[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 476 Reported in Senate (RS)]






                                                        Calendar No. 22
108th CONGRESS
  1st Session
                                 S. 476

                          [Report No. 108-11]

 To provide incentives for charitable contributions by individuals and 
 businesses, to improve the public disclosure of activities of exempt 
 organizations, and to enhance the ability of low-income Americans to 
  gain financial security by building assets, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           February 27, 2003

  Mr. Grassley, from the Committee on Finance, reported the following 
     original bill; which was read twice and placed on the calendar

_______________________________________________________________________

                                 A BILL


 
 To provide incentives for charitable contributions by individuals and 
 businesses, to improve the public disclosure of activities of exempt 
 organizations, and to enhance the ability of low-income Americans to 
  gain financial security by building assets, 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 ``CARE 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 for this Act is as 
follows:

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 accounts 
                            for charitable purposes.
Sec. 103. Charitable deduction for contributions of food inventories.
Sec. 104. Charitable deduction for contributions of book inventories.
Sec. 105. Expansion of charitable contribution allowed for scientific 
                            property used for research and for computer 
                            technology and equipment used for 
                            educational purposes.
Sec. 106. Modifications to encourage contributions of capital gain real 
                            property made for conservation purposes.
Sec. 107. Exclusion of 25 percent of gain on sales or exchanges of land 
                            or water interests to eligible entities for 
                            conservation purposes.
Sec. 108. Tax exclusion for cost-sharing payments under Partners for 
                            Fish and Wildlife Program.
Sec. 109. Adjustment to basis of S corporation stock for certain 
                            charitable contributions.
Sec. 110. Enhanced deduction for charitable contribution of literary, 
                            musical, artistic, and scholarly 
                            compositions.
Sec. 111. Mileage reimbursements to charitable volunteers excluded from 
                            gross income.
Sec. 112. Extension of enhanced deduction for inventory to include 
                            public schools.
TITLE II--PROPOSALS IMPROVING THE OVERSIGHT OF TAX-EXEMPT ORGANIZATIONS

Sec. 201. Disclosure of written determinations.
Sec. 202. Disclosure of Internet web site and name under which 
                            organization does business.
Sec. 203. Modification to reporting capital transactions.
Sec. 204. Disclosure that Form 990 is publicly available.
Sec. 205. Disclosure to State officials of proposed actions related to 
                            section 501(c) organizations.
Sec. 206. Expansion of penalties to preparers of Form 990.
Sec. 207. Notification requirement for entities not currently required 
                            to file.
Sec. 208. Suspension of tax-exempt status of terrorist organizations.
     TITLE III--OTHER CHARITABLE AND EXEMPT ORGANIZATION PROVISIONS

Sec. 301. Modification of excise tax on unrelated business taxable 
                            income of charitable remainder trusts.
Sec. 302. Modifications to section 512(b)(13).
Sec. 303. Simplification of lobbying expenditure limitation.
Sec. 304. Expedited review process for certain tax-exemption 
                            applications.
Sec. 305. Clarification of definition of church tax inquiry.
Sec. 306. Expansion of declaratory judgment remedy to tax-exempt 
                            organizations.
Sec. 307. Definition of convention or association of churches.
Sec. 308. Payments by charitable organizations to victims of war on 
                            terrorism and families of astronauts killed 
                            in the line of duty.
Sec. 309. Modification of scholarship foundation rules.
Sec. 310. Treatment of certain hospital support organizations as 
                            qualified organizations for purposes of 
                            determining acquisition indebtedness.
Sec. 311. Charitable contribution deduction for certain expenses 
                            incurred in support of Native Alaskan 
                            subsistence whaling.
Sec. 312. Matching grants to low-income taxpayer clinics for return 
                            preparation.
                 TITLE IV--SOCIAL SERVICES BLOCK GRANT

Sec. 401. Restoration of funds for the Social Services Block Grant.
Sec. 402. Restoration of authority to transfer up to 10 percent of TANF 
                            funds to the Social Services Block Grant.
Sec. 403. Requirement to submit annual report on State activities.
                TITLE V--INDIVIDUAL DEVELOPMENT ACCOUNTS

Sec. 501. Short title.
Sec. 502. Purposes.
Sec. 503. Definitions.
Sec. 504. Structure and administration of qualified individual 
                            development account programs.
Sec. 505. Procedures for opening and maintaining an individual 
                            development account and qualifying for 
                            matching funds.
Sec. 506. Deposits by qualified individual development account 
                            programs.
Sec. 507. Withdrawal procedures.
Sec. 508. Certification and termination of qualified individual 
                            development account programs.
Sec. 509. Reporting, monitoring, and evaluation.
Sec. 510. Authorization of appropriations.
Sec. 511. Matching funds for individual development accounts provided 
                            through a tax credit for qualified 
                            financial institutions.
Sec. 512. Account funds disregarded for purposes of certain means-
                            tested Federal programs.
              TITLE VI--MANAGEMENT OF EXEMPT ORGANIZATIONS

Sec. 601. Authorization of appropriations.
                     TITLE VII--REVENUE PROVISIONS

        Subtitle A--Provisions Designed To Curtail Tax Shelters

Sec. 701. Clarification of economic substance doctrine.
Sec. 702. Penalty for failing to disclose reportable transaction.
Sec. 703. Accuracy-related penalty for listed transactions and other 
                            reportable transactions having a 
                            significant tax avoidance purpose.
Sec. 704. Penalty for understatements attributable to transactions 
                            lacking economic substance, etc.
Sec. 705. Modifications of substantial understatement penalty for 
                            nonreportable transactions.
Sec. 706. Tax shelter exception to confidentiality privileges relating 
                            to taxpayer communications.
Sec. 707. Disclosure of reportable transactions.
Sec. 708. Modifications to penalty for failure to register tax 
                            shelters.
Sec. 709. Modification of penalty for failure to maintain lists of 
                            investors.
Sec. 710. Modification of actions to enjoin certain conduct related to 
                            tax shelters and reportable transactions.
Sec. 711. Understatement of taxpayer's liability by income tax return 
                            preparer.
Sec. 712. Penalty on failure to report interests in foreign financial 
                            accounts.
Sec. 713. Frivolous tax submissions.
Sec. 714. Regulation of individuals practicing before the Department of 
                            Treasury.
Sec. 715. Penalty on promoters of tax shelters.
Sec. 716. Statute of limitations for taxable years for which listed 
                            transactions not reported.
Sec. 717. Denial of deduction for interest on underpayments 
                            attributable to nondisclosed reportable and 
                            noneconomic substance transactions.
Sec. 718. Authorization of appropriations for tax law enforcement.
                      Subtitle B--Other Provisions

Sec. 721. Affirmation of consolidated return regulation authority.
Sec. 722. Signing of corporate tax returns by chief executive officer.

                 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.--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, 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).''.
    (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, 2004, 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, 2002, and before 
January 1, 2005.

SEC. 102. TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT ACCOUNTS 
              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 account--
                            ``(i) which is made directly by the 
                        trustee--
                                    ``(I) to an organization described 
                                in section 170(c), or
                                    ``(II) to a split-interest entity, 
                                and
                            ``(ii) which is made on or after--
                                    ``(I) in the case of any 
                                distribution described in clause 
                                (i)(I), the date that the individual 
                                for whose benefit the account is 
maintained has attained age 70\1/2\, and
                                    ``(II) in the case of any 
                                distribution described in clause 
                                (i)(II), the the date that such 
                                individual has attained age 59\1/2\.
                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 account 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 accounts 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--
                    (A) described in section 408(d)(8)(B)(i)(I) of the 
                Internal Revenue Code of 1986, as added by this 
                section, made after the date of the enactment of this 
                Act, and
                    (B) described in section 408(d)(8)(B)(i)(II) of 
                such Code, as so added, 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. CHARITABLE DEDUCTION FOR CONTRIBUTIONS OF FOOD INVENTORIES.

    (a) In General.--Subsection (e) of section 170 (relating to certain 
contributions of ordinary income and capital gain property) is amended 
by adding at the end the following new paragraph:
            ``(7) Application of paragraph (3) to certain contributions 
        of food inventory.--For purposes of this section--
                    ``(A) Extension to individuals.--In the case of a 
                charitable contribution of apparently wholesome food--
                            ``(i) paragraph (3)(A) shall be applied 
                        without regard to whether the contribution is 
                        made by a C corporation, and
                            ``(ii) in the case of a taxpayer other than 
                        a C corporation, the aggregate amount of such 
                        contributions from any trade or business (or 
                        interest therein) of the taxpayer for any 
                        taxable year which may be taken into account 
                        under this section shall not exceed 10 percent 
                        of the taxpayer's net income from any such 
                        trade or business, computed without regard to 
                        this section, for such taxable year.
                    ``(B) Limitation on reduction.--In the case of a 
                charitable contribution of apparently wholesome food, 
                notwithstanding paragraph (3)(B), the amount of the 
                reduction determined under paragraph (1)(A) shall not 
                exceed the amount by which the fair market value of 
                such property exceeds twice the basis of such property.
                    ``(C) Determination of basis.--If a taxpayer--
                            ``(i) does not account for inventories 
                        under section 471, and
                            ``(ii) is not required to capitalize 
                        indirect costs under section 263A,
                the taxpayer may elect, solely for purposes of 
                paragraph (3)(B), to treat the basis of any apparently 
                wholesome food as being equal to 25 percent of the fair 
                market value of such food.
                    ``(D) Determination of fair market value.--In the 
                case of a charitable contribution of apparently 
                wholesome food which is a qualified contribution 
                (within the meaning of paragraph (3), as modified by 
                subparagraph (A) of this paragraph) 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 
contribution shall be determined--
                            ``(i) without regard to such internal 
                        standards or such lack of market and
                            ``(ii) 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).
                    ``(E) Apparently wholesome food.--For purposes of 
                this paragraph, the term `apparently wholesome food' 
                has the meaning given 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 paragraph.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to contributions made after the date of the enactment of this Act.

SEC. 104. CHARITABLE DEDUCTION FOR CONTRIBUTIONS OF BOOK INVENTORIES.

    (a) In General.--Section 170(e)(3) (relating to certain 
contributions of ordinary income and capital gain 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 book 
                inventory for educational purposes.--
                            ``(i) Contributions of book inventory.--In 
                        determining whether a qualified book 
                        contribution is a qualified contribution, 
                        subparagraph (A) shall be applied without 
                        regard to whether--
                                    ``(I) the donee is an organization 
                                described in the matter preceding 
                                clause (i) of subparagraph (A), and
                                    ``(II) the property is to be used 
                                by the donee solely for the care of the 
                                ill, the needy, or infants.
                            ``(ii) Amount of reduction.--
                        Notwithstanding subparagraph (B), the amount of 
                        the reduction determined under paragraph (1)(A) 
                        shall not exceed the amount by which the fair 
                        market value of the contributed property (as 
                        determined by the taxpayer using a bona fide 
                        published market price for such book) exceeds 
                        twice the basis of such property.
                            ``(iii) Qualified book contribution.--For 
                        purposes of this paragraph, the term `qualified 
                        book contribution' means a charitable 
                        contribution of books, but only if the 
                        requirements of clauses (iv) and (v) are met.
                            ``(iv) Identity of donee.--The requirement 
                        of this clause is met if the contribution is to 
                        an organization--
                                    ``(I) described in subclause (I) or 
                                (III) of paragraph (6)(B)(i), or
                                    ``(II) described in section 
                                501(c)(3) and exempt from tax under 
                                section 501(a) (other than a private 
                                foundation, as defined in section 
                                509(a), which is not an operating 
                                foundation, as defined in section 
                                4942(j)(3)), which is organized 
                                primarily to make books available to 
                                the general public at no cost or to 
                                operate a literacy program.
                            ``(v) Certification by donee.--The 
                        requirement of this clause is met if, in 
                        addition to the certifications required by 
                        subparagraph (A) (as modified by this 
                        subparagraph), the donee certifies in writing 
                        that--
                                    ``(I) the books are suitable, in 
                                terms of currency, content, and 
                                quantity, for use in the donee's 
                                educational programs, and
                                    ``(II) the donee will use the books 
                                in its educational programs.
                            ``(vi) Bona fide published market price.--
                        For purposes of this subparagraph, the term 
                        `bona fide published market price' means, with 
                        respect to any book, a price--
                                    ``(I) determined using the same 
                                printing and edition,
                                    ``(II) determined in the usual 
                                market in which such a book has been 
                                customarily sold by the taxpayer, and
                                    ``(III) for which the taxpayer can 
                                demonstrate to the satisfaction of the 
                                Secretary that the taxpayer customarily 
                                sold such books in arm's length 
                                transactions within 7 years preceding 
                                the contribution of such a book.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to contributions made after the date of the enactment of this Act

SEC. 105. 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, 2002.

SEC. 106. MODIFICATIONS TO ENCOURAGE CONTRIBUTIONS OF CAPITAL GAIN REAL 
              PROPERTY MADE FOR CONSERVATION PURPOSES.

    (a) In General.--Section 170(h) (relating to qualified conservation 
contribution) is amended by adding at the end the following new 
paragraph:
            ``(7) Additional incentives for qualified conservation 
        contributions.--
                    ``(A) In general.--In the case of any qualified 
                conservation contribution (as defined in paragraph (1)) 
                made by an individual--
                            ``(i) subparagraph (C) of subsection (b)(1) 
                        shall not apply,
                            ``(ii) except as provided in subparagraph 
                        (B)(i), subsections (b)(1)(A) and (d)(1) shall 
                        be applied separately with respect to such 
                        contributions by treating references to 50 
                        percent of the taxpayer's contribution base as 
                        references to the amount of such base reduced 
                        by the amount of other contributions allowable 
                        under subsection (b)(1)(A), and
                            ``(iii) subparagraph (A) of subsection 
                        (d)(1) shall be applied--
                                    ``(I) by substituting `15 
                                succeeding taxable years' for `5 
                                succeeding taxable years', and
                                    ``(II) by applying clause (ii) to 
                                each of the 15 succeeding taxable 
                                years.
                    ``(B) Special rules for eligible farmers and 
                ranchers.--
                            ``(i) In general.--In the case of any such 
                        contributions made by an eligible farmer or 
                        rancher--
                                    ``(I) if the taxpayer is an 
                                individual, subsections (b)(1)(A) and 
                                (d)(1) shall be applied separately with 
                                respect to such contributions by 
                                substituting `the taxpayer's 
                                contribution base reduced by the amount 
                                of other contributions allowable under 
                                subsection (b)(1)(A)' for `50 percent 
                                of the taxpayer's contribution base' 
                                each place it appears, and
                                    ``(II) if the taxpayer is a 
                                corporation, subsections (b)(2) and 
                                (d)(2) shall be applied separately with 
                                respect to such contributions, 
                                subsection (b)(2) shall be applied with 
                                respect to such contributions as if 
                                such subsection did not contain the 
                                words `10 percent of' and as if 
                                subparagraph (A) thereof read `the 
                                deduction under this section for 
                                qualified conservation contributions', 
                                and rules similar to the rules of 
                                subparagraph (A)(iii) shall apply for 
                                purposes of subsection (d)(2).
                            ``(ii) Definition.--For purposes of clause 
                        (i), the term `eligible farmer or rancher' 
                        means a taxpayer whose gross income from the 
                        trade or business of farming (within the 
                        meaning of section 2032A(e)(5)) is at least 51 
                        percent of the taxpayer's gross income for the 
                        taxable year, and, in the case of a C 
                        corporation, the stock of which is not publicly 
                        traded on a recognized exchange.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to contributions made after the date of the enactment of this Act.

SEC. 107. EXCLUSION OF 25 PERCENT OF GAIN ON SALES OR EXCHANGES OF LAND 
              OR WATER INTERESTS TO ELIGIBLE ENTITIES FOR CONSERVATION 
              PURPOSES.

    (a) In General.--Part III of subchapter B of chapter 1 (relating to 
items specifically excluded from gross income) is amended by inserting 
after section 121 the following new section:

``SEC. 121A. 25-PERCENT EXCLUSION OF GAIN ON SALES OR EXCHANGES OF LAND 
              OR WATER INTERESTS TO ELIGIBLE ENTITIES FOR CONSERVATION 
              PURPOSES.

