (a) of section 6049 (relating to returns regarding payments of interest) is amended— (A) by inserting “or” at the end of paragraph (1), (B) by striking out “or” at the end of paragraph (2), (C) by striking out paragraph (3), and (D) by striking out “, tax deducted and withheld, and the name and address of the person to whom paid or from whom withheld”, and inserting in lieu thereof “and the name and address of the person to whom paid”. (2) Subsection (b) of section 6049 (defining interest) is amended— (A) by amending subparagraph (C) of paragraph (2) to read as follows: “(C) except to the extent otherwise provided in regulations— “(i) any amount paid to any person described in paragraph (4), or “(ii) any amount described in paragraph (5),”, and (B) by adding at the end thereof the following new paragraphs: “(4) Persons described in this paragraph.— A person is described in this paragraph if such person is— “(A) a corporation, “(B) an organization exempt from taxation under section 501(a) or an individual retirement plan, “(C) the United States or any wholly owned agency or instrumentality thereof, “(D) a State, the District of Columbia, a possession of the United States, any political subdivision of any of the foregoing, or any wholly owned agency or instrumentality of any one or more of the foregoing, “(E) a foreign government, a political subdivision of a foreign government, or any wholly owned agency or instrumentality of any one or more of the foregoing, “(F) an international organization or any wholly owned agency or instrumentality thereof, “(G) a foreign central bank of issue, “(H) a dealer in securities or commodities required to register as such under the laws of the United States or a State, the District of Columbia, or a possession of the United States, “(I) a real estate investment trust (as defined in section 856), “(J) an entity registered at all times during the taxable 15 USC 80a-51. year under the Investment Company Act of 1940, “(K) a common trust fund (as defined in section 584(a)), or “(L) any trust which— “(i) is exempt from tax under section 664(c), or “(ii) is described in section 4947(a)(1). “(5) Amounts described in this paragraph.— An amount is described in this paragraph if such amount— “(A) is subject to withholding under subchapter A of chapter 3 (relating to withholding of tax on nonresident 26 USC 1441. aliens and foreign corporations) by the person paying such amount, or “(B) would be subject to withholding under subchapter A of chapter 3 by the person paying such amount but for the fact that— “(i) such amount is income from sources outside the United States, “(ii) the payor thereof is exempt from the application of section 1441(a) by reason of section 1441(c) or a tax treaty, or “(iii) such amount is original issue discount (within the meaning of section 1232(b)(1)).”. (3) Paragraph (1) of section 6049(c) (relating to statements to 96 Stat. 591. 26 USC 6049. be furnished to persons with respect to whom information is furnished) is amended— (A) by inserting “and” at the end of subparagraph (A), (B) by striking out “, and” at the end of subparagraph (B) and inserting in lieu thereof a period, and (C) by striking out subparagraph (C). SEC. 103. SENSE OF THE CONGRESS WITH RESPECT TO INCREASED APPROPRIATIONS. It is the sense of the Congress— (1) that additional amounts should be appropriated for purposes of collecting tax due with respect to reportable payments (as defined in section 3406(b) of the Internal Revenue Code of 1954), and (2) that— (A) such additional amounts should not be less than— (i) $15,000,000 for fiscal year 1984, and (ii) $300,000,000 for the period consisting of fiscal years 1984 through 1988, and (B) it would be preferable that such additional amounts for such period be at least $600,000,000. SEC. 104. BACKUP WITHHOLDING. (a) In General.— Chapter 24 (relating to collection of income tax at source) is amended by inserting after section 3405 the following new section: “Sec. 3406. BACKUP WITHHOLDING. “(a) Requirement To Deduct and Withhold.— “(1) In general.— In the case of any reportable payment, if— “(A) the payee fails to furnish his TIN to the payor in the manner required, “(B) the Secretary notifies the payor that the TIN furnished by the payee is incorrect, “(C) there has been a notified payee underreporting described in subsection (c), or “(D) there has been a payee certification failure described in subsection (d), then the payor shall deduct and withhold from such payment a tax equal to 20 percent of such payment. “(2) Subparagraphs (c) and (d) of paragraph (1) apply only to interest and dividend payments.— Subparagraphs (C) and (D) of paragraph (1) shall apply only to reportable interest or dividend payments. “(b) Reportable Payment, Etc.— For purposes of this section— “(1) Reportable payment.— The term ‘reportable payment’ means— “(A) any reportable interest or dividend payment, and “(B) any other reportable payment. “(2) Reportable interest or dividend payment.— “(A) In general.— The term ‘reportable interest or dividend payment’ means any payment of a kind, and to a payee, required to be shown on a return required under— “(i) section 6049(a) (relating to payments of interest), “(ii) section 6042(a) (relating to payments of dividends), or “(iii) section 6044 (relating to payments of patronage dividends) but only to the extent such payment is in money. “(B) Special rule for patronage dividends.— For purposes of subparagraphs (C) and (D) of subsection (a)(1), the term ‘reportable interest or dividend payment’ shall not include any payment to which section 6044 (relating to patronage dividends) applies unless 50 percent or more of such payment is in money. “(3) Other reportable payment.