[Congressional Record Volume 149, Number 57 (Wednesday, April 9, 2003)]
[Senate]
[Pages S5008-S5044]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
CARE ACT OF 2003
The PRESIDING OFFICER. Under the previous order, the Senate will now
resume consideration of S. 476, which the clerk will report.
The legislative clerk read as follows:
The bill (S. 476) 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.
Pending:
Grassley/Baucus Amendment No. 526, to provide a manager's
amendment.
The PRESIDING OFFICER. Under the previous order there will now be 30
minutes equally divided for general debate.
Mr. GRASSLEY. Madam President, the amendment by Senator Nickles is in
order, is that right?
The PRESIDING OFFICER. The Senator is correct.
Mr. GRASSLEY. Senator Nickles will offer his amendment in just a
minute. He asked if I would do my speaking on that amendment at this
point. I am very happy to do that.
I appreciate my friend's continued efforts to reform and reduce long
term capital gain tax on real estate. And Senator Nickles is correct--
by excluding 25 percent of the capital gain on the sale of property we
reduce the effective capital gain rate on sales for conservation
purposes.
However, that is not the purpose of the provision. We intend to
preserve precious, environmentally sensitive land from ever being
developed. I need not remind my fellow Senators that they are not
making any more land and if we do not preserve sensitive wetlands and
open space from development it will be lost forever and all of our
children and grandchildren will suffer from our lack of responsibility.
Senator Nickles' amendment would literally make it easier to develop
the very land we are attempting to preserve. That is certainly not the
intent of this provision. I will be voting no and I strongly urge my
fellow Senators to also vote no on Senator Nickles' amendment.
I would like to take a few minutes to review the long history of this
important provision. As you all know, the President's budget has
included this proposal. In all of his budgets, in fact, the President
actually continues to propose the exclusion of 50 percent of the
capital gain for the sale of property for conservation purposes. So by
comparison, this 25 percent proposal is modest, but still addresses the
President's priorities.
In addition, the Senate Finance Committee has a long history of
building support. In both the 106th and 107th Congresses, we held
hearings specifically discussing this proposal. We had witnesses from
the forests of Maine to the wetlands of Louisiana and the ranches of
Arizona. Besides, this effort brings about bipartisan support for the
issue.
Not only have we heard huge support for this provision from all the
traditional conservation organizations, like the Nature Conservancy and
the Land Trusts and Iowa's own Heritage Foundation, but I know both I
and Senator Baucus continue to receive very vocal support from the
farmers and ranchers who populate our States. Both the Farm Bureau and
the Cattleman's Association have let us know that this gives our
citizens choices to stay on the land and yet preserve the open space.
The opportunity to give an easement, preserve our farm and ranch
lifestyles and give up the right to ever develop the land is important
public policy and I urge my fellow Senators to vote no on Senator
Nickles' amendment.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. Madam President, I think it is important at the outset to
know we are including in the CARE bill incentives to help provide
charitable contributions for good voluntary purposes, and I think this
bill should continue to honor that thrust. The amendment before us does
not. The amendment before us essentially is a capital gains tax
amendment and applies generally to all property that would be sold. I
think this is not the place for that kind of amendment.
The underlying provisions of the bill provide that taxpayers who
voluntarily sell land to a qualified conservation organization can
exclude 25 percent of the gain on that sale from capital gains tax. The
purpose, obviously, is to help people, most of whom are land rich and
cash poor and do not have much income from their ranching or farm
operations--to help by transferring the property to a conservation
organization.
There are many organizations in this country--a lot in my State of
Montana--such as the Nature Conservancy, lots of very good, solid
organizations which take land and save it for conservation purposes.
This is very important because our country is losing a lot of land to
development each day, each year. In fact, in the United States about 2
acres of farmland per minute, or about 1 million per year, are lost to
development; that is, shopping centers and new homes or what-not that
are just taking away some of the natural land that we have in our
country and converting it at a very rapid rate to shopping centers and
developments.
That is part of America. We need to build shopping centers. We need
to also build new homes, housing tracts, and so forth. But we also need
to remember there are other values in our country, and those are
protecting open space and protecting farms and ranches. A lot of our
farms and ranches are under great stress. I know the Presiding Officer
knows that is true in her home State as is the case in every State.
We are trying to figure out a balanced way to help those farmers and
ranchers donate a portion of their land to a conservation organization.
They cannot do that today because they have no income. Because they
have no income, they can't take the usual charitable deduction. To help
them, we are saying you don't have to worry about the charitable
deduction; you can still
[[Page S5009]]
get a little bit of benefit because we will exclude 25 percent of the
gain. It is extremely important.
I might point out, this is actually a little less generous than
provisions suggested by the President. The President, in his budget,
suggested an appreciably larger exclusion for this very purpose.
The amendment before us, though, is not geared at all toward
conservation. Essentially, it provides the same benefit, a 25-percent
exclusion that would be available to anyone who sells property for any
purpose. It does not have to be conservation. It would be pretty
expensive, I might add, too--about a $1.4 billion additional cost to
the Treasury.
I understand the concerns the Senator has, but this is just not the
time or place for capital gains tax reform. This is, rather, a CARE
bill, a bill that is encouraging conservation, encouraging charitable
giving. I urge my colleagues to not accept the amendment because I do
not think it is properly placed in this bill.
I reserve my time.
The PRESIDING OFFICER. The Senator from Oklahoma.
Mr. NICKLES. I compliment both my colleagues from Iowa and Montana
for bringing up this bill.
Amendment No. 527
(Purpose: To exclude 25 percent of gain on sales or exchanges of land
or water interests to any nonprofit entity for any charitable purpose)
Madam President, this bill has a lot of good provisions in it. It has
two provisions of which I question the value. I decided to do one
amendment.
One of the ones I question is, how much good does the above-line
deduction do? If you are an individual, you have to donate $500, and
you get a $250 deduction. So if you are in the 25-percent tax bracket,
that means you get to save $62. And we add a lot of complexity to the
Tax Code in the process. So I question the value of that.
There are several other provisions in the bill that are good--
donations from IRAs to charities. The purpose of the bill is to
increase donations to charities. I compliment the thrust of that. I
compliment the President for trying to enact it.
I am disappointed this bill does not do more for allowing charitable
and/or religious groups to be eligible to participate in Federal
programs. That is not in the bill. I am not faulting anybody. I
compliment Senator Santorum because he worked tirelessly to get this
bill forward. And I, as a legislator, am willing to take half a loaf.
I think the Senator from Pennsylvania has about half of his original
bill. I compliment him. He has been tenacious. I also compliment my
colleague, Senator Lieberman, because he is a cosponsor of the bill. I
worked with him on other legislation, including the religious liberty,
freedom bill that we cosponsored some time ago.
One of the provisions I am trying to amend right now is a provision
that says you will have a 25-percent reduction in capital gains tax if
you sell property for land conservation or sell to an organization that
qualifies for land conservation. I question the wisdom of doing that. I
say, if we are going to have a 25-percent reduction in capital gains
tax for charitable purposes, make it for all charities.
I happen to be a big fan of Nature Conservancy. They have a big
facility in my State, with a lot of land, a big buffalo farm or ranch.
I helped create that. The Nature Conservancy gets support from lots of
corporations all across the country and my State as well. I support
that.
But what I question is, if we want to help charities, let's help all
charities, so if people want to sell land to the Red Cross, they would
get a 25-percent reduction as well, or if they want to sell land to a
church--and the church may want to build a parking lot or build a
bigger church on that land--let's give them the 25-percent reduction.
Why should we say: Well, you are going to get a lower tax rate only
if you sell to the charity we choose. That is land conservation? I
question the wisdom of that. I do not like trying to micromanage, in
the Tax Code, how people are going to spend their money.
So I would encourage our colleagues, let's help all charities. I do
not think you can defend saying: Well, I think it is fine to donate
land to the Nature Conservancy or to the Sierra Club or to the Land
Trust Alliance or a lot of little groups that are going to be created
as a result of this--you don't donate the land; you sell the land--you
can donate your land to anybody in the country--but if you want to sell
your land, you can sell it to this group, and you are going to get a
25-percent reduction in your capital gains tax. So we would rather give
you that if you sell it to the Nature Conservancy but not sell it to
the First Baptist Church in rural Iowa. To me, that does not make
sense. Or if you want to help the Red Cross--and the Red Cross has a
nice facility in Oklahoma, thanks to the Presiding Officer--and they
need land, and if a farmer wants to sell that land--they could not
afford to donate it, but they wanted to sell it--why would we say: You
can only sell it for land conservation, and we will give you a 25-
percent reduction in your tax bill. But if you want to sell it to the
Red Cross, or if you want to sell it to a church, or if you want to
sell it to a children's hospital, no, we are sorry, you are out of
luck. Congress decided that charity does not deserve the same tax
benefits as land conservation.
I disagree. I say, if we are going to give a lower capital gains tax
rate, and this would be 15 percent--frankly, I think we should do it
for all Americans, but if we are going to do it for one charity or two
or three charities, let's do it for all charities.
So that is the essence of my amendment. If we are going to have a
lower capital gains tax rate on some charities, let's make it available
for all charities.
We have offsets in this amendment. It does not increase the deficit.
I urge my colleagues to support the amendment.
I reserve the remainder of my time.
The PRESIDING OFFICER. Who yields time?
Mr. NICKLES. Madam President, is the amendment pending?
The PRESIDING OFFICER. No.
Mr. NICKLES. Madam President, I apologize. I send the amendment to
the desk and thank my colleagues for their cooperation. I thought the
amendment was pending. I apologize to my colleagues.
The PRESIDING OFFICER. The clerk will report the amendment.
The bill clerk read as follows:
The Senator from Oklahoma [Mr. Nickles] proposes an
amendment numbered 527.
Mr. NICKLES: Madam President, I ask unanimous consent that further
reading of the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
(The amendment is printed in today's Record under ``Text of
Amendments.'')
The PRESIDING OFFICER (Ms. Murkowski). The Senator from Montana.
Mr. BAUCUS. Madam President, I believe the Senator from Connecticut
would like the floor. I yield to him such time as he wishes to consume.
The PRESIDING OFFICER. The Senator from Connecticut.
Mr. LIEBERMAN. Madam President, I thank my friend from Montana.
I rise to speak in favor of the CARE Act, the Charity Aid, Recovery,
and Empowerment Act. This began as an attempt to give support to faith-
based groups to perform good works.
Congratulating the UConn Women Huskies
If I may use that as a segue for a seemingly unrelated comment, I
want to express this morning the pride and exultation of the people of
Connecticut whose faith in our UConn Women Huskies was vindicated last
night as they achieved an extraordinary victory over a very tough and
proud Tennessee team. The UConn Women won another national championship
for the UConn Women Huskies, the fourth in the program's history.
