the

(e) Statements to be furnished to persons with respect to whom informe (b), tion is furnished. Subsection (e) provides that every cooperative making a return under subsection (a)(1) shall furnish to each person whose name is set forth in such return a written statement showing (1) the name and address of the cooperative making the return, and (2) the aggregate amount of payments to the person as shown on the return. This written statement is to be furnished to the person on or before January 31 of the year following the calendar year for which the return under subsection (a) (1) was made. However, no statement is required to be furnished to any person under this subsection if the aggregate amount of payments to the person as shown on the return made under subsection (a) (1) is less than $10.

SECTION 19. REPORTING OF INTEREST, DIVIDEND, AND PATRONAGE DIVIDEND PAYMENTS OF $10 OR MORE DURING A YEAR (Continued)

(c) Returns regarding payments of interest.—Subsection (c) of the new section 19 amends subpart B of part III of subchapter A of chapter 61 of the code (relating to information concerning transactions with other persons) by adding a new section 6048 to such subpart B.

SECTION 6048. RETURNS REGARDING PAYMENTS OF INTEREST

(a) Requirement of reporting.-Paragraph (1) of new section 6048(a) requires every person making payments of interest (as defined in subsec. (b)) aggregating $10 or more to any other person during an calendar year to report such payments. In addition, paragraph (1) requires persons receiving payments of interest (as defined in subsec. (b)) in the capacity of nominee to report payments by them aggre gating $10 or more during any calendar year to any other person with respect to such interest so received. The return to be filed under paragraph (1) is to be made according to the forms or regulations prescribed by the Secretary of the Treasury or his delegate and is to set forth the name and address of the person to whom the payments were made and the aggregate amount of such payments.

Paragraphs (2) and (3) restate, in general, provisions of existing law (sec. 6041 (c)). Paragraph (2) provides that, when required by the Secretary of the Treasury or his delegate, every person who makes payments of interest (as defined in subsec. (b)) aggregating less that $10 to any other person during any calendar year is to make a return setting forth the aggregate amount of such payments and the name and address of the person to whom paid. Under existing law the Secretary of the Treasury or his delegate has discretionary authority to require every corporation making payments of interest, regardless of amounts, to report the amounts so paid. Paragraph (2) limits the discretionary authority of the Secretary of the Treasury or his dele gate to require information returns, with respect to payments of interest defined in subsection (b), to such payments to another person aggregating less than $10 during a calendar year. Payments aggre gating $10 or more during the year must be reported under subsec tion (a)(1).

Paragraph (3) provides that, when required by the Secretary of the Treasury or his delegate, every corporation making payments, regard less of amounts, of interest other than interest as defined in subsection

to make a return according to the forms or regulations preby the Secretary of the Treasury or his delegate, setting forth ount paid and the name and address of the recipient of each ayment.

Interest defined. Subsection (b)(1) of the new section 6048 3 the term "interest" for purposes of subsections (a) (1) and (2) n section to mean:

(A) Interest on evidences of indebtedness (including bonds, ebentures, notes, and certificates) issued by a corporation in egistered form, and to the extent provided in regulations precribed by the Secretary of the Treasury or his delegate, interest n other evidences of indebtedness issued by a corporation of a ype offered by corporations to the public. For this purpose, in instrument is in registered form if its transfer must be effected by the surrender of the old instrument and either the reissuance of the old instrument by the corporation to the new holder or the issuance by the corporation of a new instrument to the new holder. If an instrument can be transferred by endorsement it is not in registered form even though a list is maintained by the corporation of such instruments issued by it.

As used in subsection (b)(1) the term "of a type offered by corporations to the public" refers to a type of instrument. In determining whether a particular instrument comes within the scope of the term it is immaterial whether the particular instrument (or any instrument of the issue of which it is a part) actually was offered to the public so long as it is of a type which is offered by corporations to the public. Therefore, in a case where an entire issue is offered by a corporation only to its shareholders, the instruments come within the scope of the term if they are of a type offered by corporations to the public. The term does not have reference to instruments of a type offered by corporations only to other corporations. Coupon bonds issued by a corporation are an example of an evidence of indebtedness with respect to which the Secretary of the Treasury or his delegate may require information reporting under subsections (a) (1) and (2).

(B) Interest on deposits with persons carrying on the banking business. This includes interest paid or credited by any individual or organization carrying on the banking business.

