text:
Page:United States Statutes at Large Volume 100 Part 3.djvu/934

 100 STAT. 2742

PUBLIC LAW 99-514—OCT. 22, 1986

subsection (a)) shall be applied by taking into account the first notice (or renotice) after December 31, 1986. (2) SUBSECTION (b).—The amendment made by subsection (b) .ft shall apply to amounts assessed after December 31, 1986, with respect to failures to pay which begin before, on, or after such date. SEC. 1503. AMENDMENTS TO PENALTY FOR NEGLIGENCE AND FRAUD.

(a) GENERAL RULE.—Section 6653 (relating to failure to pay tax) is amended by striking out subsections (a) and (b) and inserting in lieu thereof the following: "(a) NEGLIGENCE.—

"(1) IN GENERAL.—If any part of any underpayment (as defined in subsection (c)) is due to negligence or disregard of rules V or regulations, there shall be added to the tax an amount equal to the sum of— "(A) 5 percent of the underpayment, and "(B) an amount equal to 50 percent of the interest payable under section 6601 with respect to the portion of such . underpayment which is attributable to negligence for the period beginning on the last date 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). "(2) UNDERPAYMENT TAKEN INTO ACCOUNT REDUCED BY POR-

ai TiON ATTRIBUTABLE TO FRAUD.—There shall not be taken into account under this subsection any portion of an underpayment K attributable to fraud with respect to which a penalty is imposed fi under subsection 0)). "(3) NEGLIGENCE.—For purposes of this subsection, the term " 'negligence' includes any failure to make a reasonable attempt i to comply with the provisions of this title, and the term 'disregard' includes any careless, reckless, or intentional disregard. "(b) FRAUD.—

"(1) IN GENERAL.—If any part of any underpayment (as de^^ fined 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 ' "(A) 75 percent of the portion of the underpayment which is attributable to fraud, and ,t' «'(g) g^j^ amount equal to 50 percent of the interest pay^, able under section 6601 with respect to such portion for the S; o; 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. "(2) DETERMINATION OF PORTION ATTRIBUTABLE TO FRAUD.—If
 * the sum of—

• the Secretary establishes that any portion of an underpayment ' is attributable to fraud, the entire underpayment shall be treated as attributable to fraud, except with respect to any . portion of the underpayment which the taxpayer establishes is not attributable to fraud. "(3) SPECIAL RULE FOR JOINT RETURNS.—In the case of a joint J return, this subsection shall not apply with respect to a spouse

�


text:
Page:United States Statutes at Large Volume 100 Part 3.djvu/935

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2743

unless some part of the underpayment is due to the fraud of such spouse." (b) SPECIAL RULE FOR INTEREST OR DIVIDEND PAYMENTS EXTENDED TO OTHER AMOUNTS SHOWN ON INFORMATION RETURNS.—Subsection

(g) of section 6653 (relating to special rule in the case of interest or dividend payments) is amended to read as follows: "(g) SPECIAL RETURNS.—If—

RULE

FOR AMOUNTS

SHOWN

ON INFORMATION

"(1) any amount is shown on— "(A) an information return (as defined in section • • 6724(d)(1)), or "(B) a return filed under section 6031, section 6037, section 6012(a) by an estate or trust, section 6050B, or section 6050E,and "(2) the payee (or other person with respect to whom the return is made) fails to properly show such amount on his return, 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." (c) CONFORMING AMENDMENTS.—

(1) Subsection (d) of section 6222 is amended by striking out "intentional or negligent". (2) Subsection (d) of section 6653 is amended by striking out "same underpayment" and inserting in lieu thereof "portion of the underpayment which is attributable to fraud". (3) Subsection (f) of section 6653 is amended by striking out "or intentional disregard of rules and regulations (but without intent to defraud)". (d) CHANGE IN SECTION HEADING.—

(1) The heading for section 6653 (relating to failure to pay tax) is amended to read as follows: "SEC. 6653. ADDITIONS TO TAX FOR NEGLIGENCE AND FRAUD."

(2) The item relating to section 6653 in the table of sections for subpart A of chapter 68 is amended to read as follows: "Sec. 6653. Additions to tax for negligence and fraud."

(e) EFFECTIVE DATE.—The amendments made by this section shall apply to returns the due date for which (determined without regard to extensions) is after December 31, 1986. SEC. 1504. INCREASE IN PENALTY FOR SUBSTANTIAL UNDERSTATEMENT OF LIABILITY.

(a) IN GENERAL.—Subsection (a) of section 6661 (relating to substantial understatement of liability) is amended by striking out "10 percent" and inserting in lieu thereof "20 percent". (b) EFFECTIVE DATE.—The amendment made by this section shall apply to returns the due date for which (determined without regard to extensions) is after December 31, 1986.

�

license: Creative Commons - Attribution Share-Alike - https://creativecommons.org/licenses/by-sa/4.0/


text:
Page:United States Statutes at Large Volume 100 Part 3.djvu/936

 100 STAT. 2744

PUBLIC LAW 99-514—OCT. 22, 1986

Subtitle B—Interest Provisions SEC. 1511. DIFFERENTIAL INTEREST RATE.

(a) GENERAL RULE.—Section 6621 (relating to determination of rate of interest) is amended by striking out subsections (a), (b), and (c) and inserting in lieu thereof the following: "(a) GENERAL RULE.— "(1) OVERPAYMENT RATE.—The overpayment rate established

under this section shall be the sum of— "(A) the short-term Federal rate determined under .,,, subsection (b), plus "(B) 2 percentage points. "(2) UNDERPAYMENT RATE.—The underpayment rate established under this section shall be the sum of— "(A) the short-term Federal rate determined under subsection (b), plus "(B) 3 percentage points. "(b) SHORT-TERM FEDERAL RATE.—For purposes of this section— "(1) GENERAL RULE.—The Secretary shall determine the shortterm Federal rate for the first month in each calendar quarter. "(2) PERIOD DURING WHICH RATE APPLIES.—

"(A) IN GENERAL.—Except as provided in subparagraph (B), the Federal short-term rate determined under paragraph (1) for any month shall apply during the first calendar quarter beginning after such month. "(B) SPECIAL RULE FOR INDIVIDUAL ESTIMATED TAX.—In

•

determining the addition to tax under section 6654 for ^ failure to pay estimated tax for any taxable year, the Federal short-term rate which applies during the 3rd month following such taxable year shall also apply during year. "(3) FEDERAL SHORT-TERM RATE.—The Federal short-term rate for any month shall be the Federal short-term rate determined « during such month by the Secretary in accordance with section 1274(d). Any such rate shall be rounded to the nearest full percent (or, if a multiple of V of 1 percent, such rate shall be 2 increased to the next highest full percent)." (b) COORDINATION BY REGULATION.—The Secretary of the Treasury
 * the first 15 days of the 4th month following such taxable

or his delegate may issue regulations to coordinate section 6621 of the Internal Revenue Code of 1954 (as amended by this section) with section 6601(f) of such Code. Such regulations shall not apply to any period after the date 3 years after the date of the enactment of this Act. (c) TECHNICAL AMENDMENTS.—

(1) Section 6621 is amended— (A) by redesignating subsection (d) as subsection (c), and .:-, (B) by striking out "the adjusted rate established under subsection (b)" in subsection (c)(1) (as so redesignated) and inserting in lieu thereof "the underpayment rate established under this section", and (C) by striking out "annual" in subsection (c)(1) (as so redesignated). (2) Subparagraph (G) of section 47(d)(3) is amended by striking out "determined under section 6621" and inserting in lieu

�


text:
Page:United States Statutes at Large Volume 100 Part 3.djvu/937

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2745

thereof "determined at the underpayment rate established under section 6621". (3) The last sentence of section 48(d)(6)(C)(ii) (defining at risk percentage) is amended by striking out "the rate" and inserting in lieu thereof "the underpayment rate". (4) Subparagraph (B) of section 167(q)(2) is amended by striking out "at the rate determined under section 6621" and inserting in lieu thereof "at the underpayment rate established under section 6621". (5) Subparagraph (B) of section 644(a)(2) is amended by striking out "the annual rate established under section 6621" and inserting in lieu thereof "the underpayment rate established under section 6621". (6) Subparagraph (A) of section 852(e)(3) is amended by striking out "the annual rate established under section 6621" and inserting in lieu thereof "the underpayment rate established under section 6621". (7) Paragraph (2) of section 4497(c) is amended by striking out "at rates determined under section 6621" and inserting in lieu thereof "at the underpayment rate established under section 6621". (8) Subsection (e) of section 6214 is amended by striking out "section 6621(d)(4)" and inserting in lieu thereof "section 6621(c)(4)". (9) Paragraph (1) of section 6332(c) is amended by striking out "an annual rate established under section 6621" and inserting in lieu thereof "the underpayment rate established under section 6621". (10) Subsection (c) of section 6343 is amended by striking out "an annual rate established under section 6621" and inserting in lieu thereof "the overpayment rate established under section 6621". (11) Subsection (a) of section 6601 is amended by striking out "an annual rate established under section 6621" and inserting in lieu thereof "the underpayment rate established under section 6621". (12) Section 6602 is amended by striking out "an annual rate established under section 6621" and inserting in lieu thereof "the underpayment rate established under section 6621". (13) Subsection (a) of section 6611 is amended by striking out "an annual rate established under section 6621" and inserting in lieu thereof "the overpayment rate established under section 6621". (14) Paragraph (1) of section 6654(a) is amended by striking out "the applicable annual rate established under section 6621" and inserting in lieu thereof "the underpayment rate established under section 6621". (15) Paragraph (1) of section 6655(a) is amended by striking out "the rate established under section 6621" and inserting in lieu thereof "the underpayment rate established under section 6621". (16) Subsection (g) of section 7426 is amended by striking out "an annual rate established under section 6621" and inserting in lieu thereof "the overpayment rate established under section 6621". (17) Section 1961(c)(1) of title 28, United States Code, is amended by striking out "a rate established under section 6621"

�


text:
Page:United States Statutes at Large Volume 100 Part 3.djvu/938

 100 STAT. 2746

PUBLIC LAW 99-514—OCT. 22, 1986

"

and inserting in lieu thereof "the underpayment rate or overpayment rate (whichever is appropriate) established under I section 6621". 3 (18) Section 2411 of title 28, United States Code, is amended by striking out "an annual rate established under section 6621" and inserting in lieu thereof "the overpayment rate established under section 6621". (d) EFFECTIVE DATE.—The amendments made by this section shall apply for purposes of determining interest for periods after December 31, 1986. SEC. 1512. INTEREST ON ACCUMULATED EARNINGS TAX TO ACCRUE BEGINNING ON DATE RETURN IS DUE.

(a) IN GENERAL.—Subsection (b) of section 6601 (relating to last date prescribed for payment) is amended by redesignating paragraph (4) as paragraph (5) and by inserting after paragraph (3) the following new paragraph: "(4) ACCUMULATED EARNINGS TAX.—In the case of the tax imposed by section 531 for any taxable year, the last date prescribed for payment shall be deemed to be the due date (without regard to extensions) for the return of tax imposed by subtitle A for such taxable year." (b) EFFECTIVE DATE.—The amendments made by this section shall apply to returns the due date for which (determined without regard to extensions) is after December 31, 1985.

Subtitle C—Information Reporting Provisions SEC. 1521. REQUIREMENT OF REPORTING FOR REAL ESTATE TRANSACTIONS.

