[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1308 Placed on Calendar Senate (PCS)]

                                                        Calendar No. 52
108th CONGRESS
  1st Session
                                H. R. 1308


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             March 20, 2003

                    Received and read the first time

                             March 21, 2003

            Read the second time and placed on the calendar

_______________________________________________________________________

                                 AN ACT


 
 To amend the Internal Revenue Code of 1986 to end certain abusive tax 
  practices, to provide tax relief and simplification, and for other 
                               purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; REFERENCES; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Tax Relief, 
Simplification, and Equity Act of 2003''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.
    (c) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; references; table of contents.
                 TITLE I--ENDING ABUSIVE TAX PRACTICES

Sec. 101. Individual expatriation to avoid tax.
Sec. 102. Suspension of tax-exempt status of terrorist organizations.
Sec. 103. Expressing the sense of the Congress that tax reform is 
                            needed to address the issue of corporate 
                            expatriation.
          TITLE II--RELIEF FOR FOREIGN SERVICE AND ASTRONAUTS

Sec. 201. Special rule for members of Foreign Service in determining 
                            exclusion of gain from sale of principal 
                            residence.
Sec. 202. Tax relief and assistance for families of astronauts who lose 
                            their lives on a space mission.
                      TITLE III--HEALTH PROVISIONS

Sec. 301. Vaccine tax to apply to hepatitis A vaccine.
Sec. 302. Expansion of human clinical trials qualifying for orphan drug 
                            credit.
                TITLE IV--FOREST CONSERVATION ACTIVITIES

Sec. 401. Pilot project for forest conservation activities.
            TITLE V--RELIEF AND EQUITY FOR SMALL BUSINESSES

Sec. 501. Simplification of excise tax imposed on bows and arrows.
Sec. 502. Capital gain treatment under section 631(b) to apply to 
                            outright sales by landowners.
Sec. 503. Repeal of excise tax on fishing tackle boxes.
Sec. 504. Treatment under at-risk rules of publicly traded nonrecourse 
                            debt.
                      TITLE VI--EQUITY FOR FARMERS

Sec. 601. Special rules for livestock sold on account of weather-
                            related conditions.
Sec. 602. Income averaging for farmers not to increase alternative 
                            minimum tax.
Sec. 603. Payment of dividends on stock of cooperatives without 
                            reducing patronage dividends.
                TITLE VII--PROTECTION OF SOCIAL SECURITY

Sec. 701. Protection of social security.

                 TITLE I--ENDING ABUSIVE TAX PRACTICES

SEC. 101. INDIVIDUAL EXPATRIATION TO AVOID TAX.

