| Home > 107th Congressional Bills > H.R. 1661 (rfs) To extend indefinitely the authority of the States of Washington, Oregon, and California to manage a Dungeness crab fishery until the effective date of a fishery management plan for the fishery under the Magnuson-Stevens Fishery Conservati...
H.R. 1661 (rfs) To extend indefinitely the authority of the States of Washington, Oregon, and California to manage a Dungeness crab fishery until the effective date of a fishery management plan for the fishery under the Magnuson-Stevens Fishery Conservati...
108th CONGRESS 1st Session H. R. 1661 To provide balanced taxpayer protections in tax administrations, including elimination of abusive tax strategies, simplification of the earned income tax credit, and taxpayer protections. _______________________________________________________________________ IN THE HOUSE OF REPRESENTATIVES April 8, 2003 Mr. Rangel (for himself, Mr. Stark, Mr. Matsui, Mr. Levin, Mr. Cardin, Mr. McDermott, Mr. Kleczka, Mr. Lewis of Georgia, Mr. Neal of Massachusetts, Mr. McNulty, Mr. Jefferson, Mr. Becerra, Mr. Doggett, Mr. Sandlin, and Mrs. Jones of Ohio) introduced the following bill; which was referred to the Committee on Ways and Means _______________________________________________________________________ A BILL To provide balanced taxpayer protections in tax administrations, including elimination of abusive tax strategies, simplification of the earned income tax credit, and taxpayer protections. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE; REFERENCE; TABLE OF CONTENTS. (a) Short Title.--This Act may be cited as the ``Taxpayer and Fairness Protection Act of 2003''. (b) Amendment of 1986 Code.--Except as otherwise expressly provided, whenever in this Act an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986. (c) Table of Contents.--The table of contents for this Act is as follows: Sec. 1. Short title; reference; table of contents. TITLE I--ELIMINATION OF ABUSIVE TAX STRATEGIES Sec. 101. Findings and purpose. Subtitle A--Tax Shelters Part I--Provisions Designed to Curtail Tax Shelters Sec. 111. Clarification of economic substance doctrine. Sec. 112. Penalty for failing to disclose reportable transaction. Sec. 113. Accuracy-related penalty for listed transactions and other reportable transactions having a significant tax avoidance purpose. Sec. 114. Penalty for understatements attributable to transactions lacking economic substance, etc. Sec. 115. Modifications of substantial understatement penalty for nonreportable transactions. Sec. 116. Tax shelter exception to confidentiality privileges relating to taxpayer communications. Sec. 117. Disclosure of reportable transactions. Sec. 118. Modifications to penalty for failure to register tax shelters. Sec. 119. Modification of penalty for failure to maintain lists of investors. Sec. 120. Modification of actions to enjoin certain conduct related to tax shelters and reportable transactions. Sec. 121. Understatement of taxpayer's liability by income tax return preparer. Sec. 122. Penalty on failure to report interests in foreign financial accounts. Sec. 123. Frivolous tax submissions. Sec. 124. Regulation of individuals practicing before the Department of Treasury. Sec. 125. Penalty on promoters of tax shelters. Sec. 126. Statute of limitations for taxable years for which listed transactions not reported. Sec. 127. Denial of deduction for interest on underpayments attributable to nondisclosed reportable and noneconomic substance transactions. Part II--Other Provisions Sec. 131. Limitation on transfer or importation of built-in losses. Sec. 132. Disallowance of certain partnership loss transfers. Sec. 133. No reduction of basis under section 734 in stock held by partnership in corporate partner. Sec. 134. Repeal of special rules for FASITS. Sec. 135. Expanded disallowance of deduction for interest on convertible debt. Sec. 136. Expanded authority to disallow tax benefits under section 269. Sec. 137. Modifications of certain rules relating to controlled foreign corporations. Sec. 138. Basis for determining loss always reduced by nontaxed portion of dividends. Sec. 139. Affirmation of consolidated return regulation authority. Subtitle B--Prevention of corporate expatriation to avoid United States income tax Sec. 151. Prevention of corporate expatriation to avoid United States income tax. TITLE II--SIMPLIFICATION OF EARNED INCOME TAX CREDIT Sec. 201. Simplification of earned income tax credit. TITLE III--TAXPAYER PROTECTIONS AND IRS ACCOUNTABILITY Subtitle A--Penalty and Interest Reforms Sec. 301. Failure to pay estimated tax penalty converted to interest charge on accumulated unpaid balance. Sec. 302. Abatement of interest. Sec. 303. Deposits made to suspend running of interest on potential underpayments. Sec. 304. Expansion of interest netting for individuals. Sec. 305. Waiver of certain penalties for first-time unintentional minor errors. Sec. 306. Frivolous tax submissions. Sec. 307. Clarification of application of Federal tax deposit penalty. Subtitle B--Fairness of Collection Procedures Sec. 311. Partial payment of tax liability in installment agreements. Sec. 312. Extension of time for return of property. Sec. 313. Individuals held harmless on wrongful levy, etc., on individual retirement plan. Sec. 314. Seven-day threshold on tolling of statute of limitations during tax review. Sec. 315. Study of liens and levies. Subtitle C--Tax Administration Reforms Sec. 331. Revisions relating to termination of employment of Internal Revenue Service employees for misconduct. Sec. 332. Confirmation of authority of tax court to apply doctrine of equitable recoupment. Sec. 333. Jurisdiction of Tax Court over collection due process cases. Sec. 334. Office of Chief Counsel review of offers in compromise. Sec. 335. Access of National Taxpayer Advocate to independent legal counsel. Sec. 336. Payment of motor fuel excise tax refunds by direct deposit. Sec. 337. Family business tax simplification. Sec. 338. Suspension of tax-exempt status of terrorist organizations. Sec. 339. Tax refund anticipation loans. Sec. 340. Fairness in tax audit coverage. Subtitle D--Confidentiality and