    ``(a) Exclusion.--Gross income shall not include 25 percent of the 
qualifying gain from a conservation sale of a long-held qualifying land 
or water interest.
    ``(b) Qualifying Gain.--For purposes of this section--
            ``(1) In general.--The term `qualifying gain' means any 
        gain which would be recognized as long-term capital gain, 
        reduced by the amount of any long-term capital gain 
        attributable to disqualified improvements.
            ``(2) Disqualified improvement.--For purposes of paragraph 
        (1), the term `disqualified improvement' means any building, 
        structure, or other improvement, other than--
                    ``(A) any improvement which is described in section 
                175(c)(1), determined--
                            ``(i) without regard to the requirements 
                        that the taxpayer be engaged in farming, and
                            ``(ii) without taking into account 
                        subparagraphs (A) and (B) thereof, or
                    ``(B) any improvement which the Secretary 
                determines directly furthers conservation purposes.
            ``(3) Special rule for sales of stock.--If the long-held 
        qualifying land or water interest is 1 or more shares of stock 
        in a qualifying land or water corporation, the qualifying gain 
        is equal to the lesser of--
                    ``(A) the qualifying gain determined under 
                paragraph (1), or
                    ``(B) the product of--
                            ``(i) the percentage of such corporation's 
                        stock which is transferred by the taxpayer, 
                        times
                            ``(ii) the amount which would have been the 
                        qualifying gain (determined under paragraph 
                        (1)) if there had been a conservation sale by 
                        such corporation of all of its interests in the 
                        land and water for a price equal to the product 
                        of the fair market value of such interests 
                        times the ratio of--
                                    ``(I) the proceeds of the 
                                conservation sale of the stock, to
                                    ``(II) the fair market value of the 
                                stock which was the subject of the 
                                conservation sale.
    ``(c) Conservation Sale.--For purposes of this section, the term 
`conservation sale' means a sale or exchange which meets the following 
requirements:
            ``(1) Transferee is an eligible entity.--The transferee of 
        the long-held qualifying land or water interest is an eligible 
        entity.
            ``(2) Qualifying letter of intent required.--At the time of 
        the sale or exchange, such transferee provides the taxpayer 
        with a qualifying letter of intent.
            ``(3) Nonapplication to certain sales.--The sale or 
        exchange is not made pursuant to an order of condemnation or 
        eminent domain.
            ``(4) Controlling interest in stock sale required.--In the 
        case of the sale or exchange of stock in a qualifying land or 
        water corporation, at the end of the taxpayer's taxable year in 
        which such sale or exchange occurs, the transferee's ownership 
        of stock in such corporation meets the requirements of section 
        1504(a)(2) (determined by substituting `90 percent' for `80 
        percent' each place it appears).
    ``(d) Long-Held Qualifying Land or Water Interest.--For purposes of 
this section--
            ``(1) In general.--The term `long-held qualifying land or 
        water interest' means any qualifying land or water interest 
        owned by the taxpayer or a member of the taxpayer's family (as 
        defined in section 2032A(e)(2)) at all times during the 5-year 
        period ending on the date of the sale.
            ``(2) Qualifying land or water interest.--
                    ``(A) In general.--The term `qualifying land or 
                water interest' means a real property interest which 
                constitutes--
                            ``(i) a taxpayer's entire interest in land,
                            ``(ii) a taxpayer's entire interest in 
                        water rights,
                            ``(iii) a qualified real property interest 
                        (as defined in section 170(h)(2)), or
                            ``(iv) stock in a qualifying land or water 
                        corporation.
                    ``(B) Entire interest.--For purposes of clause (i) 
                or (ii) of subparagraph (A)--
                            ``(i) a partial interest in land or water 
                        is not a taxpayer's entire interest if an 
                        interest in land or water was divided in order 
                        to create such partial interest in order to 
                        avoid the requirements of such clause or 
                        section 170(f)(3)(A), and
                            ``(ii) a taxpayer's entire interest in 
                        certain land does not fail to satisfy 
                        subparagraph (A)(i) solely because the taxpayer 
                        has retained an interest in other land, even if 
                        the other land is contiguous with such certain 
                        land and was acquired by the taxpayer along 
                        with such certain land in a single conveyance.
    ``(e) Other Definitions.--For purposes of this section--
            ``(1) Eligible entity.--The term `eligible entity' means--
                    ``(A) a governmental unit referred to in section 
                170(c)(1), or an agency or department thereof operated 
                primarily for 1 or more of the conservation purposes 
                specified in clause (i), (ii), or (iii) of section 
                170(h)(4)(A), or
                    ``(B) an entity which is--
                            ``(i) described in section 170(b)(1)(A)(vi) 
                        or section 170(h)(3)(B), and
                            ``(ii) organized and at all times operated 
                        primarily for 1 or more of the conservation 
                        purposes specified in clause (i), (ii), or 
                        (iii) of section 170(h)(4)(A).
            ``(2) Qualifying letter of intent.--The term `qualifying 
        letter of intent' means a written letter of intent which 
        includes the following statement: `The transferee's intent is 
        that this acquisition will serve 1 or more of the conservation 
        purposes specified in clause (i), (ii), or (iii) of section 
        170(h)(4)(A) of the Internal Revenue Code of 1986, that the 
        transferee's use of the property so acquired will be consistent 
        with section 170(h)(5) of such Code, and that the use of the 
        property will continue to be consistent with such section, even 
        if ownership or possession of such property is subsequently 
        transferred to another person.'
            ``(3) Qualifying land or water corporation.--The term 
        `qualifying land or water corporation' means a C corporation 
        (as defined in section 1361(a)(2)) if, as of the date of the 
        conservation sale--
                    ``(A) the fair market value of the corporation's 
                interests in land or water held by the corporation at 
                all times during the preceding 5 years equals or 
                exceeds 90 percent of the fair market value of all of 
                such corporation's assets, and
                    ``(B) not more than 50 percent of the total fair 
                market value of such corporation's assets consists of 
                water rights or infrastructure related to the delivery 
                of water, or both.
    ``(f) Tax on Subsequent Transfers or Removals of Conservation 
Restrictions.--
            ``(1) In general.--A tax is hereby imposed on any 
        subsequent--
                    ``(A) transfer by an eligible entity of ownership 
                or possession, whether by sale, exchange, or lease, of 
                property acquired directly or indirectly in--
                            ``(i) a conservation sale described in 
                        subsection (a), or
                            ``(ii) a transfer described in clause (i), 
                        (ii), or (iii) of paragraph (4)(A), or
                    ``(B) removal of a conservation restriction 
                contained in an instrument of conveyance of such 
                property.
            ``(2) Amount of tax.--The amount of tax imposed by 
        paragraph (1) on any transfer or removal shall be equal to the 
        sum of--
                    ``(A) either--
                            ``(i) 20 percent of the fair market value 
                        (determined at the time of the transfer) of the 
                        property the ownership or possession of which 
                        is transferred, or
                            ``(ii) 20 percent of the fair market value 
                        (determined at the time immediately after the 
                        removal) of the property upon which the 
                        conservation restriction was removed, plus
                    ``(B) the product of--
                            ``(i) the highest rate of tax specified in 
                        section 11, times
                            ``(ii) any gain or income realized by the 
                        transferor or person removing such restriction 
                        as a result of the transfer or removal.
            ``(3) Liability.--The tax imposed by paragraph (1) shall be 
        paid--
                    ``(A) on any transfer, by the transferor, and
                    ``(B) on any removal of a conservation restriction 
                contained in an instrument of conveyance, by the person 
                removing such restriction.
            ``(4) Relief from liability.--The person (otherwise liable 
        for any tax imposed by paragraph (1)) shall be relieved of 
        liability for the tax imposed by paragraph (1)--
                    ``(A) with respect to any transfer if--
                            ``(i) the transferee is an eligible entity 
                        which provides such person, at the time of 
                        transfer, a qualifying letter of intent,
                            ``(ii) in any case where the transferee is 
                        not an eligible entity, it is established to 
                        the satisfaction of the Secretary, that the 
                        transfer of ownership or possession, as the 
                        case may be, will be consistent with section 
                        170(h)(5), and the transferee provides such 
                        person, at the time of transfer, a qualifying 
                        letter of intent, or
                            ``(iii) tax has previously been paid under 
                        this subsection as a result of a prior transfer 
                        of ownership or possession of the same 
                        property, or
                    ``(B) with respect to any removal of a conservation 
                restriction contained in an instrument of conveyance, 
                if it is established to the satisfaction of the 
                Secretary that the retention of the restriction was 
                impracticable or impossible and the proceeds continue 
                to be used in a manner consistent with 1 or more of the 
                conservation purposes specified in clause (i), (ii), or 
                (iii) of section 170(h)(4)(A).
            ``(5) Administrative provisions.--For purposes of subtitle 
        F, the taxes imposed by this subsection shall be treated as 
        excise taxes with respect to which the deficiency procedures of 
        such subtitle apply.
            ``(6) Reporting.--The Secretary may require such reporting 
        as may be necessary or appropriate to further the purpose under 
        this section that any conservation use be in perpetuity.''.
    (b) Clerical Amendment.--The table of sections for part III of 
subchapter B of chapter 1 is amended by inserting after the item 
relating to section 121 the following new item:

                              ``Sec. 121A. 25-percent exclusion of gain 
                                        on sales or exchanges of land 
                                        or water interests to eligible 
                                        entities for conservation 
                                        purposes.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to sales or exchanges occurring after the date of the enactment 
of this Act.

SEC. 108. TAX EXCLUSION FOR COST-SHARING PAYMENTS UNDER PARTNERS FOR 
              FISH AND WILDLIFE PROGRAM.

    (a) In General.--Section 126(a) (relating to certain cost-sharing 
payments) is amended by redesignating paragraph (10) as paragraph (11) 
and by inserting after paragraph (9) the following:
            ``(10) The Partners for Fish and Wildlife Program 
        authorized by the Fish and Wildlife Act of 1956 (16 U.S.C. 742a 
        et seq.).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to payments received after the date of the enactment of this Act.

SEC. 109. 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 contributions made after the date of the enactment of this Act.

SEC. 110. ENHANCED DEDUCTION FOR CHARITABLE CONTRIBUTION OF LITERARY, 
              MUSICAL, ARTISTIC, AND SCHOLARLY COMPOSITIONS.

    (a) In General.--Subsection (e) of section 170 (relating to certain 
contributions of ordinary income and capital gain property), as amended 
by this Act, is amended by adding at the end the following new 
paragraph:
            ``(8) Special rule for certain contributions of literary, 
        musical, artistic, or scholarly compositions.--
                    ``(A) In general.--In the case of a qualified 
                artistic charitable contribution--
                            ``(i) the amount of such contribution taken 
                        into account under this section shall be the 
                        fair market value of the property contributed 
                        (determined at the time of such contribution), 
                        and
                            ``(ii) no reduction in the amount of such 
                        contribution shall be made under paragraph (1).
                    ``(B) Qualified artistic charitable contribution.--
                For purposes of this paragraph, the term `qualified 
                artistic charitable contribution' means a charitable 
                contribution of any literary, musical, artistic, or 
                scholarly composition, or similar property, or the 
                copyright thereon (or both), but only if--
                            ``(i) such property was created by the 
                        personal efforts of the taxpayer making such 
                        contribution no less than 18 months prior to 
                        such contribution,
                            ``(ii) the taxpayer--
                                    ``(I) has received a qualified 
                                appraisal of the fair market value of 
                                such property in accordance with the 
                                regulations under this section, and
                                    ``(II) attaches to the taxpayer's 
                                income tax return for the taxable year 
                                in which such contribution was made a 
                                copy of such appraisal,
                            ``(iii) the donee is an organization 
                        described in subsection (b)(1)(A),
                            ``(iv) the use of such property by the 
                        donee is related to the purpose or function 
                        constituting the basis for the donee's 
                        exemption under section 501 (or, in the case of 
                        a governmental unit, to any purpose or function 
                        described under section 501(c)),
                            ``(v) the taxpayer receives from the donee 
                        a written statement representing that the 
                        donee's use of the property will be in 
                        accordance with the provisions of clause (iv), 
                        and
                            ``(vi) the written appraisal referred to in 
                        clause (ii) includes evidence of the extent (if 
                        any) to which property created by the personal 
                        efforts of the taxpayer and of the same type as 
                        the donated property is or has been--
                                    ``(I) owned, maintained, and 
                                displayed by organizations described in 
                                subsection (b)(1)(A), and
                                    ``(II) sold to or exchanged by 
                                persons other than the taxpayer, donee, 
                                or any related person (as defined in 
                                section 465(b)(3)(C)).
                    ``(C) Maximum dollar limitation; no carryover of 
                increased deduction.--The increase in the deduction 
                under this section by reason of this paragraph for any 
                taxable year--
                            ``(i) shall not exceed the artistic 
                        adjusted gross income of the taxpayer for such 
                        taxable year, and
                            ``(ii) shall not be taken into account in 
                        determining the amount which may be carried 
                        from such taxable year under subsection (d).
                    ``(D) Artistic adjusted gross income.--For purposes 
                of this paragraph, the term `artistic adjusted gross 
                income' means that portion of the adjusted gross income 
                of the taxpayer for the taxable year attributable to--
                            ``(i) income from the sale or use of 
                        property created by the personal efforts of the 
                        taxpayer which is of the same type as the 
                        donated property, and
                            ``(ii) income from teaching, lecturing, 
                        performing, or similar activity with respect to 
                        property described in clause (i).
                    ``(E) Paragraph not to apply to certain 
                contributions.--Subparagraph (A) shall not apply to any 
                charitable contribution of any letter, memorandum, or 
                similar property which was written, prepared, or 
                produced by or for an individual while the individual 
                is an officer or employee of any person (including any 
                government agency or instrumentality) unless such 
                letter, memorandum, or similar property is entirely 
                personal.
                    ``(F) Copyright treated as separate property for 
                partial interest rule.--In the case of a qualified 
                artistic charitable contribution, the tangible 
                literary, musical, artistic, or scholarly composition, 
                or similar property and the copyright on such work 
                shall be treated as separate properties for purposes of 
                this paragraph and subsection (f)(3).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to contributions made after the date of the enactment of this Act.

SEC. 111. MILEAGE REIMBURSEMENTS TO CHARITABLE VOLUNTEERS EXCLUDED FROM 
              GROSS INCOME.

    (a) In General.--Part III of subchapter B of chapter 1 is amended 
by inserting after section 139 the following new section:

``SEC. 139A. MILEAGE REIMBURSEMENTS TO CHARITABLE VOLUNTEERS.

    ``(a) In General.--Gross income of an individual does not include 
amounts received, from an organization described in section 170(c), as 
reimbursement of operating expenses with respect to use of a passenger 
automobile for the benefit of such organization. The preceding sentence 
shall apply only to the extent that the expenses which are reimbursed 
would be deductible under this chapter if section 274(d) were applied--
            ``(1) by using the standard business mileage rate 
        established under such section, and
            ``(2) as if the individual were an employee of an 
        organization not described in section 170(c).
    ``(b) Application to Volunteer Services Only.--Subsection (a) shall 
not apply with respect to any expenses relating to the performance of 
services for compensation.
    ``(c) No Double Benefit.--A taxpayer may not claim a deduction or 
credit under any other provision of this title with respect to the 
expenses under subsection (a).
    ``(d) Exemption From Reporting Requirements.--Section 6041 shall 
not apply with respect to reimbursements excluded from income under 
subsection (a).''.
    (b) Clerical Amendment.--The table of sections for part III of 
subchapter B of chapter 1 is amended by inserting after the item 
relating to section 139 the following new item:

                              ``Sec. 139A. Mileage reimbursements to 
                                        charitable volunteers.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 112. EXTENSION OF ENHANCED DEDUCTION FOR INVENTORY TO INCLUDE 
              PUBLIC SCHOOLS.

    (a) In General.--Subparagraph (A) of section 170(e)(3) (relating to 
special rule for certain contributions of inventory and other property) 
is amended by striking ``to an organization which is described in'' and 
all that follows through the end of clause (i) and inserting ``to a 
qualified organization, but only if--
                            ``(i) the property is to be used by the 
                        donee solely for the care of the ill, the 
                        needy, or infants and, in the case of--
                                    ``(I) an organization described in 
                                section 501(c)(3) (other than an 
                                organization described in subclause 
                                (II)), the use of the property by the 
                                donee is related to the purpose or 
                                function constituting the basis for its 
                                exemption under section 501, and
                                    ``(II) an organization described in 
                                subsection (b)(1)(A)(ii), the use of 
                                the property by the donee is related to 
                                educational purposes and such property 
                                is not computer technology or equipment 
                                (as defined in paragraph (6)(F)(i));''.
    (b) Qualified Organization.--Paragraph (3) of section 170(e) of 
such Code is amended by redesignating subparagraph (C) as subparagraph 
(D) and by inserting after subparagraph (B) the following new 
subparagraph:
                    ``(C) Qualified organization.--For purposes of this 
                paragraph, the term `qualified organization' means--
                            ``(i) an organization which is described in 
                        section 501(c)(3) and is exempt under section 
                        501(a) (other than a private foundation, as 
                        defined in section 509(a), which is not an 
                        operating foundation, as defined in section 
                        4942(j)(3)), and
                            ``(ii) an educational organization 
                        described in subsection (b)(1)(A)(ii).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to contributions made after December 31, 2003.

TITLE II--PROPOSALS IMPROVING THE OVERSIGHT OF TAX-EXEMPT ORGANIZATIONS

SEC. 201. DISCLOSURE OF WRITTEN DETERMINATIONS.

    (a) In General.--Section 6110(l) (relating to section not to apply) 
is amended by striking all matter before subparagraph (A) of paragraph 
(2) and inserting the following:
    ``(l) Section Not To Apply.--
            ``(1) In general.--This section shall not apply to any 
        matter to which section 6104 or 6105 applies, except that this 
        section shall apply to any written determination and related 
        background file document relating to an organization described 
        under subsection (c) or (d) of section 501 (including any 
        written determination denying an organization tax-exempt status 
        under such subsection) or a political organization described in 
        section 527 which is not required to be disclosed by section 
        6104(a)(1)(A).
            ``(2) Additional matters.--This section shall not apply to 
        any--''.
    (b) Effective Date.--The amendment made by this section shall apply 
to written determinations issued after the date of the enactment of 
this Act.

SEC. 202. DISCLOSURE OF INTERNET WEB SITE AND NAME UNDER WHICH 
              ORGANIZATION DOES BUSINESS.

    (a) In General.--Section 6033 (relating to returns by exempt 
organizations) is amended by redesignating subsection (h) as subsection 
(i) and by inserting after subsection (g) the following new subsection:
    ``(h) Disclosure of Name Under Which Organization Does Business and 
Its Internet Web Site.--Any organization which is subject to the 
requirements of subsection (a) shall include on the return required 
under subsection (a)--
            ``(1) any name under which such organization operates or 
        does business, and
            ``(2) the Internet web site address (if any) of such 
        organization.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to returns filed after December 31, 2003.

SEC. 203. MODIFICATION TO REPORTING CAPITAL TRANSACTIONS.

    (a) Requirement of Summary Report.--Section 6033(c) (relating to 
additional provisions relating to private foundations) is amended by 
adding at the end the following new sentence: ``Any information 
included in an annual return regarding the gain or loss from the sale 
or other disposition of stock or securities which are listed on an 
established securities market which is required to be furnished in 
order to calculate the tax on net investment income shall also be 
reported in summary form with a notice that detailed information is 
available upon request by the public.''.
    (b) Disclosure Requirement.--Section 6104(b) (relating to 
inspection of annual information returns), as amended by this Act, is 
amended by adding at the end the following new sentence: ``With respect 
to any private foundation (as defined in section 509(a)), any 
information regarding the gain or loss from the sale or other 
disposition of stock or securities which are listed on an established 
securities market which is required to be furnished in order to 
calculate the tax on net investment income but which is not in summary 
form is not required to be made available to the public under this 
subsection except upon the explicit request by a member of the public 
to the Secretary.''.
    (c) Public Inspection Requirement.--Section 6104(d) (relating to 
public inspection of certain annual returns, applications for 
exemptions, and notices of status) is amended by adding at the end the 
following new paragraph:
            ``(9) Application to private foundation capital transaction 
        information.--With respect to any private foundation (as 
        defined in section 509(a)), any information regarding the gain 
        or loss from the sale or other disposition of stock or 
        securities which are listed on an established securities market 
        which is required to be furnished in order to calculate the tax 
        on net investment income but which is not in summary form is 
        not required to be made available to the public under this 
        subsection except upon the explicit request by a member of the 
        public to the private foundation in the form and manner of a 
        request described in paragraph (1)(B).''.
    (d) Effective Date.--The amendments made by this section shall 
apply to returns filed after December 31, 2003.

SEC. 204. DISCLOSURE THAT FORM 990 IS PUBLICLY AVAILABLE.

    (a) In General.--The Commissioner of the Internal Revenue shall 
notify the public in appropriate publications or other materials of the 
extent to which an exempt organization's Form 990, Form 990-EZ, or Form 
990-PF is publicly available.
    (b) Effective Date.--The amendments made by this section shall 
apply to publications or other materials issued or revised after the 
date of the enactment of this Act.

SEC. 205. DISCLOSURE TO STATE OFFICIALS OF PROPOSED ACTIONS RELATED TO 
              SECTION 501(C) ORGANIZATIONS.

