,i #aaeth ,,congress #ast ,session ,h4 ,r4 #dahi ,,in ,,the ,,house ,,of ,,representatives ,october #ca1 #bjag ,mr4 ,kelly of ,pennsylvania introduced the following bill2 which was referred to the ,committee on ,ways and ,means ,a ,,bill ,to reduce the disadvantages of individual retirement arrangements with respect to employer-sponsored retirement plans by helping taxpayers comply with laws affecting individual retirement arrangements1 by providing for reduced penalties under the ,internal ,revenue ,code of #aihf for certain self-corrections with respect to such laws1 and for other purposes4 #a4 ,short title ,this ,act may be cited as the ,,ira ,preservation ,act of #bjag4 #b4 ,education and outreach 7a7 ,information made available ,the ,secretary shall make available to the public the following information3 7#a7 ,an overview of the laws and regulations related to individual retirement arrangements1 including-- 7,a7 limits on contributions2 7,b7 limits on deductions for contributions2 7,c7 rollovers2 7,d7 minimum required distributions2 7,e7 non-exempt prohibited transactions2 and 7,f7 tax consequences for early distributions4 7#b7 ,examples of common errors by taxpayers with respect to the laws and regulations described in paragraph 7#a7 and instructions on how to avoid such errors4 7b7 ,targeted advance notices ,based on the information on common errors identified under subsection 7a77#b71 the ,secretary shall identify critical failure points and cause notices to be issued to individual taxpayers in advance of their reaching such critical failure points1 with advice on how to avoid such failures4 7c7 ,soft notice program 7#a7 ,in general ,the ,secretary shall1 at such time as the ,secretary considers appropriate1 cause a notice under this subsection to be issued to a taxpayer if the ,secretary detects a material inconsistency between or among any tax returns or reports filed under the ,internal ,revenue ,code of #aihf1 including an individual tax return and a third-party information return1 that could represent tax liability incurred by the taxpayer because of-- 7,a7 an excess contribution to an individual retirement arrangement as described in section #digc of the ,internal ,revenue ,code of #aihf2 7,b7 an excess accumulation in an individual retirement arrangement as described in section #digd of such ,code2 or 7,c7 any other error associated with an individual retirement arrangement that the ,secretary has the capability to detect automatically because of inconsistencies in returns filed or reports made under such ,code4 7#b7 ,exceptions ,the ,secretary is not required to issue a notice under paragraph 7#a7 with respect to an individual retirement arrangement in any case in which the ,secretary-- 7,a7 intends to initiate an audit of the individual retirement arrangement2 7,b7 has reason to believe there is no outstanding tax liability attributable to an excess contribution1 excess accumulation1 or other error described in subparagraph 7,a71 7,b71 or 7,c7 of paragraph 7#a72 or 7,c7 has other good cause consistent with the purposes of this ,act4 7#c7 ,content ,a notice issued under paragraph 7#a7 to a taxpayer with respect to an individual retirement arrangement shall include-- 7,a7 an explanation of taxes that could be owed1 as of the date of the notice1 because of an excess contribution1 excess accumulation1 or other error described in subparagraph 7,a71 7,b71 or 7,c7 of paragraph 7#a71 including1 if applicable1 an explanation of the reduced rates of tax available under section #digc7;i7 or #digd7;e71 as the case may be1 of the ,internal ,revenue ,code of #aihf for voluntary correction of an excess contribution or excess accumulation described in subparagraph 7,a7 or 7,b7 of paragraph 7#a7 if voluntary correction is made within the correction window applicable under section #digc7;i7 or #digd7;e71 as the case may be1 of such ,code2 7,b7 a statement that any failure to remit any taxes owed may result in an audit2 7,c7 in the case of an excess contribution or excess accumulation described in subparagraph 7,a7 or 7,b7 of paragraph 7#a71 an explanation of taxes that could be owed because of such excess contribution or excess accumulation1 if voluntary correction is not made within the correction window applicable under section #digc7;i7 or #digd7;e71 as the case may be1 of the ,internal ,revenue ,code of #aihf2 and 7,d7 a copy of the applicable form to be used by the taxpayer to remit taxes owed with respect to the individual retirement arrangement because of the potential excess contribution1 excess accumulation1 or other error described in the notice4 7#d7 ,coordination with self-correction procedures ,a notice issued under this paragraph may not be considered as initiating an audit