[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 7 Introduced in House (IH)]







108th CONGRESS
  1st Session
                                 H. R. 7

 To amend the Internal Revenue Code of 1986 to provide incentives for 
 charitable contributions by individuals and businesses, and for other 
                               purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 7, 2003

 Mr. Blunt (for himself, Mr. Ford, Mr. Hulshof, Mr. Wynn, Mr. Hastert, 
Mr. Gordon, Mr. DeLay, Ms. Norton, Ms. Pryce of Ohio, Mr. Meeks of New 
 York, Mr. Cantor, Mr. Crane, Mr. Ramstad, Mr. English, Mr. Foley, Mr. 
   Shays, Mr. Smith of Texas, Mr. Upton, Mr. Wolf, Mr. Gillmor, Mr. 
 Stearns, Mr. Camp, Mr. Kingston, Mr. McHugh, Mr. Bachus, Mr. Bartlett 
of Maryland, Mr. Barton of Texas, Mrs. Myrick, Mr. Norwood, Mr. Souder, 
  Mr. Tiahrt, Mr. Wamp, Mr. Wicker, Mr. Doolittle, Mrs. Northup, Mr. 
 Peterson of Pennsylvania, Mr. Pickering, Mr. Pitts, Mr. Reynolds, Mr. 
Sessions, Mr. Shimkus, Mr. Green of Wisconsin, Mr. Hayes, Mr. Isakson, 
Mr. Terry, Mr. Akin, Mr. Boozman, Mr. Forbes, Mr. Graves, Ms. Hart, Mr. 
   Keller, Mr. Pence, Mr. Schrock, Mr. Simmons, Mr. Barrett of South 
    Carolina, Mrs. Blackburn, Ms. Ginny Brown-Waite of Florida, Mr. 
   Burgess, Mr. Chocola, Mr. Garrett of New Jersey, Ms. Harris, Mr. 
  Janklow, Mrs. Musgrave, Mr. Renzi, and Mr. Fossella) introduced the 
following bill; which was referred to the Committee on Ways and Means, 
and in addition to the Committee on Education and the Workforce, for a 
 period to be subsequently determined by the Speaker, in each case for 
consideration of such provisions as fall within the jurisdiction of the 
                          committee concerned

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to provide incentives for 
 charitable contributions by individuals and businesses, 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; ETC.

    (a) Short Title.--This Act may be cited as the ``Charitable Giving 
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.--

Sec. 1. Short title; etc.
                 TITLE I--CHARITABLE GIVING INCENTIVES

Sec. 101. Deduction for portion of charitable contributions to be 
                            allowed to individuals who do not itemize 
                            deductions.
Sec. 102. Tax-free distributions from individual retirement plans for 
                            charitable purposes.
Sec. 103. Increase in cap on corporate charitable contributions.
Sec. 104. Charitable deduction for contributions of food inventory.
Sec. 105. Reform of certain excise taxes related to private 
                            foundations.
Sec. 106. Excise tax on unrelated business taxable income of charitable 
                            remainder trusts.
Sec. 107. Expansion of charitable contribution allowed for scientific 
                            property used for research and for computer 
                            technology and equipment used for 
                            educational purposes.
Sec. 108. Adjustment to basis of S corporation stock for certain 
                            charitable contributions.
     TITLE II--TAX REFORM AND IMPROVEMENTS RELATING TO CHARITABLE 
                       ORGANIZATIONS AND PROGRAMS

Sec. 201. Suspension of tax-exempt status of terrorist organizations.
Sec. 202. Clarification of definition of church tax inquiry.
Sec. 203. Expansion of declaratory judgment remedy to tax-exempt 
                            organizations.
Sec. 204. Landowner incentives programs.
Sec. 205. Modifications to section 512(b)(13).
Sec. 206. Simplification of lobbying expenditure limitation.
Sec. 207. Permitted holdings of private foundation where corporation is 
                            publicly traded and publicly controlled.
                      TITLE III--OTHER PROVISIONS

Sec. 301. Compassion capital fund.
Sec. 302. Reauthorization of assets for independence demonstration.
Sec. 303. Sense of the Congress regarding corporate contributions to 
                            faith-based organizations, etc.
Sec. 304. Maternity group homes.

                 TITLE I--CHARITABLE GIVING INCENTIVES

SEC. 101. DEDUCTION FOR PORTION OF CHARITABLE CONTRIBUTIONS TO BE 
              ALLOWED TO INDIVIDUALS WHO DO NOT ITEMIZE DEDUCTIONS.