    (a) In General.--Subsection (c) of section 6104 is amended by 
striking paragraph (2) and inserting the following new paragraphs:
            ``(2) Disclosure of proposed actions related to charitable 
        organizations.--
                    ``(A) Specific notifications.--In the case of an 
                organization to which paragraph (1) applies, the 
                Secretary may disclose to the appropriate State 
                officer--
                            ``(i) a notice of proposed refusal to 
                        recognize such organization as an organization 
                        described in section 501(c)(3) or a notice of 
                        proposed revocation of such organization's 
                        recognition as an organization exempt from 
                        taxation,
                            ``(ii) the issuance of a letter of proposed 
                        deficiency of tax imposed under section 507 or 
                        chapter 41 or 42, and
                            ``(iii) the names, addresses, and taxpayer 
                        identification numbers of organizations which 
                        have applied for recognition as organizations 
                        described in section 501(c)(3).
                    ``(B) Additional disclosures.--Returns and return 
                information of organizations with respect to which 
                information is disclosed under subparagraph (A) may be 
                made available for inspection by or disclosed to an 
                appropriate State officer.
                    ``(C) Procedures for disclosure.--Information may 
                be inspected or disclosed under subparagraph (A) or (B) 
                only--
                            ``(i) upon written request by an 
                        appropriate State officer, and
                            ``(ii) for the purpose of, and only to the 
                        extent necessary in, the administration of 
                        State laws regulating such organizations.
                Such information may only be inspected by or disclosed 
                to representatives of the appropriate State officer 
                designated as the individuals who are to inspect or to 
                receive the returns or return information under this 
                paragraph on behalf of such officer. Such 
                representatives shall not include any contractor or 
                agent.
                    ``(D) Disclosures other than by request.--The 
                Secretary may make available for inspection or disclose 
                returns and return information of an organization to 
                which paragraph (1) applies to an appropriate State 
                officer of any State if the Secretary determines that 
                such inspection or disclosure may facilitate the 
                resolution of Federal or State issues relating to the 
                tax-exempt status of such organization.
            ``(3) Disclosure with respect to certain other exempt 
        organizations.--Upon written request by an appropriate State 
        officer, the Secretary may make available for inspection or 
disclosure returns and return information of an organization described 
in paragraph (2), (4), (6), (7), (8), (10), or (13) of section 501(c) 
for the purpose of, and to the extent necessary in, the administration 
of State laws regulating the solicitation or administration of the 
charitable funds or charitable assets of such organizations. Such 
information may be inspected only by or disclosed only to 
representatives of the appropriate State officer designated as the 
individuals who are to inspect or to receive the returns or return 
information under this paragraph on behalf of such officer. Such 
representatives shall not include any contractor or agent.
            ``(4) Use in civil judicial and administrative 
        proceedings.--Returns and return information disclosed pursuant 
        to this subsection may be disclosed in civil administrative and 
        civil judicial proceedings pertaining to the enforcement of 
        State laws regulating such organizations in a manner prescribed 
        by the Secretary similar to that for tax administration 
        proceedings under section 6103(h)(4).
            ``(5) No disclosure if impairment.--Returns and return 
        information shall not be disclosed under this subsection, or in 
        any proceeding described in paragraph (4), to the extent that 
        the Secretary determines that such disclosure would seriously 
        impair Federal tax administration.
            ``(6) Definitions.--For purposes of this subsection--
                    ``(A) Return and return information.--The terms 
                `return' and `return information' have the respective 
                meanings given to such terms by section 6103(b).
                    ``(B) Appropriate state officer.--The term 
                `appropriate State officer' means--
                            ``(i) the State attorney general,
                            ``(ii) in the case of an organization to 
                        which paragraph (1) applies, any other State 
                        official charged with overseeing organizations 
                        of the type described in section 501(c)(3), and
                            ``(iii) in the case of an organization to 
                        which paragraph (3) applies, the head of an 
                        agency designated by the State attorney general 
                        as having primary responsibility for overseeing 
                        the solicitation of funds for charitable 
                        purposes.''.
    (b) Conforming Amendments.--
            (1) Subsection (a) of section 6103 is amended--
                    (A) by inserting ``or any appropriate State officer 
                who has or had access to returns or return information 
                under section 6104(c)'' after ``this section'' in 
                paragraph (2), and
                    (B) by striking ``or subsection (n)'' in paragraph 
                (3) and inserting ``subsection (n), or section 
                6104(c)''.
            (2) Subparagraph (A) of section 6103(p)(3) is amended by 
        inserting ``and section 6104(c)'' after ``section'' in the 
        first sentence.
            (3) Paragraph (4) of section 6103(p), as amended by section 
        202(b)(2)(B) of the Trade Act of 2002 (Public Law 107-210; 116 
        Stat. 961), is amended by striking ``or (17)'' after ``any 
        other person described in subsection (l)(16)'' each place it 
        appears and inserting ``or (18) or any appropriate State 
        officer (as defined in section 6104(c))''.
            (4) The heading for paragraph (1) of section 6104(c) is 
        amended by inserting ``for charitable organizations''.
            (5) Paragraph (2) of section 7213(a) is amended by 
        inserting ``or under section 6104(c)'' after ``6103''.
            (6) Paragraph (2) of section 7213A(a) is amended by 
        inserting ``or 6104(c)'' after ``6103''.
            (7) Paragraph (2) of section 7431(a) is amended by 
        inserting ``(including any disclosure in violation of section 
        6104(c))'' after ``6103''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act but shall not apply to 
requests made before such date.

SEC. 206. EXPANSION OF PENALTIES TO PREPARERS OF FORM 990.

    (a) In General.--Section 6695 (relating to other assessable 
penalties with respect to the preparation of income tax returns for 
other persons) is amended by adding at the end the following new 
subsections:
    ``(h) Certain Omissions and Misrepresentations.--
            ``(1) In general.--Any person who prepares for compensation 
        any return under section 6033 who omits or misrepresents any 
        information with respect to such return which was known or 
        should have been known by such person shall pay a penalty of 
        $250 with respect to such return.
            ``(2) Exception for minor, inadvertent omissions.--
        Paragraph (1) shall not apply to minor, inadvertent omissions.
            ``(3) Rules for determining return preparer.--For purposes 
        of this subsection and subsection (i), any reference to a 
        person who prepares for compensation a return under section 
        6033--
                    ``(A) shall include any person who employs 1 or 
                more persons to prepare for compensation a return under 
                section 6033, and
                    ``(B) shall not include any person who would be 
                described in clause (i), (ii), (iii), or (iv) of 
                section 7701(a)(36)(B) if such section referred to a 
                return under section 6033.
    ``(i) Willful or Reckless Conduct.--
            ``(1) In general.--Any person who prepares for compensation 
        any return under section 6033 who recklessly or intentionally 
        misrepresents any information or recklessly or intentionally 
        disregards any rule or regulation with respect to such return 
        shall pay a penalty of $1,000 with respect to such return.
            ``(2) Coordination with other penalties.--With respect to 
        any return, the amount of the penalty payable by any person by 
        reason of paragraph (1) shall be reduced by the amount of 
the penalty paid by such person by reason of subsection (h) or section 
6694.''.
    (b) Conforming Amendments.--
            (1) The heading for section 6695 is amended by inserting 
        ``and other'' after ``income tax''.
            (2) The item relating to section 6695 in the table of 
        sections for part I of subchapter B of chapter 68 is amended by 
        inserting ``and other'' after ``income tax''.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to documents prepared after the date of the 
enactment of this Act.

SEC. 207. NOTIFICATION REQUIREMENT FOR ENTITIES NOT CURRENTLY REQUIRED 
              TO FILE.

    (a) In General.--Section 6033 (relating to returns by exempt 
organizations), as amended by this Act, is amended by redesignating 
subsection (i) as subsection (j) and by inserting after subsection (h) 
the following new subsection:
    ``(i) Additional Notification Requirements.--Any organization the 
gross receipts of which in any taxable year result in such organization 
being referred to in subsection (a)(2)(A)(ii) or (a)(2)(B)--
            ``(1) shall furnish annually, at such time and in such 
        manner as the Secretary may by forms or regulations prescribe, 
        information setting forth--
                    ``(A) the legal name of the organization,
                    ``(B) any name under which such organization 
                operates or does business,
                    ``(C) the organization's mailing address and 
                Internet web site address (if any),
                    ``(D) the organization's taxpayer identification 
                number,
                    ``(E) the name and address of a principal officer, 
                and
                    ``(F) evidence of the continuing basis for the 
                organization's exemption from the filing requirements 
                under subsection (a)(1), and
            ``(2) upon the termination of the existence of the 
        organization, shall furnish notice of such termination.''.
    (b) Loss of Exempt Status for Failure To File Return or Notice.--
Section 6033 (relating to returns by exempt organizations), as amended 
by subsection (a), is amended by redesignating subsection (j) as 
subsection (k) and by inserting after subsection (i) the following new 
subsection:
    ``(j) Loss of Exempt Status for Failure To File Return or Notice.--
            ``(1) In general.--If an organization described in 
        subsection (a)(1) or (i) fails to file an annual return or 
        notice required under either subsection for 3 consecutive 
        years, such organization's status as an organization exempt 
        from tax under section 501(a) shall be considered revoked on 
        and after the date set by the Secretary for the filing of the 
        third annual return or notice. The Secretary shall publish and 
        maintain a list of any organization the status of which is so 
        revoked.
            ``(2) Application necessary for reinstatement.--Any 
        organization the tax-exempt status of which is revoked under 
        paragraph (1) must apply in order to obtain reinstatement of 
        such status regardless of whether such organization was 
        originally required to make such an application.
            ``(3) Retroactive reinstatement if reasonable cause shown 
        for failure.--If upon application for reinstatement of status 
        as an organization exempt from tax under section 501(a), an 
        organization described in paragraph (1) can show to the 
        satisfaction of the Secretary evidence of reasonable cause for 
        the failure described in such paragraph, the organization's 
        exempt status may, in the discretion of the Secretary, be 
        reinstated effective from the date of the revocation under such 
        paragraph.''.
    (c) No Declaratory Judgment Relief.--Section 7428(b) (relating to 
limitations) is amended by adding at the end the following new 
paragraph:
            ``(4) Nonapplication for certain revocations.--No action 
        may be brought under this section with respect to any 
        revocation of status described in section 6033(j)(1).''.
    (d) No Inspection Requirement.--Section 6104(b) (relating to 
inspection of annual information returns) is amended by inserting 
``(other than subsection (i) thereof)'' after ``6033''.
    (e) No Disclosure Requirement.--Section 6104(d)(3) (relating to 
exceptions from disclosure requirements) is amended by redesignating 
subparagraph (B) as subparagraph (C) and by inserting after 
subparagraph (A) the following new subparagraph:
                    ``(B) Nondisclosure of annual notices.--Paragraph 
                (1) shall not require the disclosure of any notice 
                required under section 6033(i).''.
    (f) No Monetary Penalty for Failure To Notify.--Section 6652(c)(1) 
(relating to annual returns under section 6033 or 6012(a)(6)) is 
amended by adding at the end the following new subparagraph:
                    ``(E) No penalty for certain annual notices.--This 
                paragraph shall not apply with respect to any notice 
                required under section 6033(i).''.
    (g) Secretarial Outreach Requirements.--
            (1) Notice requirement.--The Secretary of the Treasury 
        shall notify in a timely manner every organization described in 
        section 6033(i) of the Internal Revenue Code of 1986 (as added 
        by this section) of the requirement under such section 6033(i) 
        and of the penalty established under section 6033(j)--
                    (A) by mail, in the case of any organization the 
                identity and address of which is included in the list 
                of exempt organizations maintained by the Secretary, 
                and
                    (B) by Internet or other means of outreach, in the 
                case of any other organization.
            (2) Loss of status penalty for failure to file return.--The 
        Secretary of the Treasury shall publicize in a timely manner in 
        appropriate forms and instructions and through other 
        appropriate means, the penalty established under section 
        6033(j) of such Code for the failure to file a return under 
section 6033(a)(1) of such Code.
    (h) Effective Date.--The amendments made by this section shall 
apply to notices and returns with respect to annual periods beginning 
after 2003.

SEC. 208. SUSPENSION OF TAX-EXEMPT STATUS OF TERRORIST ORGANIZATIONS.

    (a) In General.--Section 501 of the Internal Revenue Code of 1986 
(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 any provision of this title, including sections 170, 
        545(b)(2), 556(b)(2), 642(c), 2055, 2106(a)(2), and 2522, with 
        respect to 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.

     TITLE III--OTHER CHARITABLE AND EXEMPT ORGANIZATION PROVISIONS

SEC. 301. MODIFICATION OF 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 which 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) 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, 2002.

SEC. 302. 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, 2000.
            (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. 303. 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, 2002.

SEC. 304. EXPEDITED REVIEW PROCESS FOR CERTAIN TAX-EXEMPTION 
              APPLICATIONS.

    (a) In General.--The Secretary of the Treasury or the Secretary's 
delegate (in this section, referred to as the ``Secretary'') shall 
adopt procedures to expedite the consideration of applications for 
exempt status under section 501(c)(3) of the Internal Revenue Code of 
1986 filed after December 31, 2003, by any organization that--
            (1) is organized and operated for the primary purpose of 
        providing social services;
            (2) is seeking a contract or grant under a Federal, State, 
        or local program that provides funding for social services 
        programs;
            (3) establishes that, under the terms and conditions of the 
        contract or grant program, an organization is required to 
        obtain such exempt status before the organization is eligible 
        to apply for a contract or grant;
            (4) includes with its exemption application a copy of its 
        completed Federal, State, or local contract or grant 
        application; and
            (5) meets such other criteria as the Secretary deems 
        appropriate for expedited consideration.
The Secretary may prescribe other similar circumstances in which such 
organizations may be entitled to expedited consideration.
    (b) Waiver of Application Fee for Exempt Status.--Any organization 
that meets the conditions described in subsection (a) (without regard 
to paragraph (3) of that subsection) is entitled to a waiver of any fee 
for an application for exempt status under section 501(c)(3) of the 
Internal Revenue Code of 1986 if the organization certifies that the 
organization has had (or expects to have) average annual gross receipts 
of not more than $50,000 during the preceding 4 years (or, in the case 
of an organization not in existence throughout the preceding 4 years, 
during such organization's first 4 years).
    (c) Social Services Defined.--For purposes of this section--
            (1) In general.--The term ``social services'' means 
        services directed at helping people in need, reducing poverty, 
        improving outcomes of low-income children, revitalizing low-
        income communities, and empowering low-income families and low-
        income individuals to become self-sufficient, including--
                    (A) child care services, protective services for 
                children and adults, services for children and adults 
                in foster care, adoption services, services related to 
                the management and maintenance of the home, day care 
                services for adults, and services to meet the special 
                needs of children, older individuals, and individuals 
                with disabilities (including physical, mental, or 
                emotional disabilities);
                    (B) transportation services;
                    (C) job training and related services, and 
                employment services;
                    (D) information, referral, and counseling services;
                    (E) the preparation and delivery of meals, and 
                services related to soup kitchens or food banks;
                    (F) health support services;
                    (G) literacy and mentoring programs;
                    (H) services for the prevention and treatment of 
                juvenile delinquency and substance abuse, services for 
                the prevention of crime and the provision of assistance 
                to the victims and the families of criminal offenders, 
                and services related to the intervention in, and 
                prevention of, domestic violence; and
                    (I) services related to the provision of assistance 
                for housing under Federal law.
            (2) Exclusions.--The term does not include a program having 
        the purpose of delivering educational assistance under the 
        Elementary and Secondary Education Act of 1965 (20 U.S.C. 6301 
        et seq.) or under the Higher Education Act of 1965 (20 U.S.C. 
        1001 et seq.).

SEC. 305. 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. 306. 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 section 501(c) (other than 
                paragraph (3)) or 501(d) 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 December 31, 2002.

SEC. 307. DEFINITION OF CONVENTION OR ASSOCIATION OF CHURCHES.

    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) Convention or association of churches.--For purposes of this 
title, any organization which is otherwise a convention or association 
of churches shall not fail to so qualify merely because the membership 
of such organization includes individuals as well as churches or 
because individuals have voting rights in such organization.''.

SEC. 308. PAYMENTS BY CHARITABLE ORGANIZATIONS TO VICTIMS OF WAR ON 
              TERRORISM AND FAMILIES OF ASTRONAUTS KILLED IN THE LINE 
              OF DUTY.

    (a) In General.--For purposes of the Internal Revenue Code of 
1986--
            (1) any payment made by an organization described in 
        section 501(c)(3) of such Code to--
                    (A) a member of the Armed Forces of the United 
                States, or to an individual of such member's immediate 
                family, by reason of the death, injury, wounding, or 
                illness of such member incurred as the result of the 
                military response of the United States to the terrorist 
                attacks against the United States on September 11, 
                2001, or
                    (B) an individual of an astronaut's immediate 
                family by reason of the death of such astronaut 
                occurring in the line of duty after December 31, 2002,
        shall be treated as related to the purpose or function 
        constituting the basis for such organization's exemption under 
        section 501 of such Code if such payment is made using an 
        objective formula which is consistently applied, and
            (2) in the case of a private foundation (as defined in 
        section 509 of such Code), any payment described in paragraph 
        (1) shall not be treated as made to a disqualified person for 
        purposes of section 4941 of such Code.
    (b) Effective Dates.--This section shall apply to--
            (1) payments described in subsection (a)(1)(A) made after 
        the date of the enactment of this Act and before September 11, 
        2004, and
            (2) payments described in subsection (a)(1)(B) made after 
        December 31, 2002.

SEC. 309. MODIFICATION OF SCHOLARSHIP FOUNDATION RULES.

    In applying the limitations on the percentage of scholarship grants 
which may be awarded after the date of the enactment of this Act, to 
children of current or former employees under Revenue Procedure 76-47, 
such percentage shall be increased to 35 percent of the eligible 
applicants to be considered by the selection committee and to 20 
percent of individuals eligible for the grants, but only if the 
foundation awarding the grants demonstrates that, in addition to 
meeting the other requirements of Revenue Procedure 76-47, it provides 
a comparable number and aggregate amount of grants during the same 
program year to individuals who are not such employees, children or 
dependents of such employees, or affiliated with the employer of such 
employees.

SEC. 310. TREATMENT OF CERTAIN HOSPITAL SUPPORT ORGANIZATIONS AS 
              QUALIFIED ORGANIZATIONS FOR PURPOSES OF DETERMINING 
              ACQUISITION INDEBTEDNESS.

