H.R. 3962/Division A/Title V/Subtitle B/Part 2

{{SECTION|SEC. 561.|SEC. 561}}. LIMITATION ON TREATY BENEFITS FOR CERTAIN DEDUCTIBLE PAYMENTS.

 * (a) In General.—
 * Section 894 of the Internal Revenue Code of 1986 (relating to income affected by treaty) is amended by adding at the end the following new subsection:


 * (b) Effective Date.—
 * The amendment made by this section shall apply to payments made after the date of the enactment of this Act.

{{SECTION|SEC. 562.|SEC. 562}}. CODIFICATION OF ECONOMIC SUBSTANCE DOCTRINE; PENALTIES.

 * (a) In general.—
 * Section 7701 of the Internal Revenue Code of 1986 is amended by redesignating subsection (o) as subsection (p) and by inserting after subsection (n) the following new subsection:


 * (b) Effective Date.—
 * The amendments made by this section shall apply to transactions entered into after the date of the enactment of this Act.

{{SECTION|SEC. 563.|SEC. 563}}. CERTAIN LARGE OR PUBLICLY TRADED PERSONS MADE SUBJECT TO A MORE LIKELY THAN NOT STANDARD FOR AVOIDING PENALTIES ON UNDERPAYMENTS.

 * (a) Penalty for Underpayments Attributable to Transactions Lacking Economic Substance.—
 * (1) In General.—
 * Subsection (b) of section 6662 of the Internal Revenue Code of 1986 is amended by inserting after paragraph (5) the following new paragraph:


 * (2) Increased Penalty for Nondisclosed Transactions.—
 * Section 6662 of such Code is amended by adding at the end the following new subsection:


 * (3) Conforming amendment.—
 * Subparagraph (B) of section 6662A(e)(2) of such Code is amended—
 * (A) by striking ``section 6662(h)´´ and inserting ``subsections (h) or (i) of section 6662´´, and


 * (B) by striking ``gross valuation misstatement penalty´´ in the heading and inserting ``certain increased underpayment penalties´´.


 * (b) Reasonable Cause Exception Not Applicable to Noneconomic Substance Transactions, Tax Shelters, and Certain Large or Publicly Traded Persons.—
 * Subsection (c) of section 6664 of such Code is amended—
 * (1) by redesignating paragraphs (2) and (3) as paragraphs (3) and (4), respectively,


 * (2) by striking ``paragraph (2)´´ in paragraph (4), as so redesignated, and inserting ``paragraph (3)´´, and


 * (3) by inserting after paragraph (1) the following new paragraph:


 * (c) Application of Penalty for Erroneous Claim for Refund or Credit to Noneconomic Substance Transactions.—
 * Section 6676 of such Code is amended by redesignating subsection (c) as subsection (d) and inserting after subsection (b) the following new subsection:


 * ``(c) Noneconomic substance transactions treated as lacking reasonable basis.—For purposes of this section, any excessive amount which is attributable to any transaction described in section 6662(b)(6) shall not be treated as having a reasonable basis.´´.


 * (d) Special Understatement Reduction Rule for Certain Large or Publicly Traded Persons.—
 * (1) In General.—
 * Paragraph (2) of section 6662(d) of such Code is amended by adding at the end the following new subparagraph:


 * (2) Conforming Amendment.—
 * Subparagraph (C) of section 6662(d)(2) of such Code is amended by striking ``Subparagraph (B)´´ and inserting ``Subparagraphs (B) and (D)(i)(II)´´.


 * (e) Effective Date.—
 * The amendments made by this section shall apply to transactions entered into after the date of the enactment of this Act.