(C) Amounts (whether or not designated as interest) paid or credited by a mutual savings bank, savings and loan association, building and loan association, cooperative bank, homestead association, credit union, or similar organization, in respect of deposits, investment certificates, or withdrawable or repurchasable shares. This includes interest paid with respect to face amount certificates. (D) Interest on amounts held by an insurance company under an agreement to pay interest thereon. This subparagraph includes interest paid with respect to policy dividends held by an insurance company, and interest on the proceeds of an insurance policy held by an insurer under an agreement to pay interest thereon. This paragraph does not apply to amounts which represent the so-called "interest element" in the case of annuity or installment payments under a life insurance or endowment

contract.

(E) Interest on deposits with stockbrokers and dealers in securities. This subparagraph includes interest on deposits with

stockbrokers, bondbrokers, and other persons engaged in the business of dealing in securities.

Subsection (b) (2) provides that, for purposes of subsection (a) (1) and (2), the term "interest" does not include:

(A) Interest on obligations described in section 103(a) (1) or (3) of the code (relating to obligations of a State, etc.);

(B) To the extent provided in regulations prescribed by the Secretary of the Treasury or his delegate, any amount paid by or to a foreign corporation, a nonresident alien, or a partnership not engaged in trade or business in the United States and composed in whole or in part of nonresident aliens and

(C) Any amount on which the person making payment is required to deduct and withhold a tax under section 1451 (relating to tax-free covenant bonds) or would be so required but for section 1451(d) (relating to benefit of personal exemptions). Thus, the payment of interest on a tax-free covenant bond issued before January 1, 1934, is not required to be reported under subsection (a) (1) and (2). The fact that the person entitled to receive such interest files with the payer a signed notice in writing, as provided in section 1451(d) of the 1954 Code, claiming benefit of the deduction for personal exemptions provided in section 151 of the code, thereby relieving the payer of the duty to withhold a tax under section 1451(a), does not abrogate the exception provided by this subparagraph. (c) Statements to be furnished to persons with respect to whom informetion is furnished.-Subsection (c) of the new section 6042 requires every person making a return under subsection (a)(1) to furnish to each person whose name is set forth in such return a written statement showing (1) the name and address of the person making the return, and (2) the aggregate amount paid to the person as shown on the return. Such written statement is to be furnished to the person on or before January 31 of the year following the calendar year for which the return under subsection (a) (1) was made. However, no statemen: is required to be furnished to any person under this subsection if the aggregate amount of payments to the person as shown on the return made under subsection (a)(1) is less than $10.

SECTION 19. REPORTING OF INTEREST, DIVIDEND, AND PATRONAGE DIVIDEND PAYMENTS OF $10 OR MORE DURING A YEAR (Continued)

(d) Penalties for failure to file information returns.-Subsection (d) of section 19 of the bill amends section 6652 of the 1954 Code (relating to failure to file information returns) to provide a new civil penalty for failure to file an information return with respect to payments aggregating $10 or more, respectively, of dividends, interest, or patronage dividends as required by the amendments made to the code by subsections (a), (b), and (c) of the new section 19, and to reflect the other amendments with respect to information reporting made by such subsections.

SECTION 6652. FAILURE TO FILE CERTAIN INFORMATION RETURNS

(a) Returns relating to payments of dividends, interest, and patronage Evidends. Subsection (a) provides a new penalty of $10 per stateent for each failure to file a statement of the aggregate amount of ayments to another person, as required by section 6042(a) (1) (relatg to payments of dividends aggregating $10 or more), section 044(a)(1) (relating to payments of patronage dividends aggregating 10 or more), or section 6048 (a) (1) (relating to payments of interest ggregating $10 or more), on the date prescribed therefor (determined ith regard to any extension of time for filing). No penalty is to be aposed, however, with respect to a failure to file a statement, if it is hown by the payer that the failure was due to reasonable cause and ot to willful neglect. The penalty is to be paid, upon notice and emand by the Secretary of the Treasury or his delegate and in the ame manner as tax, by the person failing to so file the statement. The total amount imposed on the delinquent person for all such failres during any calendar year shall not exceed $25,000.