    (a) Expatriation To Avoid Tax.--
            (1) In general.--Subsection (a) of section 877 (relating to 
        treatment of expatriates) is amended to read as follows:
    ``(a) Treatment of Expatriates.--
            ``(1) In general.--Every nonresident alien individual to 
        whom this section applies and who, within the 10-year period 
        immediately preceding the close of the taxable year, lost 
        United States citizenship shall be taxable for such taxable 
        year in the manner provided in subsection (b) if the tax 
        imposed pursuant to such subsection (after any reduction in 
        such tax under the last sentence of such subsection) exceeds 
        the tax which, without regard to this section, is imposed 
        pursuant to section 871.
            ``(2) Individuals subject to this section.--This section 
        shall apply to any individual if--
                    ``(A) the average annual net income tax (as defined 
                in section 38(c)(1)) of such individual for the period 
                of 5 taxable years ending before the date of the loss 
                of United States citizenship is greater than $122,000,
                    ``(B) the net worth of the individual as of such 
                date is $2,000,000 or more, or
                    ``(C) such individual fails to certify under 
                penalty of perjury that he has met the requirements of 
                this title for the 5 preceding taxable years or fails 
                to submit such evidence of such compliance as the 
                Secretary may require.
        In the case of the loss of United States citizenship in any 
        calendar year after 2003, such $122,000 amount shall be 
        increased by an amount equal to such dollar amount multiplied 
        by the cost-of-living adjustment determined under section 
        1(f)(3) for such calendar year by substituting `2002' for 
        `1992' in subparagraph (B) thereof. Any increase under the 
        preceding sentence shall be rounded to the nearest multiple of 
        $1,000.''.
            (2) Revision of exceptions from alternative tax.--
        Subsection (c) of section 877 (relating to tax avoidance not 
        presumed in certain cases) is amended to read as follows:
    ``(c) Exceptions.--
            ``(1) In general.--Subparagraphs (A) and (B) of subsection 
        (a)(2) shall not apply to an individual described in paragraph 
        (2) or (3).
            ``(2) Dual citizens.--
                    ``(A) In general.--An individual is described in 
                this paragraph if--
                            ``(i) the individual became at birth a 
                        citizen of the United States and a citizen of 
                        another country and continues to be a citizen 
                        of such other country, and
                            ``(ii) the individual has had no 
                        substantial contacts with the United States.
                    ``(B) Substantial contacts.--An individual shall be 
                treated as having no substantial contacts with the 
                United States only if the individual--
                            ``(i) was never a resident of the United 
                        States (as defined in section 7701(b)),
                            ``(ii) has never held a United States 
                        passport, and
                            ``(iii) was not present in the United 
                        States for more than 30 days during any 
                        calendar year which is 1 of the 10 calendar 
                        years preceding the individual's loss of United 
                        States citizenship.
            ``(3) Certain minors.--An individual is described in this 
        paragraph if--
                    ``(A) the individual became at birth a citizen of 
                the United States,
                    ``(B) neither parent of such individual was a 
                citizen of the United States at the time of such birth,
                    ``(C) the individual's loss of United States 
                citizenship occurs before such individual attains age 
                18 \1/2\, and
                    ``(D) the individual was not present in the United 
                States for more than 30 days during any calendar year 
                which is 1 of the 10 calendar years preceding the 
                individual's loss of United States citizenship.''.
            (3) Conforming amendment.--Section 2107(a) is amended to 
        read as follows:
    ``(a) Treatment of Expatriates.--A tax computed in accordance with 
the table contained in section 2001 is hereby imposed on the transfer 
of the taxable estate, determined as provided in section 2106, of every 
decedent nonresident not a citizen of the United States if the date of 
death occurs during a taxable year with respect to which the decedent 
is subject to tax under section 877(b).''.
    (b) Special Rules for Determining When an Individual is no Longer a 
United States Citizen or Long-Term Resident.--Section 7701 (relating to 
definitions) is amended by redesignating subsection (n) as subsection 
(o) and by inserting after subsection (m) the following new subsection:
    ``(n) Special Rules for Determining When an Individual is no Longer 
a United States Citizen or Long-Term Resident.--An individual who would 
not (but for this subsection) be treated as a citizen or resident of 
the United States shall continue to be treated as a citizen or resident 
of the United States until such individual--
            ``(1) gives notice of an expatriating act or termination of 
        residency (with the requisite intent to relinquish citizenship 
        or terminate residency) to the Secretary of State or the 
        Secretary of Homeland Security, and
            ``(2) provides a statement in accordance with section 
        6039G.''.
    (c) Physical Presence in the United States for More Than 30 Days.--
Section 877 (relating to expatriation to avoid tax) is amended by 
adding at the end the following new subsection:
    ``(g) Physical Presence.--This section shall not apply to any 
individual for any taxable year during the 10-year period referred to 
in subsection (a) in which such individual is present in the United 
States for more than 30 days in the calendar year ending in such 
taxable year, and such individual shall be treated for purposes of this 
title as a citizen or resident of the United States for such taxable 
year.''.
    (d) Transfers Subject to Gift Tax.--Subsection (a) of section 2501 
(relating to taxable transfers) is amended by adding at the end the 
following:
            ``(6) Transfers of certain stock.--
                    ``(A) In general.--Paragraph (3) shall not apply to 
                the transfer of stock described in subparagraph (B) by 
                any individual to whom section 877(b) applies, and 
                section 2511(a) shall be applied without regard to 
                whether such stock is property which is situated within 
                the United States.
                    ``(B) Valuation.--For purposes of subparagraph (A), 
                the value of stock shall be determined as provided in 
                section 2103, except that--
                            ``(i) if the donor owned (within the 
                        meaning of section 958(a)) at the time of such 
                        transfer 10 percent or more of the total 
                        combined voting power of all classes of stock 
                        entitled to vote of a foreign corporation, and
                            ``(ii) if such donor owned (within the 
                        meaning of section 958(a)), or is considered to 
                        have owned (by applying the ownership rules of 
                        section 958(b)), at the time of such transfer, 
                        more than 50 percent of--
                                    ``(I) the total combined voting 
                                power of all classes of stock entitled 
                                to vote of such corporation, or
                                    ``(II) the total value of the stock 
                                of such corporation,then that 
                                proportion of the fair market value of 
                                the stock of such foreign corporation 
                                owned (within the meaning of section 
                                958(a)) by such donor at the time of 
                                such transfer, which the fair market 
                                value of any assets owned by such 
                                foreign corporation and situated in the 
                                United States, at the time of such 
                                transfer, bears to the total fair 
                                market value of all assets owned by 
                                such foreign corporation at the time of 
                                such transfer, shall be included in the 
                                value of such property.
                For purposes of the preceding sentence, a donor shall 
                be treated as owning stock of a foreign corporation at 
                the time of such transfer if, at such time, by trust or 
                otherwise, within the meaning of sections 2035 to 2038, 
                inclusive, he owned such stock.''.
    (e) Enhanced Information Reporting From Individuals Losing United 
States Citizenship.--
            (1) In general.--Subsection (a) of section 6039G is amended 
        to read as follows:
    ``(a) In General.--Notwithstanding any other provision of law, any 
individual to whom section 877(b) applies for any taxable year shall 
provide a statement for such taxable year which includes the 
information described in subsection (b).''.
            (2) Information to be provided.--Subsection (b) of section 
        6039G is amended to read as follows:
    ``(b) Information To Be Provided.--Information required under 
subsection (a) shall include--
            ``(1) the taxpayer's TIN,
            ``(2) the mailing address of such individual's principal 
        foreign residence,
            ``(3) the foreign country, in which such individual is 
        residing,
            ``(4) the foreign country of which such individual is a 
        citizen,
            ``(5) information detailing the assets and liabilities of 
        such individual,
            ``(6) the number of days that the individual was present in 
        the United States during the taxable year, and
            ``(7) such other information as the Secretary may 
        prescribe.''.
            (3) Increase in penalty.--Subsection (d) of section 6039G 
        is amended to read as follows:
    ``(d) Penalty.--If--
            ``(1) an individual is required to file a statement under 
        subsection (a) for any taxable year, and
            ``(2) fails to file such a statement with the Secretary on 
        or before the date such statement is required to be filed or 
        fails to include all the information required to be shown on 
        the statement or includes incorrect information,
such individual shall pay a penalty of $5,000 unless it is shown that 
such failure is due to reasonable cause and not to willful neglect.''.
            (4) Conforming amendment.--Section 6039G is amended by 
        striking subsections (c), (f), and (g) and by redesignating 
        subsections (d) and (e) as subsection (c) and (d), 
        respectively.
    (f) Effective Date.--The amendments made by this section shall 
apply to individuals who expatriate after February 27, 2003.

