"(A) the amount contributed for the taxable year to the accounts or for the annuities or bonds (other than a rollover contribution described in section 402(a)(5), 403(a) (4), 408 (d) (3)), or 409 (b) (3) (C), over "(B) the amount allowable as a deduction under section 219 for such contributions, and 88 STAT. 967 Post, pp. 991, 969; Ante, pp. 959, 964. "(2) the amount determined under this subsection for the preceding taxable year, reduced by the excess (if any) of the maximum amount allowable as a deduction under section 219 for the Ante, p. 958. taxable year over the amount contributed to the accounts or for the annuities or bonds for the taxable year and reduced by the sum of the distributions out of the account (for all prior taxable years) which were included in the gross income of the payee under section 408 (d) (1). For purposes of this paragraph, any contribution which is distributed out of the individual retirement account, individual retirement annuity, or bond in a distribution to which section 408 (d) (4) applies shall be treated as an amount not contributed. "(c) SECTION 403(b) CONTRACTS.-For purposes of this section, in "Excess conthe case of a custodial account referred to in subsection (a)(3), the tributions." term 'excess contributions' means the sum of "(1) the excess (if any) of the amount contributed for the taxable year to such account, over the lesser of the amount excludable from gross income under section 403(b) or the amount permitted 26 USC 403. to be contributed under the limitations contained in section 415 (or under whichever such section is applicable, if only one is applicable), and (2) the amount determined under this subsection for the preceding taxable year, reduced by "(A) the excess (if any) of the lesser of (i) the amount excludable from gross income under section 403 (b) or (ii) the amount permitted to be contributed under the limitations contained in section 415 over the amount contributed to the account for the taxable year (or under whichever such section is applicable, if only one is applicable), and "(B) the sum of the distributions out of the account (for all prior taxable years) which are included in gross income under section 72(e)." (e) EXCISE TAX ON EXCESSIVE ACCUMULATIONS.-Chapter 43 is amended by inserting after section 4973 the following new section: "SEC. 4974. EXCISE TAX ON CERTAIN ACCUMULATIONS IN INDIVIDUAL RETIREMENT ACCOUNTS OR ANNUITIES. "(a) IMPOSITION OF TAX.-If, in the case of an individual retirement account or individual retirement annuity, the amount distributed during the taxable year of the payee is less than the minimum amount required to be distributed under section 408 (a) (6) or (7), or 408(b) (3) or (4) during such year, there is imposed a tax equal to 50 percent of the amount by which the minimum amount required to be distributed during such year exceeds the amount actually distributed during the year. The tax imposed by this section shall be paid by such payee. "(b) REGULATIONS.-For purposes of this section, the minimum amount required to be distributed during a taxable year under section 408(a) (6) or (7) or 408(b) (3) or (4) shall be determined under regulations prescribed by the Secretary or his delegate.". Post, p. 979. Ante, p. 966. Ante, p. 959. (f) PENALTY FOR FAILURE TO PROVIDE REPORTS ON INDIVIDUAL RETIREMENT ACCOUNTS. Subchapter B of chapter 68 (relating to Ante, p. 946. assessable penalties) is amended by adding at the end thereof the following new section: 88 STAT. 968 Penalty. 26 USC 6211. 26 USC 37. "SEC. 6693. FAILURE TO PROVIDE REPORTS ON INDIVIDUAL RETIREMENT ACCOUNTS OR ANNUITIES. "(a) The person required by section 408 (i) to file a report regarding an individual retirement account or individual retirement annuity at the time and in the manner required by section 408 (i) shall pay a penalty of $10 for each failure unless it is shown that such failure is due to reasonable cause. "(b) DEFICIENCY PROCEDURES Nor To APPLY.-Subchapter B of chapter 63 (relating to deficiency procedures for income, estate, gift. and certain excise taxes) does not apply to the assessment or collection of any penalty imposed by subsection (a).". (g) CONFORMING AMENDMENTS. (1) Section 37 (c)(1) (defining retirement income) amended (A) by striking out "and" at the end of subparagraph (D), (B) by adding at the end of subparagraph (E) the following: "retirement bonds described in section 409, and", and (C) by adding at the end thereof the following new paragraph: "(F) an individual retirement account described in section 408 (a) or an individual retirement annuity described in section 408 (b), or”. (2) The second sentence of section 46 (a) (3) and the second sentence of section 50A (a) (3), as each is amended by sections 2001 (g) (2) (B) and 2005 (c) (4) of this Act, are each amended by inserting after "owner-employees)," the following: "section 408 (e) (relating to additional tax on income from certain retirement accounts),". (3) The third sentence of section 901 (a), as amended by section 2005 (c) (5) of this Act, is amended by inserting "against the tax imposed for the taxable year by section 408 (f) (relating to additional tax on income from certain retirement accounts)," before "against the tax imposed by section 531". (4) Subparagraph (A) of section 56 (a) (2) and paragraph (1) of section 56(c) are each amended by striking out "531" and inserting in lieu thereof "408 (f), 531,". (5) Section 402 (a) (relating to taxability of beneficiary of exempt trust), as amended by section 2005 (c) (2) of this Act, is amended by inserting after paragraph (5) the following new paragraph: "(5) ROLLOVER AMOUNTS.