(b) Other returns. Subsection (b) retains the penalty provided nder existing section 6652 for failures to file information returns not overed by the new $10 penalty in subsection (a). Subsection (b) proides a penalty of $1 for each failure to file a statement, at the proper me, of a payment to another person required under authority of ection 6041 (relating to certain information at source), section 042(a)(2) (relating to payments of dividends aggregating less than 10), section 6044 (a) (2) (relating to payments of patronage dividends ggregating less than $10), section 6048 (a) (2) (relating to payments of nterest aggregating less than $10), section 6048 (a) (3) (relating to ther payments of interest by corporations), or section 6051 (d) (relatng to information returns with respect to income tax withheld). The penalty is to be imposed, with respect to each failure, unless it is shown hat the failure was due to reasonable cause and not to willful neglect. The penalty is to be paid, upon notice and demand by the Secretary of the Treasury or his delegate and in the same manner as tax, by the person failing to so file the statement. The total amount imposed on he delinquent person for all such failures during the calendar year hall not exceed $1,000.

SECTION 19. REPORTING OF INTEREST, DIVIDEND, AND PATRONAGE DIVIDEND PAYMENTS OF $10 OR MORE DURING A YEAR (Continued)

(e) Penalty for failure to furnish statements to persons with respect o whom returns are filed.-Subsection (e) of the new section 19 amends ubchapter B of chapter 68 (relating to assessable penalties) by dding to such subchapter a new section 6678 to provide civil penalties or failure to furnish statements to persons to whom dividends, patronge dividends, or interest are paid as required by the amendments nade to the code by subsections (a), (b), and (c) of the new section 19.

SECTION 6678. FAILURE TO FURNISH CERTAIN STATEMENTS

Section 6678 provides a penalty of $10 for each failure to furnish a statement under section 6042(c), 6044 (e), or 6048 (c) on the date

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prescribed therefor to a person with respect to whom an information return has been made under section 6042(a) (1), 6044 (a) (1), or 6048(a) (1), respectively. The penalty is to be imposed unless it is shown that such failure was due to reasonable cause and not to willful neglect. The penalty is to be paid, upon notice and demand by the Secretary of the Treasury or his delegate and in the same manner as tax, by the person failing to so furnish the statement. The total amount imposed on the delinquent person for all such failures during any calendar year shall not exceed $25,000.

(f) Technical amendments.-Subsection (f) of the new section 19 amends section 6041 of the code, relating to information at source, to reflect the amendments made to the code by subsections (a), (b), and (c) of the new section 19.

Paragraph (1) amends section 6041(a) of the code (relating to information returns with respect to payments of $600 or more) in order to exclude from the application of such section payments of dividends, patronage dividends, and interest aggregating, respectively, $10 or more during any calendar year to another person, and to exclude from such application other payments of dividends, patronage dividends, and interest with respect to which the Secretary of the Treasury or his delegate requires information returns under the authority of sections 6042 (a)(2), 6044 (a) (2), 6045, 6048(a)(2), and 6048(a)(3) as amended, or added to the code, by your committee's amendment.

Paragraph (2) further amends section 6041 of the code by striking out subsection (c) thereof (relating to payments of interest by corporations) since the provisions of such subsection are contained in the new section 6048 added to the code by subsection (c) of section 19 of the bill.

(g) Clerical amendments.-Subsection (g) of section 19 of the bill bill makes certain clerical amendments to the code to reflect the other amendments made to such code by section 19 of the bill.

(h) Effective date. Subsection (h) of section 19 of the bill provides effective dates for the application of the provisions of such section 19 with respect to payments of dividends, interest, and patronage dividends.

Paragraph (1) provides that, except as provided in paragraph (2), the provisions of section 19 of the bill are to apply with respect to payments of dividends and interest on or after January 1, 1963.

Paragraph (2) provides that the provisions of section 19 of the bill are to apply with respect to payments of amounts described in section 6044(b) of the code (relating to returns regarding patronage dividends) on or after January 1, 1963, with respect to patronage occurring on or after the first day of the first taxable year of the cooperative beginning on or after January 1, 1963.

SECTION 20. INFORMATION WITH RESPECT TO CERTAIN FOREIGN ENTITIES

This section is the same as section 20 of the bill as passed by the House except for certain changes in the constructive ownership rules and in the penalty provision under section 6038 of the code, as amended by the bill (relating to information to be furnished with respect to certain foreign corporations), and except for certain changes in section