SEC. 102. SUSPENSION OF TAX-EXEMPT STATUS OF TERRORIST ORGANIZATIONS.

    (a) In General.--Section 501 (relating to exemption from tax on 
corporations, certain trusts, etc.) is amended by redesignating 
subsection (p) as subsection (q) and by inserting after subsection (o) 
the following new subsection:
    ``(p) Suspension of Tax-Exempt Status of Terrorist Organizations.--
            ``(1) In general.--The exemption from tax under subsection 
        (a) with respect to any organization described in paragraph 
        (2), and the eligibility of any organization described in 
        paragraph (2) to apply for recognition of exemption under 
        subsection (a), shall be suspended during the period described 
        in paragraph (3).
            ``(2) Terrorist organizations.--An organization is 
        described in this paragraph if such organization is designated 
        or otherwise individually identified--
                    ``(A) under section 212(a)(3)(B)(vi)(II) or 219 of 
                the Immigration and Nationality Act as a terrorist 
                organization or foreign terrorist organization,
                    ``(B) in or pursuant to an Executive order which is 
                related to terrorism and issued under the authority of 
                the International Emergency Economic Powers Act or 
                section 5 of the United Nations Participation Act of 
                1945 for the purpose of imposing on such organization 
                an economic or other sanction, or
                    ``(C) in or pursuant to an Executive order issued 
                under the authority of any Federal law if--
                            ``(i) the organization is designated or 
                        otherwise individually identified in or 
                        pursuant to such Executive order as supporting 
                        or engaging in terrorist activity (as defined 
                        in section 212(a)(3)(B) of the Immigration and 
                        Nationality Act) or supporting terrorism (as 
                        defined in section 140(d)(2) of the Foreign 
                        Relations Authorization Act, Fiscal Years 1988 
                        and 1989); and
                            ``(ii) such Executive order refers to this 
                        subsection.
            ``(3) Period of suspension.--With respect to any 
        organization described in paragraph (2), the period of 
        suspension--
                    ``(A) begins on the later of--
                            ``(i) the date of the first publication of 
                        a designation or identification described in 
                        paragraph (2) with respect to such 
                        organization, or
                            ``(ii) the date of the enactment of this 
                        subsection, and
                    ``(B) ends on the first date that all designations 
                and identifications described in paragraph (2) with 
                respect to such organization are rescinded pursuant to 
                the law or Executive order under which such designation 
                or identification was made.
            ``(4) Denial of deduction.--No deduction shall be allowed 
        under section 170, 545(b)(2), 556(b)(2), 642(c), 2055, 
        2106(a)(2), or 2522 for any contribution to an organization 
        described in paragraph (2) during the period described in 
        paragraph (3).
            ``(5) Denial of administrative or judicial challenge of 
        suspension or denial of deduction.--Notwithstanding section 
        7428 or any other provision of law, no organization or other 
        person may challenge a suspension under paragraph (1), a 
        designation or identification described in paragraph (2), the 
        period of suspension described in paragraph (3), or a denial of 
        a deduction under paragraph (4) in any administrative or 
        judicial proceeding relating to the Federal tax liability of 
        such organization or other person.
            ``(6) Erroneous designation.--
                    ``(A) In general.--If--
                            ``(i) the tax exemption of any organization 
                        described in paragraph (2) is suspended under 
                        paragraph (1),
                            ``(ii) each designation and identification 
                        described in paragraph (2) which has been made 
                        with respect to such organization is determined 
                        to be erroneous pursuant to the law or 
                        Executive order under which such designation or 
                        identification was made, and
                            ``(iii) the erroneous designations and 
                        identifications result in an overpayment of 
                        income tax for any taxable year by such 
                        organization,
                credit or refund (with interest) with respect to such 
                overpayment shall be made.
                    ``(B) Waiver of limitations.--If the credit or 
                refund of any overpayment of tax described in 
                subparagraph (A)(iii) is prevented at any time by the 
                operation of any law or rule of law (including res 
                judicata), such credit or refund may nevertheless be 
                allowed or made if the claim therefor is filed before 
                the close of the 1-year period beginning on the date of 
                the last determination described in subparagraph 
                (A)(ii).
            ``(7) Notice of Suspensions.--If the tax exemption of any 
        organization is suspended under this subsection, the Internal 
        Revenue Service shall update the listings of tax-exempt 
        organizations and shall publish appropriate notice to taxpayers 
        of such suspension and of the fact that contributions to such 
        organization are not deductible during the period of such 
        suspension.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to designations made before, on, or after the date of the 
enactment of this Act.

SEC. 103. EXPRESSING THE SENSE OF THE CONGRESS THAT TAX REFORM IS 
              NEEDED TO ADDRESS THE ISSUE OF CORPORATE EXPATRIATION.