-In the case of an employees' trust described in section 401 (a) which is exempt from tax under section 501 (a), if— "(A) the balance to the credit of an employee is paid to him on one or more distributions which constitute a lump sum distribution within the meaning of subsection (e) (4) (A) (determined without reference to subsection (e) (4) (B)), "(B) (i) the employee transfers all the property he receives in such distribution to an individual retirement account described in section 408 (a), an individual retirement annuity described in section 408 (b) (other than an endowment contract), or a retirement bond described in section 409, on or before the 60th day after the day on which he received such property, to the extent the fair market value of such property exceeds the amount referred to in subsection (e) (4) (D) (i), or "(ii) the employee transfers all the property he receives in such distribution to an employees' trust described in section 401 (a) which is exempt from tax under section 501 (a), 88 STAT. 969 or to an annuity plan described in section 403 (a) on or before 26 USC 403. the 60th day after the day on which he received such property, to the extent the fair market value of such property exceeds the amount referred to in subsection (e)(4) (D) (i), and "(C) the amount so transferred consists of the property (other than money) distributed, to the extent that the fair market value of such property does not exceed the amount required to be transferred pursuant to subparagraph (B), then such distributions are not includible in gross income for the year in which paid. For purposes of this title, a transfer described in subparagraph (B) (i) shall be treated as a rollover contribu tion as described in section 408 (d) (3). Subparagraph (B) (ii) Ante, p. 959. does not apply in the case of a transfer to an employees' trust, or annuity plan if any part of the lump sum distribution described in subparagraph (A) is attributable to a trust forming part of a plan under which the employee was an employee within the meaning of section 401(c) (1) at the time contributions were made on his behalf under the plan." (6) Section 403 (a) (relating to taxation of employee annuities) is amended by adding after paragraph (3) the following new paragraph: 66 "(4) ROLLOVER AMOUNTS.-In the case of an employee annuity described in 403 (a), if "(A) the balance to the credit of an employee is paid to him in one or more distributions which constitute a lump sum distribution within the meaning of section 402 (e) (4) (A) Ante, p. 953. determined without reference to section 402 (e) (4) (B), "(B)(i) the employee transfers all the property he receives in such distribution to an individual account described in section 408(a), an individual retirement annuity described in section 408(b) (other than an endowment contract), or a retirement bond described in section 409, on or before the 60th day after the day on which he received such property to the extent the fair market value of such property exceeds the amount referred to in section 402(e) (4) (D) (i), or "(ii) the employee transfers all the property he receives in such distribution to an employees' trust described in section 401(a) which is exempt from tax under section 501(a), or to an annuity plan described in subsection (a) on or before the 60th day after the day on which he received such property to the extent the fair market value of such property exceeds the amount referred to in section 402 (e) (4) (D) (i), and 66 (C) the amount so transferred consists of the property distributed to the extent that the fair market value of such property does not exceed the amount required to be transferred pursuant to subparagraph (B), then such distribution is not includible in gross income for the year in which paid. For purposes of this title, a transfer described in subparagraph (B) (i) shall be treated as a rollover contribution described in section 408 (d) (3). Subparagraph (B) (ii) does not apply in the case of a transfer to an employees' trust, or annuity plan if any part of the lump sum distribution described in subparagraph (A) is attributable to an annuity plan under which the employee was an employee within the meaning of section 401 (c) (1) at the time contributions were made on his behalf under the plan.". 88 STAT. 970 26 USC 3401. Ante, p. 958. 26 USC 6047. (7) Section 3401 (a) (12) (relating to exemption from collection of income tax at source on certain wages) is amended by adding at the end thereof the following new subparagraph: "(D) for a payment described in section 219(a) if, at the time of such payment, it is reasonable to believe that the employee will be entitled to a deduction under such section for payment; or". (8) Section 6047 (relating to information relating to certain trusts and annuity and bond purchase plans) is amended by redesignating subsection (d) as subsection (e) and by inserting after subsection (c) the following new subsection: "(d) OTHER PROGRAMS.