    (a) In General.--Section 170 (relating to charitable, etc., 
contributions and gifts) is amended by redesignating subsection (m) as 
subsection (n) and by inserting after subsection (l) the following new 
subsection:
    ``(m) Deduction for Individuals Not Itemizing Deductions.--
            ``(1) In general.--In the case of an individual who does 
        not itemize deductions for any taxable year, there shall be 
        taken into account as a direct charitable deduction under 
        section 63 an amount equal to the amount allowable under 
        subsection (a) for the taxable year for cash contributions 
        (determined without regard to any carryover), to the extent 
        that such contributions exceed $250 ($500 in the case of a 
        joint return) but do not exceed $500 ($1,000 in the case of a 
        joint return).
            ``(2) Termination.--This subsection shall not apply to any 
        taxable year beginning after December 31, 2005.''.
    (b) Direct Charitable Deduction.--
            (1) In general.--Subsection (b) of section 63 (defining 
        taxable income) is amended by striking ``and'' at the end of 
        paragraph (1), by striking the period at the end of paragraph 
        (2) and inserting ``, and'', and by adding at the end the 
        following new paragraph:
            ``(3) the direct charitable deduction.''.
            (2) Definition.--Section 63 is amended by redesignating 
        subsection (g) as subsection (h) and by inserting after 
        subsection (f) the following new subsection:
    ``(g) Direct Charitable Deduction.--For purposes of this section, 
the term `direct charitable deduction' means that portion of the amount 
allowable under section 170(a) which is taken as a direct charitable 
deduction for the taxable year under section 170(m).''.
            (3) Conforming amendment.--Subsection (d) of section 63 is 
        amended by striking ``and'' at the end of paragraph (1), by 
        striking the period at the end of paragraph (2) and inserting 
        ``, and'', and by adding at the end the following new 
        paragraph:
            ``(3) the direct charitable deduction.''.
    (c) Study.--
            (1) In general.--The Secretary of the Treasury shall study 
        the effect of the amendments made by this section on increased 
charitable giving and taxpayer compliance, including a comparison of 
taxpayer compliance between taxpayers who itemize their charitable 
contributions and taxpayers who claim a direct charitable deduction.
            (2) Report.--By not later than December 31, 2005, the 
        Secretary of the Treasury shall report on the study required 
        under paragraph (1) to the Committee on Finance of the Senate 
        and the Committee on Ways and Means of the House of 
        Representatives.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2003.

SEC. 102. TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT PLANS FOR 
              CHARITABLE PURPOSES.

    (a) In General.--Subsection (d) of section 408 (relating to 
individual retirement accounts) is amended by adding at the end the 
following new paragraph:
            ``(8) Distributions for charitable purposes.--
                    ``(A) In general.--No amount shall be includible in 
                gross income by reason of a qualified charitable 
                distribution.
                    ``(B) Qualified charitable distribution.--For 
                purposes of this paragraph, the term `qualified 
                charitable distribution' means any distribution from an 
                individual retirement plan--
                            ``(i) which is made on or after the date 
                        that the individual for whose benefit the plan 
                        is maintained has attained age 70 \1/2\, and
                            ``(ii) which is made directly by the 
                        trustee--
                                    ``(I) to an organization described 
                                in section 170(c), or
                                    ``(II) to a split-interest entity.
                A distribution shall be treated as a qualified 
                charitable distribution only to the extent that the 
                distribution would be includible in gross income 
                without regard to subparagraph (A) and, in the case of 
                a distribution to a split-interest entity, only if no 
                person holds an income interest in the amounts in the 
                split-interest entity attributable to such distribution 
                other than one or more of the following: the individual 
                for whose benefit such plan is maintained, the spouse 
                of such individual, or any organization described in 
                section 170(c).
                    ``(C) Contributions must be otherwise deductible.--
                For purposes of this paragraph--
                            ``(i) Direct contributions.--A distribution 
                        to an organization described in section 170(c) 
                        shall be treated as a qualified charitable 
                        distribution only if a deduction for the entire 
                        distribution would be allowable under section 
                        170 (determined without regard to subsection 
                        (b) thereof and this paragraph).
                            ``(ii) Split-interest gifts.--A 
                        distribution to a split-interest entity shall 
                        be treated as a qualified charitable 
                        distribution only if a deduction for the entire 
                        value of the interest in the distribution for 
                        the use of an organization described in section 
                        170(c) would be allowable under section 170 
                        (determined without regard to subsection (b) 
                        thereof and this paragraph).
                    ``(D) Application of section 72.--Notwithstanding 
                section 72, in determining the extent to which a 
                distribution is a qualified charitable distribution, 
                the entire amount of the distribution shall be treated 
                as includible in gross income without regard to 
                subparagraph (A) to the extent that such amount does 
                not exceed the aggregate amount which would have been 
                so includible if all amounts were distributed from all 
                individual retirement plans treated as 1 contract under 
                paragraph (2)(A) for purposes of determining the 
                inclusion on such distribution under section 72. Proper 
                adjustments shall be made in applying section 72 to 
                other distributions in such taxable year and subsequent 
                taxable years.
                    ``(E) Special rules for split-interest entities.--
                            ``(i) Charitable remainder trusts.--
                        Notwithstanding section 664(b), distributions 
                        made from a trust described in subparagraph 
                        (G)(i) shall be treated as ordinary income in 
                        the hands of the beneficiary to whom is paid 
                        the annuity described in section 664(d)(1)(A) 
                        or the payment described in section 
                        664(d)(2)(A).
                            ``(ii) Pooled income funds.--No amount 
                        shall be includible in the gross income of a 
                        pooled income fund (as defined in subparagraph 
                        (G)(ii)) by reason of a qualified charitable 
                        distribution to such fund, and all 
                        distributions from the fund which are 
                        attributable to qualified charitable 
                        distributions shall be treated as ordinary 
                        income to the beneficiary.
                            ``(iii) Charitable gift annuities.--
                        Qualified charitable distributions made for a 
                        charitable gift annuity shall not be treated as 
                        an investment in the contract.
                    ``(F) Denial of deduction.--Qualified charitable 
                distributions shall not be taken into account in 
                determining the deduction under section 170.
                    ``(G) Split-interest entity defined.--For purposes 
                of this paragraph, the term `split-interest entity' 
                means--
                            ``(i) a charitable remainder annuity trust 
                        or a charitable remainder unitrust (as such 
                        terms are defined in section 664(d)) which must 
                        be funded exclusively by qualified charitable 
                        distributions,
                            ``(ii) a pooled income fund (as defined in 
                        section 642(c)(5)), but only if the fund 
                        accounts separately for amounts attributable to 
                        qualified charitable distributions, and
                            ``(iii) a charitable gift annuity (as 
                        defined in section 501(m)(5)).''.
    (b) Modifications Relating to Information Returns by Certain 
Trusts.--
            (1) Returns.--Section 6034 (relating to returns by trusts 
        described in section 4947(a)(2) or claiming charitable 
        deductions under section 642(c)) is amended to read as follows:

``SEC. 6034. RETURNS BY TRUSTS DESCRIBED IN SECTION 4947(A)(2) OR 
              CLAIMING CHARITABLE DEDUCTIONS UNDER SECTION 642(C).

    ``(a) Trusts Described in Section 4947(a)(2).--Every trust 
described in section 4947(a)(2) shall furnish such information with 
respect to the taxable year as the Secretary may by forms or 
regulations require.
    ``(b) Trusts Claiming a Charitable Deduction Under Section 
642(c).--
            ``(1) In general.--Every trust not required to file a 
        return under subsection (a) but claiming a deduction under 
        section 642(c) for the taxable year shall furnish such 
        information with respect to such taxable year as the Secretary 
        may by forms or regulations prescribe, including--
                    ``(A) the amount of the deduction taken under 
                section 642(c) within such year,
                    ``(B) the amount paid out within such year which 
                represents amounts for which deductions under section 
                642(c) have been taken in prior years,
                    ``(C) the amount for which such deductions have 
                been taken in prior years but which has not been paid 
                out at the beginning of such year,
                    ``(D) the amount paid out of principal in the 
                current and prior years for the purposes described in 
                section 642(c),
                    ``(E) the total income of the trust within such 
                year and the expenses attributable thereto, and
                    ``(F) a balance sheet showing the assets, 
                liabilities, and net worth of the trust as of the 
                beginning of such year.
            ``(2) Exceptions.--Paragraph (1) shall not apply to a trust 
        for any taxable year if--
                    ``(A) all the net income for such year, determined 
                under the applicable principles of the law of trusts, 
                is required to be distributed currently to the 
                beneficiaries, or
                    ``(B) the trust is described in section 
                4947(a)(1).''.
            (2) Increase in penalty relating to filing of information 
        return by split-interest trusts.--Paragraph (2) of section 
        6652(c) (relating to returns by exempt organizations and by 
        certain trusts) is amended by adding at the end the following 
        new subparagraph:
                    ``(C) Split-interest trusts.--In the case of a 
                trust which is required to file a return under section 
                6034(a), subparagraphs (A) and (B) of this paragraph 
                shall not apply and paragraph (1) shall apply in the 
                same manner as if such return were required under 
                section 6033, except that--
                            ``(i) the 5 percent limitation in the 
                        second sentence of paragraph (1)(A) shall not 
                        apply,
                            ``(ii) in the case of any trust with gross 
                        income in excess of $250,000, the first 
                        sentence of paragraph (1)(A) shall be applied 
                        by substituting `$100' for `$20', and the 
                        second sentence thereof shall be applied by 
                        substituting `$50,000' for `$10,000', and
                            ``(iii) the third sentence of paragraph 
                        (1)(A) shall be disregarded.
                In addition to any penalty imposed on the trust 
                pursuant to this subparagraph, if the person required 
                to file such return knowingly fails to file the return, 
                such penalty shall also be imposed on such person who 
                shall be personally liable for such penalty.''.
            (3) Confidentiality of noncharitable beneficiaries.--
        Subsection (b) of section 6104 (relating to inspection of 
        annual information returns) is amended by adding at the end the 
        following new sentence: ``In the case of a trust which is 
        required to file a return under section 6034(a), this 
        subsection shall not apply to information regarding 
        beneficiaries which are not organizations described in section 
        170(c).''.
    (c) Effective Dates.--
            (1) Subsection (a).--The amendment made by subsection (a) 
        shall apply to distributions made after December 31, 2003.
            (2) Subsection (b).--The amendments made by subsection (b) 
        shall apply to returns for taxable years beginning after 
        December 31, 2003.

SEC. 103. INCREASE IN CAP ON CORPORATE CHARITABLE CONTRIBUTIONS.