(a) GENERAL RULE.—Section 6045 (relating to returns of brokers) is amended by adding at the end thereof the following new subsection: "(e) RETURN REQUIRED IN THE CASE OF REAL ESTATE TRANSACTIONS.—

"(1) IN GENERAL.—In the case of a real estate transaction, the s: real estate broker shall file a return under subsection (a) and a lo statement under subsection (b) with respect to such transaction. "(2) REAL ESTATE BROKER.—For purposes of this subsection, the term 'real estate broker' means any of the following persons involved in a real estate transaction in the following order: "(A) the person (including any attorney or title company) responsible for closing the transaction, ' (B) the mortgage lender, ... "(C) the seller's broker, K= r.;, • "(D) the buyer's broker, or "(E) such other person designated in regulations preT: scribed by the Secretary. {• Any person treated as a real estate broker under the preceding f sentence shall be treated as a broker for purposes of subsection (c)(1)." (b) BACKUP WITHHOLDING REQUIREMENTS.—Paragraph (5) of section 3406(h) (relating to other definitions and special rules) is amended by adding at the end thereof the following new subparagraph: e»

f

"(D) R E A L ESTATE B R O K E R N O T T R E A T E D A S A B R O K E R. —

Except as provided by regulations, such term shall not

�


text:
Page:United States Statutes at Large Volume 100 Part 3.djvu/939

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2747

include any real estate broker (as defined in section 6045(e)(2))". (c) EFFECTIVE DATE.—The amendments made by this section shall apply to real estate transactions closing after December 31, 1986. SEC. 1522. INFORMATION REPORTING ON PERSONS RECEIVING CONTRACTS FROM CERTAIN FEDERAL AGENCIES.

(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. 6050M. RETURNS RELATING TO PERSONS RECEIVING CONTRACTS FROM FEDERAL EXECUTIVE AGENCIES.

"(a) REQUIREMENT OF REPORTING.—The head of every Federal executive agency which enters into any contract shall make a return (at such time and in such form as the Secretary may by regulations prescribe) setting forth— "(1) the name, address, and TIN of each person with which ii such agency entered into a contract during the calendar year, J and "(2) such other information as the Secretary may require. "(b) FEDERAL EXECUTIVE AGENCY.—For purposes of this section, the term 'Federal executive agency* means— "(1) any Executive agency (as defined in section 105 of title 5, United States Code) other than the General Accounting Office, "(2) any military department (as defined in section 102 of such title), and "(3) the United States Postal Service and the Postal Rate Commission. "(c)

AUTHORITY TO EXTEND REPORTING TO LICENSES AND SUB-

CONTRACTS.—To the extent provided in regulations, this section also shall apply to— "(1) licenses granted by Federal executive agencies, and "(2) subcontracts under contracts to which subsection (a) ^ applies. "(d) AUTHORITY TO PRESCRIBE MINIMUM AMOUNTS.—This section shall not apply to contracts or licenses in any class which are below a minimum amount or value which may be prescribed by the Secretary by regulations for such class." (b) CLERICAL AMENDMENT.—The table of sections for such subpart B is amended by adding at the end thereof the following new item: ^j "Sec. 6050M. Returns relating to persons receiving contracts from Federal '^*"'' * executive agencies."

(c) EFFECTIVE DATE.—The amendments made by this section shall apply to contracts (and subcontracts) entered into, and licenses granted, before, on, or after January 1, 1987. SEC. 1523. RETURNS REGARDING PAYMENTS OF ROYALTIES.

(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. 6050N. RETURNS REGARDING PAYMENTS OF ROYALTIES. "(a) REQUIREMENT OF REPORTING.—Every person—

�


text:
Page:United States Statutes at Large Volume 100 Part 3.djvu/940

 100 STAT. 2748

PUBLIC LAW 99-514—OCT. 22, 1986

"(1) who m a k e s payments of royalties (or similar amounts) aggregating $10 or more to any other person during any cali e n d a r year, or i "(2) who receives payments of royalties (or similar amounts) as a nominee and who m a k e s payments aggregating $10 or more during any calendar year to any other person with respect to the royalties (or similar amounts) so received, shall m a k e a r e t u r n according to the forms or regulations prescribed by the Secretary, setting forth the aggregate a m o u n t of such payments and the n a m e and address of the person to whom paid. "(b) STATEMENTS TO B E F U R N I S H E D TO PERSONS W I T H RESPECT To W H O M INFORMATION Is F U R N I S H E D. — E v e r y person r e q u i r e d to m a k e

a r e t u r n under subsection (a) shall furnish to each person whose n a m e is required to be set forth in such r e t u r n a w r i t t e n statement showing— "(1) the n a m e and address of the person required to m a k e such r e t u r n, and "(2) the aggregate a m o u n t of payments to the person required to be shown on such r e t u r n. The w r i t t e n statement required under the preceding sentence shall be furnished (either in person or in a statement mailing by firstclass mail which includes a d e q u a t e notice that the statement is enclosed) to the person on or before January 31 of the year following the calendar year for which the r e t u r n under subsection (a) w a s made and shall be in such form a s the Secretary may prescribe by regulations. "(c) EXCEPTION FOR P A Y M E N T S TO CERTAIN P E R S O N S. — E x c e p t to

the extent otherwise provided in regulations, this section shall not apply to any a m o u n t paid to a person described in subparagraph (A), (B), (C), (D), (E), or (F) of section 6049(b)(4)." (b) CONFORMING AMENDMENTS. —

(1) Paragraph (3) of section 34060t)) (relating to backup withholding) is amended— (A) by striking out " o r " a t the e n d of subparagraph (C), (B) by striking out the period a t the e n d of subparagraph ,; (D) and inserting in lieu thereof ", or", and vt • * (C) by adding a t the e n d thereof the following new nil subparagraph: "(E) section 6050N (relating to payments of royalties)." ti. (2) Subsection (a) of section 6041 (relating to information a t r source) is amended by striking out " o r 6049(a)" and inserting in lieu thereof "6049(a), or 6050N(a)". (3) Section 6676 (relating to failure to supply identifying numbers) is amended— (A) by striking o u t " o r 6049" in subsection (a)(3) and inserting in lieu thereof "6049, or 6050N", (B) by striking o u t "or 6049" in subsection (b)(1)(A) and inserting in lieu thereof "6049, or 6050N", and ,

,

(C) by striking o u t " A N D D IV I D E N D " in the heading for

''"*"'"'

subsection (b) and inserting in lieu thereof ", DIVIDENDS,

AND ROYALTIES". (c) CLERICAL AMENDMENT. — The t a b l e of sections of subpart B of

part III of subchapter A of chapter 61 is amended by adding a t the end thereof the following new item: "Sec. 6050N. Returns regarding payments of royalties."

(.<

�


text:
Page:United States Statutes at Large Volume 100 Part 3.djvu/941

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2749

(d) EFFECTIVE DATE.—The amendments made by this section shall apply with respect to payments made after December 31, 1986. SEC. 1524. TINS REQUIRED FOR DEPENDENTS CLAIMED ON TAX RETURNS.

(a) GENERAL RULE.—Section 6109 (relating to identifying numbers) is amended by adding at the end thereof the following new subsection: "(e) FURNISHING NUMBER FOR CERTAIN DEPENDENTS.—If—

"(1) any taxpayer claims an exemption under section 151 for any dependent on a return for any taxable year, and "(2) such dependent has attained the age of 5 years before the close of such taxable year, such taxpayer shall include on such return the identifying number (for purposes of this title) of such dependent." 03) PENALTY FOR FAILURE TO SUPPLY TIN.—Section 6676 (relating to failure to supply identifying numbers) is amended by adding at the end thereof the following new subsection: "(e) PENALTY FOR FAILURE TO SUPPLY TIN OF DEPENDENT.—

"(1) IN GENERAL.—If any person required under section 6109(e) to include the TIN of any dependent on his return fails 0 to include such number on such return (or includes an incorrect 1 number), such person shall, unless it is shown that such failure is due to reasonable cause and not willful neglect, pay a penalty i- of $5 for each such failure. "(2) SUBSECTION (a) NOT TO APPLY.—Subsection (a) shall not apply to any failure described in paragraph (1) of this subsection." (c) EFFECTIVE DATE.—The amendments made by this section shall apply to returns the due date for which (determined without regard to extensions) is after December 31, 1987. SEC. 1525. TAX-EXEMPT INTEREST REQUIRED TO BE SHOWN ON RETURN.

(a) IN GENERAL.—Section 6012 (relating to persons required to make returns of income) is amended by redesignating subsection (d) as subsection (e) by inserting after subsection (c) the following new subsection: "(d) TAX-EXEMPT INTEREST REQUIRED TO B E SHOWN ON RETURN.—

Every person required to file a return under this section for the taxable year shall include on such return the amount of interest received or accrued during the taxable year which is exempt from the tax imposed by chapter 1." (b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply to taxable years beginning after December 31, 1986.

Subtitle D—Provisions Relating to Tax Shelters SEC. 1531. MODIFICATION OF TAX SHELTER RATIO TEST FOR REGISTRATION OF TAX SHELTERS.

(a) IN GENERAL.—Subparagraph (A) of section 6111(c)(2) (defining tax shelter ratio) is amended by striking out "200 percent" and inserting in lieu thereof "350 percent". (b) EFFECTIVE DATE.—The amendment made by this section shall apply to any tax shelter (within the meaning of section 6111 of the

�


text:
Page:United States Statutes at Large Volume 100 Part 3.djvu/942

 100 STAT. 2750

PUBLIC LAW 99-514—OCT. 22, 1986

Internal Revenue Code of 1986 as amended by this section) interests in which are first offered for sale after December 31, 1986. SEC. 1532. INCREASED PENALTY SHELTERS.

FOR FAILURE TO REGISTER TAX

(a) IN GENERAL.—Paragraph (2) of section 6707(a) (relating to penalty for failure to register tax shelters) is amended to read as follows: "(2) AMOUNT OF PENALTY.—The penalty imposed under paragraph (1) with respect to any tax shelter shall be an amount "^^ equal to the greater of— "(A) 1 percent of the aggregate amount invested in such tax shelter, or "(B) $500." (b) EFFECTIVE DATE.—The amendment made by this section shall apply to failures with respect to tax shelters interests in which are first offered for sale after the date of the enactment of this Act. SEC. 1533. PENALTY FOR FAILURE TO INCLUDE TAX SHELTER IDENTIFICATION NUMBER ON RETURN INCREASED TO $250.

(a) IN GENERAL.—Paragraph (2) of section 67070t>) (relating to penalty for failure to furnish tax shelter identification number) is amended by striking out "$50" and inserting in lieu thereof "$250". (b) EFFECTIVE DATE.—The amendment made by this section shall apply to returns filed after the date of the enactment of this Act. SEC. 1534. INCREASED PENALTY FOR FAILURE TO MAINTAIN LISTS OF INVESTORS IN POTENTIALLY ABUSIVE TAX SHELTERS.

(a) IN GENERAL.—Subsection (a) of section 6708 (relating to failure to maintain lists of investors in potentially abusive tax shelters) is amended by striking out "$50,000" and inserting in lieu thereof "$100,000". (b) EFFECTIVE DATE.—The amendments made by this section shall apply to failures occurring or continuing after the date of the enactment of this Act. SEC. 1535. CLARIFICATION OF TREATMENT OF SHAM OR FRAUDULENT TRANSACTIONS UNDER SECTION 6621(c). (a) CLARIFICATION OF TREATMENT OF SHAM OR FRAUDULENT TRANS-

ACTIONS.—Subparagraph (A) of section 6621(c)(3) (as so redesignated) is amended by striking out "and" at the end of clause (iii), by striking out the period at the end of clause (iv) and inserting in lieu thereof ", and", and by adding at the end thereof the following new clause: "(v) any sham or fraudulent transaction." (b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply to interest accruing after December 31, 1984; except that such amendment shall not apply in the case of any underpayment with respect to which there wgis a final court decision before the date of the enactment of this Act.

