TAX INVOLVEMENT OF ACCOMMODATION PARTIES IN TAX SHELTER TRANSACTIONS.

SEC. 516. TAX INVOLVEMENT OF ACCOMMODATION PARTIES IN TAX SHELTER TRANSACTIONS. (a) Imposition of Excise Tax.—(1) In general.—Chapter 42 (relating to private foundations and certain other tax-exempt organizations) is amended by adding at the end the following new subchapter: “Subchapter F—Tax Shelter Transactions “Sec. 4965. Excise tax on certain tax-exempt entities entering into prohibited tax shelter transactions. “SEC. 4965. EXCISE TAX ON CERTAIN TAX-EXEMPT ENTITIES ENTERING INTO PROHIBITED TAX SHELTER TRANSACTIONS. “(a) Being a Party to and Approval of Prohibited Transactions.—“(1) Tax-exempt entity.—“(A) In general.—If a transaction is a prohibited tax shelter transaction at the time any tax-exempt entity described in paragraph (1), (2), or (3) of subsection (c) becomes a party to the transaction, such entity shall pay a tax for the taxable year in which the entity becomes such a party and any subsequent taxable year in the amount determined under subsection (b)(1). “(B) Post-transaction determination.—If any tax-exempt entity described in paragraph (1), (2), or (3) of subsection (c) is a party to a subsequently listed transaction at any time during a taxable year, such entity shall pay 120 STAT. 369 a tax for such taxable year in the amount determined under subsection (b)(1). “(2) Entity manager.—If any entity manager of a tax-exempt entity approves such entity as (or otherwise causes such entity to be) a party to a prohibited tax shelter transaction at any time during the taxable year and knows or has reason to know that the transaction is a prohibited tax shelter transaction, such manager shall pay a tax for such taxable year in the amount determined under subsection (b)(2). “(b) Amount of Tax.—“(1) Entity.—In the case of a tax-exempt entity—“(A) In general.—Except as provided in subparagraph (B), the amount of the tax imposed under subsection (a)(1) with respect to any transaction for a taxable year shall be an amount equal to the product of the highest rate of tax under section 11, and the greater of—“(i) the entity’s net income (after taking into account any tax imposed by this subtitle (other than by this section) with respect to such transaction) for such taxable year which—“(I) in the case of a prohibited tax shelter transaction (other than a subsequently listed transaction), is attributable to such transaction, or “(II) in the case of a subsequently listed transaction, is attributable to such transaction and which is properly allocable to the period beginning on the later of the date such transaction is identified by guidance as a listed transaction by the Secretary or the first day of the taxable year, or “(ii) 75 percent of the proceeds received by the entity for the taxable year which—“(I) in the case of a prohibited tax shelter transaction (other than a subsequently listed transaction), are attributable to such transaction, or “(II) in the case of a subsequently listed transaction, are attributable to such transaction and which are properly allocable to the period beginning on the later of the date such transaction is identified by guidance as a listed transaction by the Secretary or the first day of the taxable year. “(B) Increase in tax for certain knowing transactions.—In the case of a tax-exempt entity which knew, or had reason to know, a transaction was a prohibited tax shelter transaction at the time the entity became a party to the transaction, the amount of the tax imposed under subsection (a)(1)(A) with respect to any transaction for a taxable year shall be the greater of—“(i) 100 percent of the entity’s net income (after taking into account any tax imposed by this subtitle (other than by this section) with respect to the prohibited tax shelter transaction) for such taxable year which is attributable to the prohibited tax shelter transaction, or 120 STAT. 370“(ii) 75 percent of the proceeds received by the entity for the taxable year which are attributable to the prohibited tax shelter transaction. This subparagraph shall not apply to any prohibited tax shelter transaction to which a tax-exempt entity became a party on or before the date of the enactment of this section. “(2) Entity manager.—In the case of each entity manager, the amount of the tax imposed under subsection (a)(2) shall be $20,000 for each approval (or other act causing participation) described in subsection (a)(2). “(c) Tax-Exempt Entity.—For purposes of this section, the term ‘tax-exempt entity’ means an entity which is—“(1) described in section 501(c) or 501(d), “(2) described in section 170(c) (other than the United States), “(3) an Indian tribal government (within the meaning of section 7701(a)(40)), “(4) described in paragraph (1), (2), or (3) of section 4979(e), “(5) a program described in section 529, “(6) an eligible deferred compensation plan described in section 457(b) which is maintained by an employer described in section 4457(e)(1)(A), or “(7) an arrangement described in section 4973(a). “(d) Entity Manager.—For purposes of this section, the term ‘entity manager’ means—“(1) in the case of an entity described in paragraph (1), (2), or (3) of subsection (c)—“(A) the person with authority or responsibility similar to that exercised by an officer, director, or trustee of an organization, and “(B) with respect to any act, the person having authority or responsibility with respect to such act, and “(2) in the case of an entity described in paragraph (4), (5), (6), or (7) of subsection (c), the person who approves or otherwise causes the entity to be a party to the prohibited tax shelter transaction. “(e) Prohibited Tax Shelter Transaction; Subsequently Listed Transaction.