    (a) In General.--Paragraph (2) of section 170(b) (relating to 
corporations) is amended by striking ``10 percent'' and inserting ``the 
applicable percentage''.
    (b) Applicable Percentage.--Subsection (b) of section 170 is 
amended by adding at the end the following new paragraph:
            ``(3) Applicable percentage defined.--For purposes of 
        paragraph (2), the applicable percentage shall be determined in 
        accordance with the following table:

                ``For taxable years beginning
                                                         The applicable
                  in calendar year--
                                                        percentage is--
                    2004...................................         11 
                    2005...................................         12 
                    2006...................................         13 
                    2007...................................         14 
                    2008 through 2011......................         15 
                    2012 and thereafter....................      20.''.
    (c) Conforming Amendments.--
            (1) Sections 512(b)(10) and 805(b)(2)(A) are each amended 
        by striking ``10 percent'' each place it occurs and inserting 
        ``the applicable percentage (determined under section 
        170(b)(3))''.
            (2) Sections 545(b)(2) and 556(b)(2) are each amended by 
        striking ``10-percent limitation'' and inserting ``applicable 
        percentage limitation''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2003.

SEC. 104. CHARITABLE DEDUCTION FOR CONTRIBUTIONS OF FOOD INVENTORY.

    (a) In General.--Paragraph (3) of section 170(e) (relating to 
special rule for certain contributions of inventory and other property) 
is amended by redesignating subparagraph (C) as subparagraph (D) and by 
inserting after subparagraph (B) the following new subparagraph:
                    ``(C) Special rule for contributions of food 
                inventory.--
                            ``(i) General rule.--In the case of a 
                        charitable contribution of food, this paragraph 
                        shall be applied--
                                    ``(I) without regard to whether the 
                                contribution is made by a C 
                                corporation, and
                                    ``(II) only for food that is 
                                apparently wholesome food.
                            ``(ii) Limitation.--In the case of taxpayer 
                        other than a C corporation, clause (i) shall 
                        not apply to any contribution of apparently 
                        wholesome food from a trade or business of the 
                        taxpayer to the extent that such contribution 
                        exceeds the applicable percentage (within the 
                        meaning of subsection (b)(3)) of the amount of 
                        net income of the taxpayer from the trade or 
                        business with respect to which such food is 
                        inventory. For purposes of the preceding 
                        sentence, the amount of net income of the 
                        taxpayer from a trade or business is the excess 
                        of--
                                    ``(I) the aggregate amount of gross 
                                income from such trade or business 
                                received or accrued by the taxpayer 
                                during the taxable year, over
                                    ``(II) the aggregate amount of any 
                                deductions allocable to such trade or 
                                business allowed to the taxpayer under 
                                this chapter for the taxable year.
                            ``(iii) Determination of fair market 
                        value.--In the case of a qualified contribution 
                        of apparently wholesome food to which this 
                        paragraph applies and which, solely by reason 
                        of internal standards of the taxpayer or lack 
                        of market, cannot or will not be sold, the fair 
                        market value of such food shall be determined 
                        by taking into account the price at which the 
                        same or substantially the same food items (as 
                        to both type and quality) are sold by the 
                        taxpayer at the time of the contribution (or, 
                        if not so sold at such time, in the recent 
                        past).
                            ``(iv) Apparently wholesome food.--For 
                        purposes of this subparagraph, the term 
                        `apparently wholesome food' shall have the 
                        meaning given to such term by section 22(b)(2) 
                        of the Bill Emerson Good Samaritan Food 
                        Donation Act (42 U.S.C. 1791(b)(2)), as in 
                        effect on the date of the enactment of this 
                        subparagraph.''.
    (b) Effective Date.--The amendment made by section shall apply to 
taxable years beginning after December 31, 2003.

SEC. 105. REFORM OF CERTAIN EXCISE TAXES RELATED TO PRIVATE 
              FOUNDATIONS.

    (a) Reduction of Tax on Net Investment Income.--Subsection (a) of 
section 4940 (relating to excise tax based on investment income) is 
amended by striking ``2 percent'' and inserting ``1 percent''.
    (b) Repeal of Reduction In Tax Where Private Foundation Meets 
Certain Distribution Requirements.--Section 4940 is amended by striking 
subsection (e).
    (c) Modification of Excise Tax on Failure to Distribute Income.--
            (1) Administrative expenses not treated as distributions.--
        Subparagraph (A) of section 4942(g)(1) is amended by striking 
        ``including that portion of reasonable and necessary 
        administrative expenses'' and inserting ``excluding 
        administrative expenses''.
            (2) Exclusion not to apply to certain private 
        foundations.--Paragraph (3) of section 4942(j) is amended--
                    (A) by striking ``(within the meaning of paragraph 
                (1) or (2) of subsection (g))'' each place it appears, 
                and
                    (B) by inserting at the end the following: ``For 
                purposes of this paragraph, the term `qualifying 
                distributions' means qualifying distributions within 
                the meaning of paragraph (1) or (2) of subsection (g), 
                except that `including that portion of reasonable and 
                necessary administrative expenses' shall be substituted 
                for `excluding administrative expenses' in subsection 
                (g)(1)(A).''.
            (3) Conforming amendment.--Subsection (g) of section 4942 
        is amended by striking paragraph (4).
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2003.

SEC. 106. EXCISE TAX ON UNRELATED BUSINESS TAXABLE INCOME OF CHARITABLE 
              REMAINDER TRUSTS.