^tii

�


text:
Page:United States Statutes at Large Volume 100 Part 3.djvu/943

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2751

fc Subtitle E—Estimated Tax Provisions SEC. 1541. CURRENT YEAR LIABILITY TEST INCREASED FROM 80 TO 90 PERCENT FOR ESTIMATED TAX PAYMENTS BY INDIVIDUALS.

(a) IN GENERAL.—Clause (i) of section 6654(d)(l)(B) (defining required annual payment) is amended by striking out "80 percent" each place it appears and inserting in lieu thereof "90 percent". (b) TECHNICAL AMENDMENTS.—

(1) The table contained in clause (ii) of section 6654(d)(2)(C) (defining applicable percentage) is amended— (A) by striking out "20" and inserting in lieu thereof "22.5", (B) by striking out "40" and inserting in lieu thereof "45", (C) by striking out "60" and inserting in lieu thereof .1 "67.5", and (D) by striking out "80" and inserting in lieu thereof "90". (2) Subparagraph (C) of section 6654(i)(l) (relating to special rules for farmers and fishermen) is amended by striking out "80 percent" and inserting in lieu thereof "90 percent". (3) The table contained in subparagraph (B) of section 6654(j)(3) (relating to special rules for nonresident aliens) is amended— (A) by striking out "40" and inserting in lieu thereof "45", (B) by striking out "60" and inserting in lieu thereof "67.5", and (C) by striking out "80" and inserting in lieu thereof "90". (c) EFFECTIVE DATE.—The amendments made by this section shall apply to taxable years beginning after December 31, 1986. SEC. 1542. CERTAIN TAX-EXEMPT ORGANIZATIONS SUBJECT TO CORPORATE ESTIMATED TAX RULES.

(a) GENERAL RULE.—Section 6154 (relating to installment payments of estimated income tax by corporations) is amended by adding at the end thereof the following new subsection: "(h) CERTAIN TAX-EXEMPT ORGANIZATIONS.—For purposes of this section and section 6655— "(1) any organization subject to the tax imposed by section 511, and any private foundation subject to the tax imposed by section 4940, shall be treated as a corporation subject to tax under section 11, "(2) any tax imposed by section 511 or 4940 shall be treated as a tax imposed by section 11, and "(3) any reference to taxable income shall be treated as including a reference to unrelated business taxable income or net investment income (as the case may be)." (b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply to taxable years beginning after December 31, 1986. SEC. 1543. WAIVER OF ESTIMATED PENALTIES FOR 1986 UNDERPAYMENTS ATTRIBUTABLE TO THIS ACT.

No addition to tax shall be made under section 6654 or 6655 of the Internal Revenue Code of 1986 (relating to failure to pay estimated tax) for any period before April 16, 1987 (March 16, 1987, in the case of a taxpayer subject to section 6655 of such Code), with respect to

�


text:
Page:United States Statutes at Large Volume 100 Part 3.djvu/944

 100 STAT. 2752

PUBLIC LAW 99-514—OCT. 22, 1986

any underpayment, to the extent such underpayment was created or increased by any provision of this Act.

Subtitle F—Provisions Regarding Judicial , Proceedings SEC. 1551. LIMITATIONS ON AWARDING OF COURT COSTS AND CERTAIN FEES MODIFIED. (a) MAXIMUM DOLLAR LIMITATION REMOVED.—Subsection (b) of

section 7430 (relating to awarding of court costs and certain fees) is amended by striking out paragraph (1) and redesignating paragraphs (2), (3), and (4) as paragraphs (1), (2), and (3), respectively. (b) AWARDING OF COURT COSTS AND CERTAIN FEES DENIED I F PREVAILING PARTY PROTRACTS PROCEEDINGS.—Section 7430(b) (relat-

ing to limitations to awarding of court costs and certain fees) is amended by adding at the end thereof the following new paragraph: "(4)

COSTS

DENIED

WHERE

PARTY

PREVAILING

PROTRACTS

PROCEEDINGS.—No award for reasonable litigation costs may be made under subsection (a) with respect to any portion of the civil proceeding during which the prevailing party has unreasonably protracted such proceeding." (c) ADDITIONAL LIMITATIONS ON FEES OF EXPERT WITNESSES AND

ATTORNEYS.—Subparagraph (A) of section 7430(c)(1) (defining reasonable litigation costs) is amended to read as follows: "(A) IN GENERAL.—The term 'reasonable litigation costs' includes— "(i) reasonable court costs, and "(ii) based upon prevailing market rates for the kind or quality of services furnished— ^^^' "(I) the reasonable expenses of expert witnesses in connection with the civil proceeding, except that no expert witness shall be compensated at a rate in excess of the highest rate of compensation for expert witnesses paid by the United States, "(II) the reasonable cost of any study, analysis, engineering report, test, or project which is found uby the court to be necessary for the preparation of the party's case, and i. "(Ill) reasonable fees paid or incurred for the services of attorneys in connection with the civil , 'c,^:. '^. proceeding, except that such fees shall not be in excess of $75 per hour unless the court determines i t ' that an increase in the cost of living or a special ^ factor, such as the limited availability of qualified attorneys for such proceeding, justifies a higher rate." (d) DEFINITION OF PREVAILING PARTY.—Subparagraph (A) of section 7430(c)(2) (defining prevailing party) is amended— (1) by striking out "was unreasonable" in clause (i) and inserting in lieu thereof "was not substantially justified", and (2) by striking out "and" at the end of clause (i), by striking out the period at the end of clause (ii) and inserting in lieu thereof ", and", and by adding at the end thereof the following new clause:

�


text:
Page:United States Statutes at Large Volume 100 Part 3.djvu/945

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2753

"(iii) meets the requirements of section 504(b)(1)(B) of title 5, United States Code (as in effect on the date of the enactment of the Tax Reform Act of 1986 and applied by taking into account the commencement of the proceeding described in subsection (a) in lieu of the initiation of the adjudication referred to in such section)." (e)

POSITION

OF

UNITED

STATES

INCLUDES

ADMINISTRATIVE

ACTION.—Section 7430(c) (relating to definitions) is amended by adding at the end thereof the following new paragraph: "(4) POSITION OF UNITED STATES.—The term 'position of the United States' includes— "(A) the position taken by the United States in the civil proceeding, and "(B) any administrative action or inaction by the District Counsel of the Internal Revenue Service (and all subsequent administrative action or inaction) upon which such proceeding is based." (0 TECHNICAL AMENDMENT.—Subsection (a) of section 7430 is amended by inserting "(payable in the case of the Tax Court in the same manner as such an award by a district court)" after "a judgment". (g) PROVISIONS MADE PERMANENT.—Section 7430 is amended by striking out subsection (f). (h) EFFECTIVE DATES.—

(1) GENERAL RULE.—Except as provided in paragraph (2), the amendments made by this section shall apply to amounts paid after September 30, 1986, in civil actions or proceedings, commenced after December 31, 1985. (2) SUBSECTION (f).—The amendment made by subsection (f) shall take effect as if included in the amendments made by section 292 of the Tax Equity and Fiscal Responsibility Act of 1982. (3) APPLICABILITY OF AMENDMENTS TO CERTAIN PRIOR CASES.—

The amendments made by this section shall apply to any case commenced after December 31, 1985, and finally disposed of before the date of the enactment of this Act, except that in any such case, the 30-day period referred to in section 2412(d)(1)(B) of title 28, United States Code, or Rule 231 of the Tax Court, as the case may be, shall be deemed to commence on the date of the enactment of this Act. SEC. 1552. FAILURE TO PURSUE ADMINISTRATIVE REMEDIES.

(a) GENERAL RULE.—Section 6673 (relating to damages assessable for instituting proceedings before the Tax Court primarily for delay, etc.) is amended by striking out "or that the taxpayer's position in such proceedings is frivolous or groundless" and inserting in lieu thereof ", that the taxpayer's position in such proceeding is frivolous or groundless, or that the taxpayer unreasonably failed to pursue available administrative remedies". O> EFFECTIVE DATE.—The amendment made by subsection (a) t) shall apply to proceedings commenced after the date of the enactment of this Act. (c) REPORT.—The Secretary of the Treasury or his delegate and the Tax Court shall each prepare a report for 1987 and for each 2calendar year period thereafter on the inventory of cases in the Tax Court and the measures to close cases more efficiently. Such reports

�


text:
Page:United States Statutes at Large Volume 100 Part 3.djvu/946

 100 STAT. 2754

PUBLIC LAW 99-514—OCT. 22, 1986

shall be submitted to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate. SEC. 1553. TAX COURT PRACTICE FEE.

(a) IN GENERAL.—Part III of Subchapter C of chapter 76 (relating to miscellaneous provisions) is amended by adding at the end thereof the following new section: "SEC. 7475. PRACTICE FEE.

"(a) IN GENERAL.—The Tax Court is authorized to impose a periodic registration fee on practitioners admitted to practice before such Court. The frequency and amount of such fee shall be determined by the Tax Court, except that such amount may not exceed $30 per year. "(b) USE OF FEES.—The fees described in subsection (a) shall be available to the Tax Court to employ independent counsel to pursue disciplinary matters." (b) CONFORMING AMENDMENTS.—

(1) The second sentence of section 7472 (relating to expenditures) is amended by striking out "All" and inserting in lieu thereof "Except as provided in section 7475, all". (2) Section 7473 (relating to disposition of fees) is amended by striking out "All" and inserting in lieu thereof "Except as provided in section 7475, all". (c) EFFECTIVE DATE.—The amendments made by this section shall take effect on January 1, 1987. SEC. 1554. CLARIFICATION OF JURISDICTION OVER ADDITION TO TAX FOR FAILURE TO PAY AMOUNT OF TAX SHOWN ON RETURN.

(a) IN GENERAL.—Subsection (a) of section 6214 (relating to determinations by Tax Court) is amended by striking out "addition to the tax" and inserting in lieu thereof "any addition to the tax". (b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply to any action or proceeding in the Tax Court with respect to which a decision has not become final (as determined under section 7481 of the Internal Revenue Code of 1954) before the date of the enactment of this Act. SEC. 1555. AUTHORITY TO REQUIRE ATTENDANCE OF UNITED STATES MARSHALS AT TAX COURT SESSIONS.

(a) IN GENERAL.—Subsection (e) of section 7456 (relating to incidental powers) is amended by adding at the end thereof the following new sentence: "The United States marshal for any district in which the Tax Court is sitting shall, when requested by the chief judge of the Tax Court, attend any session of the Tax Court in such district." (b) EFFECTIVE DATE.—The amendment made by this section shall take effect on the date of the enactment of this Act. SEC. 1556. CHANGES IN CERTAIN PROVISIONS RELATING TO SPECIAL TRIAL JUDGES.

(a) IN GENERAL.—Part I of subchapter C of chapter 76 (relating to judicial proceedings) is amended by inserting after section 7443 the following new section:

�


text:
Page:United States Statutes at Large Volume 100 Part 3.djvu/947

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2755

"SEC. 7443A, SPECIAL TRIAL JUDGES.