    (a) In General.--Subparagraph (C) of section 514(c)(9) (relating to 
real property acquired by a qualified organization) is amended by 
striking ``or'' at the end of clause (ii), by striking the period at 
the end of clause (iii) and inserting ``; or'', and by adding at the 
end the following new clause:
                                    ``(iv) a qualified hospital support 
                                organization (as defined in 
                                subparagraph (I)).''.
    (b) Qualified Hospital Support Organizations.--Paragraph (9) of 
section 514(c) is amended by adding at the end the following new 
subparagraph:
                    ``(I) Qualified hospital support organizations.--
                For purposes of subparagraph (C)(iv), the term 
                `qualified hospital support organization' means, with 
                respect to any eligible indebtedness (including any 
                qualified refinancing of such eligible indebtedness), a 
                support organization (as defined in section 509(a)(3)) 
                which supports a hospital described in section 
                119(d)(4)(B) and with respect to which--
                                    ``(i) more than half of the 
                                organization's assets (by value) at any 
                                time since its organization--
                                            ``(I) were acquired, 
                                        directly or indirectly, by 
                                        testamentary gift or devise, 
                                        and
                                            ``(II) consisted of real 
                                        property, and
                                    ``(ii) the fair market value of the 
                                organization's real estate acquired, 
                                directly or indirectly, by gift or 
                                devise, exceeded 25 percent of the fair 
                                market value of all investment assets 
                                held by the organization immediately 
                                prior to the time that the eligible 
                                indebtedness was incurred.
                For purposes of this subparagraph, the term `eligible 
                indebtedness' means indebtedness secured by real 
                property acquired by the organization, directly or 
                indirectly, by gift or devise, the proceeds of which 
                are used exclusively to acquire any leasehold interest 
                in such real property or for improvements on, or 
                repairs to, such real property. A determination under 
                clauses (i) and (ii) of this subparagraph shall be made 
                each time such an eligible indebtedness (or the 
                qualified refinancing of such an eligible indebtedness) 
                is incurred. For purposes of this subparagraph, a 
                refinancing of such an eligible indebtedness shall be 
                considered qualified if such refinancing does not 
                exceed the amount of the refinanced eligible 
                indebtedness immediately before the refinancing.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to indebtedness incurred after December 31, 2003.

SEC. 311. CHARITABLE CONTRIBUTION DEDUCTION FOR CERTAIN EXPENSES 
              INCURRED IN SUPPORT OF NATIVE ALASKAN SUBSISTENCE 
              WHALING.

    (a) In General.--Section 170 (relating to charitable, etc., 
contributions and gifts), as amended by this Act, is amended by 
redesignating subsection (n) as subsection (o) and by inserting after 
subsection (m) the following new subsection:
    ``(n) Expenses Paid by Certain Whaling Captains in Support of 
Native Alaskan Subsistence Whaling.--
            ``(1) In general.--In the case of an individual who is 
        recognized by the Alaska Eskimo Whaling Commission as a whaling 
        captain charged with the responsibility of maintaining and 
        carrying out sanctioned whaling activities and who engages in 
        such activities during the taxable year, the amount described 
        in paragraph (2) (to the extent such amount does not exceed 
        $10,000 for the taxable year) shall be treated for purposes of 
        this section as a charitable contribution.
            ``(2) Amount described.--
                    ``(A) In general.--The amount described in this 
                paragraph is the aggregate of the reasonable and 
                necessary whaling expenses paid by the taxpayer during 
                the taxable year in carrying out sanctioned whaling 
                activities.
                    ``(B) Whaling expenses.--For purposes of 
                subparagraph (A), the term `whaling expenses' includes 
                expenses for--
                            ``(i) the acquisition and maintenance of 
                        whaling boats, weapons, and gear used in 
                        sanctioned whaling activities,
                            ``(ii) the supplying of food for the crew 
                        and other provisions for carrying out such 
                        activities, and
                            ``(iii) storage and distribution of the 
                        catch from such activities.
            ``(3) Sanctioned whaling activities.--For purposes of this 
        subsection, the term `sanctioned whaling activities' means 
        subsistence bowhead whale hunting activities conducted pursuant 
        to the management plan of the Alaska Eskimo Whaling 
        Commission.''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply to contributions made after December 31, 2003.

SEC. 312. MATCHING GRANTS TO LOW-INCOME TAXPAYER CLINICS FOR RETURN 
              PREPARATION.

    (a) In General.--Chapter 77 (relating to miscellaneous provisions) 
is amended by inserting after section 7526 the following new section:

``SEC. 7526A. RETURN PREPARATION CLINICS FOR LOW-INCOME TAXPAYERS.

    ``(a) In General.--The Secretary may, subject to the availability 
of appropriated funds, make grants to provide matching funds for the 
development, expansion, or continuation of qualified return preparation 
clinics.
    ``(b) Definitions.--For purposes of this section--
            ``(1) Qualified return preparation clinic.--
                    ``(A) In general.--The term `qualified return 
                preparation clinic' means a clinic which--
                            ``(i) does not charge more than a nominal 
                        fee for its services (except for reimbursement 
                        of actual costs incurred), and
                            ``(ii) operates programs which assist low-
                        income taxpayers in preparing and filing their 
                        Federal income tax returns, including schedules 
                        reporting sole proprietorship or farm income.
                    ``(B) Assistance to low-income taxpayers.--A clinic 
                is treated as assisting low-income taxpayers under 
                subparagraph (A)(ii) if at least 90 percent of the 
                taxpayers assisted by the clinic have incomes which do 
                not exceed 250 percent of the poverty level, as 
                determined in accordance with criteria established by 
                the Director of the Office of Management and Budget.
            ``(2) Clinic.--The term `clinic' includes--
                    ``(A) a clinical program at an eligible educational 
                institution (as defined in section 529(e)(5)) which 
                satisfies the requirements of paragraph (1) through 
                student assistance of taxpayers in return preparation 
                and filing, and
                    ``(B) an organization described in section 501(c) 
                and exempt from tax under section 501(a) which 
                satisfies the requirements of paragraph (1).
    ``(c) Special Rules and Limitations.--
            ``(1) Aggregate limitation.--Unless otherwise provided by 
        specific appropriation, the Secretary shall not allocate more 
        than $10,000,000 per year (exclusive of costs of administering 
        the program) to grants under this section.
            ``(2) Other applicable rules.--Rules similar to the rules 
        under paragraphs (2) through (5) of section 7526(c) shall apply 
        with respect to the awarding of grants to qualified return 
        preparation clinics.''.
    (b) Clerical Amendment.--The table of sections for chapter 77 is 
amended by inserting after the item relating to section 7526 the 
following new item:

                              ``Sec. 7526A. Return preparation clinics 
                                        for low-income taxpayers.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to grants made after the date of the enactment of this Act.

                 TITLE IV--SOCIAL SERVICES BLOCK GRANT

SEC. 401. RESTORATION OF FUNDS FOR THE SOCIAL SERVICES BLOCK GRANT.

    (a) Findings.--Congress makes the following findings:
            (1) On August 22, 1996, the Personal Responsibility and 
        Work Opportunity Reconciliation Act of 1996 (Public Law 104-
        193; 110 Stat. 2105) was signed into law.
            (2) In enacting that law, Congress authorized 
        $2,800,000,000 for fiscal year 2003 and each fiscal year 
        thereafter to carry out the Social Services Block Grant program 
established under title XX of the Social Security Act (42 U.S.C. 1397 
et seq.).
    (b) Restoration of Funds.--Section 2003(c)(11) of the Social 
Security Act (42 U.S.C. 1397b(c)(11)) is amended by inserting ``, 
except that, with respect to fiscal year 2003, the amount shall be 
$1,975,000,000, and with respect to fiscal year 2004, the amount shall 
be $2,800,000,000'' after ``thereafter.''.

SEC. 402. RESTORATION OF AUTHORITY TO TRANSFER UP TO 10 PERCENT OF TANF 
              FUNDS TO THE SOCIAL SERVICES BLOCK GRANT.

    (a) In General.--Section 404(d)(2) of the Social Security Act (42 
U.S.C. 604(d)(2)) is amended to read as follows:
            ``(2) Limitation on amount transferable to title xx 
        programs.--A State may use not more than 10 percent of the 
        amount of any grant made to the State under section 403(a) for 
        a fiscal year to carry out State programs pursuant to title 
        XX.''.
    (b) Effective Date.--The amendment made by subsection (a) applies 
to amounts made available for fiscal year 2003 and each fiscal year 
thereafter.

SEC. 403. REQUIREMENT TO SUBMIT ANNUAL REPORT ON STATE ACTIVITIES.

    (a) In General.--Section 2006(c) of the Social Security Act (42 
U.S.C. 1397e(c)) is amended by adding at the end the following: ``The 
Secretary shall compile the information submitted by the States and 
submit that information to Congress on an annual basis.''.
    (b) Effective Date.--The amendment made by subsection (a) applies 
to information submitted by States under section 2006 of the Social 
Security Act (42 U.S.C. 1397e) with respect to fiscal year 2002 and 
each fiscal year thereafter.

                TITLE V--INDIVIDUAL DEVELOPMENT ACCOUNTS

SEC. 501. SHORT TITLE.

    This title may be cited as the ``Savings for Working Families Act 
of 2003''.

SEC. 502. PURPOSES.

    The purposes of this title are to provide for the establishment of 
individual development account programs that will--
            (1) provide individuals and families with limited means an 
        opportunity to accumulate assets and to enter the financial 
        mainstream,
            (2) promote education, homeownership, and the development 
        of small businesses,
            (3) stabilize families and build communities, and
            (4) support continued United States economic expansion.

SEC. 503. DEFINITIONS.

    As used in this title:
            (1) Eligible individual.--
                    (A) In general.--The term ``eligible individual'' 
                means, with respect to any taxable year, an individual 
                who--
                            (i) has attained the age of 18 but not the 
                        age of 61 as of the last day of such taxable 
                        year,
                            (ii) is a citizen or lawful permanent 
                        resident (within the meaning of section 
                        7701(b)(6) of the Internal Revenue Code of 
                        1986) of the United States as of the last day 
                        of such taxable year,
                            (iii) was not a student (as defined in 
                        section 151(c)(4) of such Code) for the 
                        immediately preceding taxable year,
                            (iv) is not an individual with respect to 
                        whom a deduction under section 151 of such Code 
                        is allowable to another taxpayer for a taxable 
                        year of the other taxpayer ending during the 
                        immediately preceding taxable year of the 
                        individual,
                            (v) is not a taxpayer described in 
                        subsection (c), (d), or (e) of section 6402 of 
                        such Code for the immediately preceding taxable 
                        year,
                            (vi) is not a taxpayer described in section 
                        1(d) of such Code for the immediately preceding 
                        taxable year, and
                            (vii) is a taxpayer the modified adjusted 
                        gross income of whom for the immediately 
                        preceding taxable year does not exceed--
                                    (I) $18,000, in the case of a 
                                taxpayer described in section 1(c) of 
                                such Code,
                                    (II) $30,000, in the case of a 
                                taxpayer described in section 1(b) of 
                                such Code, and
                                    (III) $38,000, in the case of a 
                                taxpayer described in section 1(a) of 
                                such Code.
                    (B) Inflation adjustment.--
                            (i) In general.--In the case of any taxable 
                        year beginning after 2004, each dollar amount 
                        referred to in subparagraph (A)(vii) shall be 
                        increased by an amount equal to--
                                    (I) such dollar amount, multiplied 
                                by
                                    (II) the cost-of-living adjustment 
                                determined under section (1)(f)(3) of 
                                the Internal Revenue Code of 1986 for 
                                the calendar year in which the taxable 
                                year begins, by substituting ``2003'' 
                                for ``1992''.
                            (ii) Rounding.--If any amount as adjusted 
                        under clause (i) is not a multiple of $50, such 
                        amount shall be rounded to the nearest multiple 
                        of $50.
                    (C) Modified adjusted gross income.--For purposes 
                of subparagraph (A)(v), the term ``modified adjusted 
                gross income'' means adjusted gross income--
                            (i) determined without regard to sections 
                        86, 893, 911, 931, and 933 of the Internal 
                        Revenue Code of 1986, and
                            (ii) increased by the amount of interest 
                        received or accrued by the taxpayer during the 
taxable year which is exempt from tax.
            (2) Individual development account.--The term ``Individual 
        Development Account'' means an account established for an 
        eligible individual as part of a qualified individual 
        development account program, but only if the written governing 
        instrument creating the account meets the following 
        requirements:
                    (A) The owner of the account is the individual for 
                whom the account was established.
                    (B) No contribution will be accepted unless it is 
                in cash, and, except in the case of any qualified 
                rollover, contributions will not be accepted for the 
                taxable year in excess of $1,500 on behalf of any 
                individual.
                    (C) The trustee of the account is a qualified 
                financial institution.
                    (D) The assets of the account will not be 
                commingled with other property except in a common trust 
                fund or common investment fund.
                    (E) Except as provided in section 507(b), any 
                amount in the account may be paid out only for the 
                purpose of paying the qualified expenses of the account 
                owner.
            (3) Parallel account.--The term ``parallel account'' means 
        a separate, parallel individual or pooled account for all 
        matching funds and earnings dedicated to an Individual 
        Development Account owner as part of a qualified individual 
        development account program, the trustee of which is a 
        qualified financial institution.
            (4) Qualified financial institution.--The term ``qualified 
        financial institution'' means any person authorized to be a 
        trustee of any individual retirement account under section 
        408(a)(2) of the Internal Revenue Code of 1986.
            (5) Qualified individual development account program.--The 
        term ``qualified individual development account program'' means 
        a program established upon approval of the Secretary under 
        section 504 after December 31, 2002, under which--
                    (A) Individual Development Accounts and parallel 
                accounts are held in trust by a qualified financial 
                institution, and
                    (B) additional activities determined by the 
                Secretary, in consultation with the Secretary of Health 
                and Human Services, as necessary to responsibly develop 
                and administer accounts, including recruiting, 
                providing financial education and other training to 
                Account owners, and regular program monitoring, are 
                carried out by the qualified financial institution.
            (6) Qualified expense distribution.--
                    (A) In general.--The term ``qualified expense 
                distribution'' means any amount paid (including through 
                electronic payments) or distributed out of an 
                Individual Development Account or a parallel account 
                established for an eligible individual if such amount--
                            (i) is used exclusively to pay the 
                        qualified expenses of the Individual 
                        Development Account owner or such owner's 
                        spouse or dependents,
                            (ii) is paid by the qualified financial 
                        institution--
                                    (I) except as otherwise provided in 
                                this clause, directly to the unrelated 
                                third party to whom the amount is due,
                                    (II) in the case of any qualified 
                                rollover, directly to another 
                                Individual Development Account and 
                                parallel account, or
                                    (III) in the case of a qualified 
                                final distribution, directly to the 
                                spouse, dependent, or other named 
                                beneficiary of the deceased Account 
                                owner, and
                            (iii) is paid after the Account owner has 
                        completed a financial education course if 
                        required under section 505(b).
                    (B) Qualified expenses.--
                            (i) In general.--The term ``qualified 
                        expenses'' means any of the following expenses 
                        approved by the qualified financial 
                        institution:
                                    (I) Qualified higher education 
                                expenses.
                                    (II) Qualified first-time homebuyer 
                                costs.
                                    (III) Qualified business 
                                capitalization or expansion costs.
                                    (IV) Qualified rollovers.
                                    (V) Qualified final distribution.
                            (ii) Qualified higher education expenses.--
                                    (I) In general.--The term 
                                ``qualified higher education expenses'' 
                                has the meaning given such term by 
                                section 529(e)(3) of the Internal 
                                Revenue Code of 1986, determined by 
                                treating the Account owner, the owner's 
                                spouse, or one or more of the owner's 
                                dependents as a designated beneficiary, 
                                and reduced as provided in section 
                                25A(g)(2) of such Code.
                                    (II) Coordination with other 
                                benefits.--The amount of expenses which 
                                may be taken into account for purposes 
                                of section 135, 529, or 530 of such 
                                Code for any taxable year shall be 
                                reduced by the amount of any qualified 
                                higher education expenses taken into 
                                account as qualified expense 
                                distributions during such taxable year.
                            (iii) Qualified first-time homebuyer 
                        costs.--The term ``qualified first-time 
                        homebuyer costs'' means qualified acquisition 
                        costs (as defined in section 72(t)(8)(C) of the 
                        Internal Revenue Code of 1986) with respect to 
a principal residence (within the meaning of section 121 of such Code) 
for a qualified first-time homebuyer (as defined in section 
72(t)(8)(D)(i) of such Code).
                            (iv) Qualified business capitalization or 
                        expansion costs.--
                                    (I) In general.--The term 
                                ``qualified business capitalization or 
                                expansion costs'' means qualified 
                                expenditures for the capitalization or 
                                expansion of a qualified business 
                                pursuant to a qualified business plan.
                                    (II) Qualified expenditures.--The 
                                term ``qualified expenditures'' means 
                                expenditures normally associated with 
                                starting or expanding a business and 
                                included in a qualified business plan, 
                                including costs for capital, plant, and 
                                equipment, inventory expenses, and 
                                attorney and accounting fees.
                                    (III) Qualified business.--The term 
                                ``qualified business'' means any 
                                business that does not contravene any 
                                law.
                                    (IV) Qualified business plan.--The 
                                term ``qualified business plan'' means 
                                a business plan which has been approved 
                                by the qualified financial institution 
                                and which meets such requirements as 
                                the Secretary may specify.
                            (v) Qualified rollovers.--The term 
                        ``qualified rollover'' means the complete 
                        distribution of the amounts in an Individual 
                        Development Account and parallel account to 
                        another Individual Development Account and 
                        parallel account established in another 
                        qualified financial institution for the benefit 
                        of the Account owner.
                            (vi) Qualified final distribution.--The 
                        term ``qualified final distribution'' means, in 
                        the case of a deceased Account owner, the 
                        complete distribution of the amounts in the 
                        Individual Development Account and parallel 
                        account directly to the spouse, any dependent, 
                        or other named beneficiary of the deceased.
            (7) Secretary.--The term ``Secretary'' means the Secretary 
        of the Treasury.

SEC. 504. STRUCTURE AND ADMINISTRATION OF QUALIFIED INDIVIDUAL 
              DEVELOPMENT ACCOUNT PROGRAMS.