My congratulations to Coach Geno Auriemma, Assistant Coach Chris
Dailey, and the great UConn women who rebuilt a lot of young talent
that came together and made us all proud. They set an extraordinary
example for young women all over America who, like my 15-year-old
daughter, love basketball, love to play it, and are inspired by the
skill and grit and team spirit of the UConn Women Huskies.
So our faith was redeemed, and you give us faith, Lady Huskies, as we
go on.
Returning to the CARE Act, I must say that I am proud and, in some
senses, relieved to join my colleagues in supporting this act. This act
is a compromise version of the initial faith-
[[Page S5010]]
based and community initiative. It comes to the Senate floor after a
difficult path. But the important point is that we are here.
This is a different plan than the President originally proposed. It
is different than the plan that Senator Santorum--who I have been so
pleased to work with as lead cosponsor with him--and I negotiated with
the White House to address concerns that were blocking its initial
movement.
Perhaps most notably, it no longer contains any provisions targeted
specifically at carving out a larger lawful space for faith-based
groups in our social service programs. But despite this evolution, the
heart of the proposal remains the same; and I guess, I would add, the
soul of the proposal remains the same as well.
That is why the CARE Act enjoys overwhelming support from America's
philanthropic community, with endorsements from more than 1,600
charities of all sizes and denominations, as well, as we can see,
strong bipartisan support here in the Senate. And that is why I feel
confident this measure will help transform the spirit of good will in
America today into more good works at a time of growing hardship and
make this country as good as its values are.
Any doubt about the vitality of America's spirit was firmly laid to
rest on September 11, 2001, when so many Americans gave so much and all
of us collectively embraced the values of compassion and community. But
if we truly hope to keep moving America closer to our founding ideals,
we have to extend that commitment to helping those who continue to live
in a different type of need--children living in poverty and despair;
drug addicts desperate for treatment and a better life; low income
working families who are struggling for self-sufficiency.
Our Government, of course, runs many programs at the Federal, State,
and local levels that aim to fill those needs as best they can by
establishing a safety net. But all of us here, regardless of party or
geography, recognize that Government can't do it all on its own, nor
should it. We have long relied on a wide network of private charities
and social service providers, community organizations and religious
groups, what you might call the sinews of our civil society, to partner
with the public sector, to fill in the gaps of the Government's reach
and, in particular, to target aid to local priorities and problems.
That is what this bill will do.
We start with a new focus on building and leveraging the capacity of
the small faith-based and community organizations who are often in the
best position to help people in need because they are closest to them.
But in many cases, they don't have the technical wherewithal to find
the public resources to do so. So to help those groups, the CARE Act
creates a Compassion Capital Fund authorized at $150 million a year
that will underwrite a wide range of technical assistance efforts. But
the bill goes beyond just expanding the pool of applicants and enlarges
the pie of resources that is available to America's charities and
social services providers. That will be particularly critical at this
difficult time in our Nation's economic history when charities are
stretched.
I saw an article in the paper in the last 24 hours that said the
United Way expects a significant drop in its fundraising this year
because of the economic problems America faces. I hope and believe this
bill will create the incentives for more giving to the United Way and a
host of other charities, national and local. It will do so by creating
several well targeted tax incentives over the next years that total
$10.6 billion which, working from the general rule that most tax
incentives are worth about 30 cents on the dollar to a taxpayer, should
lead to new donations to charities, community-based, faith-based, of
more than $30 billion over the next 10 years. How much good will come
from that is wonderful to contemplate.
Part of the CARE Act that may make as big a difference and of which I
am particularly proud is the $1.3 billion increase in Social Service
Block Grant (SSBG) funding over the next 2 years. The CARE Act will
finally make good on our commitment by restoring SSBG funding to its
authorized level of $2.8 billion over the next 2 years and in so doing
would empower charities across the country to do good for so many
people in need.
I want to mention one other provision in the bill which has been a
labor of love for me and Senator Santorum. That provision would expand
on the use of innovative savings accounts, known as Individual
Development Accounts (IDAs), to help low-income working families build
wealth and achieve financial self-sufficiency. There have been a number
of IDA demonstration projects around America that have proven
successful in making home ownership, college, and small business not
just a dream but a reality for thousands of low-income people
nationwide. The CARE Act aims to build on those successes and
significantly increase the availability of IDAs by offering America's
financial institutions new incentives to help low-income families who
want to save for their future which represents a whole new strategy in
fighting poverty. It is based on a growing body of research that shows
the best path to the middle class comes not just from hard work but
also through savings and asset accumulation.
In sum, this CARE Act represents a comprehensive response to a
complicated problem. That is why it is broadly and enthusiastically
embraced by charities all over America. This bill puts our shared
values into action by elevating the priority we place on helping our
most vulnerable citizens. For that I thank my colleagues for their
support.
I particularly thank Senator Santorum with whom it has been a
pleasure to work in this long-time effort. His dedication, his
commitment, his faith, his persistence, and his willingness to
accommodate and reach common ground is a good part of the reason why we
are on the verge of this very significant accomplishment. I thank the
leaders of the Finance Committee, Senator Grassley and Senator Baucus,
and I thank my leader, Senator Daschle, who worked with us as we
negotiated this logjam-breaking compromise with the administration and
then pushed hard among our ranks to have this bill considered on the
Senate floor. Senator Daschle's staff, particularly Jennifer Duck and
Andrea LaRue, has been indispensable to this mission.
Finally, I thank my own staff for the dedicated work they have done
on this exceedingly challenging but important legislation.
Specifically, I am grateful to Laurie Rubenstein, Debbie Forrest, Dan
Gerstein, Chuck Ludlam, and Michelle McMurray. We could not have passed
the bill without them.
I urge my colleagues to support the bill and yield the floor.
The PRESIDING OFFICER. Who yields time?
Mr. GRASSLEY. I yield such time as he might consume to the Senator
from Pennsylvania.
The PRESIDING OFFICER. The Senator from Pennsylvania.
Mr. SANTORUM. I thank my colleague from Connecticut for his kind
remarks and for his steadfast support. It was a struggle and took a lot
of persistence. That is a virtue we have seen exhibited on this
legislation. He has been persistently for it, has worked diligently to
find the common ground. That is what this legislation is all about--
finding common ground. We have seen very strong bipartisan support for
the bill. It is nice to see that every now and then on the floor of the
Senate. We will help people who are in need of help, people who are out
there serving our fellow man. It is a good day in the Senate that we
are doing something positive to help those in need in society. We are
doing it in a bipartisan way, and we are doing it in a fiscally
responsible way. It is a win-win-win across the board.
I thank my leader, Senator Frist. He has been a steadfast supporter
as well. He has fought for this priority of our conference. This is one
of the high priority items we have fought for on our side of the aisle,
and gratefully we have seen it also as a high priority on the other
side of the aisle. That is a wonderful thing.
I thank Senator Daschle and Senator Reid for their cooperation and
willingness to continue to work this issue until we could arrive at a
point where we are successful today.
I think we will be successful in a very overwhelming way. We have
already seen that the House is going through the process of marking
up--they have
[[Page S5011]]
not done it yet, but they have a template laid out for their version of
the bill. We are optimistic that the House will promptly act to move a
piece of legislation with which we can go to conference and get a bill
to the President expeditiously to help many in our society who are out
there working on the front lines trying to help people in need--
particularly those people of faith.
One of the things I have heard is that the faith-based elements have
been stripped. I counter that by saying if you look at the donations we
are encouraging and some of these provisions that we have--for example,
maternity group homes or food donation provisions--food donation in
this country is overwhelmingly done by organizations of faith. They are
the ones who collect the donations and distribute them. It is the same
thing with maternity group homes. A large segment of those homes out
there are faith based in nature, as well as a lot of the charitable
giving provisions that will disproportionately have a positive impact
on faith-based organizations. This will help faith-based organizations
on the giving side, and, as I mentioned yesterday, the compassion
capital fund in the bill provides technical assistance to small
charities.
Again, the principal beneficiaries will be small, inner-city, faith-
based organizations, these neighborhoods with many nondenominational
churches which are already receiving technical assistance and
instruction on how to apply for Federal funds through the charitable
choice provisions of the 1996 Welfare Act. Already we are providing
that assistance. This will increase that amount and will increase the
grassroots, faith-based, inner-city entities, working in many cases in
the most difficult neighborhoods, with the opportunity to access funds.
Their base of funds isn't that great. They are some of the poorest
neighborhoods in America.
So it is a great day for those who have been working hard and
committing their lives in some of the most difficult neighborhoods of
the country that will be getting the resources that are much needed to
the grassroots organizations that, as the President has said, are
driven by their faith commitment.
I yield the floor.
Mr. GRASSLEY. Madam President, I move to table the----
Mr. NICKLES. Will the Senator yield first? I am not sure we used all
of our time.
The PRESIDING OFFICER. There is time remaining for debate.
Mr. NICKLES. I am happy to conclude shortly. Correct me if I am
wrong, but I was thinking the vote was at 12:30, or are we trying to
move it up?
Mr. GRASSLEY. I think we should wait until 12:30. I will wait. I
yield the floor.
Mr. NICKLES. If the Senator wants to ask consent to move to table the
amendment and have the vote commence at 12:30, I am happy to do that.
Usually, when you move to table, you conclude the debate.
Mr. GRASSLEY. Madam President, I move to table the amendment and I
ask for the yeas and nays and then that the vote occur at 12:30.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The yeas and nays were ordered.
Mr. NICKLES. Madam President, parliamentary inquiry: How much time
remains on the amendment?
The PRESIDING OFFICER. Six and a half minutes remain for the Senator
from Oklahoma.
Mr. CRAIG. Will the Senator yield for a minute?
Mr. NICKLES. I am happy to yield.
Mr. CRAIG. I thank the Senator from Oklahoma for his amendment. I
think it improves the legislation substantially in the context of what
it is. This bill is not what it was. The CARE Act has all of the right
reasons for passing the Congress--faith-based organizations gaining the
benefit to serve people in a broader sense. We have gone beyond that
now.
Now we are talking about providing an opportunity for charities and
conservation groups to buy private land, or acquire private land, and,
for the sale of that land, to gain a benefit. In public land States
such as mine, where private land is, and it is the single tax base of
counties and local entities of government, as we deplete that land, for
whatever reason, we deplete the ability of counties to provide for
themselves and their citizens. I am struggling with this bill in the
final analysis because of that.
I do not oppose, obviously, the intent of CARE and the intent of
rewarding and extending for faith-based organizations their ability to
serve our country and its citizens. I thank my colleague for his
amendment. I hope we will not table it. I think it clearly helps
improve the legislation overall.
Mr. NICKLES. Madam President, I appreciate the comments of my
colleague and friend from Idaho. He makes a very good point. Western
States have a lot of public land and not a lot of private land. This
amendment says if you are going to sell land to a charity that deals
with conservation, you get a 25 percent lower capital gains tax than if
you sell to any other charity.