"(a) APPOINTMENT.—The chief judge may, from time to time, appoint special trial judges who shall proceed under such rules and regulations as may be promulgated by the Tax Court. "(b) PROCEEDINGS WHICH MAY B E ASSIGNED TO SPECIAL TRIAL

JUDGES.—The chief judge may assign— "(1) any declaratory judgment proceeding, "(2) any proceeding under section 7463, "(3) any proceeding where neither the amount of the deficiency placed in dispute (within the meaning of section 7463) nor the amount of any claimed overpayment exceeds $10,000, and "(4) any other proceeding which the chief judge may designate, to be heard by the special trial judges of the court. "(c) AUTHORITY TO MAKE COURT DECISION.—The court may authorize a special trial judge to make the decision of the court with respect to any proceeding described in paragraph (1), (2), or (3) of subsection (b), subject to such conditions and review as the court may provide. "(d) SALARY.—Each special trial judge shall receive salary— "(1) at a rate equal to 90 percent of the rate for judges of the Tax Court, and "(2) in the same installments as such judges. "(e) EXPENSES FOR TRAVEL AND SUBSISTENCE.—Subsection (d) of

section 7443 shall apply to special trial judges subject to such rules and regulations as may be promulgated by the Tax Court." (b) TECHNICAL AMENDMENTS.—

(1) Section 7456 (relating to administration of oaths and procurement of testimony) is amended by striking out subsections (c) and (d) and by redesignating subsection (e) as subsection

(0.

(2) Subsection (c) of section 7471 is amended by striking out "section 7456(c)" and inserting in lieu thereof "subsections (d) and (e) of section 7443A". (3) The table of sections for part I of subchapter C of chapter 76 is amended by inserting after the item relating to section 7443 the following new item: "Sec. 7443A. Special trial judges." (c) EFFECTIVE DATES.—

(1) IN GENERAL.—Except as provided in paragraph (2), the amendments made by this section shall take effect on the date of the enactment of this Act. (2) SALARY.—Subsection (d) of section 7443A of the Internal Revenue Code of 1954 (as added by this section) shall take effect on the 1st day of the 1st month beginning after the date of the enactment of this Act. (3)

NEW

APPOINTMENTS

NOT REQUIRED.—Nothing

in

the

amendments made by this section shall be construed to require the reappointment of any individual serving as a special trial judge of the Tax Court on the day before the date of the enactment of this Act.

�


text:
Page:United States Statutes at Large Volume 100 Part 3.djvu/948

 100 STAT. 2756

PUBLIC LAW 99-514—OCT. 22, 1986

SEC. 1557. EFFECT ON RETIRED PAY BY ELECTION TO PRACTICE LAW. ETC., AFTER RETIREMENT. (a)

CHANGE

I N A G E A N D SERVICE REQUIREMENTS FOR RETIRE-

M E N T. — Paragraph (2) of section 7447(b) (relating to retirement) is amended to read as follows: "(2) Any judge who m e e t s the age and service requirements set forth in the following table may retire: And the years of service as a judge are at least: 15 14 13 12 11 10."

"The judge has attained age: 65 66 67 68 69 70 (b)

E F F E C TO N RETIRED P A Y O F PRACTICING L A W, E T C., A F T E R

RETIREMENT.—Subsection (f) of section 7447 (relating to individuals receiving retired pay to be available for recall) is amended to read as follows: "(f) RETIRED P A Y AFFECTED I N CERTAIN C A S E S. — I n the case of

an

individual for whom a n election to receive retired p a y under subsection (d) is in effect— "(1) 1-YEAR FORFEITURE FOR FAILURE TO PERFORM JUDICIAL DUTIES.—If such individual during any c a l e n d a r year fails to perform judicial duties required of h i m by subsection (c), such individual shall forfeit all r i g h t s to retired pay under subsection (d) for the 1-year period which begins on the 1st day on which h e so fails to perform such duties. "(2) P E R M A N E N T FORFEITURE O F RETIRED PAY WHERE CERTAIN

NON-GOVERNMENT SERVICES PERFORMED.—If such individual performs (or supervises or directs the performance of) legal or accounting services in the field of Federal tax a t i o n for his client, his employer, or any of his employer's clients, such individual shall forfeit all rights to retired pay under subsection (d) for all periods beginning on or after the 1st day on which h e engages in any such activity. The preceding sentence shall not apply to any civil office or employment under the Government of the United States. "(3)

SUSPENSION

OF RETIRED PAY DURING

PERIOD OF COM-

PENSATED GOVERNMENT SERVICE.—If such individual accepts compensation for civil office or employment under the Government of the United States (other than the performance of judicial duties pursuant to subsection (c)), such individual shall forfeit all rights to retired pay under subsection (d) for the period for which such compensation is received. "(4) FORFEITURES O F RETIRED PAY UNDER PARAGRAPHS (i) AND (2) NOT TO A P P L Y WHERE INDIVIDUAL ELECTS TO FREEZE AMOUNT OF RETIRED PAY.—

"(A) IN GENERAL.—If any individual m a k e s a n election under this paragraph — "(i) paragraph s (1) and (2) (and subsection (c)) shall not apply to such individual beginning on the date such election t a k e s effect, and "(ii) the retired pay under subsection (d) payable to such individual for periods beginning on or after the date such election t a k e s effect shall be equal to the

�


text:
Page:United States Statutes at Large Volume 100 Part 3.djvu/949

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2757

retired pay to which such individual would be entitled without regard to this clause at the time of such election. "(B) ELECTION.—An election under this paragraph— "(i) may be made by an individual only if such individual meets the age and service requirements for retirement under paragraph (2) of subsection (b), "(ii) may be made only during the period during which the individual may make an election to receive retired pay or while the individual is receiving retired pav, and (iii) shall be made in the same manner as the election to receive retired pay. Such an election, once it takes effect, shall be irrevocable. "(C) WHEN ELECTION TAKES EFFECT.—Any election under this paragraph shall take effect on the 1st day of the 1st month following the month in which the election is made." (c) HIGH 3 YEARS OF SALARY MUST B E DURING PERIOD WHEN ELECTION TO RECEIVE RETIRED PAY IS NOT IN EFFECT.—Subsection

(m) of section 7448 (relating to computation of annuities) is amended by adding at the end thereof the following new sentence: "In determining the period of 3 consecutive years referred to in the preceding sentence, there may not be taken into account any period for which an election under section 7447(f)(4) is in effect." (d) CLERICAL AMENDMENTS.—

(1) Subsection (a) of section 7447 (relating to definitions) is amended by striking out paragraph (2) and by redesignating paragraphs (3) and (5) as paragraphs (2) and (3), respectively. (2) Subsection (e) of section 7447 is amended by striking out "Civil Service Commission" each place it appears and inserting in lieu thereof "Office of Personnel Management". (3) Subparagraph (C) of section 7447(g)(2) (relating to coordination with civil service retirement) is amended by striking out "Civil Service Commission" and inserting in lieu thereof "Office of Personnel Management". (e) EFFECTIVE DATE.—

(1) IN GENERAL.—The amendments made by this section shall take effect on the date of the enactment of this Act. (2) FORFEITURE OF RETIRED PAY.—The amendments made by this section shall not apply to any individual who, before the date of the enactment of this Act, forfeited his rights to retired pay under section 7447(d) of the Internal Revenue Code of 1954 by reason of the 1st sentence of section 7447(f) of such Code (as in effect on the day before such date). SEC. 1558. AUTHORIZATION FOR APPEALS ORDERS OF THE TAX COURT.

FROM

INTERLOCUTORY

(a) IN GENERAL.—Subsection (a) of section 7482 (relating to courts of review) is amended by adding at the end thereof the following new paragraph: "(2) INTERLOCUTORY ORDERS.—

"(A) IN GENERAL.—When any judge of the Tax Court includes in an interlocutory order a statement that a controlling question of law is involved with respect to which there is a substantial ground for difference of opinion and that an immediate appeal from that order may materially advance the ultimate termination of the litigation, the

^

�


text:
Page:United States Statutes at Large Volume 100 Part 3.djvu/950

 100 STAT. 2758

PUBLIC LAW 99-514—OCT. 22, 1986

 * 'uJitr United States Court of Appeals may, in its discretion,

,' > permit an appeal to be taken from such order, if application is made to it within 10 days after the entry of such order. Neither the application for nor the granting of an appeal . under this paragraph shall stay proceedings in the Tax Court, unless a stay is ordered by a judge of the Tax Court or by the United States Court of Appeals which has jurisdiction of the appeal or a judge of that court. "(B) ORDER TREATED AS TAX COURT DECISION.—For

pur-

poses of subsections (b) and (c), an order described in this paragraph shall be treated as a decision of the Tax Court. "(C) VENUE FOR REVIEW OF SUBSEQUENT PROCEEDINGS.—If

a United States Court of Appeals permits an appeal to be taken from an order described in subparagraph (A), except as provided in subsection (b)(2), any subsequent review of the decision of the Tax Court in the proceeding shall be made by such Court of Appeals." (b) CLERICAL AMENDMENTS.—The text of subsection (a) of section 7482 (as in effect before the amendment made by subsection (a)) is moved below the subsection heading and 2 ems to the right (so that the left margin of such text is aligned with the left margin of the paragraph (2) added by subsection (a)) and amended by inserting before such text "(1) IN GENERAL.—". (c) EFFECTIVE DATE.—The amendments made by this section shall apply to any order of the Tax Court entered after the date of the enactment of this Act. SEC. 1559. CHANGES RELATING TO ANNUITIES FOR SURVIVING SPOUSES AND DEPENDENT CHILDREN OF TAX COURT JUDGES. (a) INCREASES IN SALARY DEDUCTIONS, AND AUTHORIZATIONS OF APPROPRIATIONS, FOR TAX COURT JUDGES SURVIVORS ANNUITY FUND.— (1) INCREASES IN SALARY DEDUCTIONS.—

r. i ,^-?

(A) Subsection (c) of section 7448 (relating to salary deductions) is amended by striking out "3 percent" and inserting in lieu thereof "3.5 percent". (B) Subsection (d) of section 7448 (relating to deposits in survivors annuity fund) is amended by striking out "3 percent" the second place it appears and inserting in lieu thereof "3.5 percent". (2) AUTHORIZATION OF APPROPRIATIONS.—

(A) IN GENERAL.—Subsection (c) of section 7448 is amended— (i) by striking out "(c) SALARY DEDUCTIONS.—There"

and inserting in lieu thereof the following: "(c) SURVIVORS ANNUITY FUND.— "(1) SALARY DEDUCTIONS.—There",

(ii) by moving the text of such subsection 2 ems to the right, and (iii) by adding at the end thereof the following new paragraph: ,.j^ I

"(2) APPROPRIATIONS WHERE UNFUNDED LIABILITY.—

"(A) IN GENERAL.—Not later than the close of each fiscal year, there shall be deposited in the Treasury of the United States to the credit of the survivors annuity fund, in accordance with such procedures as may be prescribed by the Comptroller General of the United States, amounts re-

�


text:
Page:United States Statutes at Large Volume 100 Part 3.djvu/951

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2759

quired to reduce to zero the unfunded liability (if any) of such fund. Subject to appropriation Acts, such deposits shall be taken from sums available for such fiscal year for the payment of amounts described in subsection (a)(4), and shall immediately become an integrated part of such fund. "(B) EXCEPTION.—The amount required by subparagraph (A) to be deposited in any fiscal year shall not exceed an amount equal to 11 percent of the aggregate amounts described in subsection (a)(4) paid during such fiscal year. '

"(C) UNFUNDED

LIABILITY

DEFINED.—For

purposes

of

subparagraph (A), the term 'unfunded liability' means the amount estimated by the Secretary to be equal to the excess (as of the close of the fiscal year involved) of— . u. "(i) the present value of all benefits payable from the survivors annuity fund (determined on an annual basis in accordance with section 9503 of title 31, United . States Code), over -' ,, "(ii) the sum of— "(I) the present values of future deductions under subsection (c) and future deposits under subsection (d), plus "(II) the balance in such fund as of the close of such fiscal year. '•:

"(D) AMOUNTS NOT CREDITED TO INDIVIDUAL ACCOUNTS.—

Amounts appropriated pursuant to this paragraph shall not i' V'- be credited to the account of any individual for purposes of subsection, (g)." '.