    (a) Establishment of Qualified Individual Development Account 
Programs.--Any qualified financial institution may apply to the 
Secretary for approval to establish 1 or more qualified individual 
development account programs which meet the requirements of this title 
and for an allocation of the Individual Development Account limitation 
under section 45G(i)(3) of the Internal Revenue Code of 1986 with 
respect to such programs.
    (b) Basic Program Structure.--
            (1) In general.--All qualified individual development 
        account programs shall consist of the following 2 components 
        for each participant:
                    (A) An Individual Development Account to which an 
                eligible individual may contribute cash in accordance 
                with section 505.
                    (B) A parallel account to which all matching funds 
                shall be deposited in accordance with section 506.
            (2) Tailored ida programs.--A qualified financial 
        institution may tailor its qualified individual development 
        account program to allow matching funds to be spent on 1 or 
        more of the categories of qualified expenses.
            (3) No fees may be charged to idas.--A qualified financial 
        institution may not charge any fees to any Individual 
        Development Account or parallel account under a qualified 
        individual development account program.
    (c) Coordination With Public Housing Agency Individual Savings 
Accounts.--Section 3(e)(2) of the United States Housing Act of 1937 (42 
U.S.C. 1437a(e)(2)) is amended by inserting ``or in any Individual 
Development Account established under the Savings for Working Families 
Act of 2003'' after ``subsection''.
    (d) Tax Treatment of Parallel Accounts.--
            (1) In general.--Chapter 77 (relating to miscellaneous 
        provisions) is amended by adding at the end the following new 
        section:

``SEC. 7525. TAX INCENTIVES FOR INDIVIDUAL DEVELOPMENT PARALLEL 
              ACCOUNTS.

    ``For purposes of this title--
            ``(1) any account described in section 504(b)(1)(B) of the 
        Savings for Working Families Act of 2003 shall be exempt from 
        taxation,
            ``(2) except as provided in section 45G, no item of income, 
        expense, basis, gain, or loss with respect to such an account 
        may be taken into account, and
            ``(3) any amount withdrawn from such an account shall not 
        be includible in gross income.''.
            (2) Conforming amendment.--The table of sections for 
        chapter 77 is amended by adding at the end the following new 
        item:

                              ``Sec. 7525. Tax incentives for 
                                        individual development parallel 
                                        accounts.''.
    (e) Coordination of certain expenses.--Section 25A(g)(2) is amended 
by striking ``and'' at the end of subparagraph (C), by striking the 
period at the end of subparagraph (D) and inserting ``, and'', and by 
adding at the end the following new subparagraph:
                    ``(D) a qualified expense distribution with respect 
                to qualified higher education expenses from an 
                Individual Development Account or a parallel account 
                under section 507(a) of the Savings for Working 
                Families Act of 2003.''.

SEC. 505. PROCEDURES FOR OPENING AND MAINTAINING AN INDIVIDUAL 
              DEVELOPMENT ACCOUNT AND QUALIFYING FOR MATCHING FUNDS.

    (a) Opening an Account.--An eligible individual may open an 
Individual Development Account with a qualified financial institution 
upon certification that such individual has never maintained any other 
Individual Development Account (other than an Individual Development 
Account to be terminated by a qualified rollover).
    (b) Required Completion of Financial Education Course.--
            (1) In general.--Before becoming eligible to withdraw funds 
        to pay for qualified expenses, owners of Individual Development 
        Accounts must complete 1 or more financial education courses 
        specified in the qualified individual development account 
        program.
            (2) Standard and applicability of course.--The Secretary, 
        in consultation with representatives of qualified individual 
        development account programs and financial educators, shall not 
        later than January 1, 2004, establish minimum quality standards 
        for the contents of financial education courses and providers 
        of such courses described in paragraph (1) and a protocol to 
        exempt individuals from the requirement under paragraph (1) in 
        the case of hardship, lack of need, the attainment of age 65, 
        or a qualified final distribution.
    (c) Proof of Status as an Eligible Individual.--Federal income tax 
forms for the immediately preceding taxable year and any other evidence 
of eligibility which may be required by a qualified financial 
institution shall be presented to such institution at the time of the 
establishment of the Individual Development Account and in any taxable 
year in which contributions are made to the Account to qualify for 
matching funds under section 506(b)(1)(A).
    (d) Special Rule in the Case of Married Individuals.--For purposes 
of this title, if, with respect to any taxable year, 2 married 
individuals file a Federal joint income tax return, then not more than 
1 of such individuals may be treated as an eligible individual with 
respect to the succeeding taxable year.

SEC. 506. DEPOSITS BY QUALIFIED INDIVIDUAL DEVELOPMENT ACCOUNT 
              PROGRAMS.

    (a) Parallel Accounts.--The qualified financial institution shall 
deposit all matching funds for each Individual Development Account into 
a parallel account at a qualified financial institution.
    (b) Regular Deposits of Matching Funds.--
            (1) In general.--Subject to paragraph (2), the qualified 
        financial institution shall deposit into the parallel account 
        with respect to each eligible individual the following amounts:
                    (A) A dollar-for-dollar match for the first $500 
                contributed by the eligible individual into an 
                Individual Development Account with respect to any 
                taxable year of such individual.
                    (B) Any matching funds provided by State, local, or 
                private sources in accordance with the matching ratio 
                set by those sources.
            (2) Timing of deposits.--A deposit of the amounts described 
        in paragraph (1) shall be made into a parallel account--
                    (A) in the case of amounts described in paragraph 
                (1)(A), not later than 30 days after the end of the 
                calendar quarter during which the contribution 
                described in such paragraph was made, and
                    (B) in the case of amounts described in paragraph 
                (1)(B), not later than 2 business days after such 
                amounts were provided.
            (3) Cross reference.--

                                For allowance of tax credit for 
Individual Development Account subsidies, including matching funds, see 
section 45G of the Internal Revenue Code of 1986.
    (c) Deposit of Matching Funds Into Individual Development Account 
of Individual Who Has Attained Age 65.--In the case of an Individual 
Development Account owner who attains the age of 65, the qualified 
financial institution shall deposit the funds in the parallel account 
with respect to such individual into the Individual Development Account 
of such individual on the later of--
            (1) the day which is the 1-year anniversary of the deposit 
        of such funds in the parallel account, or
            (2) the first business day of the taxable year of such 
        individual following the taxable year in which such individual 
        attained age 65.
    (d) Uniform Accounting Regulations.--To ensure proper recordkeeping 
and determination of the tax credit under section 45G of the Internal 
Revenue Code of 1986, the Secretary shall prescribe regulations with 
respect to accounting for matching funds in the parallel accounts.
    (e) Regular Reporting of Accounts.--Any qualified financial 
institution shall report the balances in any Individual Development 
Account and parallel account of an individual on not less than an 
annual basis to such individual.

SEC. 507. WITHDRAWAL PROCEDURES.

    (a) Withdrawals for Qualified Expenses.--
            (1) In general.--An Individual Development Account owner 
        may withdraw funds in order to pay qualified expense 
        distributions from such individual's--
                    (A) Individual Development Account, but only from 
                funds which have been on deposit in such Account for at 
                least 1 year, and
                    (B) parallel account, but only--
                            (i) from matching funds which have been on 
                        deposit in such parallel account for at least 1 
                        year,
                            (ii) from earnings in such parallel 
                        account, after all matching funds described in 
                        clause (i) have been withdrawn, and
                            (iii) to the extent such withdrawal does 
                        not result in a remaining balance in such 
                        parallel account which is less than the 
                        remaining balance in the Individual Development 
                        Account after such withdrawal.
            (2) Procedure.--Upon receipt of a withdrawal request which 
        meets the requirements of paragraph (1), the qualified 
        financial institution shall directly transfer the funds 
        electronically to the distributees described in section 
        503(6)(A)(ii). If a distributee is not equipped to receive 
        funds electronically, the qualified financial institution may 
        issue such funds by paper check to the distributee.
    (b) Withdrawals for Nonqualified Expenses.--An Individual 
Development Account owner may withdraw any amount of funds from the 
Individual Development Account for purposes other than to pay qualified 
expense distributions, but if, after such withdrawal, the amount in the 
parallel account of such owner (excluding earnings on matching funds) 
exceeds the amount remaining in such Individual Development Account, 
then such owner shall forfeit from the parallel account the lesser of 
such excess or the amount withdrawn.
    (c) Withdrawals From Accounts of Noneligible Individuals.--If the 
individual for whose benefit an Individual Development Account is 
established ceases to be an eligible individual, such account shall 
remain an Individual Development Account, but such individual shall not 
be eligible for any further matching funds under section 506(b)(1)(A) 
for contributions which are made to the Account during any taxable year 
when such individual is not an eligible individual.
    (d) Effect of Pledging Account as Security.--If, during any taxable 
year of the individual for whose benefit an Individual Development 
Account is established, that individual uses the Account, the 
individual's parallel account, or any portion thereof as security for a 
loan, the portion so used shall be treated as a withdrawal of such 
portion from the Individual Development Account for purposes other than 
to pay qualified expenses.

SEC. 508. CERTIFICATION AND TERMINATION OF QUALIFIED INDIVIDUAL 
              DEVELOPMENT ACCOUNT PROGRAMS.

    (a) Certification Procedures.--Upon establishing a qualified 
individual development account program under section 504, a qualified 
financial institution shall certify to the Secretary at such time and 
in such manner as may be prescribed by the Secretary and accompanied by 
any documentation required by the Secretary, that--
            (1) the accounts described in subparagraphs (A) and (B) of 
        section 504(b)(1) are operating pursuant to all the provisions 
        of this title, and
            (2) the qualified financial institution agrees to implement 
        an information system necessary to monitor the cost and 
        outcomes of the qualified individual development account 
        program.
    (b) Authority To Terminate Qualified IDA Program.--If the Secretary 
determines that a qualified financial institution under this title is 
not operating a qualified individual development account program in 
accordance with the requirements of this title (and has not implemented 
any corrective recommendations directed by the Secretary), the 
Secretary shall terminate such institution's authority to conduct the 
program. If the Secretary is unable to identify a qualified financial 
institution to assume the authority to conduct such program, then any 
funds in a parallel account established for the benefit of any 
individual under such program shall be deposited into the Individual 
Development Account of such individual as of the first day of such 
termination.

SEC. 509. REPORTING, MONITORING, AND EVALUATION.

    (a) Responsibilities of Qualified Financial Institutions.--
            (1) In general.--Each qualified financial institution that 
        operates a qualified individual development account program 
        under section 504 shall report annually to the Secretary within 
        90 days after the end of each calendar year on--
                    (A) the number of individuals making contributions 
                into Individual Development Accounts and the amounts 
                contributed,
                    (B) the amounts contributed into Individual 
                Development Accounts by eligible individuals and the 
                amounts deposited into parallel accounts for matching 
                funds,
                    (C) the amounts withdrawn from Individual 
                Development Accounts and parallel accounts, and the 
                purposes for which such amounts were withdrawn,
                    (D) the balances remaining in Individual 
                Development Accounts and parallel accounts, and
                    (E) such other information needed to help the 
                Secretary monitor the effectiveness of the qualified 
                individual development account program (provided in a 
                non-individually-identifiable manner).
            (2) Additional reporting requirements.--Each qualified 
        financial institution that operates a qualified individual 
        development account program under section 504 shall report at 
        such time and in such manner as the Secretary may prescribe any 
        additional information that the Secretary requires to be 
        provided for purposes of administering and supervising the 
        qualified individual development account program. This 
        additional data may include, without limitation, identifying 
        information about Individual Development Account owners, their 
        Accounts, additions to the Accounts, and withdrawals from the 
        Accounts.
    (b) Responsibilities of the Secretary.--
            (1) Monitoring protocol.--Not later than 12 months after 
        the date of the enactment of this Act, the Secretary, in 
        consultation with the Secretary of Health and Human Services, 
        shall develop and implement a protocol and process to monitor 
        the cost and outcomes of the qualified individual development 
        account programs established under section 504.
            (2) Annual reports.--For each year after 2004, the 
        Secretary shall submit a progress report to Congress on the 
        status of such qualified individual development account 
        programs. Such report shall, to the extent data are available, 
        include from a representative sample of qualified individual 
        development account programs information on--
                    (A) the characteristics of participants, including 
                age, gender, race or ethnicity, marital status, number 
                of children, employment status, and monthly income,
                    (B) deposits, withdrawals, balances, uses of 
                Individual Development Accounts, and participant 
                characteristics,
                    (C) the characteristics of qualified individual 
                development account programs, including match rate, 
                economic education requirements, permissible uses of 
                accounts, staffing of programs in full time employees, 
                and the total costs of programs, and
                    (D) process information on program implementation 
                and administration, especially on problems encountered 
                and how problems were solved.
            (3) Reauthorization report on cost and outcomes of idas.--
                    (A) In general.--Not later than July 1, 2008, the 
                Secretary of the Treasury shall submit a report to 
                Congress and the chairmen and ranking members of the 
                Committee on Finance, the Committee on Banking, 
                Housing, and Urban Affairs, and the Committee on 
                Health, Education, Labor, and Pensions of the Senate 
                and the Committee on Ways and Means, the Committee on 
                Banking and Financial Services, and the Committee on 
                Education and the Workforce of the House of 
                Representatives, in which the Secretary shall--
                            (i) summarize the previously submitted 
                        annual reports required under paragraph (2),
                            (ii) from a representative sample of 
                        qualified individual development account 
                        programs, include an analysis of--
                                    (I) the economic, social, and 
                                behavioral outcomes,
                                    (II) the changes in savings rates, 
                                asset holdings, and household debt, and 
                                overall changes in economic stability,
                                    (III) the changes in outlooks, 
                                attitudes, and behavior regarding 
                                savings strategies, investment, 
                                education, and family,
                                    (IV) the integration into the 
                                financial mainstream, including 
                                decreased reliance on alternative 
                                financial services, and increase in 
                                acquisition of mainstream financial 
                                products, and
                                    (V) the involvement in civic 
                                affairs, including neighborhood schools 
                                and associations,
                        associated with participation in qualified 
                        individual development account programs,
                            (iii) from a representative sample of 
                        qualified individual development account 
                        programs, include a comparison of outcomes 
                        associated with such programs with outcomes 
                        associated with other Federal Government social 
                        and economic development programs, including 
                        asset building programs, and
                            (iv) make recommendations regarding the 
                        reauthorization of the qualified individual 
                        development account programs, including--
                                    (I) recommendations regarding 
                                reforms that will improve the cost and 
                                outcomes of the such programs, 
                                including the ability to help low 
                                income families save and accumulate 
                                productive assets,
                                    (II) recommendations regarding the 
                                appropriate levels of subsidies to 
                                provide effective incentives to 
                                financial institutions and Account 
                                owners under such programs, and
                                    (III) recommendations regarding how 
                                such programs should be integrated into 
                                other Federal poverty reduction, asset 
                                building, and community development 
                                policies and programs.
                    (B) Authorization.--There is authorized to be 
                appropriated $2,500,000, for carrying out the purposes 
                of this paragraph.
            (4) Use of accounts in rural areas encouraged.--The 
        Secretary shall develop methods to encourage the use of 
        Individual Development Accounts in rural areas.

SEC. 510. AUTHORIZATION OF APPROPRIATIONS.

    There is authorized to be appropriated to the Secretary $1,000,000 
for fiscal year 2004 and for each fiscal year through 2012, for the 
purposes of implementing this title, including the reporting, 
monitoring, and evaluation required under section 509, to remain 
available until expended.

SEC. 511. MATCHING FUNDS FOR INDIVIDUAL DEVELOPMENT ACCOUNTS PROVIDED 
              THROUGH A TAX CREDIT FOR QUALIFIED FINANCIAL 
              INSTITUTIONS.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
(relating to business related credits) is amended by adding at the end 
the following new section:

``SEC. 45G. INDIVIDUAL DEVELOPMENT ACCOUNT INVESTMENT CREDIT.

    ``(a) Determination of Amount.--For purposes of section 38, the 
individual development account investment credit determined under this 
section with respect to any eligible entity for any taxable year is an 
amount equal to the individual development account investment provided 
by such eligible entity during the taxable year under an individual 
development account program established under section 504 of the 
Savings for Working Families Act of 2003.
    ``(b) Applicable Tax.--For the purposes of this section, the term 
`applicable tax' means the excess (if any) of--
            ``(1) the tax imposed under this chapter (other than the 
        taxes imposed under the provisions described in subparagraphs 
        (C) through (Q) of section 26(b)(2)), over
            ``(2) the credits allowable under subpart B (other than 
        this section) and subpart D of this part.
    ``(c) Individual Development Account Investment.--For purposes of 
this section, the term `individual development account investment' 
means, with respect to an individual development account program in any 
taxable year, an amount equal to the sum of--
            ``(1) the aggregate amount of dollar-for-dollar matches 
        under such program under section 506(b)(1)(A) of the Savings 
        for Working Families Act of 2003 for such taxable year, plus
            ``(2) $50 with respect to each Individual Development 
        Account maintained--
                    ``(A) as of the end of such taxable year, but only 
                if such taxable year is within the 7-taxable-year 
                period beginning with the taxable year in which such 
                Account is opened, and
                    ``(B) with a balance of not less than $100 (other 
                than the taxable year in which such Account is opened).
    ``(d) Eligible Entity.--For purposes of this section, except as 
provided in regulations, the term `eligible entity' means a qualified 
financial institution.
    ``(e) Other Definitions.--For purposes of this section, any term 
used in this section and also in the Savings for Working Families Act 
of 2003 shall have the meaning given such term by such Act.
    ``(f) Denial of Double Benefit.--
            ``(1) In general.--No deduction or credit (other than under 
        this section) shall be allowed under this chapter with respect 
        to any expense which--
                    ``(A) is taken into account under subsection 
                (c)(1)(A) in determining the credit under this section, 
                or
                    ``(B) is attributable to the maintenance of an 
                Individual Development Account.
            ``(2) Determination of amount.--Solely for purposes of 
        paragraph (1)(B), the amount attributable to the maintenance of 
        an Individual Development Account shall be deemed to be the 
        dollar amount of the credit allowed under subsection (c)(l)(B) 
        for each taxable year such Individual Development Account is 
        maintained.
    ``(g) Credit May Be Transferred.--
            ``(1) In general.--An eligible entity may transfer any 
        credit allowable to the eligible entity under subsection (a) to 
        any person other than to another eligible entity which is 
        exempt from tax under this title. The determination as to 
        whether a credit is allowable shall be made without regard to 
        the tax-exempt status of the eligible entity.
            ``(2) Consent required for revocation.--Any transfer under 
        paragraph (1) may be revoked only with the consent of the 
        Secretary.
    ``(h) Regulations.--The Secretary may prescribe such regulations as 
may be necessary or appropriate to carry out this section, including
            ``(1) such regulations as necessary to insure that any 
        credit described in subsection (g)(1) is claimed once and not 
        retransferred by a transferee, and
            ``(2) regulations providing for a recapture of the credit 
        allowed under this section (notwithstanding any termination 
        date described in subsection (i)) in cases where there is a 
        forfeiture under section 507(b) of the Savings for Working 
        Families Act of 2003 in a subsequent taxable year of any amount 
        which was taken into account in determining the amount of such 
        credit.
    ``(i) Application of Section.--
            ``(1) In general.--This section shall apply to any 
        expenditure made in any taxable year ending after December 31, 
        2004, and beginning on or before January 1, 2012, with respect 
        to any Individual Development Account which--
                    ``(A) is opened before January 1, 2012, and
                    ``(B) as determined by the Secretary, when added to 
                all of the previously opened Individual Development 
                Accounts, does not exceed--
                            ``(i) 100,000 Accounts if opened after 
                        December 31, 2004, and before January 1, 2007,
                            ``(ii) an additional 100,000 Accounts if 
                        opened after December 31, 2006, and before 
                        January 1, 2009, but only if, except as 
                        provided in paragraph (4), the total number of 
                        Accounts described in clause (i) are opened and 
                        the Secretary determines that such Accounts are 
                        being reasonably and responsibly administered, 
                        and
                            ``(iii) an additional 100,000 Accounts if 
                        opened after December 31, 2008, and before 
                        January 1, 2012, but only if the total number 
                        of Accounts described in clauses (i) and (ii) 
                        are opened and the Secretary makes a 
                        determination described in paragraph (2).
        Notwithstanding the preceding sentence, this section shall 
        apply to amounts which are described in subsection (c)(1)(A) 
        and which are timely deposited into a parallel account during 
        the 30-day period following the end of last taxable year 
beginning before January 1, 2012.
            ``(2) Determination with respect to third group of 
        accounts.--A determination is described in this paragraph if 
        the Secretary determines that--
                    ``(A) substantially all of the previously opened 
                Accounts have been reasonably and responsibly 
                administered prior to the date of the determination,
                    ``(B) the individual development account programs 
                have increased net savings of participants in the 
                programs,
                    ``(C) participants in the individual development 
                account programs have increased Federal income tax 
                liability and decreased utilization of Federal 
                assistance programs relative to similarly situated 
                individuals that did not participate in the individual 
                development account programs, and
                    ``(D) the sum of the estimated increased Federal 
                tax liability and reduction of Federal assistance 
                program benefits to participants in the individual 
                development account programs is greater than the cost 
                of the individual development account programs to the 
                Federal government.
            ``(3) Determination of limitation.--The limitation on the 
        number of Individual Development Accounts under paragraph 
        (1)(B) shall be allocated by the Secretary among qualified 
        individual development account programs selected by the 
        Secretary and, in the case of the limitation under clause (iii) 
        of such paragraph, shall be equally divided among the States.
            ``(4) Special rule if smaller number of accounts are 
        opened.--For purposes of paragraph (1)(B)(ii)--
                            ``(i) In general.--If less than 100,000 
                        Accounts are opened before January 1, 2007, 
                        such paragraph shall be applied by substituting 
                        ``applicable number of Accounts' for `100,000 
                        Accounts'.
                            ``(ii) Applicable number.--For purposes of 
                        clause (i), the applicable number equals the 
                        lesser of--
                                    ``(I) 75,000, or
                                    ``(II) 3 times the number of 
                                Accounts opened before January 1, 
                                2007.''.
    (b) Credit Treated as Business Credit.--Section 38(b) (relating to 
current year business credit) is amended by striking ``plus'' at the 
end of paragraph (14), by striking the period at the end of paragraph 
(15) and inserting ``, plus'', and by adding at the end the following 
new paragraph:
            ``(16) the individual development account investment credit 
        determined under section 45G(a).''.
    (c) No Carrybacks.--Subsection (d) of section 39 (relating to 
carryback and carryforward of unused credits) is amended by adding at 
the end the following:
            ``(11) No carryback of section 45g credit before effective 
        date.--No portion of the unused business credit for any taxable 
        year which is attributable to the individual development 
        account investment credit determined under section 45G may be 
        carried back to a taxable year ending before January 1, 
        2004.''.
    (d) Conforming Amendment.--The table of sections for subpart C of 
part IV of subchapter A of chapter 1 is amended by adding at the end 
the following new item:

                              ``Sec. 45G. Individual development 
                                        account investment credit.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after December 31, 2004.

SEC. 512. ACCOUNT FUNDS DISREGARDED FOR PURPOSES OF CERTAIN MEANS-
              TESTED FEDERAL PROGRAMS.

    Notwithstanding any other provision of Federal law (other than the 
Internal Revenue Code of 1986) that requires consideration of 1 or more 
financial circumstances of an individual, for the purpose of 
determining eligibility to receive, or the amount of, any assistance or 
benefit authorized by such provision to be provided to or for the 
benefit of such individual, any amount (including earnings thereon) in 
any Individual Development Account of such individual and any matching 
deposit made on behalf of such individual (including earnings thereon) 
in any parallel account shall be disregarded for such purpose with 
respect to any period during which such individual maintains or makes 
contributions into such Individual Development Account.

              TITLE VI--MANAGEMENT OF EXEMPT ORGANIZATIONS

SEC. 601. AUTHORIZATION OF APPROPRIATIONS.

    (a) In General.--There is authorized to be appropriated to the 
Secretary of the Treasury $80,000,000 for each fiscal year to carry out 
the administration of exempt organizations by the Internal Revenue 
Service.
    (b) Implementation of Section 527.--There is authorized to be 
appropriated to the Secretary of the Treasury $3,000,000 to carry out 
the provisions of Public Laws 106-230 and 107-276 relating to section 
527 of the Internal Revenue Code of 1986.

                     TITLE VII--REVENUE PROVISIONS

        Subtitle A--Provisions Designed To Curtail Tax Shelters

SEC. 701. CLARIFICATION OF ECONOMIC SUBSTANCE DOCTRINE.

    (a) In General.--Section 7701 is amended by redesignating 
subsection (m) as subsection (n) and by inserting after subsection (l) 
the following new subsection:
    ``(m) Clarification of Economic Substance Doctrine; Etc.--
            ``(1) General rules.--
                    ``(A) In general.--In applying the economic 
                substance doctrine, the determination of whether a 
                transaction has economic substance shall be made as 
                provided in this paragraph.
                    ``(B) Definition of economic substance.--For 
                purposes of subparagraph (A)--
                            ``(i) In general.--A transaction has 
                        economic substance only if--
                                    ``(I) the transaction changes in a 
                                meaningful way (apart from Federal tax 
effects and, if there is any Federal tax effects, also apart from any 
foreign, State, or local tax effects) the taxpayer's economic position, 
and
                                    ``(II) the taxpayer has a 
                                substantial nontax purpose for entering 
                                into such transaction and the 
                                transaction is a reasonable means of 
                                accomplishing such purpose.
                            ``(ii) Special rule where taxpayer relies 
                        on profit potential.--A transaction shall not 
                        be treated as having economic substance by 
                        reason of having a potential for profit 
                        unless--
                                    ``(I) the present value of the 
                                reasonably expected pre-tax profit from 
                                the transaction is substantial in 
                                relation to the present value of the 
                                expected net tax benefits that would be 
                                allowed if the transaction were 
                                respected, and
                                    ``(II) the reasonably expected pre-
                                tax profit from the transaction exceeds 
                                a risk-free rate of return.
                    ``(C) Treatment of fees and foreign taxes.--Fees 
                and other transaction expenses and foreign taxes shall 
                be taken into account as expenses in determining pre-
                tax profit under subparagraph (B)(ii).
            ``(2) Special rules for transactions with tax-indifferent 
        parties.--
                    ``(A) Special rules for financing transactions.--
                The form of a transaction which is in substance the 
                borrowing of money or the acquisition of financial 
                capital directly or indirectly from a tax-indifferent 
                party shall not be respected if the present value of 
                the deductions to be claimed with respect to the 
                transaction is substantially in excess of the present 
                value of the anticipated economic returns of the person 
                lending the money or providing the financial capital. A 
                public offering shall be treated as a borrowing, or an 
                acquisition of financial capital, from a tax-
                indifferent party if it is reasonably expected that at 
                least 50 percent of the offering will be placed with 
                tax-indifferent parties.
                    ``(B) Artificial income shifting and basis 
                adjustments.--The form of a transaction with a tax-
                indifferent party shall not be respected if--
                            ``(i) it results in an allocation of income 
                        or gain to the tax-indifferent party in excess 
                        of such party's economic income or gain, or
                            ``(ii) it results in a basis adjustment or 
                        shifting of basis on account of overstating the 
                        income or gain of the tax-indifferent party.
            ``(3) Definitions and special rules.--For purposes of this 
        subsection--
                    ``(A) Economic substance doctrine.--The term 
                `economic substance doctrine' means the common law 
                doctrine under which tax benefits under subtitle A with 
                respect to a transaction are not allowable if the 
                transaction does not have economic substance or lacks a 
                business purpose.
                    ``(B) Tax-indifferent party.--The term `tax-
                indifferent party' means any person or entity not 
                subject to tax imposed by subtitle A. A person shall be 
                treated as a tax-indifferent party with respect to a 
                transaction if the items taken into account with 
                respect to the transaction have no substantial impact 
                on such person's liability under subtitle A.
                    ``(C) Exception for personal transactions of 
                individuals.--In the case of an individual, this 
                subsection shall apply only to transactions entered 
                into in connection with a trade or business or an 
                activity engaged in for the production of income.
                    ``(D) Treatment of lessors.--In applying subclause 
                (I) of paragraph (1)(B)(ii) to the lessor of tangible 
                property subject to a lease, the expected net tax 
                benefits shall not include the benefits of 
                depreciation, or any tax credit, with respect to the 
                leased property and subclause (II) of paragraph 
                (1)(B)(ii) shall be disregarded in determining whether 
                any of such benefits are allowable.
            ``(4) Other common law doctrines not affected.--Except as 
        specifically provided in this subsection, the provisions of 
        this subsection shall not be construed as altering or 
        supplanting any other rule of law, and the requirements of this 
        subsection shall be construed as being in addition to any such 
        other rule of law.
            ``(5) Regulations.--The Secretary shall prescribe such 
        regulations as may be necessary or appropriate to carry out the 
        purposes of this subsection. Such regulations may include 
        exemptions from the application of this subsection.''
    (b) Effective Date.--The amendments made by this section shall 
apply to transactions entered into after February 15, 2004.

SEC. 702. PENALTY FOR FAILING TO DISCLOSE REPORTABLE TRANSACTION.

    (a) In General.--Part I of subchapter B of chapter 68 (relating to 
assessable penalties) is amended by inserting after section 6707 the 
following new section:

``SEC. 6707A. PENALTY FOR FAILURE TO INCLUDE REPORTABLE TRANSACTION 
              INFORMATION WITH RETURN OR STATEMENT.

    ``(a) Imposition of Penalty.--Any person who fails to include on 
any return or statement any information with respect to a reportable 
transaction which is required under section 6011 to be included with 
such return or statement shall pay a penalty in the amount determined 
under subsection (b).
    ``(b) Amount of Penalty.--
            ``(1) In general.--Except as provided in paragraphs (2) and 
        (3), the amount of the penalty under subsection (a) shall be 
        $50,000.
            ``(2) Listed transaction.--The amount of the penalty under 
        subsection (a) with respect to a listed transaction shall be 
        $100,000.
            ``(3) Increase in penalty for large entities and high net 
        worth individuals.--
                    ``(A) In general.--In the case of a failure under 
                subsection (a) by--
                            ``(i) a large entity, or
                            ``(ii) a high net worth individual,
                the penalty under paragraph (1) or (2) shall be twice 
                the amount determined without regard to this paragraph.
                    ``(B) Large entity.--For purposes of subparagraph 
                (A), the term `large entity' means, with respect to any 
                taxable year, a person (other than a natural person) 
                with gross receipts in excess of $10,000,000 for the 
                taxable year in which the reportable transaction occurs 
                or the preceding taxable year. Rules similar to the 
                rules of paragraph (2) and subparagraphs (B), (C), and 
                (D) of paragraph (3) of section 448(c) shall apply for 
                purposes of this subparagraph.
                    ``(C) High net worth individual.--The term `high 
                net worth individual' means, with respect to a 
                transaction, a natural person whose net worth exceeds 
                $2,000,000 immediately before the transaction.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Reportable transaction.--The term `reportable 
        transaction' means any transaction with respect to which 
        information is required to be included with a return or 
        statement because, as determined under regulations prescribed 
        under section 6011, such transaction is of a type which the 
        Secretary determines as having a potential for tax avoidance or 
        evasion.
            ``(2) Listed transaction.--Except as provided in 
        regulations, the term `listed transaction' means a reportable 
        transaction which is the same as, or substantially similar to, 
        a transaction specifically identified by the Secretary as a tax 
        avoidance transaction for purposes of section 6011.
    ``(d) Authority To Rescind Penalty.--
            ``(1) In general.--The Commissioner of Internal Revenue may 
        rescind all or any portion of any penalty imposed by this 
        section with respect to any violation if--
                    ``(A) the violation is with respect to a reportable 
                transaction other than a listed transaction,
                    ``(B) the person on whom the penalty is imposed has 
                a history of complying with the requirements of this 
                title,
                    ``(C) it is shown that the violation is due to an 
                unintentional mistake of fact;
                    ``(D) imposing the penalty would be against equity 
                and good conscience, and
                    ``(E) rescinding the penalty would promote 
                compliance with the requirements of this title and 
                effective tax administration.
            ``(2) Discretion.--The exercise of authority under 
        paragraph (1) shall be at the sole discretion of the 
        Commissioner and may be delegated only to the head of the 
        Office of Tax Shelter Analysis. The Commissioner, in the 
        Commissioner's sole discretion, may establish a procedure to 
        determine if a penalty should be referred to the Commissioner 
        or the head of such Office for a determination under paragraph 
        (1).
            ``(3) No appeal.--Notwithstanding any other provision of 
        law, any determination under this subsection may not be 
        reviewed in any administrative or judicial proceeding.
            ``(4) Records.--If a penalty is rescinded under paragraph 
        (1), the Commissioner shall place in the file in the Office of 
        the Commissioner the opinion of the Commissioner or the head of 
        the Office of Tax Shelter Analysis with respect to the 
        determination, including--
                    ``(A) the facts and circumstances of the 
                transaction,
                    ``(B) the reasons for the rescission, and
                    ``(C) the amount of the penalty rescinded.
            ``(5) Report.--The Commissioner shall each year report to 
        the Committee on Ways and Means of the House of Representatives 
        and the Committee on Finance of the Senate--
                    ``(A) a summary of the total number and aggregate 
                amount of penalties imposed, and rescinded, under this 
                section, and
                    ``(B) a description of each penalty rescinded under 
                this subsection and the reasons therefor.
    ``(e) Penalty Reported to SEC.--In the case of a person--
            ``(1) which is required to file periodic reports under 
        section 13 or 15(d) of the Securities Exchange Act of 1934 or 
        is required to be consolidated with another person for purposes 
        of such reports, and
            ``(2) which--
                    ``(A) is required to pay a penalty under this 
                section with respect to a listed transaction,
                    ``(B) is required to pay a penalty under section 
                6662A with respect to any reportable transaction at a 
                rate prescribed under section 6662A(c), or
                    ``(C) is required to pay a penalty under section 
                6662B with respect to any noneconomic substance 
                transaction,
the requirement to pay such penalty shall be disclosed in such reports 
filed by such person for such periods as the Secretary shall specify. 
Failure to make a disclosure in accordance with the preceding sentence 
shall be treated as a failure to which the penalty under subsection 
(b)(2) applies.
    ``(f) Coordination With Other Penalties.--The penalty imposed by 
this section is in addition to any penalty imposed under this title.''
    (b) Conforming Amendment.--The table of sections for part I of 
subchapter B of chapter 68 is amended by inserting after the item 
relating to section 6707 the following:

                              ``Sec. 6707A. Penalty for failure to 
                                        include reportable transaction 
                                        information with return or 
                                        statement.''
    (c) Effective Date.--The amendments made by this section shall 
apply to returns and statements the due date for which is after the 
date of the enactment of this Act.

SEC. 703. ACCURACY-RELATED PENALTY FOR LISTED TRANSACTIONS AND OTHER 
              REPORTABLE TRANSACTIONS HAVING A SIGNIFICANT TAX 
              AVOIDANCE PURPOSE.

    (a) In General.--Subchapter A of chapter 68 is amended by inserting 
after section 6662 the following new section:

``SEC. 6662A. IMPOSITION OF ACCURACY-RELATED PENALTY ON UNDERSTATEMENTS 
              WITH RESPECT TO REPORTABLE TRANSACTIONS.