My amendment would say if you sell to any charity, you will get a
reduced capital gains tax. I mentioned the Nature Conservancy. They are
big in my State. They bought one of the biggest ranches--a buffalo
ranch--in Oklahoma. It is in the tall grass prairie. I love it. I
helped make that happen. The Nature Conservancy is a big group. I don't
know how great their assets are, but I guess it is in the millions of
dollars--lots of land and lots of millions of dollars. If you sell to
that group, you get a 25 percent reduction in your capital gains tax. I
don't think they need it, compared to a church in Oklahoma, maybe in a
rural area, which might want to build or expand. But if you want to
sell to that church, you have to pay a 25 percent higher tax than if
you sell it to a conservancy group, or the Sierra Club, that wants to
build a conservancy or other groups that might want to say: Hey, you
get a lower deal; sell it to us.
Let's encourage charitable contributions, but let's also encourage
sales to charitable organizations. If we are going to do it for one
charitable organization, let's do it for all charitable organizations.
That is the essence of my amendment. We have paid for it. It is offset.
I urge my colleagues to support it. If we are going to encourage
charitable sales, let's do it for all of them, not just conservation
groups. I urge my colleagues to vote against the motion to table.
I yield the remainder of my time.
I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. NICKLES. Madam President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
The PRESIDING OFFICER. The question is on agreeing to the motion to
table amendment No. 527. The yeas and nays have been ordered. The clerk
will call the roll.
The assistant legislative clerk called the roll.
The PRESIDING OFFICER. Are there any other Senators in the Chamber
desiring to vote?
The result was announced--yeas 62, nays 38, as follows:
[Rollcall Vote No. 127 Leg.]
YEAS--62
Akaka
Alexander
Baucus
Bayh
Biden
Bingaman
Boxer
Breaux
Brownback
Byrd
Cantwell
Carper
Chafee
Clinton
Collins
Conrad
Corzine
Daschle
Dayton
DeWine
Dodd
Dorgan
Durbin
Edwards
Feingold
Feinstein
Graham (FL)
Grassley
Gregg
Harkin
Hollings
Inouye
Jeffords
Kennedy
Kerry
Kohl
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Lincoln
McCain
Mikulski
Miller
Murray
Nelson (FL)
Nelson (NE)
Pryor
Reed
Reid
Roberts
Rockefeller
Sarbanes
Schumer
Smith
Snowe
Stabenow
Stevens
Sununu
Voinovich
Wyden
NAYS--38
Allard
Allen
Bennett
Bond
Bunning
Burns
Campbell
Chambliss
Cochran
Coleman
Cornyn
Craig
Crapo
Dole
Domenici
Ensign
Enzi
Fitzgerald
Frist
Graham (SC)
Hagel
Hatch
Hutchison
Inhofe
Johnson
Kyl
Lott
Lugar
McConnell
Murkowski
Nickles
Santorum
[[Page S5012]]
Sessions
Shelby
Specter
Talent
Thomas
Warner
The motion was agreed to.
Mr. GRASSLEY. I move to reconsider the vote.
Mr. SANTORUM. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Mr. GRASSLEY. Madam President, it is my intention to yield back all
of my time except for 30 seconds.
Welfare Benefit Plans In Relation to title VII
Mr. SANTORUM. Madam President, I rise today to engage the
distinguished chairman of the Finance Committee in a colloquy regarding
welfare benefit plans in relation to title VII of S. 476.
Employee Welfare Benefit plans, regulated under ERISA, are employer-
sponsored plans that provide security to employees at the time of an
event that interrupts or impairs their earning power by providing
benefits such as death benefits, medical insurance, long-term care and
child care.
By way of introduction, sections 419 and 419A of the Internal Revenue
Code set forth special rules for the deduction of contributions to a
welfare benefit fund, including limitations on the amount of the
deduction that would otherwise be deductible.
Moreover, 419A(f)(6) provides that the rules of sections 419 and 419A
do not apply in the case of a welfare benefit fund that is part of a
plan to which more than one employer contributes and to which no
employer normally contributes more than 10 percent of the contributions
of all employers under the plan. This exception for 10 or more employer
plans, however, does not apply to any plan that maintains experience
rating arrangements with respect to individual employers.
It is my understanding that there is ongoing review of sections 419
and 419A as the Department of Treasury seeks to establish further
guidance relative to 10 or more employer plans. It is my understanding
that such considerations have contributed to uncertainty in the tax
treatment of these plans.
I inquire of Chairman Grassley if he is aware of the concerns
surrounding the uncertain tax treatment of 10 or more employer plans,
and if so, if he would agree to continue discussions with Treasury in
an effort to achieve clarity.
Mr. GRASSLEY. I am aware that the Treasury and Labor Departments are
always examining the so-called welfare benefit plans because of
aggressive uses of some arrangements. Taxpayers need certainty and
clarity from the enforcement agencies that they can rely upon, so they
do not run afoul of the rules and operate plans in accordance with the
requirements of the law. It would be unwise to exclude a particular
type of arrangement from the rules governing tax shelters, however,
based upon some the abuses we have seen. But we can urge the Treasury
Department to provide clearer guidance on the many welfare benefit plan
arrangements. I am willing to join you in writing the Treasury
Department to ask them for clearer guidance as soon as practicable.
Mr. SANTORUM. I thank the chairman for agreeing to work with me on
this important issue.
Mr. BROWNBACK. Mr. President, it gives me great pleasure to join with
my colleagues today and support this magnificent bill, the Charity Aid,
Recovery, and Empowerment Act of 2003. This was a long fought
endeavor--one that is worthy of the effort--and an endeavor that will
continue to promote the act of charity, but also serve as a catalyst
for those who need help in gaining self-sufficiency.
As you may know, the motto of my State, Kansas, is, Ad Astra Per
Aspera or ``to the stars through difficulty.'' Indeed this is not only
true of my State, but true of our Nation as well. The act of charity
and benevolence is a hallmark of our great Nation and this bill will
help to continue that legacy and provide a pathway for success for
those in need.
During the aftermath of the September 11 attacks on our Nation, we
saw the best of America in one of the darkest times of our Nation's
history. Though as a Nation we were physically and emotional battered,
we were able to rise up and come together as one Nation united,
determined to help those in need. Many organizations such as the
Salvation Army, the Red Cross and countless other charities and
nonprofit organizations stood together with the men and women who
attended to the victims and their families. The strength and resolve of
our Nation was truly remarkable through the benevolence shown to the
families of those lost on that tragic day.
It is time now that we help these and many other charitable
organizations continue to help those in need. This bill, the CARE Act,
will do just that. This act provides charitable giving incentives in
the form of tax deductions for individuals and couples who do not
itemize their tax returns--$250 for individuals and $500 for couples.
It allows IRA holders to make charitable contributions from their
accounts, and provides an enhanced charitable deduction for donations
of food and books to charitable organizations.
Additionally, it provides an expedited review process for
organizations seeking a 501(c)(3) status designation, which makes it
easier to qualify for Federal grants and contracts. Along those same
lines, the bill requires the IRS to expedite the 501(c)(3) application
for any group that needs that status to apply for a government grant or
contract. To further help in this arena, the bill requires the IRS to
waive the application fee for groups whose annual revenues do not
exceed $50,000.
I am also pleased that we are encouraging savings accounts for those
in our society who are in the lower income brackets. The Individual
Development Accounts, IDA, section provides a tangible incentive for
folks to save and become self-sufficient, which not only provides
financial security but increases the participants self-esteem which is
priceless. Participants are able to withdraw these matched funds for a
first home purchase, higher education costs, or to start a new
business.
Lives are dramatically changed by this program and I am pleased to
see the Senate backing this important incentive.
Lastly, I would like to highlight an issue that I am passionate
about, an issue of the value of human life. I am very pleased that this
bill will provide additional funding--$33 million to be exact--for
helping teenage mothers achieve self-sufficiency by strengthening
Federal support for locally run maternity group home programs. As we
know, this was an important agenda item in the 1996 Welfare Reform
bill. Under the 1996 law, minors are required to live at home under
adult supervision or in a maternity group home in order to receive
benefits. Teenagers who are provided the opportunity to live in these
homes are more likely to continue their education or receive job
training--this is paramount for not only economic stability but for the
efficacy of the participant as well. These young women, who enter this
program are less likely to have a second pregnancy, and more likely to
find gainful employment that allows them to end a dependence upon
Federal Government programs.
I am positive that this bill will continue to financially aid those
organizations that reach out to those in need and will help them to
build on the success they have already seen in their communities.
Indeed in my own State, I have, for several years, toured charitable
organizations such as the Grace Center, which is a home for unwed
mothers, and Bread of Life, which is an inner-city church that is
leading community revitalization by partnering with schools and
neighborhood organizations to provide scholastic, mentoring and bible
study programs.
As a nation, we are strongest in our ability to provide assistance to
those in need, and to provide individuals with the tools necessary to
succeed. Dr. King once said, ``The ultimate measure of a man is not
where he stands in moments of comfort and confidence, but where he
stands at times of challenge and controversy.'' These organizations
embody the epitome of Dr. King's statement. I encourage all of my
colleagues to support this legislation, support those organizations who
have committed their lives to helping others and who are indeed helping
individuals through difficulties reach for the stars.
Mr. HATCH. Madam President, I rise today to express my support for
the CARE Act, which is currently before the Senate. This bill is
dedicated to improving the incentives for individuals and corporations
to donate to charitable entities.
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Through their generosity, Americans have shown their true colors as a
compassionate, caring people. Unfortunately, many charities have had a
difficult time raising money since the tragedy of September 11, as the
economy has remained weak. This bill, which is a priority for President
Bush, will help America's charities to continue their invaluable work.
I applaud the leadership of Chairman Grassley and Ranking Democrat
Baucus in getting this bill through the Finance Committee and onto the
Senate floor. I also applaud the perseverance of Senators Santorum and
Lieberman, who have championed this bill for many months and have kept
at it despite the discouragement of not being able to get the unanimous
consent needed to bring it to the floor until very recently.
The CARE Act includes several important incentives to encourage
additional contributions to charity. One of the more important ones is
the provision to allow individuals who do not itemize to take a
deduction under certain circumstances. I am particularly pleased that
the Finance Committee chose to craft this incentive as a targeted
provision, rather than as a provision that would allow a deduction for
the first dollar of contributions. Two-thirds of Americans do not
itemize their deductions, but most of them do make contributions.
Allowing a deduction for contributions that were already being made is
not an incentive--it is a giveaway. The provision in the CARE Act
encourages us to stretch and give more. It provides a much bigger
incentive for Americans to donate that marginal dollar and it also
lowers the cost of this provision to the Treasury.
I am also very pleased that the bill includes two other provision,
which I have been promoting for some time. The first would simplify a
complex area of the current law and eliminate significant roadblocks
that now stand in the way of businesses with excess book inventory to
donating those books to schools, libraries, and literacy programs,
where they are much needed. Unfortunately, the current tax law benefits
for donating such books to schools or libraries are often no greater
than the tax benefits for donating such books to schools or libraries
are often no greater than the tax benefits of sending the books to the
landfill.