(B) CONFORMING AMENDMENT.—Subsection (h) of section

7448 is amended by striking out "subsection (c)" and inserting in lieu thereof "subsection (c)(1)". (b) INCREASES IN ANNUITIES PAYABLE FROM SURVIVORS ANNUITY FUND.— (1) ANNUITIES FOR SURVIVING SPOUSES.— (A) INCREASE IN ANNUITY.—Subsection (m) of section 7448

f

.

>

(relating to computation of annuities) is amended— (i) by striking out "IVi percent" and inserting in lieu thereof "1.5 percent", and (ii) by striking out "but such annuity shall not" and 'i all that follows down through the end thereof and inserting in lieu thereof "except that such annuity • shall not exceed an amount equal to 50 percent of such average annual salary, nor be less than an amount equal to 25 percent of such average annual salary, and shall be further reduced in accordance with subsection (d) (if applicable)." (B) ANNUITY TO TERMINATE ON REMARRIAGE ONLY IF

a

SPOUSE NOT 55.—The second sentence of section 7448(h) is amended by striking out "or remarriage" and inserting in lieu thereof "or such surviving spouse's remarriage before attaining age 55". (2) ANNUITIES FOR SURVIVING DEPENDENT CHILDREN.— (A) ANNUITY WHERE SURVIVING SPOUSE.—Paragraph (2) of

I

section 7448(h) (relating to entitlement to annuity) is amended by striking out all that follows "equal to" and inserting in lieu thereof the following: "the lesser of—

'.

�


text:
Page:United States Statutes at Large Volume 100 Part 3.djvu/952

 100 STAT. 2760

PUBLIC LAW 99-514—OCT. 22, 1986 "(A) 10 percent of the average annual salary of such judge (determined in accordance with subsection (m)), or "(B) 20 percent of such average annual salary, divided by the n u m b e r of such children; or". (B) A N N U I T Y WHERE N O SURVIVING S P O U S E. — Paragraph

(3) of section 7448(h) is amended by striking o u t all that follows "equal to " and inserting in lieu thereof the following: i " the lesser of— ' "(A) 20 percent of the average annual salary of such judge (determined in accordance with subsection (m)), or ', "(B) 40 percent of such average annual salary, divided by the n u m b e r of such children." (c) AUTHORITY TO ELECT TERMINATION OF PARTICIPATION I N S U R VI VOR A N N U I T Y P R O G R A M. —

(1) IN GENERAL.—Subsection (g) of section 7448 is amended by inserting "or if any judge ceases to be m a r r i e d after making the election under subsection (b) and revokes (in a writing filed as provided in subsection (b)) such election" after "1939". (2) CONFORMING AMENDMENT. — The subsection

heading

for

such subsection (g) is amended by striking o u t " O F SERVICE". (d) EFFECTIVE D A T E. — (1) SALARY DEDUCTIONS.—

(A) The amendment m a d e by subsection (a)(1)(A) shall t < \ apply to a m o u n t s paid after November 1, 1986. r Jt (B) The amendment m a d e by subsection (a)(1)(B) shall apply to service after November 1, 1986. (2) APPROPRIATIONS.—The amendments m a d e by subsection ? (a)(2) shall apply to fiscal year s beginning after 1986. (3) COMPUTATION OF A N N U I T I E S. — The amendments m a d e by

subsection (b) shall apply to a n n u i t i e s the s t a r t i n g date of which is after November 1, 1986. (4) OPPORTUNITY TO REVOKE SURVIVOR ANNUITY ELECTION.—

I •'

is-

(A) IN GENERAL.—Any individual who before November 1, 1986, m a d e a n election under subsection (b) of section 7448 of the I n t e r n a l Revenue Code of 1954 may revoke such election. Such a revocation shall constitute a complete withd r a w a l from the survivor a n n u i t y program provided for in such section and shall be filed a s provided for elections under such subsection. (B)

EFFECT

O F REVOCATION.—Any

revocation

under

subparagraph (A) shall have the s a m e effect a s if the r e were a termination to which section 7448(g) of such Code applies on the date such revocation is filed. (C)

PERIOD

REVOCATION

PERMITTED.—Any

revocation

under subparagraph (A) may be m a d e only during the 180day period beginning on the date of the e n a c t m e n t of this Act. •,

(5) OPPORTUNITY TO ELECT SURVIVOR ANNUITY W H E R E PRIOR

REVOCATION.—Any individual who under paragraph (4) revoked a n election under subsection (b) of section 7448 of such Code deposits to the credit of the survivors a n n u i t y fund under subsection (c) of such section the e n t i r e a m o u n t paid to such individual under paragraph (4), together with i n t e r e s t computed as provided in subsection (d) of such section.
 * may thereafter m a k e such a n election only if such individual

�


text:
Page:United States Statutes at Large Volume 100 Part 3.djvu/953

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2761

Subtitle G—Tax Administration Provisions SEC. 1561. SUSPENSION OF STATUTE OF LIMITATIONS IF THIRD-PARTY RECORDS NOT PRODUCED WITHIN 6 MONTHS AFTER SERVICE OF SUMMONS.

(a) IN GENERAL.—Subsection (e) of section 7609 (relating to special procedures for third-party summonses) is amended to read as follows: "(e) SUSPENSION OF STATUTE OF LIMITATIONS.— "(1) SUBSECTION (b) ACTION.—If any person takes any action

e

as provided in subsection (b) and such person is the person with respect to whose liability the summons is issued (or is the agent, nominee, or other person acting under the direction or control of such person), then 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 a proceeding, and appeals therein, with respect to the enforcement of such summons is pending. "(2) SUSPENSION AFTER 6 MONTHS OF SERVICE OF SUMMONS.—In

c

a I

the absence of the resolution of the third-party recordkeeper's response to the summons described in subsection (c), the running of any period of limitations under section 6501 or under section 6531 with respect to any person with respect to whose liability the summons is issued other (other than a person taking action as provided in subsection (b)) shall be suspended for the period— "(A) beginning on the date which is 6 months after the service of such summons, and "(B) ending with the final resolution of such response." (b) NOTICE OF SUSPENSION IN THE CASE OF A JOHN DOE SUMMONS.—

Section 7609(i) (relating to duty of third-party recordkeeper) is amended by adding at the end thereof the following new paragraph: "(4) NOTICE OF SUSPENSION OF STATUTE OF LIMITATIONS IN THE CASE OF A JOHN DOE SUMMONS.—In the case of a summons

described in subsection (f) with respect to which any period of limitations has been suspended under subsection (e)(2), the third-party recordkeeper shall provide notice of such suspension to any person described in subsection (f)." (c) EFFECTIVE DATE.—The amendments made by this section shall take effect on the date of the enactment of this Act. SEC. 1562. AUTHORITY

TO RESCIND NOTICE OF DEFICIENCY WITH

T A X P A Y E R S CONSENT.

(a) IN GENERAL.—Section 6212 (relating to notice of deficiency) is amended by adding at the end thereof the following new subsection: "(d) AUTHORITY TO RESCIND NOTICE OF DEFICIENCY WITH TAXPAYER'S CONSENT.—The Secretary may, with the consent of the

taxpayer, rescind any notice of deficiency mailed to the taxpayer. Any notice so rescinded shall not be treated as a notice of deficiency for purposes of subsection (c)(1) (relating to further deficiency letters restricted), section 6213(a) (relating to restrictions applicable to deficiencies; petition to Tax Court), and section 6512(a) (relating to limitations in case of petition to Tax Court), and the taxpayer shall have no right to file a petition with the Tax Court based on such notice."

�


text:
Page:United States Statutes at Large Volume 100 Part 3.djvu/954

 100 STAT. 2762

PUBLIC LAW 99-514—OCT. 22, 1986

(b) EFFECTIVE DATE.—The amendment made by this section shall apply to notices of deficiency issued on or after January 1, 1986. SEC. 1563. AUTHORITY TO ABATE INTEREST DUE TO ERRORS OR DELAYS BY THE INTERNAL REVENUE SERVICE.

(a) IN GENERAL.—Section 6404 (relating to abatements) is amended by adding at the end thereof the following new subsection: "(e) ASSESSMENTS OF INTEREST ATTRIBUTABLE TO ERRORS AND DELAYS BY INTERNAL REVENUE SERVICE.—

"(1) IN GENERAL.—In the case of any assessment of interest on— "(A) any deficiency attributable in whole or in part to any error or delay by an officer or employee of the Internal Revenue Service (acting in his official capacity) in performing a ministerial act, or • "(B) any payment of any tax described in section 6212(a) to the extent that any delay in such payment is attributable to such an officer or employee being dilatory in performing a ministerial act, the Secretary may abate the assessment of all or any part of such interest for any period. For purposes of the preceding sentence, an error or delay shall be taken into account only if no significant aspect of such error or delay can be attributed to the taxpayer involved, and after the Internal Revenue Service has contacted the taxpayer in writing with respect to such deficiency or payment. •K^

"(2) INTEREST ABATED WITH RESPECT TO ERRONEOUS REFUND

CHECK.—The Secretary shall abate the assessment of all interest r' on any erroneous refund under section 6602 until the date demand for repayment is made, unless— "(A) the taxpayer (or a related party) has in any way caused such erroneous refund, or "(B) such erroneous refund exceeds $50,000." ' (b) EFFECTIVE DATE.—

(1) IN GENERAL.—The amendment made by subsection (a) shall apply to interest accruing with respect to deficiencies or payments for taxable years beginning after December 31, 1978. (2) STATUTE OF LIMITATIONS.—If refund or credit of any amount resulting from the application of the amendment made by subsection (a) is prevented at any time before the close of the date which is 1 year after the date of the enactment of this Act by the operation of any law or rule of law (including res ,,, judicata), refund or credit of such amount (to the extent attributable to the application of the amendment made by subsection (a)) may, nevertheless, be made or allowed if claim therefore is filed before the close of such 1-year period. SEC. 1564. SUSPENSION OF COMPOUNDING DEFICIENCY SUSPENDED.

WHERE

INTEREST

ON

(a) IN GENERAL.—Subsection (c) of section 6601 (relating to suspension of interest in certain income, estate, gift, and certain excise taxes cases) is amended by inserting before the period at the end thereof "and interest shall not be imposed during such period on any interest with respect to such deficiency for any prior period". (b) EFFECTIVE DATE.— (1) EFFECTIVE DATE.—The amendment made by subsection (a)

shall apply to interest accruing after December 31, 1982.