    ``(a) Imposition of Penalty.--If a taxpayer has a reportable 
transaction understatement for any taxable year, there shall be added 
to the tax an amount equal to 20 percent of the amount of such 
understatement.
    ``(b) Reportable Transaction Understatement.--For purposes of this 
section--
            ``(1) In general.--The term `reportable transaction 
        understatement' means the sum of--
                    ``(A) the product of--
                            ``(i) the amount of the increase (if any) 
                        in taxable income which results from a 
                        difference between the proper tax treatment of 
                        an item to which this section applies and the 
                        taxpayer's treatment of such item (as shown on 
                        the taxpayer's return of tax), and
                            ``(ii) the highest rate of tax imposed by 
                        section 1 (section 11 in the case of a taxpayer 
                        which is a corporation), and
                    ``(B) the amount of the decrease (if any) in the 
                aggregate amount of credits determined under subtitle A 
                which results from a difference between the taxpayer's 
                treatment of an item to which this section applies (as 
                shown on the taxpayer's return of tax) and the proper 
                tax treatment of such item.
        For purposes of subparagraph (A), any reduction of the excess 
        of deductions allowed for the taxable year over gross income 
        for such year, and any reduction in the amount of capital 
        losses which would (without regard to section 1211) be allowed 
        for such year, shall be treated as an increase in taxable 
        income.
            ``(2) Items to which section applies.--This section shall 
        apply to any item which is attributable to--
                    ``(A) any listed transaction, and
                    ``(B) any reportable transaction (other than a 
                listed transaction) if a significant purpose of such 
                transaction is the avoidance or evasion of Federal 
                income tax.
    ``(c) Higher Penalty for Nondisclosed Listed and Other Avoidance 
Transactions.--
            ``(1) In general.--Subsection (a) shall be applied by 
        substituting `30 percent' for `20 percent' with respect to the 
        portion of any reportable transaction understatement with 
        respect to which the requirement of section 6664(d)(2)(A) is 
        not met.
            ``(2) Rules applicable to compromise of penalty.--
                    ``(A) In general.--If the 1st letter of proposed 
                deficiency which allows the taxpayer an opportunity for 
                administrative review in the Internal Revenue Service 
                Office of Appeals has been sent with respect to a 
                penalty to which paragraph (1) applies, only the 
                Commissioner of Internal Revenue may compromise all or 
                any portion of such penalty.
                    ``(B) Applicable rules.--The rules of paragraphs 
                (2), (3), (4), and (5) of section 6707A(d) shall apply 
                for purposes of subparagraph (A).
    ``(d) Definitions of Reportable and Listed Transactions.--For 
purposes of this section, the terms `reportable transaction' and 
`listed transaction' have the respective meanings given to such terms 
by section 6707A(c).
    ``(e) Special Rules.--
            ``(1) Coordination with penalties, etc., on other 
        understatements.--In the case of an understatement (as defined 
        in section 6662(d)(2))--
                    ``(A) the amount of such understatement (determined 
                without regard to this paragraph) shall be increased by 
                the aggregate amount of reportable transaction 
                understatements and noneconomic substance transaction 
                understatements for purposes of determining whether 
                such understatement is a substantial understatement 
                under section 6662(d)(1), and
                    ``(B) the addition to tax under section 6662(a) 
                shall apply only to the excess of the amount of the 
                substantial understatement (if any) after the 
                application of subparagraph (A) over the aggregate 
                amount of reportable transaction understatements and 
                noneconomic substance transaction understatements.
            ``(2) Coordination with other penalties.--
                    ``(A) Application of fraud penalty.--References to 
                an underpayment in section 6663 shall be treated as 
                including references to a reportable transaction 
                understatement and a noneconomic substance transaction 
                understatement.
                    ``(B) No double penalty.--This section shall not 
                apply to any portion of an understatement on which a 
                penalty is imposed under section 6662B or 6663.
            ``(3) Special rule for amended returns.--Except as provided 
        in regulations, in no event shall any tax treatment included 
        with an amendment or supplement to a return of tax be taken 
        into account in determining the amount of any reportable 
transaction understatement or noneconomic substance transaction 
understatement if the amendment or supplement is filed after the 
earlier of the date the taxpayer is first contacted by the Secretary 
regarding the examination of the return or such other date as is 
specified by the Secretary.
                    ``(4) Noneconomic substance transaction 
                understatement.--For purposes of this subsection, the 
                term `noneconomic substance transaction understatement' 
                has the meaning given such term by section 6662B(c).
                    ``(5) Cross reference.--

                                ``For reporting of section 6662A(c) 
penalty to the Securities and Exchange Commission, see section 
6707A(e).''
    (b) Determination of Other Understatements.--Subparagraph (A) of 
section 6662(d)(2) is amended by adding at the end the following flush 
sentence:
                ``The excess under the preceding sentence shall be 
                determined without regard to items to which section 
                6662A applies and without regard to items with respect 
                to which a penalty is imposed by section 6662B.''
(c) Reasonable Cause Exception.--
            (1) In general.--Section 6664 is amended by adding at the 
        end the following new subsection:
    ``(d) Reasonable Cause Exception for Reportable Transaction 
Understatements.--
            ``(1) In general.--No penalty shall be imposed under 
        section 6662A with respect to any portion of a reportable 
        transaction understatement if it is shown that there was a 
        reasonable cause for such portion and that the taxpayer acted 
        in good faith with respect to such portion.
            ``(2) Special rules.--Paragraph (1) shall not apply to any 
        reportable transaction understatement unless--
                    ``(A) the relevant facts affecting the tax 
                treatment of the item are adequately disclosed in 
                accordance with the regulations prescribed under 
                section 6011,
                    ``(B) there is or was substantial authority for 
                such treatment, and
                    ``(C) the taxpayer reasonably believed that such 
                treatment was more likely than not the proper 
                treatment.
        A taxpayer failing to adequately disclose in accordance with 
        section 6011 shall be treated as meeting the requirements of 
        subparagraph (A) if the penalty for such failure was rescinded 
        under section 6707A(d).
            ``(3) Rules relating to reasonable belief.--For purposes of 
        paragraph (2)(C)--
                    ``(A) In general.--A taxpayer shall be treated as 
                having a reasonable belief with respect to the tax 
                treatment of an item only if such belief--
                            ``(i) is based on the facts and law that 
                        exist at the time the return of tax which 
                        includes such tax treatment is filed, and
                            ``(ii) relates solely to the taxpayer's 
                        chances of success on the merits of such 
                        treatment and does not take into account the 
                        possibility that a return will not be audited, 
                        such treatment will not be raised on audit, or 
                        such treatment will be resolved through 
                        settlement if it is raised.
                    ``(B) Certain opinions may not be relied upon.--
                            ``(i) In general.--An opinion of a tax 
                        advisor may not be relied upon to establish the 
                        reasonable belief of a taxpayer if--
                                    ``(I) the tax advisor is described 
                                in clause (ii), or
                                    ``(II) the opinion is described in 
                                clause (iii).
                            ``(ii) Disqualified tax advisors.--A tax 
                        advisor is described in this clause if the tax 
                        advisor--
                                    ``(I) is a material advisor (within 
                                the meaning of section 6111(b)(1)) who 
                                participates in the organization, 
                                management, promotion, or sale of the 
                                transaction or who is related (within 
                                the meaning of section 267(b) or 
                                707(b)(1)) to any person who so 
                                participates,
                                    ``(II) is compensated directly or 
                                indirectly by a material advisor with 
                                respect to the transaction,
                                    ``(III) has a fee arrangement with 
                                respect to the transaction which is 
                                contingent on all or part of the 
                                intended tax benefits from the 
                                transaction being sustained, or
                                    ``(IV) as determined under 
                                regulations prescribed by the 
                                Secretary, has a continuing financial 
                                interest with respect to the 
                                transaction.
                            ``(iii) Disqualified opinions.--For 
                        purposes of clause (i), an opinion is 
                        disqualified if the opinion--
                                    ``(I) is based on unreasonable 
                                factual or legal assumptions (including 
                                assumptions as to future events),
                                    ``(II) unreasonably relies on 
                                representations, statements, findings, 
                                or agreements of the taxpayer or any 
                                other person,
                                    ``(III) does not identify and 
                                consider all relevant facts, or
                                    ``(IV) fails to meet any other 
                                requirement as the Secretary may 
                                prescribe.''
            (2) Conforming amendment.--The heading for subsection (c) 
        of section 6664 is amended by inserting ``for Underpayments'' 
        after ``Exception''.
    (d) Conforming Amendments.--
            (1) Subparagraph (C) of section 461(i)(3) is amended by 
        striking ``section 6662(d)(2)(C)(iii)'' and inserting ``section 
        1274(b)(3)(C)''.
            (2) Paragraph (3) of section 1274(b) is amended--
                    (A) by striking ``(as defined in section 
                6662(d)(2)(C)(iii))'' in subparagraph (B)(i), and
                    (B) by adding at the end the following new 
                subparagraph:
                    ``(C) Tax shelter.--For purposes of subparagraph 
                (B), the term `tax shelter' means--
                            ``(i) a partnership or other entity,
                            ``(ii) any investment plan or arrangement, 
                        or
                            ``(iii) any other plan or arrangement,
                if a significant purpose of such partnership, entity, 
                plan, or arrangement is the avoidance or evasion of 
                Federal income tax.''
            (3) Section 6662(d)(2) is amended by striking subparagraphs 
        (C) and (D).
            (4) Section 6664(c)(1) is amended by striking ``this part'' 
        and inserting ``section 6662 or 6663''.
            (5) Subsection (b) of section 7525 is amended by striking 
        ``section 6662(d)(2)(C)(iii)'' and inserting ``section 
        1274(b)(3)(C)''.
            (6)(A) The heading for section 6662 is amended to read as 
        follows:

``SEC. 6662. IMPOSITION OF ACCURACY-RELATED PENALTY ON UNDERPAYMENTS.''

            (B) The table of sections for part II of subchapter A of 
        chapter 68 is amended by striking the item relating to section 
        6662 and inserting the following new items:

                              ``Sec. 6662. Imposition of accuracy-
                                        related penalty on 
                                        underpayments.
                              ``Sec. 6662A. Imposition of accuracy-
                                        related penalty on 
                                        understatements with respect to 
                                        reportable transactions.''
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after the date of the enactment of this 
Act.

SEC. 704. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO TRANSACTIONS 
              LACKING ECONOMIC SUBSTANCE, ETC.

    (a) In General.--Subchapter A of chapter 68 is amended by inserting 
after section 6662A the following new section:

``SEC. 6662B. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO TRANSACTIONS 
              LACKING ECONOMIC SUBSTANCE, ETC.

    ``(a) Imposition of Penalty.--If a taxpayer has an noneconomic 
substance transaction understatement for any taxable year, there shall 
be added to the tax an amount equal to 40 percent of the amount of such 
understatement.
    ``(b) Reduction of Penalty for Disclosed Transactions.--Subsection 
(a) shall be applied by substituting `20 percent' for `40 percent' with 
respect to the portion of any noneconomic substance transaction 
understatement with respect to which the relevant facts affecting the 
tax treatment of the item are adequately disclosed in the return or a 
statement attached to the return.
    ``(c) Noneconomic Substance Transaction Understatement.--For 
purposes of this section--
            ``(1) In general.--The term `noneconomic substance 
        transaction understatement' means any amount which would be an 
        understatement under section 6662A(b)(1) if section 6662A were 
        applied by taking into account items attributable to 
        noneconomic substance transactions rather than items to which 
        section 6662A applies.
            ``(2) Noneconomic substance transaction.--The term 
        `noneconomic substance transaction' means any transaction if--
                    ``(A) there is a lack of economic substance (within 
                the meaning of section 7701(m)(1)) for the transaction 
                giving rise to the claimed benefit or the transaction 
                was not respected under section 7701(m)(2), or
                    ``(B) the transaction fails to meet the 
                requirements of any similar rule of law.
    ``(d) Rules Applicable To Compromise of Penalty.--
            ``(1) In general.--If the 1st letter of proposed deficiency 
        which allows the taxpayer an opportunity for administrative 
        review in the Internal Revenue Service Office of Appeals has 
        been sent with respect to a penalty to which this section 
        applies, only the Commissioner of Internal Revenue may 
        compromise all or any portion of such penalty.
            ``(2) Applicable rules.--The rules of paragraphs (2), (3), 
        (4), and (5) of section 6707A(d) shall apply for purposes of 
        paragraph (1).
    ``(e) Coordination With Other Penalties.--Except as otherwise 
provided in this part, the penalty imposed by this section shall be in 
addition to any other penalty imposed by this title.
    ``(f) Cross References.--

                                ``(1) For coordination of penalty with 
understatements under section 6662 and other special rules, see section 
6662A(e).
                                ``(2) For reporting of penalty imposed 
under this section to the Securities and Exchange Commission, see 
section 6707A(e).''
    (b) Clerical Amendment.--The table of sections for part II of 
subchapter A of chapter 68 is amended by inserting after the item 
relating to section 6662A the following new item:

                              ``Sec. 6662B. Penalty for understatements 
                                        attributable to transactions 
                                        lacking economic substance, 
                                        etc.''
    (c) Effective Date.--The amendments made by this section shall 
apply to transactions entered into after February 15, 2004.

SEC. 705. MODIFICATIONS OF SUBSTANTIAL UNDERSTATEMENT PENALTY FOR 
              NONREPORTABLE TRANSACTIONS.

    (a) Substantial Understatement of Corporations.--Section 
6662(d)(1)(B) (relating to special rule for corporations) is amended to 
read as follows:
                    ``(B) Special rule for corporations.--In the case 
                of a corporation other than an S corporation or a 
                personal holding company (as defined in section 542), 
                there is a substantial understatement of income tax for 
                any taxable year if the amount of the understatement 
                for the taxable year exceeds the lesser of--
                            ``(i) 10 percent of the tax required to be 
                        shown on the return for the taxable year (or, 
                        if greater, $10,000), or
                            ``(ii) $10,000,000.''
    (b) Reduction for Understatement of Taxpayer Due to Position of 
Taxpayer or Disclosed Item.--
            (1) In general.--Section 6662(d)(2)(B)(i) (relating to 
        substantial authority) is amended to read as follows:
                            ``(i) the tax treatment of any item by the 
                        taxpayer if the taxpayer had reasonable belief 
                        that the tax treatment was more likely than not 
                        the proper treatment, or''.
            (2) Conforming amendment.--Section 6662(d) is amended by 
        adding at the end the following new paragraph:
            ``(3) Secretarial list.--For purposes of this subsection, 
        section 6664(d)(2), and section 6694(a)(1), the Secretary may 
        prescribe a list of positions for which the Secretary believes 
        there is not substantial authority or there is no reasonable 
        belief that the tax treatment is more likely than not the 
        proper tax treatment. Such list (and any revisions thereof) 
        shall be published in the Federal Register or the Internal 
        Revenue Bulletin.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 706. TAX SHELTER EXCEPTION TO CONFIDENTIALITY PRIVILEGES RELATING 
              TO TAXPAYER COMMUNICATIONS.

    (a) In General.--Section 7525(b) (relating to section not to apply 
to communications regarding corporate tax shelters) is amended to read 
as follows:
    ``(b) Section Not To Apply to Communications Regarding Tax 
Shelters.--The privilege under subsection (a) shall not apply to any 
written communication which is--
            ``(1) between a federally authorized tax practitioner and--
                    ``(A) any person,
                    ``(B) any director, officer, employee, agent, or 
                representative of the person, or
                    ``(C) any other person holding a capital or profits 
                interest in the person, and
            ``(2) in connection with the promotion of the direct or 
        indirect participation of the person in any tax shelter (as 
        defined in section 1274(b)(3)(C)).''
    (b) Effective Date.--The amendment made by this section shall apply 
to communications made on or after the date of the enactment of this 
Act.

SEC. 707. DISCLOSURE OF REPORTABLE TRANSACTIONS.

    (a) In General.--Section 6111 (relating to registration of tax 
shelters) is amended to read as follows:

``SEC. 6111. DISCLOSURE OF REPORTABLE TRANSACTIONS.

    ``(a) In General.--Each material advisor with respect to any 
reportable transaction shall make a return (in such form as the 
Secretary may prescribe) setting forth--
            ``(1) information identifying and describing the 
        transaction,
            ``(2) information describing any potential tax benefits 
        expected to result from the transaction, and
            ``(3) such other information as the Secretary may 
        prescribe.
Such return shall be filed not later than the date specified by the 
Secretary.
    ``(b) Definitions.--For purposes of this section--
            ``(1) Material advisor.--
                    ``(A) In general.--The term `material advisor' 
                means any person--
                            ``(i) who provides any material aid, 
                        assistance, or advice with respect to 
                        organizing, promoting, selling, implementing, 
                        or carrying out any reportable transaction, and
                            ``(ii) who directly or indirectly derives 
                        gross income in excess of the threshold amount 
                        for such aid, assistance, or advice.
                    ``(B) Threshold amount.--For purposes of 
                subparagraph (A), the threshold amount is--
                            ``(i) $50,000 in the case of a reportable 
                        transaction substantially all of the tax 
                        benefits from which are provided to natural 
                        persons, and
                            ``(ii) $250,000 in any other case.
            ``(2) Reportable transaction.--The term `reportable 
        transaction' has the meaning given to such term by section 
        6707A(c).
    ``(c) Regulations.--The Secretary may prescribe regulations which 
provide--
            ``(1) that only 1 person shall be required to meet the 
        requirements of subsection (a) in cases in which 2 or more 
        persons would otherwise be required to meet such requirements,
            ``(2) exemptions from the requirements of this section, and
            ``(3) such rules as may be necessary or appropriate to 
        carry out the purposes of this section.''
    (b) Conforming Amendments.--
            (1) The item relating to section 6111 in the table of 
        sections for subchapter B of chapter 61 is amended to read as 
        follows:

                              ``Sec. 6111. Disclosure of reportable 
                                        transactions.''
            (2)(A) So much of section 6112 as precedes subsection (c) 
        thereof is amended to read as follows:

``SEC. 6112. MATERIAL ADVISORS OF REPORTABLE TRANSACTIONS MUST KEEP 
              LISTS OF ADVISEES.

    ``(a) In General.--Each material advisor (as defined in section 
6111) with respect to any reportable transaction (as defined in section 
6707A(c)) shall maintain, in such manner as the Secretary may by 
regulations prescribe, a list--
            ``(1) identifying each person with respect to whom such 
        advisor acted as such a material advisor with respect to such 
        transaction, and
            ``(2) containing such other information as the Secretary 
        may by regulations require.
This section shall apply without regard to whether a material advisor 
is required to file a return under section 6111 with respect to such 
transaction.''
            (B) Section 6112 is amended by redesignating subsection (c) 
        as subsection (b).
            (C) Section 6112(b), as redesignated by subparagraph (B), 
        is amended--
                    (i) by inserting ``written'' before ``request'' in 
                paragraph (1)(A), and
                    (ii) by striking ``shall prescribe'' in paragraph 
                (2) and inserting ``may prescribe''.
            (D) The item relating to section 6112 in the table of 
        sections for subchapter B of chapter 61 is amended to read as 
        follows:

                              ``Sec. 6112. Material advisors of 
                                        reportable transactions must 
                                        keep lists of advisees.''
            (3)(A) The heading for section 6708 is amended to read as 
        follows:

``SEC. 6708. FAILURE TO MAINTAIN LISTS OF ADVISEES WITH RESPECT TO 
              REPORTABLE TRANSACTIONS.''

            (B) The item relating to section 6708 in the table of 
        sections for part I of subchapter B of chapter 68 is amended to 
        read as follows:

                              ``Sec. 6708. Failure to maintain lists of 
                                        advisees with respect to 
                                        reportable transactions.''
    (c) Effective Date.--The amendments made by this section shall 
apply to transactions with respect to which material aid, assistance, 
or advice referred to in section 6111(b)(1)(A)(i) of the Internal 
Revenue Code of 1986 (as added by this section) is provided after the 
date of the enactment of this Act.

SEC. 708. MODIFICATIONS TO PENALTY FOR FAILURE TO REGISTER TAX 
              SHELTERS.

    (a) In General.--Section 6707 (relating to failure to furnish 
information regarding tax shelters) is amended to read as follows:

``SEC. 6707. FAILURE TO FURNISH INFORMATION REGARDING REPORTABLE 
              TRANSACTIONS.

    ``(a) In General.--If a person who is required to file a return 
under section 6111(a) with respect to any reportable transaction--
            ``(1) fails to file such return on or before the date 
        prescribed therefor, or
            ``(2) files false or incomplete information with the 
        Secretary with respect to such transaction,
such person shall pay a penalty with respect to such return in the 
amount determined under subsection (b).
    ``(b) Amount of Penalty.--
            ``(1) In general.--Except as provided in paragraph (2), the 
        penalty imposed under subsection (a) with respect to any 
        failure shall be $50,000.
            ``(2) Listed transactions.--The penalty imposed under 
        subsection (a) with respect to any listed transaction shall be 
        an amount equal to the greater of--
                    ``(A) $200,000, or
                    ``(B) 50 percent of the gross income derived by 
                such person with respect to aid, assistance, or advice 
                which is provided with respect to the reportable 
                transaction before the date the return including the 
                transaction is filed under section 6111.
        Subparagraph (B) shall be applied by substituting `75 percent' 
        for `50 percent' in the case of an intentional failure or act 
        described in subsection (a).
    ``(c) Rescission Authority.--The provisions of section 6707A(d) 
(relating to authority of Commissioner to rescind penalty) shall apply 
to any penalty imposed under this section.
    ``(d) Reportable and Listed Transactions.--The terms `reportable 
transaction' and `listed transaction' have the respective meanings 
given to such terms by section 6707A(c).''.
    (b) Clerical Amendment.--The item relating to section 6707 in the 
table of sections for part I of subchapter B of chapter 68 is amended 
by striking ``tax shelters'' and inserting ``reportable transactions''.
    (c) Effective Date.--The amendments made by this section shall 
apply to returns the due date for which is after the date of the 
enactment of this Act.