The provision in the CARE Act addresses the obstacles of donating
excess book inventory by providing a simple and clear rule whereby any
donation of book inventory to a qualified school, library, or literacy
program is eligible for an enhanced deduction. This means that
booksellers and publishers would receive a higher tax benefit for
donating the books rather than throwing them away and would thus be
encouraged to go to the extra trouble and expense of seeking out
qualified donees and making the contributions.
The second provision deals with a problem that owners of S
corporation have in donating their stock to charitable entities. Under
the current law, a donor of S corporation stock worth $500 but having a
tax basis of $100 would receive a deduction for ony the amount of the
basis, or $100. A holder of shares in a C corporation, however, is
allowed to deduct the full $500 value of the stock. There is no
justification for this disparity in treatment between S corporation and
C corporations, and a provision in the CARE Act corrects it.
I am also pleased that another provision, which Senator Lincoln and I
added as a amendment to the bill in the Finance Committee, is included
in the CARE Act. Similar to the books provision I mentioned before,
this provision provides a larger deduction, and therefore a stronger
incentive, for businesses to donate their excess inventory to
charitable entities, such as schools or churches.
The CARE Act includes many worthwhile incentives designed to increase
charitable contributions. Its enactment should make a real difference
in our Nation.
There is, however, one portion of the CARE Act in which I am
disappointed. As an offset, the bill includes a package of measures
designed to crack down on abusive corporate tax shelters. While I am
certainly not in favor of abusive tax shelters, I am concerned that
part of this package of antitax shelter provisions, known as the
clarification of the economic substance doctrine, could also close down
legitimate tax planning techniques and give the Internal Revenue
Service an unprecedented degree of authority to recast the tax
treatment of transactions it does not like, regardless of whether the
transactions are otherwise allowed under the tax law. The provision
would also override a significant body of case law, some of which
reaches back almost to the inception of the income tax.
I hope that the codification of the economic substance doctrine can
be deleted in the conference with the House.
All in all, however, the CARE Act is a very good bill, and it
deserves the support of the Senate. I urge all of my colleagues to vote
for this bill.
Mr. FEINGOLD. Madam President, I am delighted that the Finance
Committee has included my volunteer mileage reimbursement legislation
in the CARE Act, and I want to take this opportunity to thank the
Chairman Grassley and the ranking member Baucus for their efforts to
include this needed provision. I am also pleased that some troubling
provisions have been deleted from this legislation. In particular, I
congratulate the sponsors for agreeing to drop title VIII before
bringing the bill to the floor. Doing so strengthens this bill, and
will greatly speed consideration of the measure.
Under current law, when volunteers use their cars for charitable
purposes, the volunteers may be reimbursed up to 14 cents per mile for
their donated services without triggering a tax consequence for either
the organization or the volunteers. If the charitable organization
reimburses any more than that, the organization is required to file an
information return with the IRS, and the volunteers must include the
amount over 14 cents per mile in their taxable income. By contrast, the
mileage reimbursement level currently permitted for businesses is 36
cents per mile.
At a time when Government is asking volunteers and volunteer
organizations to bear a greater burden of delivering essential
services, the 14 cents per mile limit is posing a very real hardship on
charitable organizations and other nonprofit groups. I have heard from
a number of people in Wisconsin on the need to increase this
reimbursement limit.
At a listening session I held in Portage County, WI, representatives
of the local Department on Aging explained just how important volunteer
drivers are to their ability to provide services to seniors in that
county. The Department on Aging reported that in 2001, 54 volunteer
drivers delivered meals to homes and transported people to medical
appointments, meal sites, and other essential services. The Department
noted that their volunteer drivers provided 4,676 rides, and drove
nearly 126,000 miles. They also delivered 9,385 home-delivered meals,
and nearly two-thirds of the drivers logged more than 100 miles per
month in providing these needed services. Together, volunteers donated
over 5,200 hours last year, and as the Department notes, at the rate of
minimum wage, that amounts to over $27,000, not including other
benefits.
As many of my colleagues know, the senior meals program is one of the
most vital services provided under the Older Americans Act, and
ensuring that meals can be delivered to seniors or that seniors can be
taken to meal sites is an essential part of that program.
Unfortunately, federal support for the senior nutrition programs has
stagnated in recent years. This has increased pressure on local
programs to leverage more volunteer services to make up for lagging
federal support. The 14 cents per mile reimbursement limit, though,
increasingly poses a barrier to obtaining those contributions. Portage
County reports that many of their volunteers cannot afford to offer
their services under such a restriction. And if volunteers cannot be
found, their services will have to be replaced by contracting with a
provider, greatly increasing costs to the department, costs that come
directly out of the pot of funds available to pay for meals and other
services.
By contrast, businesses do not face this restrictive mileage
reimbursement limit. The comparable mileage rate for someone who works
for a business is currently 36 cents per mile. This disparity means
that a business hired to deliver the same meals delivered by volunteers
for Portage County may reimburse their employees over double
[[Page S5014]]
the amount permitted the volunteer without a tax consequence.
This doesn't make sense. The 14 cents per mile volunteer
reimbursement limit is badly outdated. According to the Congressional
Research Service, Congress first set a reimbursement rate of 12 cents
per mile as part of the Deficit Reduction Act of 1984, and did not
increase it until 1997, when the level was raised slightly, to 14 cents
per mile, as part of the Taxpayer Relief Act of 1997.
The provision included in the CARE Act addresses this problem by
raising the limit on volunteer mileage reimbursement to the level
permitted to businesses, currently 36 cents per mile.
Once again, I thank the chairman and ranking member of the Finance
Committee for their help in including this provision in the CARE Act.
This timely measure will help ensure that charitable organizations can
continue to attract the volunteers who play such a critical role in
helping to deliver services, and it will simplify the tax code both for
nonprofit groups and the volunteers themselves.
As I noted earlier, I am also pleased that the sponsors of the CARE
Act agreed to drop title VIII before bringing the bill to the floor. I
had two serious concerns about title VIII. First, it threatened to
undermine our Nation's long-standing public policy against
discrimination in employment. Religious organizations currently enjoy
an exemption from title VII of the Civil Rights Act of 1964, allowing
them to discriminate against individuals on the basis of religion when
making employment decisions about individuals involved in religious
services. The bill as introduced was silent on this issue and therefore
threatened to extend this exemption and allow religious groups that
provide federally funded social services to discriminate on the basis
of religion in hiring, firing, or promotion decisions.
Second, title VIII could have allowed religious organizations
receiving Federal funds to proselytize during the provision of the
federally funded social service. Faith-based organizations do a lot of
good work in our society. But the Founders were right when they crafted
the Constitution's separation of church and state provision. We need to
protect each American's right to practice his or her religion as he or
she chooses. I am troubled by the possibility that, regardless of good
intentions, in practice, people who are in trouble would feel pressured
to engage in religious activities that they are not comfortable with in
order to get access to help, or otherwise be denied the services that
they desperately need.
Again, I am pleased that title VIII, the problematic faith-based
provision, has been dropped from the version of the bill that is before
the Senate today. Congress, however, must continue to be vigilant to
ensure that we do not enact legislation that allows taxpayer dollars to
be used to promote employment discrimination based on religion, or
religious instruction, worship, or proselytization.
Mr. INOUYE. Mr. President, I want to express my appreciation to
Chairman Grassley and Senator Baucus for the inclusion of the hospital
support organization provision to the CARE Act. This provision is
important to all teaching hospital support organizations, including
those in Hawaii. The provision would treat borrowing by these support
organizations as qualified exceptions under the unrelated business
income rule for debt acquisition.
As a requirement for tax exemption status, nonprofit hospitals must
provide significant charity services. They do this mainly by treating
Medicaid and Medicare patients and by running an open emergency room
that treats anyone without regard to payment. For example, Medicare and
Medicaid admissions comprise nearly 60 percent of all admissions at the
largest private, nonprofit hospital in my State. The demand for
indigent or charitable hospital care will continue to grow especially
in an economic down turn.
A number of charitable hospitals, such as the Queen's Medical Center
in the State of Hawaii, also provide residency training as teaching
hospitals for our future doctors. In addition, they must extend staff
privileges to all qualified physicians in nearly all specialties.
Accordingly, they cannot be selective as to their patients or to their
staff physicians. To pay for these charitable services nonprofit
hospitals must use their endowment income as well as fees from other
patients.
For-profit enterprises can easily borrow or raise the capital to
build the most up-to-date facilities to compete for the high-profit
patients. In comparison, charitable hospitals face lower reimbursements
for Medicaid and Medicare patients, while at the same time they
struggle to cope with rising costs for wages, supplies and insurance.
In order to meet the growing demand for indigent care, many charitable
hospitals postpone updating their equipment and defer modernizing their
facilities. As a result, there is a growing trend for charitable
hospitals to sell off their facilities to for-profit operations because
they can easily secure the required capital to update or expand the
facilities.
In the past, Congress has allowed nonprofit schools, colleges,
universities, and pension funds to invest in real estate with borrowed
funds, and the income from real investments has allowed these
institutions to meet their financial needs. Accordingly, with this
provision, teaching hospitals' support organizations would also be
allowed to borrow in order to repair and improve the real property held
in the portfolio assets of their endowments, thereby increasing the
value of the real property segment of their endowments. The resulting
increase of income can then help cover the growing costs for more
charitable services.
Again, I thank Chairman Grassley and Senator Baucus for the support
they have given me
Mr. LEAHY. Madam President, I rise today in support of the Charity
Aid, Recovery, and Empowerment, CARE Act of 2003. The tax provisions in
the CARE Act will encourage increased giving to charitable
organizations across the country. In community after community, our
charitable organizations have seen donations drop off significantly
because of the sluggish economy.
The CARE Act would allow taxpayers who do not itemize tax deductions
to write off a portion of their charitable donations for 2 years--
nonitemizers would be limited to $250 for individuals and $500 for
couples filing joint returns. The bill would also permit tax-free
distributions from IRAs for charitable purposes and would provide
enhanced deductions for contributions of food, books, computers and
conservation easements. It is important to note that the $13.1 billion
in tax allowances in the CARE Act are fully offset by tax shelter
legislation that would impose stiff penalties on those who try to hide
assets from the IRS. I am also pleased that the bill reported by the
Senate Finance Committee on February 5 contains none of the
controversial ``charitable choice'' provisions that hindered its
passage in the last Congress.
There are a number of bipartisan and noncontroversial tax incentive
provisions in the CARE Act that I have supported as stand-alone bills,
including the Artist-Museum Partnership Act, S. 287, that I coauthored
with Senator Bennett, and the Good Samaritan Hunger Relief Act, S. 85,
that I coauthored with Senator Lugar.