—For purposes of this section—“(1) Prohibited tax shelter transaction.—“(A) In general.—The term ‘prohibited tax shelter transaction’ means—“(i) any listed transaction, and “(ii) any prohibited reportable transaction. “(B) Listed transaction.—The term ‘listed transaction’ has the meaning given such term by section 6707A(c)(2). “(C) Prohibited reportable transaction.—The term ‘prohibited reportable transaction’ means any confidential transaction or any transaction with contractual protection (as defined under regulations prescribed by the Secretary) which is a reportable transaction (as defined in section 6707A(c)(1)). “(2) Subsequently listed transaction.—The term ‘subsequently listed transaction’ means any transaction to which a tax-exempt entity is a party and which is determined by the Secretary to be a listed transaction at any time after 120 STAT. 371 the entity has become a party to the transaction. Such term shall not include a transaction which is a prohibited reportable transaction at the time the entity became a party to the transaction. “(f) Regulatory Authority.—The Secretary is authorized to promulgate regulations which provide guidance regarding the determination of the allocation of net income or proceeds of a tax-exempt entity attributable to a transaction to various periods, including before and after the listing of the transaction or the date which is 90 days after the date of the enactment of this section. “(g) Coordination With Other Taxes and Penalties.—The tax imposed by this section is in addition to any other tax, addition to tax, or penalty imposed under this title.”. (2) Conforming amendment.—The table of subchapters for chapter 42 is amended by adding at the end the following new item: “Subchapter F. Tax Shelter Transactions.”. (b) Disclosure Requirements.—(1) Disclosure by entity to the internal revenue service.—(A) In general.—Section 6033(a) (relating to organizations required to file) is amended by redesignating paragraph (2) as paragraph (3) and by inserting after paragraph (1) the following new paragraph: “(2) Being a party to certain reportable transactions.—Every tax-exempt entity described in section 4965(c) shall file (in such form and manner and at such time as determined by the Secretary) a disclosure of—“(A) such entity’s being a party to any prohibited tax shelter transaction (as defined in section 4965(e)), and “(B) the identity of any other party to such transaction which is known by such tax-exempt entity.”. (B) Conforming amendment.—Section 6033(a)(1) is amended by striking “paragraph (2)” and inserting “paragraph (3)”. (2) Disclosure by other taxpayers to the tax-exempt entity.—Section 6011 (relating to general requirement of return, statement, or list) is amended by redesignating subsection (g) as subsection (h) and by inserting after subsection (f) the following new subsection: “(g) Disclosure of Reportable Transaction to Tax-Exempt Entity.—Any taxable party to a prohibited tax shelter transaction (as defined in section 4965(e)(1)) shall by statement disclose to any tax-exempt entity (as defined in section 4965(c)) which is a party to such transaction that such transaction is such a prohibited tax shelter transaction.”. (c) Penalty for Nondisclosure.—(1) In general.—Section 6652(c) (relating to returns by exempt organizations and by certain trusts) is amended by redesignating paragraphs (3) and (4) as paragraphs (4) and (5), respectively, and by inserting after paragraph (2) the following new paragraph: “(3) Disclosure under section 6033(a)(2).—“(A) Penalty on entities.—In the case of a failure to file a disclosure required under section 6033(a)(2), there shall be paid by the tax-exempt entity (the entity manager 120 STAT. 372 in the case of a tax-exempt entity described in paragraph (4), (5), (6), or (7) of section 4965(c)) $100 for each day during which such failure continues. The maximum penalty under this subparagraph on failures with respect to any 1 disclosure shall not exceed $50,000. “(B) Written demand.—“(i) In general.—The Secretary may make a written demand on any entity or manager subject to penalty under subparagraph (A) specifying therein a reasonable future date by which the disclosure shall be filed for purposes of this subparagraph. “(ii) Failure to comply with demand.—If any entity or manager fails to comply with any demand under clause (i) on or before the date specified in such demand, there shall be paid by such entity or manager failing to so comply $100 for each day after the expiration of the time specified in such demand during which such failure continues. The maximum penalty imposed under this subparagraph on all entities and managers for failures with respect to any 1 disclosure shall not exceed $10,000. “(C) Definitions.—Any term used in this section which is also used in section 4965 shall have the meaning given such term under section 4965.”. (2) Conforming amendment.—Paragraph (1) of section 6652(c) is amended by striking “6033” each place it appears in the text and heading thereof and inserting “6033(a)(1)”. (d) Effective Dates.—(1) In general.—Except as provided in paragraph (2), the amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act, with respect to transactions before, on, or after such date, except that no tax under section 4965(a) of the Internal Revenue Code of 1986 (as added by this section) shall apply with respect to income or proceeds that are properly allocable to any period ending on or before the date which is 90 days after such date of enactment. 120 STAT. 373(2) Disclosure.—The amendments made by subsections (b) and (c) shall apply to disclosures the due date for which are after the date of the enactment of this Act.