SEC. 709. MODIFICATION OF PENALTY FOR FAILURE TO MAINTAIN LISTS OF 
              INVESTORS.

    (a) In General.--Subsection (a) of section 6708 is amended to read 
as follows:
    ``(a) Imposition of Penalty.--
            ``(1) In general.--If any person who is required to 
        maintain a list under section 6112(a) fails to make such list 
        available upon written request to the Secretary in accordance 
        with section 6112(b)(1)(A) within 20 business days after the 
        date of the Secretary's request, such person shall pay a 
        penalty of $10,000 for each day of such failure after such 20th 
        day.
            ``(2) Reasonable cause exception.--No penalty shall be 
        imposed by paragraph (1) with respect to the failure on any day 
        if such failure is due to reasonable cause.''
    (b) Effective Date.--The amendment made by this section shall apply 
to requests made after the date of the enactment of this Act.

SEC. 710. MODIFICATION OF ACTIONS TO ENJOIN CERTAIN CONDUCT RELATED TO 
              TAX SHELTERS AND REPORTABLE TRANSACTIONS.

    (a) In General.--Section 7408 (relating to action to enjoin 
promoters of abusive tax shelters, etc.) is amended by redesignating 
subsection (c) as subsection (d) and by striking subsections (a) and 
(b) and inserting the following new subsections:
    ``(a) Authority To Seek Injunction.--A civil action in the name of 
the United States to enjoin any person from further engaging in 
specified conduct may be commenced at the request of the Secretary. Any 
action under this section shall be brought in the district court of the 
United States for the district in which such person resides, has his 
principal place of business, or has engaged in specified conduct. The 
court may exercise its jurisdiction over such action (as provided in 
section 7402(a)) separate and apart from any other action brought by 
the United States against such person.
    ``(b) Adjudication and Decree.--In any action under subsection (a), 
if the court finds--
            ``(1) that the person has engaged in any specified conduct, 
        and
            ``(2) that injunctive relief is appropriate to prevent 
        recurrence of such conduct,
the court may enjoin such person from engaging in such conduct or in 
any other activity subject to penalty under this title.
    ``(c) Specified Conduct.--For purposes of this section, the term 
`specified conduct' means any action, or failure to take action, 
subject to penalty under section 6700, 6701, 6707, or 6708.''
    (b) Conforming Amendments.--
            (1) The heading for section 7408 is amended to read as 
        follows:

``SEC. 7408. ACTIONS TO ENJOIN SPECIFIED CONDUCT RELATED TO TAX 
              SHELTERS AND REPORTABLE TRANSACTIONS.''

            (2) The table of sections for subchapter A of chapter 67 is 
        amended by striking the item relating to section 7408 and 
        inserting the following new item:

        ``Sec. 7408. Actions to enjoin specified conduct related to tax 
                            shelters and reportable transactions.''
    (c) Effective Date.--The amendment made by this section shall take 
effect on the day after the date of the enactment of this Act.

SEC. 711. UNDERSTATEMENT OF TAXPAYER'S LIABILITY BY INCOME TAX RETURN 
              PREPARER.

    (a) Standards Conformed to Taxpayer Standards.--Section 6694(a) 
(relating to understatements due to unrealistic positions) is amended--
            (1) by striking ``realistic possibility of being sustained 
        on its merits'' in paragraph (1) and inserting ``reasonable 
        belief that the tax treatment in such position was more likely 
        than not the proper treatment'',
            (2) by striking ``or was frivolous'' in paragraph (3) and 
        inserting ``or there was no reasonable basis for the tax 
        treatment of such position'', and
            (3) by striking ``Unrealistic'' in the heading and 
        inserting ``Improper''.
    (b) Amount of Penalty.--Section 6694 is amended--
            (1) by striking ``$250'' in subsection (a) and inserting 
        ``$1,000'', and
            (2) by striking ``$1,000'' in subsection (b) and inserting 
        ``$5,000''.
    (c) Effective Date.--The amendments made by this section shall 
apply to documents prepared after the date of the enactment of this 
Act.

SEC. 712. PENALTY ON FAILURE TO REPORT INTERESTS IN FOREIGN FINANCIAL 
              ACCOUNTS.

    (a) In General.--Section 5321(a)(5) of title 31, United States 
Code, is amended to read as follows:
            ``(5) Foreign financial agency transaction violation.--
                    ``(A) Penalty authorized.--The Secretary of the 
                Treasury may impose a civil money penalty on any person 
                who violates, or causes any violation of, any provision 
                of section 5314.
                    ``(B) Amount of penalty.--
                            ``(i) In general.--Except as provided in 
                        subparagraph (C), the amount of any civil 
                        penalty imposed under subparagraph (A) shall 
                        not exceed $5,000.
                            ``(ii) Reasonable cause exception.--No 
                        penalty shall be imposed under subparagraph (A) 
                        with respect to any violation if--
                                    ``(I) such violation was due to 
                                reasonable cause, and
                                    ``(II) the amount of the 
                                transaction or the balance in the 
                                account at the time of the transaction 
                                was properly reported.
                    ``(C) Willful violations.--In the case of any 
                person willfully violating, or willfully causing any 
                violation of, any provision of section 5314--
                            ``(i) the maximum penalty under 
                        subparagraph (B)(i) shall be increased to the 
                        greater of--
                                    ``(I) $25,000, or
                                    ``(II) the amount (not exceeding 
                                $100,000) determined under subparagraph 
                                (D), and
                            ``(ii) subparagraph (B)(ii) shall not 
                        apply.
                    ``(D) Amount.--The amount determined under this 
                subparagraph is--
                            ``(i) in the case of a violation involving 
                        a transaction, the amount of the transaction, 
                        or
                            ``(ii) in the case of a violation involving 
                        a failure to report the existence of an account 
                        or any identifying information required to be 
                        provided with respect to an account, the 
                        balance in the account at the time of the 
                        violation.''
    (b) Effective Date.--The amendment made by this section shall apply 
to violations occurring after the date of the enactment of this Act.

SEC. 713. FRIVOLOUS TAX SUBMISSIONS.

    (a) Civil Penalties.--Section 6702 is amended to read as follows:

``SEC. 6702. FRIVOLOUS TAX SUBMISSIONS.

    ``(a) Civil Penalty for Frivolous Tax Returns.--A person shall pay 
a penalty of $5,000 if--
            ``(1) such person files what purports to be a return of a 
        tax imposed by this title but which--
                    ``(A) does not contain information on which the 
                substantial correctness of the self-assessment may be 
                judged, or
                    ``(B) contains information that on its face 
                indicates that the self-assessment is substantially 
                incorrect; and
            ``(2) the conduct referred to in paragraph (1)--
                    ``(A) is based on a position which the Secretary 
                has identified as frivolous under subsection (c), or
                    ``(B) reflects a desire to delay or impede the 
                administration of Federal tax laws.
    ``(b) Civil Penalty for Specified Frivolous Submissions.--
            ``(1) Imposition of penalty.--Except as provided in 
        paragraph (3), any person who submits a specified frivolous 
        submission shall pay a penalty of $5,000.
            ``(2) Specified frivolous submission.--For purposes of this 
        section--
                    ``(A) Specified frivolous submission.--The term 
                `specified frivolous submission' means a specified 
                submission if any portion of such submission--
                            ``(i) is based on a position which the 
                        Secretary has identified as frivolous under 
                        subsection (c), or
                            ``(ii) reflects a desire to delay or impede 
                        the administration of Federal tax laws.
                    ``(B) Specified submission.--The term `specified 
                submission' means--
                            ``(i) a request for a hearing under--
                                    ``(I) section 6320 (relating to 
                                notice and opportunity for hearing upon 
                                filing of notice of lien), or
                                    ``(II) section 6330 (relating to 
                                notice and opportunity for hearing 
                                before levy), and
                            ``(ii) an application under--
                                    ``(I) section 6159 (relating to 
                                agreements for payment of tax liability 
                                in installments),
                                    ``(II) section 7122 (relating to 
                                compromises), or
                                    ``(III) section 7811 (relating to 
                                taxpayer assistance orders).
            ``(3) Opportunity to withdraw submission.--If the Secretary 
        provides a person with notice that a submission is a specified 
        frivolous submission and such person withdraws such submission 
        within 30 days after such notice, the penalty imposed under 
        paragraph (1) shall not apply with respect to such submission.
    ``(c) Listing of Frivolous Positions.--The Secretary shall 
prescribe (and periodically revise) a list of positions which the 
Secretary has identified as being frivolous for purposes of this 
subsection. The Secretary shall not include in such list any position 
that the Secretary determines meets the requirement of section 
6662(d)(2)(B)(ii)(II).
    ``(d) Reduction of Penalty.--The Secretary may reduce the amount of 
any penalty imposed under this section if the Secretary determines that 
such reduction would promote compliance with and administration of the 
Federal tax laws.
    ``(e) Penalties in Addition to Other Penalties.--The penalties 
imposed by this section shall be in addition to any other penalty 
provided by law.''
    (b) Treatment of Frivolous Requests for Hearings Before Levy.--
            (1) Frivolous requests disregarded.--Section 6330 (relating 
        to notice and opportunity for hearing before levy) is amended 
        by adding at the end the following new subsection:
    ``(g) Frivolous Requests for Hearing, Etc.--Notwithstanding any 
other provision of this section, if the Secretary determines that any 
portion of a request for a hearing under this section or section 6320 
meets the requirement of clause (i) or (ii) of section 6702(b)(2)(A), 
then the Secretary may treat such portion as if it were never submitted 
and such portion shall not be subject to any further administrative or 
judicial review.''
            (2) Preclusion from raising frivolous issues at hearing.--
        Section 6330(c)(4) is amended--
                    (A) by striking ``(A)'' and inserting ``(A)(i)'';
                    (B) by striking ``(B)'' and inserting ``(ii)'';
                    (C) by striking the period at the end of the first 
                sentence and inserting ``; or''; and
                    (D) by inserting after subparagraph (A)(ii) (as so 
                redesignated) the following:
                    ``(B) the issue meets the requirement of clause (i) 
                or (ii) of section 6702(b)(2)(A).''
            (3) Statement of grounds.--Section 6330(b)(1) is amended by 
        striking ``under subsection (a)(3)(B)'' and inserting ``in 
        writing under subsection (a)(3)(B) and states the grounds for 
        the requested hearing''.
    (c) Treatment of Frivolous Requests for Hearings Upon Filing of 
Notice of Lien.--Section 6320 is amended--
            (1) in subsection (b)(1), by striking ``under subsection 
        (a)(3)(B)'' and inserting ``in writing under subsection 
        (a)(3)(B) and states the grounds for the requested hearing'', 
        and
            (2) in subsection (c), by striking ``and (e)'' and 
        inserting ``(e), and (g)''.
    (d) Treatment of Frivolous Applications for Offers-in-Compromise 
and Installment Agreements.--Section 7122 is amended by adding at the 
end the following new subsection:
    ``(e) Frivolous Submissions, Etc.--Notwithstanding any other 
provision of this section, if the Secretary determines that any portion 
of an application for an offer-in-compromise or installment agreement 
submitted under this section or section 6159 meets the requirement of 
clause (i) or (ii) of section 6702(b)(2)(A), then the Secretary may 
treat such portion as if it were never submitted and such portion shall 
not be subject to any further administrative or judicial review.''
    (e) Clerical Amendment.--The table of sections for part I of 
subchapter B of chapter 68 is amended by striking the item relating to 
section 6702 and inserting the following new item:

                              ``Sec. 6702. Frivolous tax submissions.''
    (f) Effective Date.--The amendments made by this section shall 
apply to submissions made and issues raised after the date on which the 
Secretary first prescribes a list under section 6702(c) of the Internal 
Revenue Code of 1986, as amended by subsection (a).

SEC. 714. REGULATION OF INDIVIDUALS PRACTICING BEFORE THE DEPARTMENT OF 
              TREASURY.

    (a) Censure; Imposition of Penalty.--
            (1) In general.--Section 330(b) of title 31, United States 
        Code, is amended--
                    (A) by inserting ``, or censure,'' after 
                ``Department'', and
                    (B) by adding at the end the following new flush 
                sentence:
``The Secretary may impose a monetary penalty on any representative 
described in the preceding sentence. If the representative was acting 
on behalf of an employer or any firm or other entity in connection with 
the conduct giving rise to such penalty, the Secretary may impose a 
monetary penalty on such employer, firm, or entity if it knew, or 
reasonably should have known, of such conduct. Such penalty shall not 
exceed the gross income derived (or to be derived) from the conduct 
giving rise to the penalty and may be in addition to, or in lieu of, 
any suspension, disbarment, or censure.''
            (2) Effective date.--The amendments made by this subsection 
        shall apply to actions taken after the date of the enactment of 
        this Act.
    (b) Tax Shelter Opinions, Etc.--Section 330 of such title 31 is 
amended by adding at the end the following new subsection:
    ``(d) Nothing in this section or in any other provision of law 
shall be construed to limit the authority of the Secretary of the 
Treasury to impose standards applicable to the rendering of written 
advice with respect to any entity, transaction plan or arrangement, or 
other plan or arrangement, which is of a type which the Secretary 
determines as having a potential for tax avoidance or evasion.''

SEC. 715. PENALTY ON PROMOTERS OF TAX SHELTERS.

    (a) Penalty on Promoting Abusive Tax Shelters.--Section 6700(a) is 
amended by adding at the end the following new sentence: 
``Notwithstanding the first sentence, if an activity with respect to 
which a penalty imposed under this subsection involves a statement 
described in paragraph (2)(A), the amount of the penalty shall be equal 
to 50 percent of the gross income derived (or to be derived) from such 
activity by the person on which the penalty is imposed.''
    (b) Effective Date.--The amendment made by this section shall apply 
to activities after the date of the enactment of this Act.

SEC. 716. STATUTE OF LIMITATIONS FOR TAXABLE YEARS FOR WHICH LISTED 
              TRANSACTIONS NOT REPORTED.

    (a) In General.--Section 6501(e)(1) (relating to substantial 
omission of items for income taxes) is amended by adding at the end the 
following new subparagraph:
                    ``(C) Listed transactions.--If a taxpayer fails to 
                include on any return or statement for any taxable year 
                any information with respect to a listed transaction 
                (as defined in section 6707A(c)(2)) which is required 
                under section 6011 to be included with such return or 
                statement, the tax for such taxable year may be 
                assessed, or a proceeding in court for collection of 
                such tax may be begun without assessment, at any time 
                within 6 years after the time the return is filed. This 
                subparagraph shall not apply to any taxable year if the 
                time for assessment or beginning the proceeding in 
                court has expired before the time a transaction is 
                treated as a listed transaction under section 6011.''
    (b) Effective Date.--The amendment made by this section shall apply 
to transactions in taxable years beginning after the date of the 
enactment of this Act.

SEC. 717. DENIAL OF DEDUCTION FOR INTEREST ON UNDERPAYMENTS 
              ATTRIBUTABLE TO NONDISCLOSED REPORTABLE AND NONECONOMIC 
              SUBSTANCE TRANSACTIONS.

    (a) In General.--Section 163 (relating to deduction for interest) 
is amended by redesignating subsection (m) as subsection (n) and by 
inserting after subsection (l) the following new subsection:
    ``(m) Interest on Unpaid Taxes Attributable To Nondisclosed 
Reportable Transactions and Noneconomic Substance Transactions.--No 
deduction shall be allowed under this chapter for any interest paid or 
accrued under section 6601 on any underpayment of tax which is 
attributable to--
            ``(1) the portion of any reportable transaction 
        understatement (as defined in section 6662A(b)) with respect to 
        which the requirement of section 6664(d)(2)(A) is not met, or
            ``(2) any noneconomic substance transaction understatement 
        (as defined in section 6662B(c)).''
    (b) Effective Date.--The amendments made by this section shall 
apply to transactions in taxable years beginning after the date of the 
enactment of this Act.

SEC. 718. AUTHORIZATION OF APPROPRIATIONS FOR TAX LAW ENFORCEMENT.

    There is authorized to be appropriated $300,000,000 for each fiscal 
year beginning after September 30, 2002, for the purpose of carrying 
out tax law enforcement to combat tax avoidance transactions and other 
tax shelters, including the use of offshore financial accounts to 
conceal taxable income.

                      Subtitle B--Other Provisions

SEC. 721. AFFIRMATION OF CONSOLIDATED RETURN REGULATION AUTHORITY.

    (a) In General.--Section 1502 (relating to consolidated return 
regulations) is amended by adding at the end the following new 
sentence: ``In prescribing such regulations, the Secretary may 
prescribe rules applicable to corporations filing consolidated returns 
under section 1501 that are different from other provisions of this 
title that would apply if such corporations filed separate returns.''
    (b) Result Not Overturned.--Notwithstanding subsection (a), the 
Internal Revenue Code of 1986 shall be construed by treating Treasury 
regulation Sec. 1.1502-20(c)(1)(iii) (as in effect on January 1, 2001) 
as being inapplicable to the type of factual situation in 255 F.3d 1357 
(Fed. Cir. 2001).
    (c) Effective Date.--The provisions of this section shall apply to 
taxable years beginning before, on, or after the date of the enactment 
of this Act.

SEC. 722. SIGNING OF CORPORATE TAX RETURNS BY CHIEF EXECUTIVE OFFICER.

    (a) In General.--Section 6062 (relating to signing of corporation 
returns) is amended by striking the first sentence and inserting the 
following new sentence: ``The return of a corporation with respect to 
income shall be signed by the chief executive officer of such 
corporation (or other such officer of the corporation as the Secretary 
may designate if the corporation does not have a chief executive 
officer). The preceding sentence shall not apply to any return of a 
regulated investment company (within the meaning of section 851).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to returns filed after the date of the enactment of this Act.




                                                        Calendar No. 22

108th CONGRESS

  1st Session

                                 S. 476

                          [Report No. 108-11]

_______________________________________________________________________

                                 A BILL

 To provide incentives for charitable contributions by individuals and 
 businesses, to improve the public disclosure of activities of exempt 
 organizations, and to enhance the ability of low-income Americans to 
  gain financial security by building assets, and for other purposes.

_______________________________________________________________________

                           February 27, 2003

                 Read twice and placed on the calendar