102 STAT. 3744 PUBLIC LAW 100-647—NOV. 10, 1988

"(1) reasonable administrative costs incurred in connection
with such administrative proceeding within the Internal Reve-
nue Service, and

"(2) reasonable litigation costs incurred in connection with
such court proceeding.
"(b) LIMITATIONS.—

"(1) REQUIREMENT THAT ADMINISTRATIVE REMEDIES BE
EXHAUSTED.—A judgment for reasonable litigation costs shall
not be awarded under subsection (a) in any court proceeding
unless the court determines that the prevailing party has
exhausted the administrative remedies available to such party
within the Internal Revenue Service.

"(2) ONLY COSTS ALLOCABLE TO THE UNITED STATES.—An award
under subsection (a) shall be made only for reasonable litigation
and administrative costs which are allocable to the United
States and not to any other party.

"(3) EXCLUSION OF DECLARATORY JUDGMENT PROCEEDINGS.—
"(A) IN GENERAL.—No award for reasonable litigation
costs may be made under subsection (a) with respect to any
declaratory judgment proceeding.

"(B) EXCEPTION FOR SECTION 50i(cX3) DETERMINATION
REVOCATION PROCEEDINGS.—-Subparagraph (A) shall not
apply to any proceeding which involves the revocation of a
determination that the organization is described in section
501(cX3).

"(4) COSTS DENIED WHERE PARTY PREVAILING PROTRACTS

PROCEEDINGS.—No award for reasonable litigation and adminis-
trative costs may be made under subsection (a) with respect to
any portion of the administrative or court proceeding during
which the prevailing party has unreasonably protracted such
proceeding,
"(c) DEFINITIONS.—For purposes of this section—

"(1) REASONABLE LITIGATION COSTS.—The term 'reasonable
litigation costs' includes—

"(A) reasonable court costs, and

"(B) based upon prevailing market rates for the kind or
quality of services furnished—

"(i) the reasonable expenses of expert witnesses in
connection with a court proceeding, except that no
expert witness shall be compensated at a rate in excess
of the highest rate of compensation for expert wit-
nesses paid by the United States,

"(ii) the reasonable cost of any study, analysis,
engineering report, test, or project which is found by
the court to be necessary for the preparation of the
party's case, and

"(iii) reasonable fees paid or incurred for the services
of attorneys in connection with the court proceeding,
except that such fees shall not be in excess of $75 per
hour unless the court determines that an increase in
the cost of living or a special factor, such as the limited
availability of qualified attorneys for such proceeding,
justifies a higher rate.

"(2) REASONABLE ADMINISTRATIVE COSTS.—The term 'reason-
able administrative costs' means—

"(A) any administrative fees or similar charges imposed
by the Internal Revenue Service, and