    (a) Findings.--The Congress finds that--
            (1) the tax laws of the United States are overly complex;
            (2) the tax laws of the United States are among the most 
        burdensome and uncompetitive in the world;
            (3) the tax laws of the United States make it difficult for 
        domestically-owned United States companies to compete abroad 
        and in the United States;
            (4) a domestically-owned corporation is disadvantaged 
        compared to a United States subsidiary of a foreign-owned 
        corporation; and
            (5) international competitiveness is forcing many United 
        States corporations to make a choice they do not want to make-
        go out of business, sell the business to a foreign competitor, 
        or become a subsidiary of a foreign corporation (i.e., engage 
        in an inversion transaction).
    (b) Sense of Congress.--It is the sense of Congress that passage of 
legislation to fix the underlying problems with our tax laws is 
essential and should occur as soon as possible, so United States 
corporations will not face the current pressures to engage in inversion 
transactions.

          TITLE II--RELIEF FOR FOREIGN SERVICE AND ASTRONAUTS

SEC. 201. SPECIAL RULE FOR MEMBERS OF FOREIGN SERVICE IN DETERMINING 
              EXCLUSION OF GAIN FROM SALE OF PRINCIPAL RESIDENCE.

    (a) In General.--Subsection (d) of section 121 (relating to 
exclusion of gain from sale of principal residence) is amended by 
adding at the end the following new paragraph:
            ``(10) Members of foreign service.--
                    ``(A) In general.--At the election of an individual 
                with respect to a property, the running of the 5-year 
                period referred to in subsections (a) and (c)(1)(B) and 
                paragraph (7) of this subsection with respect to such 
                property shall be suspended during any period that such 
                individual or such individual's spouse is serving on 
                qualified official extended duty as a member of the 
                Foreign Service.
                    ``(B) Maximum period of suspension.--Such 5-year 
                period shall not be extended more than 5 years by 
                reason of subparagraph (A).
                    ``(C) Qualified official extended duty.--For 
                purposes of this paragraph--
                            ``(i) In general.--The term `qualified 
                        official extended duty' means any extended duty 
                        while serving at a duty station which is at 
                        least 150 miles from such property or while 
                        residing under Government orders in Government 
                        quarters.
                            ``(ii) Foreign service.--The term `member 
                        of the Foreign Service' has the meaning given 
                        the term `member of the Service' by paragraph 
                        (1), (2), (3), (4), or (5) of section 103 of 
                        the Foreign Service Act of 1980, as in effect 
                        on the date of the enactment of this paragraph.
                            ``(iii) Extended duty.--The term `extended 
                        duty' means any period of active duty pursuant 
                        to a call or order to such duty for a period in 
                        excess of 180 days or for an indefinite period.
                    ``(D) Special rules relating to election.--
                            ``(i) Election limited to 1 property at a 
                        time.--An election under subparagraph (A) with 
                        respect to any property may not be made if such 
                        an election is in effect with respect to any 
                        other property.
                            ``(ii) Revocation of election.--An election 
                        under subparagraph (A) may be revoked at any 
                        time.''.
    (b) Effective Date; Special Rule.--
            (1) Effective date.--The amendment made by this section 
        shall take effect as if included in the amendments made by 
        section 312 of the Taxpayer Relief Act of 1997.
            (2) Waiver of limitations.--If refund or credit of any 
        overpayment of tax resulting from the amendment made by this 
        section is prevented at any time before the close of the 1-year 
        period beginning on the date of the enactment of this Act by 
        the operation of any law or rule of law (including res 
        judicata), such refund or credit may nevertheless be made or 
        allowed if claim therefor is filed before the close of such 
        period.

SEC. 202. TAX RELIEF AND ASSISTANCE FOR FAMILIES OF ASTRONAUTS WHO LOSE 
              THEIR LIVES ON A SPACE MISSION.

    (a) Income Tax Relief.--
            (1) In general.--Subsection (d) of section 692 (relating to 
        income taxes of members of Armed Forces and victims of certain 
        terrorist attacks on death) is amended by adding at the end the 
        following new paragraph:
            ``(5) Relief with respect to astronauts.--The provisions of 
        this subsection shall apply to any astronaut whose death occurs 
        while on a space mission, except that paragraph (3)(B) shall be 
        applied by using the date of the death of the astronaut rather 
        than September 11, 2001.''.
            (2) Conforming amendments.--
                    (A) Section 5(b)(1) is amended by inserting ``, 
                astronauts,'' after ``Forces''.
                    (B) Section 6013(f)(2)(B) is amended by inserting 
                ``, astronauts,'' after ``Forces''.
            (3) Clerical amendments.--
                    (A) The heading of section 692 is amended by 
                inserting ``, astronauts,'' after ``forces''.
                    (B) The item relating to section 692 in the table 
                of sections for part II of subchapter J of chapter 1 is 
                amended by inserting ``, astronauts,'' after 
                ``Forces''.
            (4) Effective date.--The amendments made by this subsection 
        shall apply with respect to any astronaut whose death occurs 
        after December 31, 2002.
    (b) Death Benefit Relief.--
            (1) In general.--Subsection (i) of section 101 (relating to 
        certain death benefits) is amended by adding at the end the 
        following new paragraph:
            ``(4) Relief with respect to astronauts.--The provisions of 
        this subsection shall apply to any astronaut whose death occurs 
        while on a space mission.''.
            (2) Clerical amendment.--The heading for subsection (i) of 
        section 101 is amended by inserting ``or Astronauts'' after 
        ``Victims''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to amounts paid after December 31, 2002, with 
        respect to deaths occurring after such date.
    (c) Estate Tax Relief.--
            (1) In general.--Subsection (b) of section 2201 (defining 
        qualified decedent) is amended by striking ``and'' at the end 
        of paragraph (1)(B), by striking the period at the end of 
        paragraph (2) and inserting ``, and'', and by adding at the end 
        the following new paragraph:
            ``(3) any astronaut whose death occurs while on a space 
        mission.''.
            (2) Clerical amendments.--
                    (A) The heading of section 2201 is amended by 
                inserting ``, deaths of astronauts,'' after ``forces''.
                    (B) The item relating to section 2201 in the table 
                of sections for subchapter C of chapter 11 is amended 
                by inserting ``, deaths of astronauts,'' after 
                ``Forces''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to estates of decedents dying after December 31, 
        2002.