— The term ‘other reportable payment’ means any payment of a kind, and to a payee, required to be shown on a return required under— “(A) section 6041 (relating to certain information at source), “(B) section 6041A(a) (relating to payments of remuneration for services), “(C) section 6045 (relating to returns of brokers), or “(D) section 6050A (relating to reporting requirements of certain fishing boat operators), but only to the extent such payment is in money and represents a share of the proceeds of the catch. “(4) Whether payment is of reportable kind determined without regard to minimum amount.— The determination of whether any payment is of a kind required to be shown on a return described in paragraph (2) or (3) shall be made without regard to any minimum amount which must be paid before a return is required. “(5) Exception for certain small payments.— To the extent provided in regulations, the term ‘reportable payment’ shall not include any payment which— “(A) does not exceed $10, and “(B) if determined for a 1-year period, would not exceed $10. “(6) Other reportable payments include payments described in section 6041(a) OR 6041(A) (a) only where aggregate for calendar year is $600 or more.— Any payment of a kind required to be shown on a return required under section 6041(a) or 6041A(a) which is made during any calendar year shall be treated as a reportable payment only if— “(A) the aggregate amount of such payment and all previous payments described in such sections by the payor to the payee during such calendar year equals or exceeds $600, “(B) the payor was required under section 6041(a) or 6041A(a) to file a return for the preceding calendar year 96 Stat. 601. 26 USC 6041A. with respect to payments to the payee, or “(C) during the preceding calendar year, the payor made reportable payments to the payee with respect to which amounts were required to be deducted and withheld under subsection (a). “(7) Exception for certain window payments of interest, etc.— For purposes of subparagraphs (C) and (D) of subsection (a)(1), the term ‘reportable interest or dividend payment’ shall not include any payment— “(A) in redemption of a coupon on a bearer instrument or in redemption of a United States savings bond, or “(B) to the extent provided in regulations, of interest on instruments similar to those described in subparagraph (A). The preceding sentence shall not apply for purposes of determining whether there is payee underreporting described in subsection (c). “(c) Notified Payee Underreporting With Respect to Interest and Dividends.— “(1) Notified payee underreporting.— If— “(A) the Secretary determines with respect to any payee that there has been payee underreporting, “(B) at least 4 notices have been mailed by the Secretary to the payee (over a period of at least 120 days) with respect to the underreporting, and “(C) in the case of any payee who has filed a return for the taxable year, any deficiency of tax attributable to such failure has been assessed, the Secretary may notify payors of reportable interest or dividend payments with respect to such payee of the requirement to deduct and withhold under subsection (a)(1)(C) (but not the reasons therefor). “(2) Payee underreporting defined.— For purposes of this section, there has been payee underreporting if for any taxable year the Secretary determines that— “(A) the payee failed to include in his return of tax under chapter 1 for such year any portion of a reportable interest or dividend payment required to be shown on such return, or “(B) the payee may be required to file a return for such year and to include a reportable interest or dividend payment in such return, but failed to file such return. “(3) Determination by secretary to stop (or not to start) withholding.— “(A) In general.— If the Secretary determines that— “(i) there was no payee underreporting, “(ii) any payee underreporting has been corrected (and any tax, penalty, or interest with respect to the payee underreporting has been paid), “(iii) withholding under subsection (a)(1)(C) has caused (or would cause) undue hardship to the payee and it is unlikely that any payee underreporting by such payee will occur again, or “(iv) there is a bona fide dispute as to whether there has been any payee underreporting, then the Secretary shall take the action described in subparagraph (B). “(B) Secretary to take action to stop (or not to start) withholding.— For purposes of subparagraph (A), if at the time of the Secretary’s determination under subparagraph (A)— “(i) no notice has been given under paragraph (1) to any payor with respect to the underreporting, the Secretary shall not give any such notice, or “(ii) if such notice has been given, the Secretary shall— “(I) provide the payee with a written certification that withholding under subsection (a)(1)(C) is to stop, and “(II) notify the applicable payors (and brokers) that such withholding is to stop. “(C) Time for taking action where notice to payor has been given.— In any case where notice has been given under paragraph (1) to any payor with respect to any underreporting, if the Secretary makes a determination under subparagraph (A) during the 12-month period ending on October 15 of any calendar year— “(i) except as provided in clause (ii), the Secretary shall take the action described in subparagraph (B)(ii) to bring about the stopping of withholding no later than December 1 of such calendar year, or “(ii) in the case of— “(I) a no payee underreporting determination under clause (i) of subparagraph (A), or “(II) a hardship determination under clause (iii) of subparagraph (A), such action shall be taken no later than the 45th day after the day on which the Secretary made the determination. “(D) Opportunity to request determination.