Senator Bennett and I introduced the Artist-Museum Partnership Act to
enable our country to keep cherished art works in the United States and
to preserve them in our public institutions, while erasing an inequity
in our Tax Code that now serves as a disincentive for artists to donate
their works to museums and libraries. Under current law, artists who
donate self-created works are only able to deduct the cost of supplies
such as canvas, pen, paper and ink--a sum that does not come close to
the works' true value. This is unfair to artists and it hurts museums
and libraries large and small that are dedicated to preserving works
for posterity. Our bill would allow artists, writers, and composers who
donate works to museums and libraries to take a tax deduction equal to
the fair-market value of the work.
In my State of Vermont, we are incredibly proud of the great works
produced by hundreds of local artists who choose to live and work in
the Green Mountain State. Displaying their creations in museums and
libraries helps develop a sense of pride among Vermonters and
strengthens a bond with Vermont, its landscape, its beauty, and its
cultural heritage. Anyone
[[Page S5015]]
who has gained a greater understanding of both the artist and the
subject by contemplating a painting in a museum or examining an
original manuscript or composition knows the tremendous value of these
works. I would like to see more of them, not fewer, preserved in
Vermont and across the country.
I would like to thank Senators Allen, Bingaman, Cantwell, Chafee,
Clinton, Cochran, Daschle, Dodd, Durbin, Feinstein, Graham of Florida,
Jeffords, Johnson, Kennedy, Kerry, Lieberman, Lincoln, Miller, Stevens,
and Warner for cosponsoring our bill.
The Good Samaritan Hunger Relief Act that Senator Lugar and I
introduced represents a great partnership between businesses and
organizations working to alleviate hunger. The bill will increase
donations to food banks, soup kitchens, and other hunger relief
charities and therefore help local communities and organizations become
the first line of defense against hunger in America.
Under current tax law, the deduction allowed for donated food does
not cover expenses incurred by the business. In many cases, this means
that it is cheaper for a business or farmer to throw away leftover food
instead of donating it to the hungry. This legislation will make it
easier for restaurants, food processors, and farmers to contribute food
to food banks, pantries, and homeless shelters by allowing the
deduction of the full market value of food donated.
Over the years, the legislation has received the endorsement of
various hunger relief and food community organizations, including
America's Second Harvest Food Banks, the American Farm Bureau
Federation, the California Emergency Foodlink, the Council of Chain
Restaurants, the Grocery Manufacturers of America, Lighthouse
Ministries Inc., the National Restaurant Association and the Salvation
Army. I would like to thank Senators Akaka, Allen, Bayh, Bond, Cochran,
Dayton, DeWine, Dodd, Durbin, Ensign, Fitzgerald, Harkin, Kerry,
Landrieu, Miller, Roberts, Santorum, Schumer, and Smith for also
cosponsoring our bill.
I want to thank the chairman and ranking member of the Senate Finance
Committee for including the Artist-Museum Partnership Act and the Good
Samaritan Hunger Relief Act in the CARE Act. As we pass this important
legislation today, I look forward to working with my colleagues to
ensure that the bipartisan compromises contained in the Senate bill are
preserved.
Mr. KERRY. Madam President, I rise today to offer my support for the
CARE Act of 2003. Now that the objectionable ``charitable choice''
provisions of the bill have been removed, and the Republicans have
agreed to pay for the tax provisions in the bill, the positives of the
legislation clearly outweigh the negatives and the final result is
worthy of support.
There are several aspects of the bill of which I want to make note.
Let me briefly mention them.
First, several elements in the bill were included as amendments after
several Senators, including myself, worked to add them in the Finance
Committee. These include an enhanced tax deduction for contributions of
food inventory, which will be very helpful for food banks assisting the
poor; a new market-value deduction for art donated to nonprofit
institutions by an artist during his or her lifetime; and some
restoration of funding for the social service block grant program.
These are all worthy provisions.
Second, I have argued that while we have the largest deficits in
history and face pressing domestic needs and the long-term expense of
rebuilding Iraq, we should not have any new tax cuts that are not paid
for. That is why I have offered a stimulus package whose costs are
offset in future years, so we can stimulate the economy today without
passing the bill to our kids. I am pleased that the Finance Committee
worked in a bipartisan way to pay for the provisions in the CARE Act,
in order to eliminate any long-term cost. Moreover, I am especially
pleased that the major pay-for provisions in the bill are clarification
of the economic substance doctrine and other provisions related to tax
shelters. I introduced legislation to reform these shelters during the
107th Congress and the Finance Committee took much of the language from
my original bill when they needed a more comprehensive offset this
year. Most notably, last year's offsets for the CARE Act did not
include the economic substance provision; now it represents the single
largest pay-for. At a time when we are learning how far companies will
go to abuse the tax system, changes to these shelter provisions come at
just the right time.
Finally, although the nonitemizer deduction for charitable
contributions is getting the most attention in this bill, the largest
permanent provision of the CARE Act will allow tax-free IRA rollovers
to charitable organizations. Under the bill, people will be able to
make planned charitable gifts out of IRAs at age 59\1/2\, and direct
gifts at age 70\1/2\, without any tax consequence. This is language
that I worked on with Senator Dorgan, and I worked hard in the Finance
Committee to have the Dorgan-Kerry language included in the CARE
markup. The new language will be very beneficial to the many colleges,
universities, and cultural institutions throughout my home State.
The new law will make a big difference, and it is important that
people understand how it works. Under current law, one's itemized
deductions are generally limited to one-half of one's income. In the
case of a retired worker with $30,000 of annual income, but $150,000
accumulated in an IRA, this limitation would prevent the retiree from
making a $30,000 donation from the IRA to the charity of his or her
choice. The entire $30,000 withdrawal from the IRA would be taxed as
income, but only $15,000--50 percent of annual income--would be allowed
as a charitable deduction. Under this bill, however, the entire
contribution would be free of any tax consequence: The withdrawal would
not be taxed as income, and the contribution would not be counted as a
deduction. The taxpayer can simply make the transfer to the charity
completely tax-free.
If the objective of this bill is to increase charitable giving, this
is the central provision that will drive that result. I thank the
sponsors of the bill, Senators Lieberman and Santorum, and the Finance
Committee leadership, Senators Grassley and Baucus, and I urge my
colleagues to support the CARE Act.
Mr. LIEBERMAN. Madam President, I am disappointed that the
administration has put out a statement today opposing the SSBG
provisions in this bill, especially after we negotiated a bill with the
Administration that included those provisions. The SSBG funding is
critically important to this bill. It funds a number of essential
social services that have been harmed by cuts to that program. I'd like
to put in the record here the results of a survey done by the United
Way of America.
In January 2000, UWA conducted an informal survey to assess the
impact cuts to SSBG have had on local United Ways and their community
partners. This study represents the impact of cuts from a funding level
of $2.8 billion to SSBG in fiscal year 1995, to $1.9 billion in fiscal
year 1999. Since conducting the survey, SSBG funding has been further
reduced to $1.7 billion.
Following summarizes ``The Stories Behind the Social Services Block
Grant: A Survey by United Way of America.''
Effect of SSBG Cuts on Health and Human Service Agencies:
One hundred thirty-eight agencies from 26 States responded.
Effect on budget: 38 percent received less SSBG money in
1999 than in the 1995; 42 percent have been level funded for
the past 5 years.
Effect on services: 17 percent of the total respondents had
to cut programs to compensate for SSBG cuts; 29 percent of
the agencies that received less SSBG money in 1999 than in
1995 were forced to cut programs; 32 percent of the total
respondents had to cut staff to compensate for SSBG cuts; 50
percent of the agencies that received less SSBG money in 1999
than in 1995 had to cut staff; 46 percent of the total
respondents were forced to serve fewer clients; 73 percent of
the agencies that received less SSBG money in 1999 than in
1995 were forced to serve fewer clients.
Respondents' median 1999 grant: $70,472.00.
Median percent of respondents' budget that SSBG represents:
10 percent.
Median number of people served with respondents' SSBG
funds: 180.
The survey found that further cuts to SSBG would greatly reduce the
reach and impact programs that provide services for a full range of
health and human services from child welfare and
[[Page S5016]]
child care to youth development, job training and other work supports
for those transitioning off welfare, assistance for domestic violence
victims, respite care, home care services and information and referral.
The administration's backtracking on its assurances about funding this
program will further damage these efforts.
Mr. BUNNING. Madam President, I would like to express my support for
S. 476, the CARE Act. The bill before us today contains many important
provisions that work toward a single goal of encouraging charitable
giving in the United States. The bill does this by making it easier for
individuals to deduct their charitable contributions from their incomes
taxes, by allowing tax-free distributions from IRAs for charities and
by encouraging donations of books, food inventory, and computers.
I particularly would like to thank the managers of this bill for
including a provision in the Managers' amendment that I had discussed
in the Finance Committee earlier this year. That provision which will
be in effect for certain tax-exempt bonds issued 1 year after the date
of enactment of this bill, is aimed at making it easier for non-profit
nursing and elder-care facilities to gain access to tax-exempt bond
markets which might not otherwise be available to it. The provision was
crafted to address some of the affordable funding issues facing the
non-profit agencies that are attempting to provide these important and
much-needed elder-care facilities, particularly in underserved regions
of our country.
As you well know, Madam President, with the aging of our population,
the challenges facing the underserved community of the elderly will
continue to grow. One way that we can contribute to the good work that
these non-profit nursing homes are doing is by finding ways to help
them gain access to affordable capital so that they can continue to
serve this important segment of our population.
I thank Chairman Grassley and Ranking Member Baucus of the Finance
Committee and Mr. Santorum, the chief supporter of this bill, and their
staffs for their assistance with this issue.
Mr. GRASSLEY. Madam President, I rise today to speak in support of a
key provision in the CARE Act, the restoration of $1.375 billion for
the Social Services Block Grant Program or SSBG.
As my colleagues know, SSBG is an extremely flexible grant program
that states use to pay for a wide variety of social services
activities. States have broad discretion over the use of these funds.
In recent years, the largest expenditures for services under the SSBG
were for child protective services, children's foster care and
prevention and intervention services.
Additionally, SSBG funds go to provide crucial services such as
respite care for the elderly, adult protective services, as well as
adoption programs.
In 1996, during the debate over welfare reauthorization, the Congress
and the States agreed to temporarily decrease SSBG from $2.8 billion a
year to $2.38 billion a year, until welfare reform was firmly
established. The agreement further stipulated that SSBG would be funded
at $2.38 billion per year until fiscal year 2003 when it would be
restored to $2.8 billion per year.
We have not lived up to our promise. Funding for SSBG has been
reduced considerably. Currently this vital program is funded at $1.7
billion a year.
This program is very important in my State of Iowa.
There were over 119,708 children and adults benefitting from SSBG-
funded services in the state of Iowa in fiscal year 2000.