                      TITLE III--HEALTH PROVISIONS

SEC. 301. VACCINE TAX TO APPLY TO HEPATITIS A VACCINE.

    (a) In General.--Paragraph (1) of section 4132(a) (defining taxable 
vaccine) is amended by redesignating subparagraphs (I), (J), (K), and 
(L) as subparagraphs (J), (K), (L), and (M), respectively, and by 
inserting after subparagraph (H) the following new subparagraph:
                    ``(I) Any vaccine against hepatitis A.''
    (b) Effective Date.--
            (1) Sales, etc.--The amendments made by subsection (a) 
        shall apply to sales and uses on or after the first day of the 
        first month which begins more than 4 weeks after the date of 
        the enactment of this Act.
            (2) Deliveries.--For purposes of paragraph (1) and section 
        4131 of the Internal Revenue Code of 1986, in the case of sales 
        on or before the effective date described in such paragraph for 
        which delivery is made after such date, the delivery date shall 
        be considered the sale date.

SEC. 302. EXPANSION OF HUMAN CLINICAL TRIALS QUALIFYING FOR ORPHAN DRUG 
              CREDIT.

    (a) In General.--Paragraph (2) of section 45C(b) (relating to 
qualified clinical testing expenses) is amended by adding at the end 
the following new subparagraph:
                    ``(C) Treatment of certain expenses incurred before 
                designation.--For purposes of subparagraph (A)(ii)(I), 
                if a drug is designated under section 526 of the 
                Federal Food, Drug, and Cosmetic Act not later than the 
                due date (including extensions) for filing the return 
                of tax under this subtitle for the taxable year in 
                which the application for such designation of such drug 
                was filed, such drug shall be treated as having been 
                designated on the date that such application was filed. 
                The preceding sentence shall not apply with respect to 
                any expense incurred after December 31, 2010.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to expenses incurred after the date of the enactment of this Act.

                TITLE IV--FOREST CONSERVATION ACTIVITIES

SEC. 401. PILOT PROJECT FOR FOREST CONSERVATION ACTIVITIES.