— The Secretary shall prescribe procedures under which— “(i) a payee may request a determination under subparagraph (A), and “(ii) the payee may provide information with respect to such request. “(4) Payor notifies payee of withholding because of payee underreporting.— Any payor required to withhold any tax under subsection (a)(1)(C) shall, at the time such withholding begins, notify the payee of such withholding. “(5) Payee may be required to notify secretary who his payors and brokers are.— For purposes of this section, the Secretary may require any payee of reportable interest or dividend payments who is subject to withholding under subsection (a)(1)(C) to notify the Secretary of— “(A) all payors from whom the payee receives reportable interest or dividend payments, and “(B) all brokers with whom the payee has accounts which may involve reportable interest or dividend payments. The Secretary may notify any such broker that such payee is subject to withholding under subsection (a)(1)(C). “(d) Interest and Dividend Backup Withholding Applies to New Accounts and Instruments Unless Payee Certifies That He Is Not Subject to Such Withholding.— “(1) In general.— There is a payee certification failure unless the payee has certified to the payor, under penalty of perjury, that such payee is not subject to withholding under subsection (a)(1)(C). “(2) Special rules for readily tradable instruments.— “(A) In general.— Subsection (a)(1)(D) shall apply to any reportable interest or dividend payment to any payee on any readily tradable instrument if (and only if) no certification was provided to the payor by the payee under paragraph (1) and— “(i) the payor was notified by a broker under subparagraph (B), “(ii) such instrument was acquired directly by the pavee from the payor, or “(iii) such instrument is held by the payor as nominee for the payee. “(B) Broker notifies payor.— If— “(i) a payee acquires any readily tradable instrument through a broker, and “(ii) (I) the payee does not provide a certification to such broker under subparagraph (C), or (II) such broker is notified by the Secretary before such acquisition that such payee is subject to withholding under subsection (a)(1)(C), such broker shall, within 15 days after the date of the acquisition, notify the payor that such payee is subject to withholding under subsection (a)(1)(D) (or subsection (a)(1)(C) in the case of a notification described in clause (ii)(II)). “(C) Time for payee to provide certification to broker.— In the case of any readily tradable instrument acquired by a payee through a broker, the certification described in paragraph (1) may be provided by the payee to such broker— “(i) at any time after the payee’s account with the broker was established and before the acquisition of such instrument, or “(ii) in connection with the acquisition of such instrument. “(3) Exception for existing accounts, etc.— This subsection and subsection (a)(1)(D) shall not apply to any reportable interest or dividend payment which is paid or credited— “(A) in the case of interest or any other amount of a kind reportable under section 6049, with respect to any account 96 Stat. 591. 26 USC 6049. (whatever called) established before January 1, 1984, or with respect to any instrument acquired before January 1, 1984, “(B) in the case of dividends or any other amount reportable under section 6042, on any stock or other instrument acquired before January 1, 1984, or “(C) in the case of patronage dividends or other amounts of a kind reportable under section 6044, with respect to any membership acquired, or contract entered into, before January 1, 1984. “(4) Exception for readily tradable instruments acquired through existing brokerage accounts.— Subparagraph (B) of paragraph (2) shall not apply with respect to a readily tradable instrument which was acquired through an account with a broker if— “(A) such account was established before January 1, 1984, and “(B) during 1983, such broker bought or sold instruments for the payee (or acted as a nominee for the payee) through such account. The preceding sentence shall not apply with respect to any readily tradable instrument acauired through such account after the broker was notified by the Secretary that the payee is subject to withholding under subsection (a)(1)(C). “(e) Period for Which Withholding Is in Effect.— “(1) Failure to furnish tin.— In the case of any failure by a payee to furnish his TIN to a payor in the manner required, subsection (a) shall apply to any reportable payment made by such payor during the period during which the TIN has not been furnished in the manner required. “(2) Notification of incorrect number.— In any case in which the Secretary notifies the payor that the TIN furnished by the payee is incorrect, subsection (a) shall apply to any reportable payment made by such payor— “(A) after the close of the 30th day after the day on which the payor received such notification, and “(B) before the payee furnishes another TIN in the manner required. “(3) Notified payee underreporting described in subsection (C).— “(A) In general.— In the case of any notified payee underreporting described in subsection (c), subsection (a) shall apply to any reportable interest or dividend payment made— “(i) after the close of the 30th day after the day on which the payor received notification from the Secretary of such underreporting, and “(ii) before the stop date. “(B) Stop date.