or otherwise demanding payment for purposes of section #digc7;i7 or #digd7;e7 of the ,internal ,revenue ,code of #aihf4 #c4 ,reduction of excise taxes for voluntary correction of common ,,ira errors 7a7 ,reduction in excise tax on excess contributions ,section #digc of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new subsection3 7i7 ,reduction of tax in certain cases 7#a7 ,reduction ,in the case of a taxpayer who-- 7,a7 corrects1 during the correction window1 an excess contribution that was made to an individual retirement arrangement and that resulted in imposition of a tax under paragraph 7#a7 or 7#c7 of subsection 7a71 and 7,b7 submits a return1 during the correction window1 reflecting such tax 7as modified by this subsection71 the first and second sentences of subsection 7a7 shall be applied by substituting #c percent for #f percent each place it appears4 7#b7 ,correction window defined ,for purposes of this subsection1 the term correction window means the period beginning on the date on which the tax under subsection 7a7 is imposed with respect to an excess contribution1 and ending on the earlier of-- 7,a7 the date on which the ,secretary initiates an audit1 or otherwise demands payment1 with respect to the excess contribution1 or 7,b7 the last day of the second tax year that begins after the end of the tax year in which the tax under subsection 7a7 is imposed4 4 7b7 ,reduction in excise tax on failures ,to take required minimum distributions 7#a7 ,in general ,section #digd of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new subsection3 7e7 ,reduction of tax in certain cases 7#a7 ,reduction ,in the case of a taxpayer who-- 7,a7 corrects1 during the correction window1 a shortfall of distributions from an individual retirement arrangement that resulted in imposition of a tax under subsection 7a71 and 7,b7 submits a return1 during the correction window1 reflecting such tax 7as modified by this subsection71 the first sentence of subsection 7a7 shall be applied by substituting #e percent for #ej percent4 7#b7 ,correction window defined ,for purposes of this subsection1 the term correction window means the period of time beginning on the date on which the tax under subsection 7a7 is imposed with respect to a shortfall of distributions from an individual retirement arrangement1 and ending on the earlier of-- 7,a7 the date on which the ,secretary initiates an audit1 or otherwise demands payment1 with respect to the shortfall of distributions1 or 7,b7 the last day of the second tax year that begins after the end of the tax year in which the tax under subsection 7a7 is imposed4 4 7#b7 ,coordination with waiver provisions 7,a7 ,in general ,subsection 7d7 of section #digd of the ,internal ,revenue ,code of #aihf is amended-- 7i7 by redesignating paragraphs 7#a7 and 7#b7 as subparagraphs 7,a7 and 7,b71 respectively2 7ii7 by striking ,if the taxpayer and inserting3 7#a7 ,waiver ,subject to paragraph 7#b71 if the taxpayer 2 and 7iii7 by adding at the end the following3 7#b7 ,exception ,the ,secretary may not waive the tax imposed by subsection 7a7 with respect to an individual retirement arrangement4 4 7,b7 ,authority to compromise ,the amendments made by subparagraph 7,a7 shall not limit the authority of the ,secretary of the ,treasury under section #gaba or any other provision of the ,internal ,revenue ,code of #aihf to compromise the amount of any tax due under section #digd of such ,code1 except that1 in determining the amount of any such compromise1 the ,secretary may take into account the availability1 under section #digd7;e7 of such ,code1 of voluntary correction during the correction window 7as defined in section #digd7;e77#b7 of such ,code74 #d4 ,harmonization of treatment of ,i,r,as with employer plans 7a7 ,elimination of additional tax on certain distributions ,subparagraph 7,a7 of section #gb7t77#b7 of the ,internal ,revenue ,code of #aihf is amended-- 7#a7 by striking or at the end of clause 7vii72 7#b7 by striking the period at the end of clause 7viii7 and inserting 1 or2 and 7#c7 by adding at the end the following new clause3 7ix7 attributable to withdrawal of interest or other income earned on excess contributions to an individual retirement arrangement4 4 7b7 ,repeal of tax disqualification penalty 7#a7 ,in general ,paragraph 7#b7 of subsection 7e7 of section #djh of the ,internal ,revenue ,code of #aihf is repealed4 7#b7 ,conforming amendments 7,a7 ,section #djh7;e77#a7 of such ,code is amended by striking 7#b7 or4 7,b7 ,sections #bbj7;e77#b71 #bbc7;e77#b71 and #ecj7;e7 of such ,code are amended by striking paragraphs 7#b7 and 7#d7 of section #djh7;e7 each place it appears and inserting paragraph 7#d7 of section #djh7;e74 7,c7 ,section #dige7;c77#c7 of such ,code is