    (a) Tax-Exempt Bond Financing.--
            (1) In General.--For purposes of the Internal Revenue Code 
        of 1986, any qualified forest conservation bond shall be 
        treated as an exempt facility bond under section 142 of such 
        Code.
            (2) Qualified forest conservation bond.--For purposes of 
        this section, the term ``qualified forest conservation bond'' 
        means any bond issued as part of an issue if--
                    (A) 95 percent or more of the net proceeds (as 
                defined in section 150(a)(3) of such Code) of such 
                issue are to be used for qualified project costs,
                    (B) such bond is an obligation of the State of 
                Washington or any political subdivision thereof and is 
                issued for the Evergreen Forest Trust, and
                    (C) such bond is issued before October 1, 2004.
            (3) Limitation on aggregate amount issued.--The maximum 
        aggregate face amount of bonds which may be issued under this 
        section shall not exceed $250,000,000.
            (4) Qualified project costs.--For purposes of this 
        subsection, the term ``qualified project costs'' means the sum 
        of--
                    (A) the cost of acquisition by the Evergreen Forest 
                Trust from an unrelated person of forests and forest 
                land--
                            (i) which are located in the State of 
                        Washington, and
                            (ii) which at the time of acquisition or 
                        immediately thereafter are subject to a 
                        conservation restriction described in 
                        subsection (c)(2),
                    (B) capitalized interest on the qualified forest 
                conservation bonds for the 3-year period beginning on 
                the date of issuance of such bonds, and
                    (C) credit enhancement fees which constitute 
                qualified guarantee fees (within the meaning of section 
                148 of such Code).
            (5) Special rules.--In applying the Internal Revenue Code 
        of 1986 to any qualified forest conservation bond, the 
        following modifications shall apply:
                    (A) Section 146 of such Code (relating to volume 
                cap) shall not apply.
                    (B) For purposes of section 147(b) of such Code 
                (relating to maturity may not exceed 120 percent of 
                economic life), the land and standing timber acquired 
                with proceeds of qualified forest conservation bonds 
                shall have an economic life of 35 years.
                    (C) Subsections (c) and (d) of section 147 of such 
                Code (relating to limitations on acquisition of land 
                and existing property) shall not apply.
                    (D) Section 57(a)(5) of such Code (relating to tax-
                exempt interest) shall not apply to interest on 
                qualified forest conservation bonds.
            (6) Treatment of current refunding bonds.--Paragraphs 
        (2)(C) and (3) shall not apply to any bond (or series of bonds) 
        issued to refund a qualified forest conservation bond issued 
        before October 1, 2004, if--
                    (A) the average maturity date of the issue of which 
                the refunding bond is a part is not later than the 
                average maturity date of the bonds to be refunded by 
                such issue,
                    (B) the amount of the refunding bond does not 
                exceed the outstanding amount of the refunded bond, and
                    (C) the net proceeds of the refunding bond are used 
                to redeem the refunded bond not later than 90 days 
                after the date of the issuance of the refunding bond.
        For purposes of subparagraph (A), average maturity shall be 
        determined in accordance with section 147(b)(2)(A) of such 
        Code.
            (7) Effective date.--This subsection shall apply to 
        obligations issued after the date of the enactment of this Act.
    (b) Items From Qualified Harvesting Activities Not Subject to Tax 
or Taken Into Account.--
            (1) In general.--Income, gains, deductions, losses, or 
        credits from a qualified harvesting activity conducted by the 
        Evergreen Forest Trust shall not be subject to tax or taken 
        into account under subtitle A of the Internal Revenue Code of 
        1986.
            (2) Qualified harvesting activity.--For purposes of 
        paragraph (1)--
                    (A) In general.--The term ``qualified harvesting 
                activity'' means the sale, lease, or harvesting, of 
                standing timber--
                            (i) on land owned by the Evergreen Forest 
                        Trust which was acquired with proceeds of 
                        qualified forest conservation bonds, and
                            (ii) pursuant to a qualified conservation 
                        plan adopted by the Evergreen Forest Trust.
                    (B) Exceptions.--
                            (i) Cessation as qualified organization.--
                        The term ``qualified harvesting activity'' 
                        shall not include any sale, lease, or 
                        harvesting during any period that the Evergreen 
                        Forest Trust is not a qualified organization.
                            (ii) Exceeding limits on harvesting.--The 
                        term ``qualified harvesting activity'' shall 
                        not include any sale, lease, or harvesting of 
                        standing timber on land acquired with proceeds 
                        of qualified forest conservation bonds to the 
                        extent that--
                                    (I) the average annual area of 
                                timber harvested from such land exceeds 
                                2.5 percent of the total area of such 
                                land, or
                                    (II) the quantity of timber removed 
                                from such land exceeds the quantity 
                                which can be removed from such land 
                                annually in perpetuity on a sustained-
                                yield basis with respect to such land.
                        The limitations under subclauses (I) and (II) 
                        shall not apply to salvage or sanitation 
                        harvesting of timber stands which are 
                        substantially damaged by fire, windthrow, or 
                        other catastrophe, or which are in imminent 
                        danger from insect or disease attack.
            (3) Termination.--This subsection shall not apply to any 
        qualified harvesting activity occurring after the date on which 
        there is no outstanding qualified forest conservation bond or 
        any such bond ceases to be a tax-exempt bond.
            (4) Partial recapture of benefits if harvesting limit 
        exceeded.--If, as of the date that this subsection ceases to 
        apply under paragraph (3), the average annual area of timber 
        harvested from the land exceeds the requirement of paragraph 
        (2)(B)(ii)(I), the tax imposed by chapter 1 of the Internal 
        Revenue Code of 1986 shall be increased, under rules prescribed 
        by the Secretary, by the sum of the tax benefit attributable to 
        such excess and interest at the underpayment rate under section 
        6621 for the period of the underpayment.
    (c) Definitions.--For purposes of this section--
            (1) Qualified conservation plan.--The term ``qualified 
        conservation plan'' means a multiple land use program or plan 
        which--
                    (A) is designed and administered primarily for the 
                purposes of protecting and enhancing wildlife and fish, 
                timber, scenic attributes, recreation, and soil and 
                water quality of the forest and forest land,
                    (B) mandates that conservation of forest and forest 
                land is the single-most significant use of the forest 
                and forest land,
                    (C) requires that timber harvesting be consistent 
                with--
                            (i) restoring and maintaining reference 
                        conditions for the Westside Douglas Fir forest 
                        type,
                            (ii) restoring and maintaining a 
                        representative sample of young, mid, and late 
                        successional forest age classes,
                            (iii) maintaining or restoring the 
                        resources' ecological health for purposes of 
                        preventing damage from fire, insect, or 
                        disease,
                            (iv) maintaining or enhancing wildlife or 
                        fish habitat,
                            (v) enhancing research opportunities in 
                        sustainable renewable resource uses, or
                            (vi) preserving or protecting open space.
            (2) Conservation restriction.--The conservation restriction 
        described in this paragraph is a restriction which--
                    (A) is granted in perpetuity to an unrelated person 
                which is described in section 170(h)(3) of such Code 
                and which, in the case of a nongovernmental unit, is 
                organized and operated for conservation purposes,
                    (B) meets the requirements of clause (ii) or 
                (iii)(II) of section 170(h)(4)(A) of such Code,
                    (C) obligates the Evergreen Forest Trust to pay the 
                costs incurred by the holder of the conservation 
                restriction in monitoring compliance with such 
                restriction, and
                    (D) requires an increasing level of conservation 
                benefits to be provided whenever circumstances allow 
                it.
            (3) Qualified organization.--The term ``qualified 
        organization'' means an organization--
                    (A) which is a nonprofit organization organized and 
                operated exclusively for charitable, scientific, or 
                educational purposes including but not limited to 
                acquiring, protecting, restoring, managing, and 
                developing forest lands and other renewable resources 
                for the long-term charitable, educational, scientific, 
                and public benefit of the State of Washington,
                    (B) more than half of the value of the property of 
                which consists of forests and forest land acquired with 
                the proceeds from qualified forest conservation bonds,
                    (C) which periodically conducts educational 
                programs designed to inform the public of 
                environmentally sensitive forestry management and 
                conservation techniques,
                    (D) which has a board of directors that at all 
                times is comprised of 9 members--
                            (i) at least 2 of whom represent the 
                        holders of the conservation restriction 
                        described in paragraph (2), and
                            (ii) at least 2 of whom are public 
                        officials,
                    (E) of which not more than one-third of the members 
                of the board of directors is comprised of individuals 
                who are or were at any time within 5 years before the 
                beginning of a term of membership on the board, an 
                employee of, independent contractor with respect to, 
                officer of, director of, or held a material financial 
                interest in, a commercial forest products enterprise 
                with which the Evergreen Forest Trust has a contractual 
                or other financial arrangement,
                    (F) the bylaws of which require at least two-thirds 
                of the members of the board of directors to vote 
                affirmatively to approve the qualified conservation 
                program and any change thereto, and
                    (G) upon dissolution, is required to dedicate its 
                assets to--
                            (i) an organization described in section 
                        501(c)(3) of such Code which is organized and 
                        operated for conservation purposes, or
                            (ii) a governmental unit described in 
                        section 170(c)(1) of such Code.
            (4) Evergreen forest trust.--The term ``Evergreen Forest 
        Trust'' means a nonprofit corporation known as the Evergreen 
        Forest Trust which was incorporated on February 25, 2000, under 
        chapter 24.03 of the Revised Code of Washington and which, on 
        May 11, 2001, was recognized as an organization described in 
        section 501(c)(3) of the Internal Revenue Code of 1986.
            (5) Unrelated person.--The term ``unrelated person'' means 
        a person who is not a related person.
            (6) Related person.--A person shall be treated as related 
        to another person if--
                    (A) such person bears a relationship to such other 
                person described in section 267(b) (determined without 
                regard to paragraph (9) thereof), or 707(b)(1), of such 
                Code, determined by substituting ``25 percent'' for 
                ``50 percent'' each place it occurs therein, and
                    (B) in the case such other person is a nonprofit 
                organization, if such person controls directly or 
                indirectly more than 25 percent of the governing body 
                of such organization.