    (a) In General.--Subsection (c) of section 664 (relating to 
exemption from income taxes) is amended to read as follows:
    ``(c) Taxation of Trusts.--
            ``(1) Income tax.--A charitable remainder annuity trust and 
        a charitable remainder unitrust shall, for any taxable year, 
        not be subject to any tax imposed by this subtitle.
            ``(2) Excise tax.--
                    ``(A) In general.--In the case of a charitable 
                remainder annuity trust or a charitable remainder 
                unitrust that has unrelated business taxable income 
                (within the meaning of section 512, determined as if 
                part III of subchapter F applied to such trust) for a 
                taxable year, there is hereby imposed on such trust or 
                unitrust an excise tax equal to the amount of such 
                unrelated business taxable income.
                    ``(B) Certain rules to apply.--The tax imposed by 
                subparagraph (A) shall be treated as imposed by chapter 
                42 for purposes of this title other than subchapter E 
                of chapter 42.
                    ``(C) Character of distributions and coordination 
                with distribution requirements.--The amounts taken into 
                account in determining unrelated business taxable 
                income (as defined in subparagraph (A)) shall not be 
                taken into account for purposes of--
                            ``(i) subsection (b),
                            ``(ii) determining the value of trust 
                        assets under subsection (d)(2), and
                            ``(iii) determining income under subsection 
                        (d)(3).
                    ``(D) Tax court proceedings.--For purposes of this 
                paragraph, the references in section 6212(c)(1) to 
                section 4940 shall be deemed to include references to 
                this paragraph.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2003.

SEC. 107. EXPANSION OF CHARITABLE CONTRIBUTION ALLOWED FOR SCIENTIFIC 
              PROPERTY USED FOR RESEARCH AND FOR COMPUTER TECHNOLOGY 
              AND EQUIPMENT USED FOR EDUCATIONAL PURPOSES.

    (a) Scientific Property Used for Research.--
            (1) In general.--Clause (ii) of section 170(e)(4)(B) 
        (defining qualified research contributions) is amended by 
        inserting ``or assembled'' after ``constructed''.
            (2) Conforming amendment.--Clause (iii) of section 
        170(e)(4)(B) is amended by inserting ``or assembling'' after 
        ``construction''.
    (b) Computer Technology and Equipment for Educational Purposes.--
            (1) In general.--Clause (ii) of section 170(e)(6)(B) is 
        amended by inserting ``or assembled'' after ``constructed'' and 
        ``or assembling'' after ``construction''.
            (2) Special rule extended.--Section 170(e)(6)(G) is amended 
        by striking ``2003'' and inserting ``2005''.
            (3) Conforming amendments.--Subparagraph (D) of section 
        170(e)(6) is amended by inserting ``or assembled'' after 
        ``constructed'' and ``or assembling'' after ``construction''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2003.

SEC. 108. ADJUSTMENT TO BASIS OF S CORPORATION STOCK FOR CERTAIN 
              CHARITABLE CONTRIBUTIONS.

    (a) In General.--Paragraph (2) of section 1367(a) (relating to 
adjustments to basis of stock of shareholders, etc.) is amended by 
adding at the end the following new flush sentence:
        ``The decrease under subparagraph (B) by reason of a charitable 
        contribution (as defined in section 170(c)) of property shall 
        be the amount equal to the shareholder's pro rata share of the 
        adjusted basis of such property.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2003.

     TITLE II--TAX REFORM AND IMPROVEMENTS RELATING TO CHARITABLE 
                       ORGANIZATIONS AND PROGRAMS

SEC. 201. 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. 202. CLARIFICATION OF DEFINITION OF CHURCH TAX INQUIRY.

    Subsection (i) of section 7611 (relating to section not to apply to 
criminal investigations, etc.) is amended by striking ``or'' at the end 
of paragraph (4), by striking the period at the end of paragraph (5) 
and inserting ``, or'', and by inserting after paragraph (5) the 
following:
            ``(6) information provided by the Secretary related to the 
        standards for exemption from tax under this title and the 
        requirements under this title relating to unrelated business 
        taxable income.''.

SEC. 203. EXPANSION OF DECLARATORY JUDGMENT REMEDY TO TAX-EXEMPT 
              ORGANIZATIONS.

    (a) In General.--Paragraph (1) of section 7428(a) (relating to 
creation of remedy) is amended--
            (1) in subparagraph (B) by inserting after ``509(a))'' the 
        following: ``or as a private operating foundation (as defined 
        in section 4942(j)(3))''; and
            (2) by amending subparagraph (C) to read as follows:
                    ``(C) with respect to the initial qualification or 
                continuing qualification of an organization as an 
                organization described in subsection (c) (other than 
                paragraph (3)) or (d) of section 501 which is exempt 
                from tax under section 501(a), or''.
    (b) Court Jurisdiction.--Subsection (a) of section 7428 is amended 
in the material following paragraph (2) by striking ``United States Tax 
Court, the United States Claims Court, or the district court of the 
United States for the District of Columbia'' and inserting the 
following: ``United States Tax Court (in the case of any such 
determination or failure) or the United States Claims Court or the 
district court of the United States for the District of Columbia (in 
the case of a determination or failure with respect to an issue 
referred to in subparagraph (A) or (B) of paragraph (1)),''.
    (c) Effective Date.--The amendments made by this section shall 
apply to pleadings filed with respect to determinations (or requests 
for determinations) made after the date of the enactment of this Act.