Iowa spent almost half of their $29 million block grant--48 percent--
on services to persons with disabilities covering both physically
disabled and developmentally disabled persons. Services include adult
residential care, adult day care, community-supervised living,
sheltered workshops and work activities.
Iowa used $982,078 in SSBG for the prevention of abuse and neglect to
elderly and disabled persons compared to receiving only $55,927 from
the title VII Elder Abuse under the Older Americans Act.
I worked very hard to ensure that SSBG was included in the CARE Act.
The reason why I felt so strongly that it be included in the bill is
because I see an SSBG increase as one of the ways we can direct fiscal
relief to the states.
States are currently suffering under the worst fiscal crisis since
World War II. I am committed to finding ways to assist the states
manage this fiscal crisis. I view the inclusion of the restoration of
SSBG funds as a good first step towards assisting the States make it
through this current crisis.
I appreciate my colleagues' hard work on this bill and look forward
to its enactment into law.
Mr. BAUCUS. Madam President, the CARE Act is an important piece of
legislation that will help those organizations that are always there to
help us. On balance, I believe the bill will encourage more charitable
giving. And this is particularly important now, when demand on these
organizations is out-pacing resources.
This legislation would not have been possible without the
contributions of many.
First, I would like to thank the Finance Committee staff for their
expert counsel and hard work. They spent many long hours perfecting
this legislation. They are role models for those in public service.
I appreciate the cooperation we received from the Republican staff
members including Kolan Davis, Mark Prater, Dean Zerbe, Elizabeth
Paris, Christy Mistr, and Ed McClellan.
I want to especially thank my staff, including Jeff Forbes, John
Angell, Russ Sullivan, Patrick Heck, and Jonathan Selib. I also want to
mention our hardworking interns, Shawn White and Tyler Garrett.
The Finance Committee staff worked closely with staff members from
other Senate offices. They also were in touch with officials from the
Administration, including Susan Brown and others from Treasury.
The Joint Committee on Taxation provided technical assistance. Lindy
Paull, Mary Schmitt, Roger Colinvaux, Ron Schultz, Sam Olchyk, Ray
Beeman, and Brian Meighan. And many others. We owe many thanks for the
assistance they provided.
Second, I want to thank Senators Lieberman and Santorum. The CARE Act
has been a priority for them for a long time. They have worked
tirelessly to get this bill before the Senate. We are grateful for
their diligence, cooperation and input.
I also want to thank our leaders Senators Frist and Daschle for their
decision in moving the CARE Act forward.
I want to thank my good friend and colleague, Chairman Grassley. As
always, he has been instrumental in ensuring a truly bipartisan bill.
And, it continues to be a pleasure to work with him.
Finally, I look forward to seeing this bill passed into law--and
soon. It is my hope that the House will take up this legislation
quickly.
The CARE Act is one of the President's top priorities. There is a lot
in this bill that enjoys widespread, bipartisan support.
Together, we have been working on this bill for more than 2 years.
There is no need for further delay.
I urge the House to act quickly on this legislation so that we can
have the CARE Act on the President's desk by the Memorial Day recess.
This is a good bill. I urge my colleagues to vote for the CARE Act.
Madam President, the CARE Act takes bold steps to combat the
devastating problem of hunger--an issue that affects far too many of my
constituents in Montana.
Today, in the greatest and most prosperous nation in the world,
hunger remains a real problem for our families.
According to the USDA, more than 1 in 8 households were food insecure
in Montana between 1999 and 2001. This means that they do not
consistently know where their next meal will come from.
And 4 percent of households in Montana--that is 32,000 people, 12,000
of whom are children--live in conditions so severe that they are
classified as actually experiencing hunger.
These numbers are on the rise--Montana's hunger rate had the second
highest jump of any state from an identical USDA study done just three
years earlier.
Many of these are working poor families, making gut-wrenching
decisions
[[Page S5017]]
between whether to spend their hard-earned money on housing,
healthcare, child-care, or food.
So this is an issue that concerns me deeply.
The CARE Act will provide a valuable weapon in the war to end hunger.
It will do so by making it easier for farmers and small businesses to
donate surplus food to our struggling hunger relief charities.
Simply put, these difficult economic times mean that more people are
showing up to food pantries and soup kitchens at a time when these
organizations are struggling the most to meet demand.
These community groups--usually consisting solely of volunteers--are
often ``first-responders'' in the battle against hunger.
The CARE Act will help food pantries and soup kitchens to keep food
on the shelves for hungry families.
The CARE Act is also good for America's struggling farmers and
businesses. It helps them do the right thing by donating surplus food
that would otherwise have been thrown away.
Here is what Peggy Grimes, of the Montana Food Bank Network has to
say about the CARE Act:
It has come to my attention that these struggling farmers
and small grocers do not receive any tax benefit for their
increasing donations. They have been donating out of concern
for their neighbors as they have been hearing reports of
increased food insecurity throughout Montana. . . . For
Montana, as an agricultural state, the Care Act will be of
significant benefit to both those donating food and those in
need of food.
Hunger in America is not a problem of lack of food. The USDA
estimates that 96 billion pounds of food are thrown away each year.
This is simply shameful when working families are struggling to make
ends meet. There is a problem when it is more profitable to throw away
food than it is to donate it to those who need it.
The CARE Act helps solve this problem by providing incentives to
farmers and small businesses, whose resources are also constrained in
these economic times.
America's Second Harvest, the nation's largest anti-hunger charity,
estimates that the CARE Act will result in enough donated food to
provide roughly 765 million meals over the next 10 years.
These results are real, and I am proud to support this provision.
The CARE Act is a win-win-win situation. It is a win for anti-hunger
charities that work hard to ensure that America's families have food on
the table.
It is a win for our farmers and businesses that want to help their
neighbors in need. And most importantly, it is a win for America's low-
income families, who will see food on their tables.
I urge my colleagues to support the CARE Act.
Madam President, it is a sad fact that in a large number of homes--
particularly in the homes of our poorest, most at-risk children--you
cannot find a book. Sixty percent of kindergartners--in neighborhoods
that performed poorly in school--did not own a single book.
The lack of access to books poses the greatest barrier to literacy.
That is why we must change the status quo.
Unfortunately, the tax law functions as a disincentive to the
charitable donation of books to schools, libraries, and literacy
programs. Under the tax law, it is actually more economical to truck
books to a dump than it is to give them to your local school or
library.
Through the title I program, however, we have nearly 15 million
youngsters nationwide enrolled. This allows us to reach at least a
portion of the disadvantaged children in our country.
In my State of Montana, there are an estimated 35,000 poor children
who qualify for the title I program. These children will also benefit
from the provision in the CARE Act which encourages the donation of
books. For a child who has never owned a book--their first book is a
prized possession.
An increase in charitable book contributions would especially benefit
the State of Montana. According to the Montana Library Association, the
Montana State Library has fallen victim to a 26 percent budget cut in
2003. These reductions will mean less money for local libraries. And
they will mean cuts in the State subsidies that currently fund book
purchases, interlibrary loans, and audio and other special books for
the elderly, disabled, and sick.
According to the Montana Commissioner of Higher Education, Montana
universities will also receive fewer books. In the wake of the latest
budget cuts, the state legislature has cut university budgets 8.4
percent. That puts university funding below 1992 levels.
The University of Montana leads the list with a 10.9 percent cut in
state money. Followed by Montana State University at a 9.8 percent cut.
And MSUY-Billings at a 8.5 percent cut. The libraries at Montana
universities will experience cuts of $1.6 million for new materials.
These cuts will not only hurt universities--they will also hurt the
programs in which university students participate. For example, the
Montana Reads literacy program--started by University of Montana
President Dennison in 1997.
This program is critical to the 60-plus University of Montana student
volunteers who regularly tutor kindergarten through fifth grade
Missoula students. I think it is simple common sense that a critical
component of any successful literacy program is for the students to
have books. These Montana tutors depend on book donations to help their
students. The CARE Act helps them to help the elementary kids in
Missoula.
Of course these donations will also greatly aid adult literacy.
Campaigns such as the Montana Adult Basic & Literacy Education, ABLE,
program serve adults who lack sufficient mastery of basic skills to
function in society, a high school diploma, or basic English skills. In
Montana, 75,000 adults aged 25 and over do not have a high school
diploma or a GED. Twenty-five thousand adults have less than a ninth
grade education.
Every effort we make to improve reading in Montana will suffer if we
do not include books in the equation. The Federal Government granted 36
Montana schools $11 million over 3 years to find reading coaches,
family literacy programs and tutors.
These grants are so important to Montana. But if we fail to supply
books as part of the equation, then the grants are not put to use in
the most efficient way. Allowing charitable donations for books ensures
that we use taxpayer dollars more effectively. We cannot afford not to.
Madam President, earlier this year, Senator Grassley and I
reintroduced S. 701, the Rural Heritage Conservation Act. This bill
will help the nation's hard-working farmers and ranchers preserve their
heritage and way-of-life. At the same time, it promotes conservation of
valuable open space and wildlife habitat. This legislation is included
as a provision in the CARE Act.
S. 701 provides targeted income tax relief to small farmers and
ranchers who wish to make a charitable contribution of a qualified
conservation easement.
The bill would allow eligible farmers and ranchers to increase the
currently deductible amount for charitable contributions of qualified
conservation easements. That means that farmers and ranchers can deduct
amounts up to 100 percent of adjusted gross income.
The bill also extends the carryover period from 5 years to 15 years.
In the case of all other landowners, the AGI limitation would be raised
from 30 percent to 50 percent.
Senator Grassley has worked closely with me to include the provisions
of S. 701 in the CARE Act. I believe our bipartisan cooperation is the
reason why we have come so far in moving this very important piece of
legislation.
Passing the provisions in S. 701 will mean that farmers and ranchers
facing the potential of having to sell their ranch will have another
financially viable option. Under this proposal, they will be able to
choose to take advantage of the conservation easement incentives, stay
on their land, and invest in their farming or ranching business.
In practical terms, that means these farmers and ranchers do not have
to sell the family farm or ranch. They can keep it in the family. This
is so important to preserving the character and economic vitality of
our rural communities.
Over the past 25 years, over 3 million acres of agricultural lands
have been
[[Page S5018]]
lost to development in Montana alone. Many of those lands were lost
when family farms--hit hard by tough times--were forced to give up
their generations' old farming operations and sell to developers in
order to pay the bills.
We have to find additional tools to help these folks keep their land
in agricultural production and in open space. Our legislation provides
one of those tools.
To illustrate why this legislation is so important, let me give you
an example of the impact of current law on farmers and ranchers.
Jerry Townsend was born and raised on his family's ranch in Highwood,
Montana. He has operated the ranch since purchasing it from his parents
in 1974. On his ranch, called the Elk Run Ranch, he raises commercial
beef cattle.
In 1995, Mr. Townsend donated a conservation easement to the Montana
Land Reliance. His ``donation'' was calculated at $528,000. However,
because his ranch is held as a C corporation, his tax deduction was
limited to10 percent of the ranch's net income. His tax deduction over
the six years totaled a paltry $1,998--less than one percent of the
total value of his donation.