            TITLE V--RELIEF AND EQUITY FOR SMALL BUSINESSES

SEC. 501. SIMPLIFICATION OF EXCISE TAX IMPOSED ON BOWS AND ARROWS.

    (a) Bows.--Paragraph (1) of section 4161(b) (relating to bows) is 
amended to read as follows:
            ``(1) Bows.--
                    ``(A) In general.--There is hereby imposed on the 
                sale by the manufacturer, producer, or importer of any 
                bow which has a draw weight of 30 pounds or more, a tax 
                equal to 11 percent of the price for which so sold.
                    ``(B) Archery equipment.--There is hereby imposed 
                on the sale by the manufacturer, producer, or 
                importer--
                            ``(i) of any part or accessory suitable for 
                        inclusion in or attachment to a bow described 
                        in subparagraph (A), and
                            ``(ii) of any quiver or broadhead suitable 
                        for use with an arrow described in paragraph 
                        (3),
                a tax equal to 11 percent of the price for which so 
                sold.''.
    (b) Arrows.--Subsection (b) of section 4161 (relating to bows and 
arrows, etc.) is amended by redesignating paragraph (3) as paragraph 
(4) and inserting after paragraph (2) the following:
            ``(3) Arrows.--
                    ``(A) In general.--There is hereby imposed on the 
                sale by the manufacturer, producer, or importer of any 
                arrow, a tax equal to 12 percent of the price for which 
                so sold.
                    ``(B) Exception.--The tax imposed by subparagraph 
                (A) on an arrow shall not apply if the arrow contains 
                an arrow shaft subject to the tax imposed by paragraph 
                (2).
                    ``(C) Arrow.--For purposes of this paragraph, the 
                term `arrow' means any shaft described in paragraph (2) 
                to which additional components are attached.''.
    (c) Conforming Amendment.--The heading of section 4161(b)(2) is 
amended by striking ``Arrows.--'' and inserting ``Arrow components.--
''.
    (d) Effective Date.--The amendments made by this section shall 
apply to articles sold by the manufacturer, producer, or importer after 
the 90th day after the date of the enactment of this Act.

SEC. 502. CAPITAL GAIN TREATMENT UNDER SECTION 631(B) TO APPLY TO 
              OUTRIGHT SALES BY LANDOWNERS.

    (a) In General.--The first sentence of section 631(b) (relating to 
disposal of timber with a retained economic interest) is amended by 
striking ``retains an economic interest in such timber'' and inserting 
``either retains an economic interest in such timber or makes an 
outright sale of such timber''.
    (b) Conforming Amendments.--
            (1) The third sentence of section 631(b) is amended by 
        striking ``The date of disposal'' and inserting ``In the case 
        of disposal of timber with a retained economic interest, the 
        date of disposal''.
            (2) The heading for section 631(b) is amended by striking 
        ``With a Retained Economic Interest''.
    (c) Effective Date.--The amendments made by this section shall 
apply to sales after the date of the enactment of this Act.

SEC. 503. REPEAL OF EXCISE TAX ON FISHING TACKLE BOXES.