SEC. 204. LANDOWNER INCENTIVES PROGRAMS.

    (a) In General.--Subsection (a) of section 126 is amended by 
redesignating paragraph (10) as paragraph (11) and by inserting after 
paragraph (9) the following new paragraph:
            ``(10) Landowner initiatives programs to conserve 
        threatened, endangered, or imperiled species, or protect or 
        restore habitat carried out under--
                    ``(A) the Fish and Wildlife Coordination Act (16 
                U.S.C. 661 et seq.),
                    ``(B) the Fish and Wildlife Act of 1956 (16 U.S.C. 
                742f), or
                    ``(C) section 6 of the Endangered Species Act (16 
                U.S.C. 11531 et seq.).''.
    (b) Excludable Portion.--Subparagraph (A) of section 126(b)(1) is 
amended by inserting after ``Secretary of Agriculture'' the following: 
``(the Secretary of the Interior, in the case of the landowner 
incentives programs described in subsection (a)(10) and the programs 
described in subsection (a)(11) that are implemented by the Department 
of the Interior)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts received after the date of the enactment of this Act, 
in taxable years ending after such date.

SEC. 205. MODIFICATIONS TO SECTION 512(B)(13).

    (a) In General.--Paragraph (13) of section 512(b) (relating to 
special rules for certain amounts received from controlled entities) is 
amended by redesignating subparagraph (E) as subparagraph (F) and by 
inserting after subparagraph (D) the following new subparagraph:
                    ``(E) Paragraph to apply only to excess payments.--
                            ``(i) In general.--Subparagraph (A) shall 
                        apply only to the portion of a specified 
                        payment received or accrued by the controlling 
                        organization that exceeds the amount which 
                        would have been paid or accrued if such payment 
                        met the requirements prescribed under section 
                        482.
                            ``(ii) Addition to tax for valuation 
                        misstatements.--The tax imposed by this chapter 
                        on the controlling organization shall be 
                        increased by an amount equal to 20 percent of 
                        the larger of--
                                    ``(I) such excess determined 
                                without regard to any amendment or 
                                supplement to a return of tax, or
                                    ``(II) such excess determined with 
                                regard to all such amendments and 
                                supplements.''.
    (b) Effective Date.--
            (1) In general.--The amendment made by this section shall 
        apply to payments received or accrued after December 31, 2003.
            (2) Payments subject to binding contract transition rule.--
        If the amendments made by section 1041 of the Taxpayer Relief 
        Act of 1997 did not apply to any amount received or accrued in 
        the first 2 taxable years beginning on or after the date of the 
        enactment of the Taxpayer Relief Act of 1997 under any contract 
        described in subsection (b)(2) of such section, such amendments 
        also shall not apply to amounts received or accrued under such 
        contract before January 1, 2001.

SEC. 206. SIMPLIFICATION OF LOBBYING EXPENDITURE LIMITATION.

    (a) Repeal of Grassroots Expenditure Limit.--Paragraph (1) of 
section 501(h) (relating to expenditures by public charities to 
influence legislation) is amended to read as follows:
            ``(1) General rule.--In the case of an organization to 
        which this subsection applies, exemption from taxation under 
        subsection (a) shall be denied because a substantial part of 
        the activities of such organization consists of carrying on 
        propaganda, or otherwise attempting, to influence legislation, 
        but only if such organization normally makes lobbying 
expenditures in excess of the lobbying ceiling amount for such 
organization for each taxable year.''.
    (b) Excess Lobbying Expenditures.--Section 4911(b) is amended to 
read as follows:
    ``(b) Excess Lobbying Expenditures.--For purposes of this section, 
the term `excess lobbying expenditures' means, for a taxable year, the 
amount by which the lobbying expenditures made by the organization 
during the taxable year exceed the lobbying nontaxable amount for such 
organization for such taxable year.''.
    (c) Conforming Amendments.--
            (1) Section 501(h)(2) is amended by striking subparagraphs 
        (C) and (D).
            (2) Section 4911(c) is amended by striking paragraphs (3) 
        and (4).
            (3) Paragraph (1)(A) of section 4911(f) is amended by 
        striking ``limits of section 501(h)(1) have'' and inserting 
        ``limit of section 501(h)(1) has''.
            (4) Paragraph (1)(C) of section 4911(f) is amended by 
        striking ``limits of section 501(h)(1) are'' and inserting 
        ``limit of section 501(h)(1) is''.
            (5) Paragraphs (4)(A) and (4)(B) of section 4911(f) are 
        each amended by striking ``limits of section 501(h)(1)'' and 
        inserting ``limit of section 501(h)(1)''.
            (6) Paragraph (8) of section 6033(b) (relating to certain 
        organizations described in section 501(c)(3)) is amended by 
        inserting ``and'' at the end of subparagraph (A) and by 
        striking subparagraphs (C) and (D).
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2003.

SEC. 207. PERMITTED HOLDINGS OF PRIVATE FOUNDATION WHERE CORPORATION IS 
              PUBLICLY TRADED AND PUBLICLY CONTROLLED.