In contrast, a landowner with more in income would have a much
greater incentive to enter into an easement agreement because he or she
would be able to deduct more of the value of the donation from their
taxes.
S. 701 would do nothing more than level the playing field for farmers
and ranchers when it comes to the tax benefits of donating conservation
easements. What should matter is the value of your land--not the amount
of your income.
Our conservation easement bill, and as included in the CARE Act, have
been endorsed by 210 land trusts representing 44 States. Other
supporters include the Montana Stockgrowers, the American Farmland
Trust, and the Colorado Cattlemen.
This is a win-win proposition. Farmers and ranchers will be able to
preserve their important agricultural and ranching lands for future
generations. They will be able to continue to operate their businesses.
They will be able to stay on their land.
It is a purely voluntary, incentive-based way to promote
conservation. And it will allow us to bring people together.
Landowners. Conservationists. The Federal Government. And local
communities. All working together to preserve our precious natural
resources and agricultural heritage.
Madam President, I rise to talk about another important, but often
overlooked, aspect of the CARE Act additional funding for the Social
Services Block Grant, or SSBG.
SSBG funds are very flexible. States can use these funds to assist
abused children cope with their trauma; to help seniors live at home,
instead of nursing homes; to provide day care for children in low-
income working families; so that we know those kids are in safe places
while their parents work; to assist the disabled so that they can fully
participate in our society; to help parents adopt children, so that
every child has a loving parent.
In my State of Montana, we use SSBG to help children with
developmental disabilities, like those with cerebral palsy.
SSBG is ``glue money.'' Communities use it to fill holes in the
safety net. It is up to States and localities to decide where it goes.
We give them a long menu of options, and they use it the way they see
fit, based on local needs. This bill provides over $1 billion more in
SSBG to fill those holes over 2 years.
The goal of the CARE Act is to increase compassionate activity in our
country. We are a big-hearted country. We want to help each other. This
bill will help turn more of that desire into action and will make sure
Government is doing its part.
SSBG funds support the activities of faith-related charities. We give
the money to the States and they often contract with faith-related
organizations to do the hands-on work that they do so well. If you want
to support Catholic Charities, then you should support SSBG. If you
want to support Lutheran Social Services, then you should support SSBG.
These organizations have told me that SSBG funds are crucially
important to them.
The CARE Act is about increased individual giving. That is absolutely
vital. But if the Government does less, then any increase in individual
giving may only be filling that gap left by the withdrawal of the
Government.
The additional SSBG funding in this bill is our way of saying that
the Government will keep its part of the bargain and continue to play a
role. It is a flexible source of funds, so it won't be bureaucrats in
Washington dictating the money will be used. And much of the funding
will go to faith-related charities--the very organizations we want to
bolster.
We haven't talked much about the SSBG provision. That is a good sign.
Around here, we tend to talk about the things we disagree about. I am
glad we could find common ground on this provision so easily. I'm sure
the faith-related charities will thank us for doing so.
I commend Senators Lieberman and Santorum for their work on the CARE
Act.
Madam President, on February 5, 2003, the Finance Committee passed
tax shelter legislation to offset the cost of the CARE Act.
How appropriate it is for a bill to encourage more charitable giving
to be paid for by those shirking their responsibility to pay their fair
share of taxes.
The tax shelter legislation included in the CARE Act was developed by
the Finance Committee over the past 4 years.
The committee has taken time to develop appropriately targeted
legislation. Care has been taken to avoid encumbering legitimate
business transactions. Nevertheless, we will all be burdened until we
get this problem in check.
Without these changes, honest businesses will continue to be burdened
to the extent they compete against companies avoiding taxes.
Tax shelters are carefully engineered tax transactions. Most have
little or no economic substance. That means that they are designed to
achieve unwarranted tax benefits rather than business profit. And, they
place honest taxpayers at a considerable disadvantage.
As Michael Graetz, Professor of Law at Yale University, once said:
``a tax shelter is a deal done by very smart people that, absent tax
considerations, would be very stupid.''
It is time to put a stop to the unsavory practice of mining the Tax
Code for these abusive shelters.
These transactions are designed to take advantage of the complexity
of the tax law to obtain benefits that Congress never intended.
They pose a real threat to the integrity of our self-assessment
system by eroding the public's respect of the tax law.
Under tax shelter legislation produced by the Finance Committee,
promoters, advisors, and taxpayers would be subject to stiff penalties
for failing to acknowledge these transactions to the IRS.
Treasury believes that if a taxpayer feels comfortable entering into
a transaction; if a promoter feels comfortable selling a transaction;
and, an advisor feels comfortable recommending a transaction, they
should all feel comfortable disclosing the transaction to the IRS.
We have worked closely with the Treasury Department in crafting this
legislation. We have given Treasury authority to fine-tune the
provisions so as to protect legitimate tax planning.
But make no mistake, I am committed to combating abusive tax
transactions. The tax shelter package is the first installment. It will
not be the last.
The tax shelter package reinforces steps already taken by Treasury by
requiring more transparency.
Taxpayers will now be required to disclose certain reportable
transactions on their tax returns or face stiff penalties. Promoters
will have to provide information to IRS on their tax avoidance
strategies or face stiff sanctions.
These provisions are designed to change the cost-benefit ratio of
those contemplating engaging in egregious tax planning strategies.
The bill would also eliminate abusive tax shelters by denying tax
benefits with little or no economic substance.
That means that taxpayers will have to enter into transactions for
legitimate economic and business reasons and not purely for tax
avoidance.
[[Page S5019]]
This was the key recommendation made by the Joint Committee on
Taxation in response to the investigation of Enron's tax transactions.
Presently, there is lack of uniformity regarding the proper
application of the economic substance doctrine. Some courts apply a
conjunctive test that requires a taxpayer to establish the presence of
both economic substance and a substantial nontax business purpose.
Other courts have found the existence of one of these as sufficient to
respect a transaction.
The provision will clarify the application of the doctrine. It does
not tell the court when to apply it.
A tax shelter disallowed in New York should not be permitted
elsewhere. The clarification ensures uniformity across the country.
The tax shelter legislation included in the CARE Act is only a down
payment. It will go a long way toward curbing abusive transactions. But
it is not the final answer.
Based on the Joint Committee's investigation of Enron's tax returns,
additional steps are needed. The Joint Committee made several specific
recommendations for additional changes. We are looking closely at these
recommendations. Additional legislation will be forthcoming. I am
confident we will make any additional changes with bipartisan support.
Enron kept the IRS in the dark and out-maneuvered. The lack of
adequate disclosure rules and the lack of sufficient IRS enforcement
resources clearly helped Enron and its executives walk away with
millions maybe billions. Our legislation would bring more transparency
to these Enron-type transactions. The Enron report clearly demonstrates
the need for meaningful shelter legislation.
I urge my colleagues to support this measure.
Mr. DASCHLE. Madam President, this is an important day for Senate.
As American service men and women risk their lives to relieve the
suffering of an oppressed people in Iraq, the Senate is setting aside
ideological differences to energize American compassion to relieve
suffering here at home.
Over the past few years, the country's economic troubles have carried
a double sting for America's charities. While more Americans are in
need, charitable donations have dropped as families feel the pinch of
the economic downturn. As a result, many charities have had to cut back
on the services they provide. That means fewer meals for the hungry,
fewer beds for the homeless, fewer safe havens for battered wives and
children.
This legislation, the CARE Act, expands our Nation's capacity to
respond to the needs of its citizens who need help. With its passage,
the Senate adds the resources of the Federal Government to the
commitment of our charities and faith-based organizations.
This bill won't solve every problem in our cities and towns. But it
will get meaningful aid to organizations and institutions that are
equipped to help those who need help the most. It also creates real
incentives to encourage giving and makes it easier for Americans to
come to the aid of their fellow citizens.
Our country has a history of pulling together to help the less
fortunate, and the religious community and private charities are an
integral part of these efforts.
I am pleased that the Senate is helping carry that spirit forward by
reaffirming the relationship between the Federal Government and our
community and faith-based groups.
I want to commend Senator Lieberman and Senator Santorum for their
leadership on this legislation.
Throughout their work, they have kept sight of two fundamental goals:
First, increasing assistance to those organizations that lend a hand to
those in need; and second crafting a bill that reflects the Senate's
strong bipartisan support for America's charities.
Today all their hard work is being rewarded. And the result will be
community and faith-based groups that are better equipped to tackle the
challenges facing our families and neighborhoods today.
This legislation increases funding for social services block grants
and maternity homes that help teen mothers get their lives back on the
right track. It also creates new avenues for giving, by making it
easier to transfer retirement savings into charitable gifts and by
expanding the range of deductible donations.
While we are forgoing a stronger relationship between the Federal
Government and the faith community, we have been able to accomplish
this goal without undermining basic constitutional protections.
I was particularly pleased that Senators Santorum and Lieberman were
able to eliminate some of the more divisive elements of the version
that passed the House of Representatives.
This compromise package will not privatize Federal social service
programs, or pre-empt State and local civil rights laws. These are
difficult and divisive issues. But American charities need help today.
And by passing this legislation, the Senate sends a message that when
our citizens are in need, we cannot hold aid hostage to endless
ideological debate. Compassion is not a partisan issue.
All Americans, indeed, all human being, are bound by a common
commandment to pursue justice, love kindness, and seek mercy for the
oppressed. It is a standard that should guide all our work.
Today, with the passage of this bill, we move a little closer to
embodying the spirit of these words, and ever closer to fulfilling our
obligation to one another.
Mr. GRASSLEY. Madam President, I yield back all of my time except for
30 seconds that I want to yield to the Senator from Pennsylvania,
because of his hard work on this legislation.
The PRESIDING OFFICER. I ask those who are speaking to please take
their conversations off the floor so we can hear the Senator from
Pennsylvania.
Mr. SANTORUM. Madam President, I thank the chairman and ranking
member of the Finance Committee for the tremendous bipartisan work it
took to bring this bill to the floor, where I hope we will have a very
strong vote on final passage. Particularly I thank the Senator from
Connecticut, Mr. Lieberman, for his outstanding cooperation and work to
make sure this was done in a very strong, bipartisan way.
Finally, I thank Randy Brandt, from my staff, who has put his heart
and soul into this legislation and just did an outstanding job. I thank
him and yield the remainder of my time.
The PRESIDING OFFICER. All time having been yielded back, the
question is on the engrossment and third reading of the bill.
The bill was ordered to be engrossed for a third reading and was read
the third time.
Mr. GRASSLEY. Madam President, have the yeas and nays been ordered?
The PRESIDING OFFICER. They have not.
Mr. GRASSLEY. I ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second? There is a
sufficient second.
The bill having been read the third time, the question is, Shall the
bill pass?
The clerk will call the roll.