    (a) Repeal.--Paragraph (6) of section 4162(a) (defining sport 
fishing equipment) is amended by striking subparagraph (C) and by 
redesignating subparagraphs (D) through (J) as subparagraphs (C) 
through (I), respectively.
    (b) Effective Date.--The amendment made by this section shall take 
effect 30 days after the date of the enactment of this Act.

SEC. 504. TREATMENT UNDER AT-RISK RULES OF PUBLICLY TRADED NONRECOURSE 
              DEBT.

    (a) In General.--Subparagraph (A) of section 465(b)(6) (relating to 
qualified nonrecourse financing treated as amount at risk) is amended 
by striking ``share of'' and all that follows and inserting ``share 
of--
                            ``(i) any qualified nonrecourse financing 
                        which is secured by real property used in such 
                        activity, and
                            ``(ii) any other financing which--
                                    ``(I) would (but for subparagraph 
                                (B)(ii)) be qualified nonrecourse 
                                financing,
                                    ``(II) is qualified publicly traded 
                                debt, and
                                    ``(III) is not borrowed by the 
                                taxpayer from a person described in 
                                subclause (I), (II), or (III) of 
                                section 49(a)(1)(D)(iv).''.
    (b) Qualified Publicly Traded Debt.--Paragraph (6) of section 
465(b) is amended by adding at the end the following new subparagraph:
                    ``(F) Qualified publicly traded debt.--For purposes 
                of subparagraph (A), the term `qualified publicly 
                traded debt' means any debt instrument which is readily 
                tradable on an established securities market. Such term 
                shall not include any debt instrument which has a yield 
                to maturity which equals or exceeds the limitation in 
                section 163(i)(1)(B).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to debt instruments issued after the date of the enactment of 
this Act.

                      TITLE VI--EQUITY FOR FARMERS

SEC. 601. SPECIAL RULES FOR LIVESTOCK SOLD ON ACCOUNT OF WEATHER-
              RELATED CONDITIONS.

    (a) Rules for Replacement of Involuntarily Converted Livestock.--
Subsection (e) of section 1033 (relating to involuntary conversions) is 
amended--
            (1) by striking ``Conditions.--For purposes'' and inserting 
        ``Conditions.--
            ``(1) In general.--For purposes'', and
            (2) by adding at the end the following new paragraph:
            ``(2) Extension of replacement period.--
                    ``(A) In general.--In the case of drought, flood, 
                or other weather-related conditions described in 
                paragraph (1) which result in the area being designated 
                as eligible for assistance by the Federal Government, 
                subsection (a)(2)(B) shall be applied with respect to 
                any converted property by substituting `4 years' for `2 
                years'.
                    ``(B) Further extension by secretary.--The 
                Secretary may extend on a regional basis the period for 
                replacement under this section (after the application 
                of subparagraph (A)) for such additional time as the 
                Secretary determines appropriate if the weather-related 
                conditions which resulted in such application continue 
                for more than 3 years.''.
    (b) Income Inclusion Rules.--Subsection (e) of section 451 
(relating to special rule for proceeds from livestock sold on account 
of drought, flood, or other weather-related conditions) is amended by 
adding at the end the following new paragraph:
            ``(3) Special election rules.--If section 1033(e)(2) 
        applies to a sale or exchange of livestock described in 
        paragraph (1), the election under paragraph (1) shall be deemed 
        valid if made during the replacement period described in such 
        section.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to any taxable year with respect to which the due date (without 
regard to extensions) for the return is after December 31, 2002.

SEC. 602. INCOME AVERAGING FOR FARMERS NOT TO INCREASE ALTERNATIVE 
              MINIMUM TAX.

    (a) In General.--Subsection (c) of section 55 (defining regular 
tax) is amended by redesignating paragraph (2) as paragraph (3) and by 
inserting after paragraph (1) the following new paragraph:
            ``(2) Coordination with income averaging for farmers.--
        Solely for purposes of this section, section 1301 (relating to 
        averaging of farm income) shall not apply in computing the 
        regular tax liability.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years beginning after December 31, 2002.

SEC. 603. PAYMENT OF DIVIDENDS ON STOCK OF COOPERATIVES WITHOUT 
              REDUCING PATRONAGE DIVIDENDS.

    (a) In General.--Subsection (a) of section 1388 (relating to 
patronage dividend defined) is amended by adding at the end the 
following: ``For purposes of paragraph (3), net earnings shall not be 
reduced by amounts paid during the year as dividends on capital stock 
or other proprietary capital interests of the organization to the 
extent that the articles of incorporation or bylaws of such 
organization or other contract with patrons provide that such dividends 
are in addition to amounts otherwise payable to patrons which are 
derived from business done with or for patrons during the taxable 
year.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to distributions in taxable years beginning after the date of the 
enactment of this Act.

                TITLE VII--PROTECTION OF SOCIAL SECURITY

SEC. 701. PROTECTION OF SOCIAL SECURITY.

    The amounts transferred to any trust fund under title II of the 
Social Security Act shall be determined as

if this Act (other than title I, section 301, and this section) had not 
been enacted.

            Passed the House of Representatives March 19, 2003.

            Attest:

                                                 JEFF TRANDAHL,

                                                                 Clerk.




                                                        Calendar No. 52

108th CONGRESS

  1st Session

                               H. R. 1308

_______________________________________________________________________

                                 AN ACT

 To amend the Internal Revenue Code of 1986 to end certain abusive tax 
  practices, to provide tax relief and simplification, and for other 
                               purposes.

_______________________________________________________________________

                             March 21, 2003

            Read the second time and placed on the calendar