    (a) In General.--Paragraph (2) of section 4943(c) (relating to the 
permitted holdings in a corporation) is amended by adding at the end 
the following new subparagraphs:
                    ``(D) Permitted holdings where corporation is 
                publicly-traded and publicly controlled.--A private 
                foundation shall not be treated as having excess 
                business holdings in any corporation in any calendar 
                year in which it (together with all other private 
                foundations which are described in section 
                4946(a)(1)(H)) owns not more than 5 percent of the 
                voting stock and not more than 5 percent in value of 
                all outstanding shares of all classes of stock if--
                            ``(i) the common stock of the corporation, 
                        and any other class of stock of which shares 
                        are held by the private foundation, are 
                        regularly traded on an established securities 
                        market (within the meaning of section 
                        897(c)(3)),
                            ``(ii) more than 50 percent of--
                                    ``(I) the total combined voting 
                                power of all classes of stock of such 
                                corporation entitled to vote, and
                                    ``(II) the total value of the stock 
                                of such corporation,
                        is owned directly or indirectly by persons 
                        other than the private foundation and persons 
                        who are disqualified persons with respect to 
                        the private foundation,
                            ``(iii) the Board of Directors of such 
                        corporation consists of a majority of persons 
                        who are not disqualified persons with respect 
                        to the private foundation, and
                            ``(iv) any undistributed income (within the 
                        meaning of section 4942(c)) of the private 
                        foundation for such year (determined after 
                        substituting `6 percent' for `5 percent' in 
                        section 4942(e)(1)) shall have been distributed 
                        within the required period under section 
                        4942(a) so as to avoid application of the 
                        initial tax on such undistributed income.
                    ``(E) Exception to permitted holdings where 
                corporation is publicly-traded and publicly 
                controlled.--No stock of a corporation held by the 
                private foundation shall be considered permitted 
                holdings pursuant to subparagraph (D) to the extent 
                such stock was acquired by the private foundation by 
                purchase in a taxable transaction or was acquired from 
                a disqualified person who acquired such stock by 
                purchase in a taxable transaction within the 5 years 
                immediately preceding the transfer of such stock to the 
                private foundation. Solely for purposes of applying the 
                preceding sentence--
                            ``(i) any such stock acquired by purchase 
                        in a taxable transaction by such disqualified 
                        person within such 5 year period shall be 
                        treated as included in such transfer to the 
                        extent of such transfer,
                            ``(ii) all stock acquired by such 
                        disqualified person by purchase in a taxable 
                        transaction during the 24 month period 
                        beginning on the date of the transfer to the 
                        private foundation shall be treated as held by 
                        such disqualified person on the date of such 
                        transfer and included in such transfer, and
                            ``(iii) the private foundation may 
                        specifically designate any shares of stock not 
                        considered permitted holdings for purposes of 
                        allowing such private foundation to dispose of 
                        such stock.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2003.

                      TITLE III--OTHER PROVISIONS

SEC. 301. COMPASSION CAPITAL FUND.

    Title IV of the Social Security Act (42 U.S.C. 601-679b) is amended 
by adding at the end the following:

                   ``PART F--COMPASSION CAPITAL FUND

``SEC. 481. SECRETARY'S FUND TO SUPPORT AND REPLICATE PROMISING SOCIAL 
              SERVICE PROGRAMS.

    ``(a) Grant Authority.--
            ``(1) In general.--The Secretary may make grants to support 
        any private entity that operates a promising social services 
        program.
            ``(2) Applications.--An entity desiring to receive a grant 
        under paragraph (1) shall submit to the Secretary an 
        application for the grant, which shall contain such information 
        as the Secretary may require.
    ``(b) Contract Authority, Etc.--The Secretary may enter into a 
grant, contract, or cooperative agreement with any entity under which 
the entity would provide technical assistance to another entity to 
operate a social service program that assists persons and families in 
need, including by--
            ``(1) providing the other entity with--
                    ``(A) technical assistance and information, 
                including legal assistance and other business 
                assistance;
                    ``(B) information on capacity-building;
                    ``(C) information and assistance in identifying and 
                using best practices for serving persons and families 
                in need; or
                    ``(D) assistance in replicating programs with 
                demonstrated effectiveness in assisting persons and 
                families in need; or
            ``(2) supporting research on the best practices of social 
        service organizations.
    ``(c) Guidance and Technical Assistance.--The Secretary may use not 
more than 25 percent of the amount appropriated under this section for 
a fiscal year to provide guidance and technical assistance to States 
and political subdivisions of States with respect to the implementation 
of any social service program.
    ``(d) Social Services Program Defined.--In this section, the term 
`social services program' means a program that provides benefits or 
services of any kind to persons and families in need.
    ``(e) Limitations on Authorization of Appropriations.--To carry out 
this section, there are authorized to be appropriated to the Secretary 
$150,000,000 for fiscal year 2003, and such sums as may be necessary 
for fiscal years 2004 through 2007.''.

SEC. 302. REAUTHORIZATION OF ASSETS FOR INDEPENDENCE DEMONSTRATION.

    Section 416 of the Assets for Independence Act (title IV of Public 
Law 105-285; 42 U.S.C. 604 note) is amended by striking ``and 2003'' 
and inserting ``2003, 2004, 2005, 2006, 2007, and 2008''.

SEC. 303. SENSE OF THE CONGRESS REGARDING CORPORATE CONTRIBUTIONS TO 
              FAITH-BASED ORGANIZATIONS, ETC.