�


text:
Page:United States Statutes at Large Volume 100 Part 3.djvu/955

 PUBLIC LAW 99-514—OCT. 22, 1986 ^

100 STAT. 2763)

(2) STATUTE OF LIMITATIONS.—If refund or credit of any amount resulting from the application of the amendment made by subsection (a) is prevented at any time before the close of the date which is 1 year after the date of the enactment of,this Act by the operation of any law or rule of law (including res judicata), refund or credit of such amount (to the extent attributable to the application of the amendment made by subsection (a)) may, nevertheless, be made or allowed if claim therefore is filed before the close of such 1-year period.

SEC. 1565. CERTAIN SERVICECONNECTED EXEMPT FROM LEVY.

DISABILITY

PAYMENTS

(a) EXEMPTION FROM LEVY.—Subsection (a) of section 6334 (relating to the enumeration of property exempt from levy) is amended by adding at the end thereof the following new paragraph: "(10) CERTAIN SERVICE-CONNECTED DISABILITY PAYMENTS.—Any

amount payable to an individual as a service-connected (within the meaning of section 101(16) of title 38, United States Code) disability benefit under— "(A) subchapter II, IV, or VI of chapter 11 of such title 38, "(B) subchapter I, II, or III of chapter 19 of such title 38, or "(C) chapter 21, 31, 32, 34, 35, 37, or 39 of such title 38." (b) EFFECTIVE DATE.—The amendment made by this section shall apply to amounts payable after December 31, 1986. SEC. 1566. INCREASE IN VALUE OF PERSONAL PROPERTY SUBJECT TO CERTAIN LISTING AND NOTICE PROCEDURES.

(a) IN GENERAL.—Section 7325 (relating to personal property valued at $2,500 or less) is amended by striking out "$2,500" each place it appears (including the section heading) and inserting in lieu thereof "$100,000". (b) INCREASE IN AMOUNT OF BOND BY CLAIMANT.—Paragraph (3) of

section 7325 is amended by striking out "$250" and inserting in lieu thereof "$2,500". (c) TECHNICAL AMENDMENT.—Paragraph (4) of section 7103(b) is amended by striking out "$1,000" and inserting in lieu thereof "$100,000". (d) CLERICAL AMENDMENT.—The item relating to section 7325 in the table of sections for part II of subchapter C of chapter 75 is amended by striking out "$2,500" and inserting in lieu thereof "$100,000". (e) EFFECTIVE DATE.—The amendments made by this section shall take effect on the date of the enactment of this Act. SEC. 1567. CERTAIN RECORDKEEPING REQUIREMENTS.

(a) IN GENERAL.—For purposes of sections 132 and 274 of the Internal Revenue Code of 1954, use of an automobile by a special agent of the Internal Revenue Service shall be treated in the same manner as use of an automobile by an officer of any other law enforcement agency. (b) EFFECTIVE DATE.—The provisions of this section shall take effect on January 1, 1985.

�


text:
Page:United States Statutes at Large Volume 100 Part 3.djvu/956

 100 STAT. 2764

PUBLIC LAW 99-514—OCT. 22, 1986

SEC. 1568. DISCLOSURE OF RETURNS AND RETURN INFORMATION TO CERTAIN CITIES.

(a) IN GENERAL.—Subsection (b) of section 6103 (relating to definitions for confidentiality and disclosure of returns and return information) is amended— (1) by striking out paragraph (5) and inserting in lieu thereof the following: "(5) STATE.—The term 'State' means— "(A) any of the 50 States, the District of Columbia, the . Commonwealth of Puerto Rico, the Virgin Islands, the "*^^ Canal Zone, Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, the Republic of the Marshall Islands, the Federated States of Micronesia, and the Republic of Palau, and "(B) for purposes of subsections (a)(2), (b)(4), (d)(1), (h)(4), Vr * and (p) any municipality— "(i) with a population in excess of 2,000,000 (as determined under the most recent decennial United States census data available), .. f:. "(ii) which imposes a tax on income or wages, and '."> "(iii) with which the Secretary (in his sole discretion) has entered into an agreement regarding disclosure.", and r (2) by adding at the end thereof the following new paragraph: "(10) CHIEF EXECUTIVE OFFICER.—The term 'chief executive officer' means, with respect to any municipality, any elected official and the chief official (even if not elected) of such municipality." (b) EFFECTIVE DATE.—The amendments made by this section shall take effect on the date of the enactment of this Act. SEC. 1569. TREATMENT OF CERTAIN FORFEITURES.
 * i

(a) IN GENERAL.—Subsection (i) of section 6323 is amended by adding at the end thereof the following new paragraph: "(3) FORFEITURES.—For purposes of this subchapter, a forfeiture under local law of property seized by a law enforcement agency of a State, county, or other local governmental subdivision shall relate back to the time of seizure, except that this paragraph shall not apply to the extent that under local law the holder of an intervening claim or interest would have priority over the interest of the State, county, or other local governmental subdivision in the property." (b) EFFECTIVE DATE.—The amendment made by this section shall take effect on the date of the enactment of this Act. SEC. 1570. PROCEDURE AT TAX SALE OF SEIZED PROPERTY WHERE NO PERSON OFFERS MINIMUM PRICE.

(a) IN GENERAL.—Paragraph (1) of section 6335(e) (relating to manner and conditions of sale of seized property) is amended to read as follows: > ,^, "(1) IN GENERAL.— "(A) DETERMINATIONS RELATING TO MINIMUM PRICE.—

-^ ' ^"'

Before the sale of property seized by levy, the Secretary shall determine— "(i) a minimum price for which such property shall be sold (taking into account the expense of making the levy and conducting the sale), and

�


text:
Page:United States Statutes at Large Volume 100 Part 3.djvu/957

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2765

"(ii) whether, on the basis of criteria prescribed by the Secretary, the purchase of such property by the United States at such minimum price would be in the best interest of the United States. "(B)

SALE TO HIGHEST BIDDER AT OR ABOVE MINIMUM

PRICE.—If, at the sale, one or more persons offer to purchase such property for not less than the amount of the minimum price, the property shall be declared sold to the highest bidder. "(C) PROPERTY DEEMED SOLD TO UNITED STATES AT MINIMUM PRICE IN CERTAIN CASES.—If no person offers the

-.: s ^.-.

amount of the minimum price for such property at the sale and the Secretary has determined that the purchase of such property by the United States would be in the best interest of the United States, the property shall be declared to be sold to the United States at such minimum price. "(D) RELEASE TO OWNER IN OTHER CASES.—If, at the sale, the property is not declared sold under subparagraph (B) or (C), the property shall be released to the owner thereof and J, I J the expense of the levy and sale shall be added to the amount of tax for the collection of which the levy was made. Any property released under this subparagraph shall 5; remain subject to any lien imposed by subchapter C." (b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply to— (1) property seized after the date of the enactment of this Act, and J (2) property seized on or before such date which is held by the I United States on such date. SEC. 1571. MODIFICATION OF TIPS ALLOCATION METHOD.

Effective for any payroll period beginning after December 31, 1986, an establishment may utilize the optional method of tips allocation described in the last sentence of section 31.6053-3(fKlXiv) of the Internal Revenue Regulations only if such establishment employs less than the equivalent of 25 full-time employees during such payroll period. SEC. 1572. TREATMENT OF FORFEITURES OF LAND SALES CONTRACTS FOR PURPOSES OF DISCHARGE OF LIENS.

(a) AMENDMENT OF SECTION 7425(c).—Subsection (c) of section 7425 (relating to special rules for discharge of liens) is amended by adding at the end thereof the following new paragraph: "(4) FORFEITURES OF LAND SALES CONTRACTS.—For purposes of

subsection (b), a sale of property includes any forfeiture of a land sales contract." (b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply to forfeitures after the 30th day after the date of the enactment of this Act.

Subtitle H—Miscellaneous Provisions SEC. 1581. WITHHOLDING SCHEDULES.

ALLOWANCES

TO

REFLECT

NEW

RATE

(a) IN GENERAL.—The Secretary of the Treasury or his delegate shall modify the withholding schedules and withholding exemption

�


text:
Page:United States Statutes at Large Volume 100 Part 3.djvu/958

 100 STAT. 2766

PUBLIC LAW 99-514—OCT. 22, 1986

certificates under section 3402 of the Internal Revenue Code of 1954 to better approximate actual tax liability under the amendments made by this Act. (b) CERTAIN DECREASES IN WITHHOLDING NOT PERMITTED.—Subsec-

tion (i) of section 3402 is amended by striking out "or decreases". (c) EMPLOYER'S RESPONSIBILITY.—If an employee has not filed a revised withholding allowance certificate before October 1, 1987, the employer shall withhold income taxes from the employee's wages— (1) as if the employee claimed 1 withholding allowance, if the employee checked the "single" box on the employee's previous withholding allowance certificate, or (2) as if the employee claimed 2 withholding allowances, if the employee checked the "married" box on the employee's previous withholding allowance certificate. SEC. 1582. REPORT ON RETURN-FREE SYSTEM.

(a) REPORT.—The Secretary of the Treasury or his delegate shall prepare a report on a return-free system for the Federal income tax of individuals. Such report shall include— (1) the identification of classes of individuals who would be permitted to use a return-free system, (2) how such a system would be phased in, (3) what additional resources the Internal Revenue Service ~) would need to carry out such a system, and (4) the types of changes to the Internal Revenue Code of 1954 which would inhibit or enhance the use of such a system. (b) DUE DATE.—The report under subsection (a) shall be submitted, not later than 6 months after the date of the enactment of this Act, to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate.

TITLE XVI—EXEMPT AND NONPROFIT ORGANIZATIONS SEC. 1601. CERTAIN DISTRIBUTIONS OF LOW COST ARTICLES AND EXCHANGES AND RENTALS OF MEMBER LISTS BY CERTAIN ORGANIZATIONS NOT TO BE TREATED AS UNRELATED TRADE OR BUSINESS.

(a) IN GENERAL.—Section 513 (defining unrelated trade or business) is amended by adding at the end thereof the following new subsection: "(h) CERTAIN DISTRIBUTIONS OF LOW COST ARTICLES WITHOUT OBLIGATION TO PURCHASE AND EXCHANGES AND RENTALS OF MEMBER LISTS.—

"(1) IN GENERAL.—In the case of an organization which is described in section 501 and contributions to which are deductible under paragraph (2) or (3) of section 170(c), the term 'unrelated trade or business' does not include— "(A) activities relating to the distribution of low cost articles if the distribution of such articles is incidental to the solicitation of charitable contributions, or af^AII "(B) g^jjy trade or business which consists of— "(i) exchanging with another such organization names and addresses of donors to (or members of) such organization, or

�


text:
Page:United States Statutes at Large Volume 100 Part 3.djvu/959

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2767

"(ii) renting such names and addresses to another such organization. "(2) Low COST ARTICLE DEFINED.—For purposes of this subsection— "(A) IN GENERAL.—The term 'low cost article' means any article which has a cost not in excess of $5 to the organization which distributes such item (or on whose behalf such item is distributed). "(B) AGGREGATION RULE.—If more than 1 item is distributed by or on behalf of an organization to a single distributee in any calendar year, the aggregate of the items so distributed in such calendar year to such distributee shall ' •' be treated as 1 article for purposes of subparagraph (A). "(C) INDEXATION OF $5 AMOUNT.—In the case of any taxable year beginning in a calendar year after 1987, the $5 amount in subparagraph (A) shall be increased by an t: 0 amount equal to— "(i) $5, multiplied by "(ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins. "(3) DISTRIBUTION WHICH IS INCIDENTAL TO THE SOLICITATION OF CHARITABLE CONTRIBUTIONS

DESCRIBED.—For

purpOSeS

of

this

subsection, any distribution of low cost articles by an organization shall be treated as a distribution incidental to the solicitation of charitable contributions only if— "(A) such distribution is not made at the request of the distributee, "(B) such distribution is made without the express consent of the distributee, and "(C) the articles so distributed are accompanied by— "(i) a request for a charitable contribution (as defined imm in section 170(c)) by the distributee to such organization, and ' "(ii) a statement that the distributee may retain the low cost article regardless of whether such distributee makes a charitable contribution to such organization." (b) EFFECTIVE DATE.—The amendment made by this section shall apply to distributions of low cost articles and exchanges and rentals of member lists after the date of the enactment of this Act. SEC. 1602. EDUCATIONAL ACTIVITIES AT CONVENTION AND TRADE SHOWS. (a) CERTAIN EDUCATIONAL ACTIVITIES TREATED AS CONVENTION AND TRADE SHOW ACTIVITIES.—Section 513(d)(3)(B) (defining to qualified

convention and trade show activity) is amended by inserting after "industry in general" the following: "or to educate persons in attendance regarding new developments or products and services related to the exempt activities of the organization". (b) QUALIFYING ORGANIZATIONS.—Section 513(d)(3)(C) (defining qualifying organization) is amended— (1) by striking out "501(c)(5) or (6)" and inserting in lieu thereof "501(c)(3), (4), (5), or (6)", and (2) by inserting before the period at the end thereof the following: "or which educates persons in attendance regarding new developments or products and services related to the exempt activities of the organization".

