text: SECTION 1. SHORT TITLE.
  
      This Act may be cited as the ``Software Trade Secrets Protection 
  Act''.
  
  SEC. 2. SOFTWARE TRADE SECRETS PROTECTION.
  
      (a) In General.--Subchapter A of chapter 78 of the Internal Revenue 
  Code of 1986 (relating to examination and inspection) is amended by 
  redesignating section 7612 as section 7613 and by inserting after 7611 
  the following:
  
  ``SEC. 7612. SPECIAL PROCEDURES FOR SUMMONSES FOR COMPUTER SOFTWARE.
  
      ``(a) Limitation on Authority to Require Production of Computer 
  Software Source Code.--
              ``(1) In general.--No summons may be issued under this 
          title, and the Secretary may not begin any action under section 
          7604 to enforce any summons, to produce or examine any computer 
          software source code or related customer communications, and 
          training materials.
              ``(2) Exception where information not otherwise available 
          to verify correctness of item on return.--Paragraph (1) shall 
          not apply to any portion, item, or component of computer 
          software source code if--
                      ``(A) the Secretary, without examining the computer 
                  software source code, is unable to otherwise ascertain 
                  with reasonable accuracy the correctness of any item on 
                  a return after employing auditing procedures and 
                  practices otherwise used pursuant to this title,
                      ``(B) the Secretary identifies with reasonable 
                  specificity the portion, item, or component of such 
                  code needed to verify the correctness of such item on 
                  the return, and
                      ``(C) the Secretary demonstrates that with respect 
                  to the issue under examination the need for the 
                  portion, item, or component of the computer software 
                  source code requested outweighs the burdens of 
                  production imposed on the summoned person and the risks 
                  of disclosure of trade secrets.
              ``(3) Other exceptions.--Paragraph (1) shall not apply to--
                      ``(A) any inquiry into any offense connected with 
                  the administration or enforcement of the internal 
                  revenue laws, and
                      ``(B) any computer software developed by the 
                  taxpayer or a related person (within the meaning of 
                  section 267 or 707(b)) for internal use by the taxpayer 
                  or such person and not for commercial purposes.
              ``(4) Enforcement proceeding.--In any proceeding brought 
          under section 7604 to enforce a summons issued under this 
          section, the court shall hold a hearing to determine whether 
          the Secretary has met the requirements of paragraph (2).
              ``(5) Compliance with summons for computer software source 
          code.--Any person to whom a summons for a portion, item, or 
          component of computer software source code is issued shall be 
          deemed to have complied with such summons by producing a hard-
          copy printout of such code.
      ``(b) Protection of Trade Secrets and Other Confidential 
  Information.--
              ``(1) Entry of protective order.--In any court proceeding 
          to enforce a summons for any portion of software, the court may 
          receive evidence and issue any order necessary to prevent undue 
          burdens or the disclosure of trade secrets or other 
          confidential information with respect to such software, 
          including providing that any information be placed under seal 
          to be opened only as directed by the court.
              ``(2) Protection of software.--Notwithstanding any other 
          provision of this section, and in addition to any protections 
          ordered pursuant to paragraph (1), in the case of software that 
          comes into the possession or control of the Secretary in the 
          course of any examination with respect to any taxpayer--
                      ``(A) the software may be examined only in 
                  connection with the examination of such taxpayer's 
                  return,
                      ``(B) the software may be disclosed only to persons 
                  conducting such examination whose duties or 
                  responsibilities require access to the software,
                      ``(C) the software shall be maintained in a secure 
                  area or place, and, in the case of computer software 
                  source code and related documents, shall not be removed 
                  from the owner's place of business,
                      ``(D) the software may not be copied except as 
                  necessary to perform such examination,
                      ``(E) at the end of the examination (and any 
                  judicial review of the summons issued under this 
                  section), the software and all copies thereof shall be 
                  returned to the person from whom they were obtained and 
                  any copies thereof made under subparagraph (D) on the 
                  hard drive of a machine or other mass storage device 
                  shall be permanently deleted and any notes or other 
                  memoranda made with regard to such software shall be 
                  destroyed,
                      ``(F) the software may not be decompiled, 
                  disassembled, or reverse engineered, and
                      ``(G) the Secretary shall provide to the taxpayer 
                  and the owner of any interest in such software, as the 
                  case may be, a written agreement between the Secretary 
                  and any person who will examine or otherwise have 
                  access to such software, in which such person agrees--
                              ``(i) not to disclose such software to any 
                          person other than authorized employees or 
                          agents of the Secretary during and after 
                          employment by the Secretary, and
                              ``(ii) not to compete with the owner of the 
                          software for a period of 2 years after 
                          disclosure to such person of such software.
          ``The owner of any interest in the software shall be considered 
          a party to any agreement described in subparagraph (G).
      ``(c) Compliance With Summons for Certain Computer Software 
  Executable Code.--Any taxpayer to whom is issued a summons for 
  commercially available computer software executable code used to 
  prepare such taxpayer's return or to account for the taxpayer's 
  transactions with others shall be deemed to have complied with such 
  summons by producing a read-only version of such code.
      ``(d) Definitions.--For purposes of this section--
              ``(1) Software.--The term `software' includes computer 
          software source code and computer software executable code.
              ``(2) Computer software source code.--The term `computer 
          software source code' means--
                      ``(A) the code written by a programmer using a 
                  programming language which is comprehensible to 
                  appropriately trained persons, is not machine readable, 
                  and is not capable of directly being used to give 
                  instructions to a computer, and
                      ``(B) related programmers' notes, design documents, 
                  memoranda, and similar documentation, excluding 
                  customer communications and training materials.
              ``(3) Computer software executable code.--The term 
          `computer software executable code' means--
                      ``(A) any object code, machine code, or other code 
                  readable by a computer when loaded into its memory and 
                  used directly by such computer to execute instructions, 
                  and
                      ``(B) any related user manuals.''.
      (b) Unauthorized Disclosure of Software.--Section 7213 of the 
  Internal Revenue Code of 1986 (relating to unauthorized disclosure of 
  information) is amended by redesignating subsection (d) as subsection 
  (e) and by inserting after subsection (c) the following:
      ``(d) Disclosure of Software.--Any person who divulges or makes 
  known in any manner whatever not provided under section 7612 to any 
  other person software (as defined in section 7612(d)(1)) shall be 
  guilty of a felony and, upon conviction thereof, shall be fined not 
  more than $5,000, or imprisoned not more than 5 years, or both, 
  together with the costs of prosecution.''.
      (c) Conforming Amendment.--The table of sections for subchapter A 
  of chapter 78 of the Internal Revenue Code of 1986 is amended by 
  striking the item relating to section 7612 and by inserting the 
  following:
  
  ``Sec. 7612. Special procedures for summonses for computer software.
  ``Sec. 7613. Cross references.''.
      (d) Effective Date.--The amendments made by this section shall take 
  effect on the date of enactment of this Act.
target: Software Trade Secrets Protection Act - Amends the Internal Revenue Code to prohibit the issuance or enforcement of any summons to produce or examine any computer software source code or related customer communications and training materials, subject to stated exceptions.
feat_title: Software Trade Secrets Protection Act