— For purposes of this subsection, the term ‘stop date’ means the determination effective date or, if later, the earlier of— “(i) the day on which the payor received notification from the Secretary under subsection (c)(3)(B) to stop withholding, or “(ii) the day on which the payor receives from the payee a certification provided by the Secretary under subsection (c)(3)(B). “(C) Determination effective date.— For purposes of this subsection— “(i) In general.— Except as provided in clause (ii), the determination effective date of any determination under subsection (c)(3)(A) which is made during the 12- month period ending on October 15 of any calendar year shall be the first January 1 following such October 15. “(ii) Determination that there was no underreporting; hardship.— In the case of any determination under clause (i) or (iii) of subsection (c)(3)(A), the determination effective date shall be the date on which the Secretary’s determination is made. “(4) Failure to provide certification that payee is not subject to withholding.— “(A) In general.— In the case of any payee certification failure described in subsection (d)(1), subsection (a) shall apply to any reportable interest or dividend payment made during the period during which the certification described in subsection (d)(1) has not been furnished to the payor. “(B) Special rule for readily tradable instruments acquired through broker where notification.— In the case of any readily tradable instrument acquired by the payee through a broker, the period described in subparagraph (A) shall start with payments to the payee made after the close of the 30th day after the payor receives notification from a broker under subsection (d)(2)(B). “(5) 30-day grace periods.— “(A) Start-up.— If the payor elects the application of this subparagraph with respect to the payee, subsection (a) shall also apply to any reportable payment made during the 30- day period described in paragraph (2)(A), (3)(A), or (4)(B). “(B) Stopping.— Unless the payor elects not to have this subparagraph apply with respect to the payee, subsection (a) shall also apply to any reportable payment made after the close of the period described in paragraph (1), (2), or (4) (as the case may be) and before the 30th day after the close of such period. A similar rule shall also apply with respect to the period described in paragraph (3)(A) where the stop date is determined under clause (i) or (ii) of paragraph (3)(B). “(C) Election of shorter grace period.— The payor may elect a period shorter than the grace period set forth in subparagraph (A) or (B), as the case may be. “(f) Confidentiality of Information.— “(1) In general.— No person may use any information obtained under this section (including any failure to certify under subsection (d)) except for purposes of meeting any requirement under this section or (subject to the safeguards set forth in section 6103) for purposes permitted under section 6103. “(2) Cross reference.— “For provision providing for civil damages for violation of paragraph (1), see section 7431. “(g) Exceptions.— “(1) Payments to certain payees.— Subsection (a) shall not apply to any payment made to— “(A) any organization or governmental unit described in subparagraph (B), (C), (D), (E), or (F) of section 6049(b)(4), or “(B) any other person specified in regulations. “(2) Amounts for which withholding otherwise required.— Subsection (a) shall not apply to any amount for which withholding is otherwise required by this title. “(3) Exemption while waiting for tin.— The Secretary shall prescribe regulations for exemptions from the tax imposed by subsection (a) during the period during which a person is waiting for receipt of a TIN. “(h) Other Definitions and Special Rules.— For purposes of this section— “(1) Obviously incorrect number.— A person shall be treated as failing to furnish his TIN if the TIN furnished does not contain the proper number of digits. “(2) Payee furnishes 2 incorrect tins.— If the payee furnishes the payor 2 incorrect TINs in any 3-year period, the payor shall, after receiving notice of the second incorrect TIN, treat the payee as not having furnished another TIN under subsection (e)(2)(B) until the day on which the payor receives notification from the Secretary that a correct TIN has been furnished. “(3) Joint payees.— Except to the extent otherwise provided in regulations, any payment to joint payees shall be treated as if all the payment were made to the first person listed in the payment. “(4) Payor defined.— The term ‘payor’ means, with respect to any reportable payment, a person required to file a return described in paragraph (2) or (3) of subsection (b) with respect to such payment. “(5) Broker.— “(A) In general.— The term ‘broker’ has the meaning 96 Stat. 600. given to such term by section 6045(c)(1). “(B) Only 1 broker per acquisition.— If, but for this subparagraph, there would be more than 1 broker with respect to any acquisition, only the broker having the closest contact with the payee shall be treated as the broker. “(C) Payor not treated as broker.— In the case of any instrument, such term shall not include any person who is the payor with respect to such instrument. “(6) Readily tradable instrument.