    (a) Findings.--The Congress finds as follows:
            (1) America's community of faith has long played a leading 
        role in dealing with difficult societal problems that might 
        otherwise have gone unaddressed.
            (2) President Bush has called upon Americans ``to revive 
        the spirit of citizenship . . . to marshal the compassion of 
        our people to meet the continuing needs of our Nation''.
            (3) Although the work of faith-based organizations should 
        not be used by government as an excuse for backing away from 
        its historic and rightful commitment to help those who are 
        disadvantaged and in need, such organizations can and should be 
        seen as a valuable partner with government in meeting societal 
        challenges.
            (4) Every day faith-based organizations in the United 
        States help people recover from drug and alcohol addiction, 
        provide food and shelter for the homeless, rehabilitate prison 
        inmates so that they can break free from the cycle of 
        recidivism, and teach people job skills that will allow them to 
        move from poverty to productivity.
            (5) Faith-based organizations are often more successful in 
        dealing with difficult societal problems than government and 
        non-sectarian organizations.
            (6) As President Bush has stated, ``It is not sufficient to 
        praise charities and community groups; we must support them. 
        And this is both a public obligation and a personal 
        responsibility.''.
            (7) Corporate foundations contribute billions of dollars 
        each year to a variety of philanthropic causes.
            (8) According to a study produced by the Capital Research 
        Center, the 10 largest corporate foundations in the United 
        States contributed $1,900,000,000 to such causes.
            (9) According to the same study, faith-based organizations 
        only receive a small fraction of the contributions made by 
        corporations in the United States, and 6 of the 10 corporations 
        that give the most to philanthropic causes explicitly ban or 
        restrict contributions to faith-based organizations.
    (b) Corporations Encouraged To Contribute to Faith-Based 
Organizations.--The Congress calls on corporations in the United 
States, in the words of the President, ``to give more and to give 
better'' by making greater contributions to faith-based organizations 
that are on the front lines battling some of the great societal 
challenges of our day.
    (c) Sense of the Congress.--It is the sense of Congress that--
            (1) corporations in the United States are important 
        partners with government in efforts to overcome difficult 
        societal problems; and
            (2) no corporation in the United States should adopt 
        policies that prohibit the corporation from contributing to an 
        organization that is successfully advancing a philanthropic 
        cause merely because such organization is faith based.

SEC. 304. MATERNITY GROUP HOMES.

    (a) Permissible Use of Funds.--Section 322 of the Runaway and 
Homeless Youth Act (42 U.S.C. 5714-2) is amended--
            (1) in subsection (a)(1), by inserting ``(including 
        maternity group homes)'' after ``group homes''; and
            (2) by adding at the end the following:
    ``(c) Maternity Group Home.--In this part, the term `maternity 
group home' means a community-based, adult-supervised group home that 
provides--
            ``(1) young mothers and their children with a supportive 
        and supervised living arrangement in which such mothers are 
        required to learn parenting skills, including child 
        development, family budgeting, health and nutrition, and other 
        skills to promote their long-term economic independence and the 
        well-being of their children; and
            ``(2) pregnant women with--
                    ``(A) information regarding the option of placing 
                children for adoption through licensed adoption service 
                providers;
                    ``(B) assistance with prenatal care and child 
                birthing; and
                    ``(C) pre- and post-placement adoption 
                counseling.''.
    (b) Contract for Evaluation.--Part B of the Runaway and Homeless 
Youth Act (42 U.S.C. 5701 et seq.) is amended by adding at the end the 
following:

``SEC. 323. CONTRACT FOR EVALUATION.

    ``(a) In General.--The Secretary shall enter into a contract with a 
public or private entity for an evaluation of the maternity group homes 
that are supported by grant funds under this Act.
    ``(b) Information.--The evaluation described in subsection (a) 
shall include the collection of information about the relevant 
characteristics of individuals who benefit from maternity group homes 
such as those that are supported by grant funds under this Act and what 
services provided by those maternity group homes are most beneficial to 
such individuals.
    ``(c) Report.--Not later than 2 years after the date on which the 
Secretary enters into a contract for an evaluation under subsection 
(a), and biennially thereafter, the entity conducting the evaluation 
under this section shall submit to Congress a report on the status, 
activities, and accomplishments of maternity group homes that are 
supported by grant funds under this Act.''.
    (c) Authorization of Appropriations.--Section 388 of the Runaway 
and Homeless Youth Act (42 U.S.C. 5751) is amended--
            (1) in subsection (a)(1)--
                    (A) by striking ``There'' and inserting the 
                following:
                    ``(A) In general.--There'';
                    (B) in subparagraph (A), as redesignated, by 
                inserting ``and the purpose described in subparagraph 
                (B)'' after ``other than part E''; and
                    (C) by adding at the end the following:
                    ``(B) Maternity group homes.--There is authorized 
                to be appropriated, for maternity group homes eligible 
                for assistance under section 322(a)(1)--
                            ``(i) $33,000,000 for fiscal year 2003; and
                            ``(ii) such sums as may be necessary for 
                        fiscal year 2004.''; and
            (2) in subsection (a)(2)(A), by striking ``paragraph (1)'' 
        and inserting ``paragraph (1)(A)''.
                                 <all>