PUBLIC LAW 104-168-^ULY 30, 1996
110 STAT. 1463
SEC. 602. REQUIREMENT TO CONDUCT REASONABLE INVESTIGATIONS
OF INFORMATION RETURNS.
(a) GENERAL RULE.— Section 6201 (relating to assessment
authority) is amended by redesignating subsection (d) as subsection
(e) and by inserting sifter subsection (c) the following new subsection:
" (d) REQUIRED REASONABLE VERIFICATION OF INFORMATION
RETURNS. —In any court proceeding, if a taxpayer asserts a reasonable dispute with respect to any item of income reported on an
information return filed with the Secretary under subpart B or
C of part III of subchapter A of chapter 61 by a third party
and the taxpayer has fully cooperated with the Secretary (including
providing, within a reasonable period of time, access to and inspection of all witnesses, information, and documents within the control
of the taxpayer as reasonably requested by the Secretary), the
Secretary shall have the burden of producing reasonable and probative information concerning such deficiency in addition to such
information return.".
(b) EFFECTIVE DATE.— The amendment made by subsection (a) 26 USC 620i
shalltakeeffectonthedateoftheenactmentof this Act.
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TITLE VII—AWARDING OF COSTS AND
CERTAIN FEES
SEC. 701. UNITED STATES MUST ESTABLISH THAT ITS POSITION IN
PROCEEDING WAS SUBSTANTIALLY JUSTIFIED.
(a) GENERAL RULE.—Subparagraph (A) of section 7430(c)(4)
(defining prevaiHng party) is amended by striking clause (i) and
by redesignating clauses (ii) and (iii) as clauses (i) and (ii), respectively.
(b) BURDEN OF PROOF ON UNITED STATES. —Paragraph (4) of
section 7430(c) is £unended by redesignating subparagraph (B) as
subparagraph (C) and by inserting after subparagraph (A) the following new subparagraph:
" (B) EXCEPTION IF UNITED STATES ESTABLISHES THAT
ITS POSITION WAS SUBSTANTIALLY JUSTIFIED. —
"(i) GENERAL RULE.—^A party shall not be treated
as the prevailing party in a proceeding to which subsection (a) appHes if the United States establishes that
the position of the United States in the procee(Ung
was substantially justified.
" (ii) PRESUMPTION OF NO JUSTIFICATION IF
INTERNAL REVENUE SERVICE DID NOT FOLLOW CERTAIN
PUBLISHED GUIDANCE.—For purposes of clause (i), the
position of the United States shall be presumed not
to be substantially justified if the Internal Revenue
Service did not follow its applicable published guidance
in the administrative proceeding. Such presumption
may be rebutted.
"(iii) APPLICABLE PUBLISHED GUIDANCE. —For purposes of clause (ii), the term 'applicable published guidance' means—
"(I) regulations, revenue rulings, revenue
procedures, information releases, notices, and
announcements, and
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