— The term ‘readily tradable instrument’ means— “(A) any instrument which is part of an issue any portion of which is traded on an established securities market (within the meaning of section 453(f)(5)), and “(B) except as otherwise provided in regulations prescribed by the Secretary, any instrument which is regularly quoted by brokers or dealers making a market. “(7) Original issue discount.— To the extent provided in 96 Stat. 591. regulations, rules similar to the rules of paragraph (6) of section 6049(d) shall apply. “(8) Requirement of notice to payee.— Whenever the Secretary 26 USC 6049. notifies a payor under paragraph (1)(B) of subsection (a) that the TIN furnished by any payee is incorrect, the Secretary shall at the same time furnish a copy of such notice to the payor, and the payor shall promptly furnish such copy to the payee. “(9) Requirement of notice to secretary.— If the Secretary notifies a payor under paragraph (1)(B) of subsection (a) that the TIN furnished by any payee is incorrect and such payee subsequently furnishes another TIN to the payor, the payor shall promptly notify the Secretary of the other TIN so furnished. “(10) Coordination with other sections.— For purposes of 96 Stat. 585. 26 USC 31. section 31, this chapter (other than section 3402(n)), and so much of subtitle F (other than section 7205) as relates to this chapter, payments which are subject to withholding under this section shall be treated as if they were wages paid by an employer to an employee (and amounts deducted and withheld under this section shall be treated as if deducted and withheld under section 3402). “(i) Regulations.— The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section.” (b) Civil Damages for Unauthorized Disclosure of Information.— Section 7431 (relating to civil damages for unauthorized 96 Stat. 645. 26 USC 7431. disclosure of returns and return information) is amended by adding at the end thereof the following new subsection: “(f) Extension to Information Obtained Under Section 3406.— For purposes of this section— “(1) any information obtained under section 3406 (including information with respect to any payee certification failure under subsection (d) thereof) shall be treated as return information, and “(2) any use of such information other than for purposes of meeting any requirement under section 3406 or (subject to the safeguards set forth in section 6103) for purposes permitted under section 6103 shall be treated as a violation of section 6103. For purposes of subsection (b), the reference to section 6103 shall be treated as including a reference to section 3406.” (c) Penalty for Failure by Broker To Provide Notice.— (1) In general.— Subchapter B of chapter 68 (relating to assessable penalties) is amended by adding at the end thereof the following new section: “SEC. 6705. FAILURE BY BROKER TO PROVIDE NOTICE TO PAYORS. “(a) In General.— Any person required under section 3406(d)(2)(B) Ante, p. 371. to provide notice to any payor who willfully fails to provide such notice to such payor shall pay a penalty of $500 for each such failure. “(b) Penalty in Addition to Other Penalties.— Any penalty imposed by this section shall be in addition to any other penalty provided by law.” (2) Conforming amendment.— The table of sections for subchapter B of chapter 68 is amended by adding at the end thereof the following new item: “Sec. 6705. Failure by broker to provide notice to payors.” (d) Technical Amendments.— (1) Definition of tin.— Subsection (a) of section 7701 (relating 96 Stat. 2611. 26 USC 7701. to definitions) is amended by adding at the end thereof the following new paragraph: “(41) TIN.— The term ‘TIN’ means the identifying number assigned to a person under section 6109.” (2) Year for which credit allowed.— Section 31 (relating to 96 Stat. 585. 26 USC 31. credit for tax withheld on wages) is amended by adding at the end thereof the following new subsection: “(c) Special Rule for Backup Withholding.— Any credit allowed by subsection (a) for any amount withheld under section 3406 shall Ante, p. 371. be allowed for the taxable year of the recipient of the income in which the income is received.” (3) Repeal of existing backup withholding provisions.— Subsection (s) of section 3402 is hereby repealed. (4) Clerical amendment.— The table of sections for chapter 24 is amended by inserting after the item relating to section 3405 the following new item: “Sec. 3406. Backup withholding.” SEC. 105. PENALTY FOR FAILURE BY PAYORS TO MEET CERTAIN INTEREST AND DIVIDEND REPORTING REQUIREMENTS. (a) Failure To Supply Taxpayer Identification Numbers.— Section 6676 (relating to failure to supply identifying numbers) is amended to read as follows: “SEC. 6676. FAILURE TO SUPPLY IDENTIFYING NUMBERS. “(a) In General.— If any person who is required by regulations prescribed under section 6109— “(1) to include his TIN in any return, statement, or other document, “(2) to furnish his TIN to another person, or “(3) except in the case of a return or statement required to be 96 Stat. 591. 26 USC 6049. filed under section 6042, 6044, or 6049, to include in any return, statement, or other document made with respect to another person the TIN of such other person, fails to comply with such requirement at the time prescribed by such regulations, such person shall, unless it is shown that such failure is due to reasonable cause and not to willful neglect, pay a penalty of $5 for each such failure described in paragraph (1) and $50 for each such failure described in paragraph (2) or (3), except that the total amount imposed on such person for all such failures during any calendar year shall not exceed $50,000. “(b) Penalties Involving Failures on Interest and Dividend Returns.— “(1) In general.