of 1986 is amended by adding at the end the following new subparagraph: (F) Eligible small business (i) In general For purposes of subparagraph (D)(iii), the term eligible small business means, with respect to any proceeding commenced in a taxable year— (I) a corporation the stock of which is not publicly traded, (II) a partnership, or (III) a sole proprietorship, if the average annual gross receipts of such corporation, partnership, or sole proprietorship for the 3-taxable-year period preceding such taxable year does not exceed $50,000,000. For purposes of applying the test under the preceding sentence, rules similar to the rules of paragraphs (2) and (3) of section 448(c) shall apply. (ii) Adjustment for inflation In the case of any calendar year after 2018, the $50,000,000 amount in clause (i) shall be increased by an amount equal to— (I) such dollar amount, multiplied by (II) the cost-of-living adjustment determined under section 1(f)(3) for such calendar year, determined by substituting calendar year 2017 for calendar year 2016 in subparagraph (A)(ii) thereof. If any amount as increased under the preceding sentence is not a multiple of $500, such amount shall be rounded to the next lowest multiple of $500. . (c) Effective date The amendments made by this section shall apply to proceedings commenced after the date of the enactment of this Act. 3. Civil damages allowed for reckless or intentional disregard of internal revenue laws (a) Increase in amount of damages (1) In general Section 7433(b) of the Internal Revenue Code of 1986 is amended by striking $1,000,000 ($100,000, in the case of negligence) and inserting $5,000,000 ($500,000, in the case of negligence) . (2) Adjustment for inflation Section 7433 of such Code is amended by adding at the end the following new subsection: (f) Adjustment for inflation In the case of any calendar year after 2018, the $5,000,000 and $500,000 amounts in subsection (b) shall each be increased by an amount equal to— (1) such dollar amount, multiplied by (2) the