�


text:
Page:United States Statutes at Large Volume 100 Part 3.djvu/960

 100 STAT. 2768

PUBLIC LAW 99-514—OCT. 22, 1986

(c) EFFECTIVE DATE.—The amendments made by this section shall apply to activities in taxable years beginning after the date of the enactment of this Act. SEC. 1603. TAX EXEMPTION FOR CERTAIN TITLE-HOLDING COMPANIES.

(a) IN GENERAL.—Section 501(c) (relating to the list of exempt organizations) is amended by adding at the end thereof the following new paragraph: "(25)(A) Any corporation or trust which— "(i) has no more than 35 shareholders or beneficiaries, "(ii) has only 1 class of stock or beneficial interest, and "(iii) is organized for the exclusive purposes of— "(I) acquiring real property and holding title to, and collecting income from, such property, and c "(II) remitting the entire amount of income from fic yi such property (less expenses) to 1 or more organizations described in subparagraph (C) which are shareholders of such corporation or beneficiaries of such trust. "(B) A corporation or trust shall be described in subparagraph (A) without regard to whether the corporation or trust is organized by 1 or more organizations described in subparagraph (C). "(C) An organization is described in this subparagraph if such organization is— "(i) a qualified pension, profit sharing, or stock bonus plan that meets the requirements of section 401(a), "(ii) a governmental plan (within the meaning of section 9f!r 414(d)), "(iii) the United States, any State or political subdivision fk5 thereof, or any agency or instrumentality of any of the foregoing, "(iv) any organization described in paragraph (3), or "(v) any organization described in this paragraph. "(D) A corporation or trust described in this paragraph must permit its shareholders or beneficiaries— "(i) to dismiss the corporation's or trust's investment adviser, following reasonable notice, upon a vote of the shareholders or beneficiaries holding a majority of interest in the corporation or trust, and i' "(ii) to terminate their interest in the corporation or trust by either, or both, of the following alternatives, as deter„^^, mined by the corporation or trust: '*" "(I) by selling or exchanging their stock in the corporation or interest in the trust (subject to any Federal f ^ or State securities law) to any organization described in subparagraph (C) so long as the sale or exchange does not increase the number of shareholders or beneficiaries in such corporation or trust above 35, or . -,. -. "(II) by having their stock or interest redeemed by the corporation or trust after the shareholder or bener*' '!> ficiary has provided 90 days notice to such corporation or trust." (b) CLERICAL AMENDMENT.—Subparagraph (C) of section 514(c)(9) (relating to real property acquired by a qualified organization) is amended— (1) by striking out "or" at the end of clause (i), (2) by striking out the period following clause (ii) and inserting in lieu thereof "; or", and

�


text:
Page:United States Statutes at Large Volume 100 Part 3.djvu/961

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2769

(3) by adding at the end thereof the following new clause: "(iii) an organization described in section 501(c)(25)." (c) EFFECTIVE DATE.—The amendments made by this section shall apply to taxable years beginning after December 31, 1986. SEC.

1604. EXCEPTION TO MEMBERSHIP ORGANIZATION DEDUCTION RULES.

(a) IN GENERAL.—Subsection 0?) of section 277 (relating to deductions incurred by certain membership organizations in transactions with members) is amended— (1) by striking out "or" at the end of paragraph (2), (2) by striking out the period at the end of paragraph (3) and inserting in lieu thereof ", or", and (3) by adding at the end thereof the following new paragraph: "(4) which is engaged primarily in the gathering and distribution of news to its members for publication." (b) EFFECTIVE DATE.—The amendment made by this section shall apply to taxable years beginning after the date of the enactment of this Act. SEC. 1605. TAX-EXEMPT STATUS FOR AN ORGANIZATION INTRODUCING INTO PUBLIC USE TECHNOLOGY DEVELOPED BY QUALIFIED ORGANIZATIONS.

(a) IN GENERAL.—For purposes of the Internal Revenue Code of 1986, an organization shall be treated as an organization organized and operated exclusively for charitable purposes if such organization— (1) is organized and operated exclusively— (A) to provide for (directly or by arranging for and supervising the performance by independent contractors)— (i) reviewing technology disclosures from qualified organizations, (ii) obtaining protection for such technology through tfii if patents, copyrights, or other means, and (iii) licensing, sale, or other exploitation of such technology, (B) to distribute the income therefrom, to such qualified organizations after paying expenses and other amounts as agreed with the originating qualified organizations, and (C) to make research grants to such qualified organizations, (2) regularly provides the services and research grants described in paragraph (1) exclusively to 1 or more qualified organizations, except that research grants may be made to such qualified organizations through an organization which is controlled by 1 or more organizations each of which— (A) is an organization described in section 501(c)(3) of the Internal Revenue Code of 1986 or the income of which is excluded from taxation under section 115 of such Code, and (B) may be a recipient of the services or research grants described in paragraph (1), (3) derives at least 80 percent of its gross revenues from providing services to qualified organizations located in the same State as the State in which such organization has its principal office, and (4) was incorporated on July 20, 1981.

�


text:
Page:United States Statutes at Large Volume 100 Part 3.djvu/962

 100 STAT. 2770

PUBLIC LAW 99-514—OCT. 22, 1986

(b) QUALIFIED ORGANIZATIONS.—For purposes of this section, the term "qualified organization" has the same meaning given to such term by subparagraphs (A) and (B) of section 41(e)(6) (as redesig nated by section 231(d)(2)) of the Internal Revenue Code of 1986. (c) TREATMENT OF INVESTMENT IN A TECHNOLOGY TRANSFER SERVICE ORGANIZATION.—

(1) IN GENERAL.—A qualified investment made by a private foundation in an organization described in subparagraph (C) shall be treated as an investment described in section 4944(c) of the Internal Revenue Code of 1986 and shall not result in imposition of taxes under section 4941, 4943, 4944, 4945, or 507(c) of such Code. (2) DEFINITIONS.—For purposes of this subsection— (A) QUALIFIED INVESTMENT.—The term "qualified investment" means a transfer by a private foundation of— (i) all of the patents, copyrights, know-how, and other technology or rights thereto of the private foundation, and (ii) investment assets, net receivables, and cash not exceeding $35,000,000, to such organization in exchange for debt. (B) PRIVATE FOUNDATION.—The term "private foundation" means— ' (i) a nonprofit corporation which was incorporated before 1913 which is described in sections 501(c)(3) and 509(a) of such Code, and which is exempt from taxation under section 501(a) of such Code, and (ii) the principal purposes of which are to support research by and to provide technology transfer services to organizations described in section 170(b)(l)(A) of such Code— (I) which are exempt from taxation under section

501(a) of such Code, or (II) the income of which is excluded from tax' > ation under section 115 of such Code. (C) TECHNOLOGY TRANSFER ORGANIZATION.—The term "technology transfer organization" means a corporation established after the date of the enactment of this Act— (i) which is organized and operated to advance the public welfare through the provision of technology . • -.. i transfer services to research organizations, (ii) no part of the net earnings of which inures to the benefit of, or is distributable to, any private share., "' ' holder, individual, or entity, other than a private foundation or research organization, t (iii) which does not participate in, or intervene in (including the publishing or distributing of statements) ? any political campaign on behalf of any candidate for public office, '. (iv) no substantial part of the activities of which is . !-,• carrying on propaganda, or otherwise attempting, to influence legislation, and '^ (v) upon liquidation or dissolution of which all of its net assets can be distributed only to research organizations. (d) EFFECTIVE DATE.—This section shall take effect on the date of the enactment of this Act.

�


text:
Page:United States Statutes at Large Volume 100 Part 3.djvu/963

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2771

SEC. 1606. DEFINITION OF GOVERNMENT OFFICIAL.

(a) IN GENERAL.—Paragraph (5) of section 4946(c) of the Internal Revenue Code of 1986 (relating to government official) is amended by striking out "$15,000" and inserting in lieu thereof "$20,000". (b) EFFECTIVE DATE.—The amendment made by this section shall apply to compensation received after December 31, 1985. SEC. 1607. TRANSITION RULE FOR ACQUISITION INDEBTEDNESS WITH RESPECT TO CERTAIN LAND.

For purposes of applying section 514(c) of the Internal Revenue Code of 1986, with respect to a disposition during calendar year 1986 or calendar year 1987 of land acquired during calendar year 1984, the term "acquisition indebtedness" does not include indebtedness incurred in connection with bonds issued after January 1, 1984, and before July 19, 1984, on behalf of an organization which is a community college and which is described in section 511(a)(2)(B) of such Code. SEC. 1608. TREATMENT OF CERTAIN AMOUNTS PAID TO OR FOR THE BENEFIT OF CERTAIN INSTITUTIONS OF HIGHER EDUCATION.

(a) IN GENERAL.—Amounts paid by a taxpayer to or for the benefit of an institution of higher education described in paragraph (1) or (2) of subsection (b) (other than amounts separately paid for tickets) which would otherwise qualify as a charitable contribution within the meaning of section 170 of the Internal Revenue Code of 1986 shall not be disqualified because such taxpayer receives the right to seating or the right to purchase seating in an athletic stadium of such institution. flt)) DESCRIBED INSTITUTIONS.—

(1) An institution is described in this paragraph, if— (A) such institution was mandated by a State constitution
 * ^^; '* in 1876,

m:' (g) such institution was established by a State legislature in March 1881, and is located in a State capital pursuant to a statewide election in September 1981, (C) the campus of such institution formally opened on September 15, 1883, and (D) such institution is operated under the authority of a 9member board of regents appointed by the governor. (2) An institution is described in this paragraph if such institution has an athletic stadium— (A) the plans for renovation of which were approved by a board of supervisors in December 1984, and reaffirmed by such board in December 1985 and January 1986, and (B) the plans for renovation of which were approved by a State board of ethics for public employees in February 1986. (c) EFFECTIVE DATE.—The provisions of this section shall apply to amounts paid in taxable years beginning on or after January 1, 1984.