— If any payor— “(A) is required to include in any return or statement required to be filed under section 6042, 6044, or 6049 with respect to any payee the TIN of such payee, and “(B) fails to include such number or includes an incorrect number, then the payor shall pay a penalty of $50 for each such failure unless it is shown that the payor exercised due diligence in attempting to satisfy the requirement with respect to such TIN. “(c) Procedures Relating to Assessment of Penalty.— “(1) Self-assessment of penalty imposed by subsection (b).— Any penalty imposed under subsection (b) on any person— “(A) for purposes of this subtitle, shall be treated as an 26 USC 4041. excise tax imposed by subtitle D, and “(B) shall be due and payable on April 1 of the calendar year following the calendar year for which the return or statement was made. “(2) Deficiency procedures not to apply.— Subchapter B of 26 USC 6211. chapter 63 (relating to deficiency procedures for income, estate, gift, and certain excise taxes) shall not apply in respect of the assessment or collection of any penalty imposed by this section.” (b) Failure To File Statements.— (1) Section 6652.— (A) Subsection (a) of section 6652 (relating to returns 96 Stat. 605. 26 USC 6652. relating to information at source, payments of dividends, etc., and certain transfers of stock) is amended by redesignating paragraph (2) as paragraph (3) and by inserting after paragraph (1) the following new paragraph: “(2) Failure to file returns on interest, dividends, and patronage dividends.— “(A) In general.— In the case of each failure to file a statement of the amount of payments to another person required by— “(i) section 6042(a)(1) (relating to payments of dividends), “(ii) section 6044(a)(1) (relating to payments of 96 Stat. 587. 26 USC 6044. patronage dividends), or “(iii) section 6049(a) (relating to payments of interest), on the date prescribed therefor (determined with regard to any extension of time for filing), there shall be paid by the person failing to file such statement a penalty of $50 for each such failure unless it is shown that such person exercised due diligence in attempting to satisfy the requirement with respect to such statement. “(B) Self-assessment.— Any penalty imposed under subparagraph (A) on any person— “(i) for purposes of this subtitle, shall be treated as an excise tax imposed by subtitle D, and “(ii) shall be due and payable on April 1 of the calendar year following the calendar year for which such statement is required. “(C) Deficiency procedures not to apply.— Subchapter B of chapter 63 (relating to deficiency procedures for 26 USC 6211. income, estate, gift, and certain excise taxes) shall not apply in respect of the assessment or collection of any penalty imposed by subparagraph (A).” (B) Subparagraph (A) of section 6652(a)(1) is amended— (i) by striking out clauses (ii), (iii), and (iv) and by redesignating clauses (v) and (vi) as clauses (ii) and (iii), respectively, and (ii) by striking out “6042(e), 6044(f), 6049(e), or” in clause (iii), as so redesignated. (C) Paragraph (3) of section 6652(a) (as redesignated by subparagraph (A)) is amended by striking out “paragraph Supra. (1)” in the matter preceding subparagraph (A) and in subparagraph (A) and inserting in lieu thereof “paragraph (1) or (2)”. (2) Section 6678.— Section 6678 (relating to failure to furnish 26 USC 6678. certain statements) is amended— (A) by inserting “(a) In General.—” before “In the case of”, (B) by striking out “6042(c), 6044(e), 6045(b), 6049(c),” in paragraph (1) and inserting in lieu thereof “6045(b),”, (C) by striking out “6042(a)(1), 6044(a)(1), 6045(a), 6049(a),” in paragraph (1) and inserting in lieu thereof “6045(a),”, and (D) by adding at the end thereof the following new subsection: “(b) Failure To File Interest and Dividend Statements.— “(1) In general.— In the case of any person who fails to Post, p. 383. furnish a statement under section 6042(c), 6044(e), or 6049(c) on the date prescribed therefor to a person with respect to whom a return has been made under section 6042(a)(1), 6044(a)(1), or 96 Stat. 587; ante, p. 370 6049(a), respectively, such person shall pay a penalty of $50 for each such failure unless it is shown that such person exercised due diligence in attempting to satisfy the requirement with respect to such statement. “(2) Self-assessment.— Any penalty imposed under paragraph (1) on any person— “(A) for purposes of this subtitle, shall be treated as an 26 USC 4041. excise tax imposed by subtitle D, and “(B) shall be due and payable on April 1 of the calendar year following the calendar year for which such statement is required. “(3) Deficiency procedures not to apply.— Subchapter B of 26 USC 6211. chapter 63 (relating to deficiency procedures for income, estate, gift, and certain excise taxes) shall not apply in respect of the assessment or collection of any penalty imposed by paragraph (1).” SEC. 106. PRESUMPTION THAT NEGLIGENCE PENALTY APPLIES TO UNDERPAYMENTS ATTRIBUTABLE TO FAILURE TO REPORT CERTAIN INTEREST AND DIVIDEND PAYMENTS. Section 6653 (relating to failure to pay tax) is amended by adding at the end thereof the following new subsection: “(g) Special Rule in the Case of Interest or Dividend Payments.— “(1) In general.— If— “(A) any payment is shown on a return made by the payor under section 6042(a), 6044(a), or 6049(a), and “(B) the payee fails to include any portion of such payment in gross income, any portion of an underpayment attributable to such failure shall be treated, for purposes of subsection (a), as due to negligence in the absence of clear and convincing evidence to the contrary. “(2) Penalty to apply only to portion of underpayment due to failure to include interest or dividend payment.