amended by striking the account ceases to be an individual retirement account by reason of the application of section #djh7;e77#b77;,a7 or if4 7c7 ,statute of limitations ,subsection 7l7 of section #feja of the ,internal ,revenue ,code of #aihf is amended-- 7#a7 in paragraph 7#a71 by inserting 7other than for individual retirement arrangements7 after section #dige2 and 7#b7 by adding at the end the following new paragraph3 7#d7 ,individual retirement arrangements ,for purposes of any tax imposed by section #digc1 #digd1 or #dige in connection with an individual retirement arrangement1 the return referred to in this section shall be the income tax return filed by the person on whom the tax under such section is imposed for the year in which the act 7or failure to act7 giving rise to such liability for such tax occurred4 ,in the case of a person who is not required to file an income tax return for the year in which the act 7or failure to act7 giving rise to such liability for such tax occurred-- 7,a7 the return referred to in this section shall be the income tax return that such person would have been required to file but for the fact that such person was not required to file such return1 and 7,b7 the #c-year period referred to in subsection 7a7 with respect to the return shall be deemed to begin on the date by which the return would have been required to be filed 7excluding any extension thereof74 4 #e4 ,individual retirement arrangement defined 7a7 ,in general ,for purposes of this ,act1 the term individual retirement arrangement means an individual retirement account1 an individual retirement annuity1 and a ,roth ,,ira described in sections #djh7;a71 #djh7;b71 and #djh;,a1 respectively1 of the ,internal ,revenue ,code of #aihf4 7b7 ,internal ,revenue ,code ,section #djh of the ,internal ,revenue ,code of #aihf is amended-- 7#a7 by redesignating subsection 7r7 as subsection 7s72 and 7#b7 by inserting after subsection 7q7 the following new subsection3 7r7 ,individual retirement arrangement defined ,for purposes of this section and sections #gb7t71 #digc1 #digd1 and #feja7l71 the term individual retirement arrangement means an individual retirement account described in section #djh7;a71 an individual retirement annuity described in section #djh7;b71 and a ,roth ,,ira described in section #djh;,a4 4 #f4 ,effective date 7a7 ,in general ,subject to subsections 7b7 and 7c71 this ,act and the amendments made by this ,act shall take effect on the date of the enactment of this ,act4 7b7 ,transition provisions 7#a7 ,requests for waivers 7,a7 ,in general ,notwithstanding the amendments to section #digd7;d7 of the ,internal ,revenue ,code of #aihf made by section #c7;b77#b7 of this ,act1 a taxpayer may1 at any time before or during the transition period1 file a written request for a waiver under section #digd7;d7 of such ,code1 as in effect on the day before the date of the enactment of this ,act4 ,the ,secretary of the ,treasury shall consider any such request as if the amendments made by section #c7;b77#b7 had not been made4 7,b7 ,transition period defined ,for purposes of this paragraph1 the term transition period means the period beginning on the date of the enactment of this ,act and ending on the date that is #a year after such date of enactment4 7#b7 ,applicability to certain prior acts 7,a7 ,in general ,except as provided in paragraph 7#a71 the amendments made by this ,act shall apply to any determination of or affecting liability for taxes1 interest1 or penalties that is made on or after the date of the enactment of this ,act1 even if the conduct upon which the determination is based occurred before such date of enactment4 7,b7 ,calculation of correction window in certain cases ,in the case of an error that would have been eligible for correction under section #digc7;i7 or #digd7;e7 of the ,internal ,revenue ,code of #aihf if tax had not been imposed under #digc7;a7 or #digd7;a71 as the case may be1 of such ,code before the date of the enactment of this ,act1 the correction window referred to in sections #digc7;i7 and #digd7;e7 of such ,code shall be the period beginning on the date on which such tax was imposed and ending on the earlier of-- 7i7 the date on which the ,secretary of the ,treasury initiates an audit or otherwise demands payment with respect to the conduct described in section #digc7;a7 or #digd7;a71 as the case may be1 of such ,code2 or 7ii7 the last day of the second tax year that begins after the tax year in which the date of the enactment of this ,act occurs4 7c7 ,implementation ,section #b shall be implemented as soon as reasonably practicable after the enactment of this ,act but in no case later than the date that is #a year after the date of the enactment of this ,act4