-To the extent provided by regulations prescribed by the Secretary or his delegate, the provisions of this section apply with respect to any payment described in section 219 (a) Ante, p. 959. and to transactions of any trust described in section 408 (a) or under an individual retirement annuity described in section 408(b).". Pension plan reserves. (9) Section 805 (d) (i) (relating to definition of pension plan reserves) is amended by striking out "or" at the end of subparagraph (C), by striking out "foregoing." at the end of subparagraph (D) and inserting in lieu thereof "foregoing; or", and by adding at the end thereof the following new subparagraph : "(E) purchased under contracts entered into with trusts which (at the time the contracts were entered into) were individual retirement accounts described in section 408 (a) or under contracts entered into with individual retirement annuities described in section 408 (b)." (10) Section 72 (relating to annuities) is amended— (A) by inserting after "501 (a)" in subsection (m) (4) (A) 66 an individual retirement amount described in section 408 (a), an individual retirement annuity described in section 408 (b)". (B) by striking out at the end of subsection (m) (6) “401 (c) (3)" and inserting in lieu thereof "401 (c) (3) and includes an individual for whose benefit an individual retirement account or annuity described in section 408 (a) or (b) is maintained". (11) Section 801 (g) (7) (relating to basis of assets held for qualified pension plan contracts) is amended by striking out "or (D)" and inserting in lieu thereof “(D), or (E)”. (h) CLERICAL AMENDMENTS.- (1) The table of sections for part VII of subchapter B of chapter 1 is amended by striking out the item relating to section 219 and inserting in lieu thereof the following: "Sec. 219. Retirement savings. (2) The table of sections for subpart A of part I of subchapter D of chapter 1 is amended by adding at the end thereof the following: "Sec. 408. Individual retirement accounts. "Sec. 409. Retirement bonds.". (3) The table of sections for chapter 43 is amended by inserting after the item relating to section 4972 the following new items: "Sec. 4973. Tax on excess contributions to individual retirement accounts. "Sec. 4975. Tax on prohibited transactions.". 88 STAT. 971 (4) The table of sections for subchapter B of chapter 68 is amended by adding at the end thereof the following new item: "Sec. 6693. Failure to provide reports on individual retirement accounts or annuities.". (i) EFFECTIVE DATES.— (1) The amendments made by subsections (a), (b), and (c) apply to taxable years beginning after December 31, 1974. (2) The amendments made by subsections (d) through (h) except subsection (g)(5) and (6) shall take effect on January 1, 1975. (3) The amendments made by subsection (g)(5) and (6) shall apply on and after the date of enactment of this Act with respect to contributions to an employees' trust described in section 401(a) of the Internal Revenue Code of 1954 which is exempt from tax under section 501 (a) of such Code or an annuity plan described in section 403 (a) of such Code. SEC. 2003. PROHIBITED TRANSACTIONS. (a) EXCISE TAX ON PROHIBITED TRANSACTIONS.-Chapter 43 (relat- Ante, p. 967. ing to qualified pension, etc., plans) is amended by adding after section 1974 the following new section: "SEC. 4975. TAX ON PROHIBITED TRANSACTIONS. "(a) INITIAL TAXES ON DISQUALIFIED PERSON.-There is hereby imposed a tax on each prohibited transaction. The rate of tax shall be equal to 5 percent of the amount involved with respect to the prohibited transaction for each year (or part thereof) in the taxable period. The tax imposed by this subsection shall be paid by any disqualified person who participates in the prohibited transaction (other than a fiduciary acting only as such). "(b) ADDITIONAL TAXES ON DISQUALIFIED PERSON.—In any case in which an initial tax is imposed by subsection (a) on a prohibited transaction and the transaction is not corrected within the correction period, there is hereby imposed a tax equal to 100 percent of the amount involved. The tax imposed by this subsection shall be paid by any disqualified person who participated in the prohibited transaction (other than a fiduciary acting only as such). "(c) PROHIBITED TRANSACTION. "(1) GENERAL RULE. For purposes of this section, the term 'prohibited transaction' means any direct or indirect— "(A) sale or exchange, or leasing, of any property between a plan and a disqualified person; "(B) lending of money or other extension of credit between a plan and a disqualified person; "(C) furnishing of goods, services, or facilities between a plan and a disqualified person; "(D) transfer to, or use by or for the benefit of, a disqualified person of the income or assets of a plan; "(E) act by a disqualified person who is a fiduciary whereby he deals with the income or assets of a pian in his own interest or for his own account; or "(F) receipt of any consideration for his own personal account by any disqualified person who is a fiduciary from any party dealing with the plan in connection with a transaction involving the income or assets of the plan. "(2) SPECIAL EXEMPTION.-The Secretary or his delegate shall establish an exemption procedure for purposes of this subsection. Pursuant to such procedure, he may grant a conditional or unconditional exemption of any disqualified person or transaction, |