— If any penalty is imposed under subsection (a) by reason of paragraph (1), the amount of the penalty imposed by paragraph (1) of subsection (a) shall be 5 percent of the portion of the underpayment which is attributable to the failure described in paragraph (1).” SEC. 107. CIVIL AND CRIMINAL PENALTIES ON FALSE INFORMATION WITH RESPECT TO BACKUP WITHHOLDING ON INTEREST AND DIVIDENDS. (a) Civil Penalty.— Paragraph (1) of section 6682(a) (relating to civil penalty for false information with respect to withholding) is amended by inserting “or section 3406” after “section 3402”. (b) Criminal Penalty.— Section 7205 (relating to fraudulent withholding exemption certificate or failure to supply information) is amended— (1) by striking out “Any individual” and inserting in lieu thereof “(a) Withholding on Wages.—Any individual”, and (2) by adding at the end thereof the following new subsection: “(b) Backup Withholding on Interest and Dividends.— If any individual willfully makes— “(1) any false certification or affirmation on any statement required by a payor in order to meet the due diligence requirements of section 6676(b), or “(2) a false certification under paragraph (1) or (2)(C) of section 3406(d), Ante, p. 371 then such individual shall, in lieu of any other penalty provided by law (except the penalty provided by section 6682), upon conviction thereof, be fined not more than $1,000, or imprisoned not more than 1 year, or both.” SEC. 108. SEPARATE MAILING OF 1099. (a) Interest.— Section 6049(c)(2) (relating to time statement must Ante, p. 371. be furnished) is amended to read as follows: “(2) Time and form of statement.— The written statement under paragraph (1)— “(A) shall be furnished (either in person or in a separate mailing by first-class mail) to the person on or before January 31 of the year following the calendar year for which the return under subsection (a) was made, and “(B) shall be in such form as the Secretary may prescribe by regulations.” (b) Dividends.— The second sentence of section 6042(c) (relating to 96 Stat. 587. 26 USC 6042. time statement must be furnished) is amended to read as follows: “The written statement required under the preceding sentence shall be furnished (either in person or in a separate mailing by first-class mail) to the person on or before January 31 of the year following the calendar year for which the return under subsection (a) was made, and shall be in such form as the Secretary may prescribe by regulations.” (c) Patronage Dividends.— The second sentence of section 6044(e) 96 Stat. 588. 26 USC 6044. (relating to time statement must be furnished) is amended to read as follows: “The written statement required under the preceding sentence shall be furnished (either in person or in a separate mailing by first-class mail) to the person on or before January 31 of the year following the calendar year for which the return under subsection (a) was made, and shall be in such form as the Secretary may prescribe by regulations.” SEC. 109. RETURNS ON MAGNETIC TAPE. (a) Certain Returns Must Be on Magnetic Tape.— Subsection (e) of section 6011 (relating to regulations requiring returns on magnetic 96 Stat. 610. 26 USC 6011. tape, etc.) is amended to read as follows: “(e) Regulations Requiring Returns on Magnetic Tape, Etc.— “(1) In general.— The Secretary shall prescribe regulations providing standards for determining which returns must be filed on magnetic media or in other machine-readable form. The Secretary may not require returns of any tax imposed by subtitle A on individuals, estates, and trusts to be other than on 26 USC 1. paper forms supplied by the Secretary. In prescribing such regulations, the Secretary shall take into account (among other relevant factors) the ability of the taxpayer to comply at reasonable cost with such a filing requirement. “(2) Certain returns must be filed on magnetic media.— “(A) In general.— In the case of any person who is required to file returns under sections 6042(a), 6044(a), and Ante, p. 370. 6049(a) with respect to more than 50 payees for any calendar year, all returns under such sections shall be on magnetic media. “(B) Hardship exception.— Subparagraph (A) shall not apply to any person for any period if such person establishes to the satisfaction of the Secretary that its application to such person for such period would result in undue hardship.” (b) Study of Wage Returns on Magnetic Tape.— (1) Study.— The Secretary of the Treasury, in consultation with the Secretary of Health and Human Services, shall conduct a study of the feasibility of requiring persons to file, on magnetic media, returns under section 6011 of the Internal 26 USC 6011. Revenue Code of 1954 containing information described in section 6051(a) of such Code (relating to W-2s). (2) Report to congress.— Not later than July 1, 1984, the Secretary of the Treasury shall submit to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate the results of the study conducted under paragraph (1). SEC. 110. EFFECTIVE DATES. (a) General Rule.— Except as otherwise provided in this section, the amendments made by this title shall apply with respect to payments made after December 31, 1983. (b) Section 102.— The amendments made by section 102 shall take effect as of the close of June 30, 1983. (c) Sections 104(b) and 107.— The amendments made by sections 104(b) and 107 shall take effect on the date of the enactment of this Act.