Disclosure Sec. 341. Collection activities with respect to joint return disclosable to either spouse based on oral request. Sec. 342. Taxpayer representatives not subject to examination on sole basis of representation of taxpayers. Sec. 343. Disclosure in judicial or administrative tax proceedings of return and return information of persons who are not party to such proceedings. Sec. 344. Prohibition of disclosure of taxpayer identification information with respect to disclosure of accepted offers-in-compromise. Sec. 345. Compliance by contractors with confidentiality safeguards. Sec. 346. Higher standards for requests for and consents to disclosure. Sec. 347. Notice to taxpayer concerning administrative determination of browsing; annual report. Sec. 348. Expanded disclosure in emergency circumstances. Sec. 349. Disclosure of taxpayer identity for tax refund purposes. Sec. 350. Disclosure to State officials of proposed actions related to section 501(c)(3) organizations. Sec. 351. Confidentiality of taxpayer communications with the Office of the Taxpayer Advocate. Subtitle E--Miscellaneous Sec. 361. Clarification of definition of church tax inquiry. Sec. 362. Expansion of declaratory judgment remedy to tax-exempt organizations. Sec. 363. Employee misconduct report to include summary of complaints by category. Sec. 364. Annual report on awards of costs and certain fees in administrative and court proceedings. Sec. 365. Annual report on abatement of penalties. Sec. 366. Better means of communicating with taxpayers. Sec. 367. Explanation of statute of limitations and consequences of failure to file. Sec. 368. Amendment to Treasury auction reforms. Sec. 369. Enrolled agents. Sec. 370. Financial management service fees. Sec. 371. Extension of Internal Revenue Service user fees. Subtitle F--Low-Income Taxpayer Clinics Sec. 381. Low-income taxpayer clinics. Sec. 382. Matching grants to low income return preparation clinics. Subtitle G--Federal-State Unemployment Assistance Agreements Sec. 391. Applicability of certain Federal-State Agreements relating to unemployment assistance. TITLE I--ELIMINATION OF ABUSIVE TAX STRATEGIES SEC. 101. FINDINGS AND PURPOSE. (a) Findings.--The Congress hereby finds that: (1) Many corporate tax shelter transactions are complicated ways of accomplishing nothing aside from claimed tax benefits, and the legal opinions justifying those transactions take an inappropriately narrow and restrictive view of well-developed court doctrines under which-- (A) the taxation of a transaction is determined in accordance with its substance and not merely its form, (B) transactions which have no significant effect on the taxpayer's economic or beneficial interests except for tax benefits are treated as sham transactions and disregarded, (C) transactions involving multiple steps are collapsed when those steps have no substantial economic meaning and are merely designed to create tax benefits, (D) transactions with no business purpose are not given effect, and (E) in the absence of a specific congressional authorization, it is presumed that Congress did not intend a transaction to result in a negative tax where the taxpayer's economic position or rate of return is better after tax than before tax. (2) Permitting aggressive and abusive tax shelters not only results in large revenue losses but also undermines voluntary compliance with the Internal Revenue Code of 1986. (b) Purpose.--The purpose of this title is to eliminate abusive tax shelters by denying tax attributes claimed to arise from transactions that do not meet a heightened economic substance requirement and by repealing the provision that permits legal opinions to be used to avoid penalties on tax underpayments resulting from transactions without significant economic substance or business purpose. Subtitle A--Tax Shelters Part I--Provisions Designed to Curtail Tax Shelters SEC. 111. CLARIFICATION OF ECONOMIC SUBSTANCE DOCTRINE. (a) In General.--Section 7701 is amended by redesignating subsection (m) as subsection (n) and by inserting after subsection (l) the following new subsection: ``(m) Clarification of Economic Substance Doctrine; etc.-- ``(1) General rules.-- ``(A) In general.--In applying the economic substance doctrine, the determination of whether a transaction has economic substance shall be made as provided in this paragraph. ``(B) Definition of economic substance.--For purposes of subparagraph (A)-- ``(i) In general.--A transaction has economic substance only if-- ``(I) the transaction changes in a meaningful way (apart from Federal tax effects and, if there is any Federal tax effects, also apart from any foreign, State, or local tax effects) the taxpayer's economic position, and ``(II) the taxpayer has a substantial nontax purpose for entering into such transaction and the transaction is a reasonable means of accomplishing such purpose. ``(ii) Special rule where taxpayer relies on profit potential.--A transaction shall not be treated as having economic substance by reason of having a potential for profit unless-- ``(I) the present value of the reasonably expected pre-tax profit from the transaction is substantial in relation to the present value of the expected net tax benefits that would be allowed if the transaction were respected, and ``(II) the reasonably expected pre- tax profit from the transaction exceeds a risk-free rate of return. ``(C) Treatment of fees and foreign taxes.--Fees and other transaction expenses and foreign taxes shall be taken into account as expenses in determining pre- tax profit under subparagraph (B)(ii). ``(2) Special rules for transactions with tax-indifferent parties.-- ``(A) Special rules for financing transactions.-- The form of a transaction which is in substance the borrowing of money or the acquisition of financial capital directly or indirectly from a tax-indifferent party shall not be respected if the present value of the deductions to be claimed with respect to the transaction is substantially in excess of the present value of the anticipated economic returns of the person lending the money or providing the financial capital. 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