�


text:
Page:United States Statutes at Large Volume 100 Part 3.djvu/964

 100 STAT. 2772

PUBLIC LAW 99-514—OCT. 22, 1986

TITLE XVII—MISCELLANEOUS PROVISIONS SEC. 1701. EXTENSION AND MODIFICATION OF TARGETED JOBS CREDIT.

(a) 3-YEAR EXTENSION.—Paragraph (3) of section 51(c) (relating to termination) is amended by striking out "December 31, 1985" and inserting in lieu thereof "December 31, 1988". (b) CREDIT FOR FIRST-YEAR WAGES ONLY.—

(1) IN GENERAL.—Section 51(a) (relating to determination of amount of credit) is amended to read as follows: "(a) DETERMINATION OF AMOUNT.—For purposes of section 38, the

amount of the targeted jobs credit determined under this section for the taxable year shall be equal to 40 percent of the qualified firstyear wages for such year." (2) CONFORMING AMENDMENTS.—

(A) Subsection (b) of section 51 (defining qualified wages) is amended— (i) by striking out paragraph (3) and by redesignating paragraph (4) as paragraph (3), and (ii) by striking out ", and the amount of the qualified second-year wages," in paragraph (3) (as so redesignated). (B) Subparagraph (B) of section 51(d)(12) (relating to qualified summer youth employee) is amended— (i) by striking out "50 percent" in clause (i) thereof and inserting in lieu thereof "40 percent", (ii) by striking out clause (ii) and redesignating clauses (iii) and (iv) as clauses (ii) and (iii), respectively, (iii) by striking out "subsection (b)(4)" and inserting in lieu thereof "subsection (b)(3)" in clause (iii) (as so redesignated). (c) ELIGIBLE INDIVIDUALS—PERIOD OF EMPLOYMENT.—Subsection (i)

of section 51 (relating to certain individuals ineligible) is amended by adding at the end thereof the following new paragraph: "(3)

INDIVIDUALS

NOT

MEETING

MINIMUM

EMPLOYMENT

PERIOD.—No wages shall be taken into account under subsection (a) with respect to any individual unless such individual either— "(A) is employed by the employer at least 90 days (14 days y in the case of an individual described in subsection (d)(12)), or .., "(B) has completed at least 120 hours (20 hours in the case of an individual described in subsection (d)(12)) of services performed for the employer." (d) EXTENSION OF AUTHORIZATION.—Paragraph (2) of section 261(f) of the Economic Recovery Tax Act of 1981 is amended by striking out "fiscal years 1983, 1984, and 1985" and inserting in lieu thereof "fiscal years 1983, 1984, 1985, 1986, 1987, and 1988". (e) EFFECTIVE DATE.—The amendments made by this section shall apply with respect to individuals who begin work for the employer after December 31, 1985.

�


text:
Page:United States Statutes at Large Volume 100 Part 3.djvu/965

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2773

SEC. 1702. CERTAIN DIESEL FUEL TAXES MAY BE IMPOSED ON SALES TO RETAILERS.

(a) IN GENERAL.—Section 4041 (relating to imposition of tax on special fuels) is amended by adding at the end thereof the following new subsection: "(n) TAX ON DIESEL FUEL FOR HIGHWAY VEHICLE USE MAY B E IMPOSED ON SALE TO RETAILER.—Under regulations prescribed by the

Secretary— "(1) IN GENERAL.—Upon the written consent of the seller, the tax imposed by subsection (a)(1)— "(A) shall apply to the sale of diesel fuel to a qualified retailer (and such sale shall be treated as described in subsection (a)(1)(A)), and "(B) shall not apply to the sale of diesel fuel by such retailer or the use of diesel fuel described in subsection (a)(1)(B) if tax was imposed on such fuel under subparagraph (A) of this paragraph. "(2)

LIABILITY FOR VIOLATION OF CERTIFICATION.—Notwith-

standing paragraph (1), a qualified retailer shall be liable for the tax on liquid described in paragraph (3)(C)(ii) if such liquid is used as fuel in a diesel-powered highway vehicle. "(3) DEFINITIONS.—For purposes of this subsection— "(A) QUALIFIED RETAILER.—The term 'qualified retailer' means any retailer— "(i) who elects (under such terms and conditions as may be prescribed by the Secretary) to have paragraph (1) apply to all sales of diesel fuel to such retailer by any person, and '- ^ "(ii) who agrees to provide a written notice to such person that paragraph (1) applies to all sales of diesel fuel by such person to such retailer. Such election and notice shall be effective for such period or • periods as may be prescribed by the Secretary. "(B) RETAILER.—The term 'retailer' means any person who sells diesel fuel for use as a fuel in a diesel-powered highway vehicle. Such term does not include any person who sells diesel fuel primarily for resale. "(C) DIESEL FUEL.—

"(i) IN GENERAL.—The term 'diesel fuel' means any liquid on which tax would be imposed by subsection (a)(1) if sold to a person, and for a use, described in subsection (a)(1)(A). "(ii) EXCEPTION.—A liquid shall not be treated as diesel fuel for purposes of this subsection if the retailer certifies in writing to the seller of such liquid that such liquid will not be sold for use as a fuel in a dieselpowered highway vehicle. "(4) FAILURE TO NOTIFY SELLER.—

"(A) IN GENERAL.—If a qualified retailer fails to provide the notice described in paragraph (3)(A)(ii) to any seller of diesel fuel to such retailer— "(i) paragraph (1) shall not apply to sales of diesel fuel by such seller to such retailer during the period for which such failure continues, and "(ii) any diesel fuel sold by such seller to such retailer during such period shall be treated as sold by such

71-19A 0 - 89 - 32: QL. 3 Part3

�


text:
Page:United States Statutes at Large Volume 100 Part 3.djvu/966

 100 STAT. 2774

PUBLIC LAW 99-514—OCT. 22, 1986

•i - • ^ ^ J, -, 4

!*

retailer (in a sale described in subsection (a)(1)(A)) on the date such fuel was sold to such retailer. "(B) PENALTY.—For penalty for failing to notify seller, see section 6652(j). . fx •: •.;jc "(5) EXEMPTIONS NOT TO APPLY.—

"(A) IN GENERAL.—No exemption from the tax imposed by subsection (a)(1) shall apply to a sale to which paragraph (1) or (4)(A) of this subsection applies. .,,t

-

"(B) CROSS REFERENCE.— "For provisions allowing a credit or refund for certain sales and uses of fuel, see sections 6416 and 6427."

(b) PENALTY.—Section 6652 (relating to failure to file certain information returns, registration statements, etc.), as amended by section 1501(d), is amended by redesignating subsection (j) as subsection (k) and by inserting after subsection (i) the following new subsection: "(j) FAILURE TO GIVE WRITTEN NOTICE TO CERTAIN SELLERS OF DIESEL FUEL.—

,..

"(1) IN GENERAL.—If any qualified retailer fails to provide the notice described in section 4041(n)(3)(A)(ii) to any seller of diesel fuel to such retailer, unless it is shown that such failure is due to reasonable cause and not to willful neglect, there shall be ';j paid, on notice and demand of the Secretary and in the same manner as tax, by such retailer with respect to each sale of diesel fuel to such retailer by such seller to which section 4041(n)(4) applies an amount equal to 5 percent of the tax imposed by section 4041(a)(1) on such sale by reason of paragraphs (3) and (4)(A) of section 4041(n). ,(,; "(2) DEFINITIONS.—For purposes of paragraph (1), the terms •, 'qualified retailer' and 'diesel fuel' have the respective meanings given such terms by section 404 l(n)." (c) EFFECTIVE DATE.—The amendments made by this section shall apply to sales after the first calendar quarter beginning more than 60 days after the date of the enactment of this Act. SEC. 1703. GASOLINE TAX GENERALLY COLLECTED AT TERMINAL LEVEL. (a) IN GENERAL.—Subpart A of part III of subchapter A of chapter 32 (relating to manufacturers excise taxes) is amended to read as follows: i • "Subpart A—Gasoline -;H ^«j

"Sec. 4081. Imposition of tax. "Sec. 4082. Definitions. "Sec. 4083. Cross references.

' • •.

•

"SEC. 4081. IMPOSITION OF TAX. "(a) TAX IMPOSED.—

,; ',,'

"(1) IN GENERAL.—There is hereby imposed a tax of 9 cents a gallon on the earlier of— - ^. "(A) the removal, or "(B) the sale, of gasoline by the refiner or importer thereof or the terminal operator. "(2) BULK TRANSFER TO TERMINAL OPERATOR.—For purposes of

paragraph (1), the bulk transfer of gasoline to a terminal opera-

�


text:
Page:United States Statutes at Large Volume 100 Part 3.djvu/967

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2775

tor by a refiner or importer shall not be considered a removal or sale of gasoline by such refiner or importer. "(b) TREATMENT OF REMOVAL OR SUBSEQUENT SALE BY BLENDER OR COMPOUNDER.—

"(1) IN GENERAL.—There is hereby imposed a tax of 9 cents a gallon on gasoline removed or sold by the blender or compounder thereof. "(2) CREDIT FOR TAX PREVIOUSLY PAID.—If—

aw?,,.,.

u^^^ ^g^^ jg imposed on the removal or sale of gasoline by reason of paragraph (1), and "(B) the blender or compounder establishes the amount of the tax paid with respect to such gasoline by reason of subsection (a), the amount of the tax so paid shall be allowed as a credit against the tax imposed by reason of paragraph (1).

"(c) GASOLINE MIXED WITH ALCOHOL AT REFINERY, ETC.—

"(1) IN GENERAL.—Under regulations prescribed by the Secretary, subsection (a) shall be applied by substituting '3 cents' for '9 cents' in the case of the removal or sale of any gasoline for use in producing gasohol at the time of such removal or sale. For purposes of this paragraph, the term 'gasohol' means any mixture of gasoline if at least 10 percent of such mixture is alcohol. "(2) LATER SEPARATION OF GASOLINE FROM GASOHOL.—If any

person separates the gasoline from a mixture of gasoline and alcohol on which tax was imposed under subsection (a) at a rate equivalent to 3 cents a gallon by reason of this subsection (or with respect to which a credit or payment was allowed or made by reason of section 6427(f)(1)), such person shall be treated as the refiner of such gasoline. The amount of tax imposed on any sale of such gasoline by such person shall be 5% cents a gallon. "(3) ALCOHOL DEFINED.—For purposes of this subsection, the term 'alcohol' includes methanol and ethanol but does not include alcohol produced from petroleum, natural gas, or coal (including peat). Such term does not include alcohol with a proof of less than 190 (determined without regard to any added denaturants). "(4) TERMINATION.—Paragraph (1) shall not apply to any removal or sale after December 31, 1992. "(d) TERMINATION.—On and after October 1, 1988, the taxes imposed by this section shall not apply. "SEC. 4082. DEFINITIONS.

"(a) GASOLINE.—For purposes of this subpart, the term 'gasoline' includes, to the extent prescribed in regulations— "(1) gasoline blend stocks, and "(2) products commonly used as additives in gasoline. For purposes of paragraph (1), the term 'gasoline blend stocks' means any petroleum product component of gasoline. "03) CERTAIN USES DEFINED AS REMOVAL.—If a refiner, importer,

terminal operator, blender, or compounder uses (other than in the production of gasoline or special fuels referred to in section 4041) gasoline refined, imported, blended, or compounded by him, such use shall for the purposes of this chapter be considered a removal.