8. 1986

   Tax Reform Act of 1986

   Pub. L. 99–514 title XV § 1501(c)(3) · 100 Stat. 2085

   1. Changed · 26 U.S.C. § 6044(e)

      Pub. L. 99–514, in amending subsec. (e) generally

   2. Substituted · 26 U.S.C. § 6044(e)

      Pub. L. 99–514, in substituted “information is required” for “information is furnished” in heading and, in text

   3. Substituted · 26 U.S.C. § 6044(e)

      Pub. L. 99–514, in substituted references to persons required to make a return for former references to persons making a return

   4. Struck · 26 U.S.C. § 6044(e)

      Pub. L. 99–514, in struck out provision directing that no statement was required if the aggregate amount of payments made to the person as shown on the return was less than $10

   Source evidence

   Code amendment note
   Subsec. (e). Pub. L. 99–514, in amending subsec. (e) generally, substituted “information is required” for “information is furnished” in heading and, in text, substituted references to persons required to make a return for former references to persons making a return and struck out provision directing that no statement was required if the aggregate amount of payments made to the person as shown on the return was less than $10.

   Enacted provision · exact public law section
   (3) Subsection (e) of section 6044 is amended to read as follows: “(e) Statements To Be Furnished to Persons With Respect to Whom Information Is Required.— Every cooperative required to make a return under subsection (a) shall furnish to each person whose name is required to be set forth in such return a written statement showing— “(1) the name and address of the cooperative required to make such return, and “(2) the aggregate amount of payments to the person required to be shown on the return. The written statement required under the preceding sentence shall be furnished (either in person or in a statement mailing by first-class mail which includes adequate notice that the statement is enclosed) to the person on or before January 31 of the year following the calendar year for which the return under subsection (a) was required to be made and shall be in such form as the Secretary may prescribe by regulations.”

9. 1996

   Taxpayer Bill of Rights 2

   Pub. L. 104–168 title XII § 1201(a)(4) · 110 Stat. 1452

   Substituted · 26 U.S.C. § 6044(e)(1)

   Pub. L. 104–168 substituted “name, address, and phone number of the information contact” for “name and address”

   Source evidence

   Code amendment note
   Subsec. (e)(1). Pub. L. 104–168 substituted “name, address, and phone number of the information contact” for “name and address”.

   Enacted provision · exact public law section
   (4) Section 6044(e)(1).

   Effective date note
   Amendment by Pub. L. 104–168 applicable to statements required to be furnished after Dec. 31, 1996 (determined without regard to any extension), see section 1201(b) of Pub. L. 104–168, set out as a note under section 6041 of this title.

8 of 15 references resolved to an enrolled provision · 7 partial