The legislative clerk called the roll.
The result was announced--yeas 95, nays 5, as follows:
[Rollcall Vote No. 128 Leg.]
YEAS--95
Akaka
Alexander
Allard
Allen
Baucus
Bayh
Bennett
Biden
Bingaman
Bond
Boxer
Breaux
Brownback
Bunning
Burns
Byrd
Campbell
Cantwell
Carper
Chafee
Chambliss
Clinton
Cochran
Coleman
Collins
Conrad
Cornyn
Corzine
Daschle
Dayton
DeWine
Dodd
Dole
Domenici
Dorgan
Durbin
Edwards
Ensign
Feingold
Feinstein
Fitzgerald
Frist
Graham (FL)
Graham (SC)
Grassley
Gregg
Hagel
Harkin
Hatch
Hollings
Hutchison
Inhofe
Inouye
Jeffords
Johnson
Kennedy
Kerry
Kohl
Kyl
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Lincoln
Lott
Lugar
McCain
McConnell
Mikulski
Miller
Murkowski
Murray
Nelson (FL)
Nelson (NE)
Pryor
Reed
Reid
Roberts
Rockefeller
Santorum
Sarbanes
Schumer
Sessions
Shelby
Smith
Snowe
Specter
Stabenow
Stevens
Sununu
Talent
Voinovich
Warner
Wyden
[[Page S5020]]
NAYS--5
Craig
Crapo
Enzi
Nickles
Thomas
The bill (S. 476), as amended, was passed, as follows:
S. 476
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.
Sec. 113. 10-year divestiture period for certain excess business
holdings of private foundations
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.
Sec. 313. Exemption of qualified 501(c)(3) bonds for nursing homes from
Federal guarantee prohibitions.
Sec. 314. Excise taxes exemption for blood collector organizations.
Sec. 315. Pilot project for forest conservation activities.
Sec. 316. Clarification of treatment of Johnny Micheal Spann Patriot
Trusts.
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.
Sec. 723. Securities civil enforcement provisions.
Sec. 724. Review of State agency blindness and disability
determinations.
TITLE VIII--COMPASSION CAPITAL FUND
Sec. 801. Support for nonprofit community-based organizations;
Department of Health and Human Services.
Sec. 802. Support for nonprofit community-based organizations;
Corporation for National and Community Service.
Sec. 803. Support for nonprofit community-based organizations;
Department of Justice.
Sec. 804. Support for nonprofit community-based organizations;
Department of Housing and Urban Development.
Sec. 805. Coordination.
TITLE IX--MATERNITY GROUP HOMES
Sec. 901. Maternity group homes.
[[Page S5021]]
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
[[Page S5022]]
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 by
a taxpayer who is an eligible farmer or rancher for the
taxable year in which such contributions are made--
``(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
[[Page S5023]]
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.
[[Page S5024]]
``(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.
SEC. 113. 10-YEAR DIVESTITURE PERIOD FOR CERTAIN EXCESS
BUSINESS HOLDINGS OF PRIVATE FOUNDATIONS.
(a) In General.--Section 4943(c) (relating to excess
business holdings) is amended by redesignating paragraph (7)
as paragraph (8) and by inserting after paragraph (6) the
following new paragraph:
[[Page S5025]]
``(7) 10-year period to dispose of certain large gifts and
bequests.--
``(A) In General.--Paragraph (6) shall be applied by
substituting `10-year period' for `5-year period' if--
``(i) upon the election of a private foundation, it is
established to the satisfaction of the Secretary that--
``(I) the excess business holdings (or increase in excess
business holdings) in a business enterprise by the private
foundation in an amount which is not less than $1,000,000,000
is the result of a gift or bequest the fair market value of
which is not less than $1,000,000,000, and
``(II) after such gift or bequest, the private foundation
does not have effective control of such business enterprise
to which such gift or bequest relates,
``(ii) subject to subparagraph (C), the private foundation
submits to the Secretary with such election a reasonable plan
for disposing of all of the excess business holdings related
to such gift or bequest, and
``(iii) the private foundation certifies annually to the
Secretary that the private foundation is complying with the
plan submitted under this paragraph, the requirement under
clause (i)(II), and the rules under subparagraph (D).
``(B) Election.--Any election under subparagraph (A)(i)
shall be made not later than 6 months after the date of such
gift or bequest and shall--
``(i) establish the fair market value of such gift or
bequest, and
``(ii) include a certification that the requirement of
subparagraph (A)(i)(II) is met.
``(C) Reasonableness of plan.--
``(i) In general.--Any plan submitted under subparagraph
(A)(ii) shall be presumed reasonable unless the Secretary
notifies the private foundation to the contrary not later
than 6 months after the submission of such plan.
``(ii) Resubmission.--Upon notice by the Secretary under
clause (i), the private foundation may resubmit a plan and
shall have the burden of establishing the reasonableness of
such plan to the Secretary.
``(D) Special rules.--During any period in which an
election under this paragraph is in effect--
``(i) section 4941(d)(2) (other than subparagraph (A)
thereof) shall apply only with respect to any disqualified
person described in section 4941(a)(1)(B),
``(ii) section 4942(a) shall be applied by substituting
`third' for `second' both places it appears,
``(iii) section 4942(e)(1) shall be applied by substituting
`12 percent' for `5 percent', and
``(iv) section 4942(g)(1)(A) shall be applied without
regard to any portion of reasonable and necessary
administrative expenses.
``(E) Inflation adjustment.--In the case of any taxable
year beginning in a calendar year after 2003, the
$1,000,000,000 amount under subparagraph (A)(i)(I) shall be
increased by an amount equal to such dollar amount,
multiplied by the cost-of-living adjustment determined under
section 1(f)(3) for such calendar year, determined by
substituting `2002' for `1992' in subparagraph (B) thereof.
If the $1,000,000,000 amount as increased under this
subparagraph is not a multiple of $100,000,000, such amount
shall be rounded to the next lowest multiple of
$100,000,000.''.
(b) Effective Date.--The amendments made by this section
shall apply to gifts and bequests made after the date of the
enactment of this Act.
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.
[[Page S5026]]
``(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
[[Page S5027]]
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
[[Page S5028]]
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.
[[Page S5029]]
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.
SEC. 313. EXEMPTION OF QUALIFIED 501(C)(3) BONDS FOR NURSING
HOMES FROM FEDERAL GUARANTEE PROHIBITIONS.
(a) In General.--Section 149(b)(3) (relating to exceptions)
is amended by adding at the end the following new
subparagraph:
``(E) Exception for qualified 501(c)(3) bonds for nursing
homes.--
``(i) In general.--Paragraph (1) shall not apply to any
qualified 501(c)(3) bond issued before the date which is 1
year after the date of the enactment of this subparagraph for
the benefit of an organization described in section
501(c)(3), if such bond is part of an issue the proceeds of
which are used to finance 1 or more of the following
facilities primarily for the benefit of the elderly:
``(I) Licensed nursing home facility.
``(II) Licensed or certified assisted living facility.
``(III) Licensed personal care facility.
``(IV) Continuing care retirement community.
``(ii) Limitation.--With respect to any calendar year,
clause (i) shall not apply to any bond described in such
clause if the aggregate authorized face amount of the issue
of which such bond is a part when increased by the
outstanding amount of such bonds issued by the issuer for
such calendar year exceeds $15,000,000.
``(iii) Continuing care retirement community.--For purposes
of this subparagraph, the term `continuing care retirement
community' means a community which provides, on the same
campus, a continuum of residential living options and support
services to persons at least 60 years of age under a written
agreement. For purposes of the preceding sentence, the
residential living options shall include independent living
units, nursing home beds, and either assisted living units or
personal care beds.''.
(b) Effective Date.--The amendment made by this section
shall apply to bonds issued after the date of the enactment
of this Act.
SEC. 314. EXCISE TAXES EXEMPTION FOR BLOOD COLLECTOR
ORGANIZATIONS.
(a) Exemption from Imposition of Special Fuels Tax.--
Section 4041(g) (relating to other exemptions) is amended by
striking ``and'' at the end of paragraph (3), by striking the
period in paragraph (4) and inserting ``; and'', and by
inserting after paragraph (4) the following new paragraph:
``(5) with respect to the sale of any liquid to a qualified
blood collector organization (as defined in section
7701(a)(48)) for such organization's exclusive use, or with
respect to the use by a qualified blood collector
organization of any liquid as a fuel.''.
(b) Exemption from Manufacturers Excise Tax.--
(1) In general.--Section 4221(a) (relating to certain tax-
free sales) is amended by striking ``or'' at the end of
paragraph (4), by adding ``or'' at the end of paragraph (5),
and by inserting after paragraph (5) the following new
paragraph:
``(6) to a qualified blood collector organization (as
defined in section 7701(a)(48)) for such organization's
exclusive use,''.
(2) Conforming amendments.--
(A) The second sentence of section 4221(a) is amended by
striking ``Paragraphs (4) and (5)'' and inserting
``Paragraphs (4), (5), and (6)''.
(B) Section 6421(c) is amended by striking ``or (5)'' and
inserting ``(5), or (6)''.
(c) Exemption from Communication Excise Tax.--
(1) In general.--Section 4253 (relating to exemptions) is
amended by redesignating subsection (k) as subsection (l) and
inserting after subsection (j) the following new subsection:
``(k) Exemption for Qualified Blood Collector
Organizations.--Under regulations provided by the Secretary,
no tax shall be imposed under section 4251 on any amount paid
by a qualified blood collector organization (as defined in
section 7701(a)) for services or facilities furnished to such
organization.''.
(2) Conforming amendment.--Section 4253(l), as redesignated
by paragraph (1), is amended by striking ``or (j)'' and
inserting ``(j), or (k)''.
(d) Credit for Refund for Certain Taxes on Sales and
Services.--
(1) Deemed overpayment.--
(A) In general.--Section 6416(b)(2) is amended by
redesignating subparagraphs (E) and (F) as subparagraphs (F)
and (G), respectively, and by inserting after subparagraph
(D) the following new subparagraph:
``(E) sold to a qualified blood collector organization's
(as defined in section 7701(a)(48)) for such organization's
exclusive use;''.
(B) Conforming amendments.--Section 6416(b)(2) is amended--
(i) by striking ``Subparagraphs (C) and (D)'' and inserting
``Subparagraphs (C), (D), and (E)'', and
(ii) by striking ``(C), and (D)'' and inserting ``(C), (D),
and (E)''.
(2) Sales of tires.--Clause (ii) of section 6416(b)(4)(B)
is amended by inserting ``sold to
[[Page S5030]]
a qualified blood collector organization (as defined in
section 7701(a)(48)),'' after ``for its exclusive use,''.
(e) Definition of Qualified Blood Collector Organization.--
Section 7701(a) is amended by inserting at the end the
following new paragraph:
``(48) Qualified blood collector organization.--For
purposes of this title, the term `qualified blood collector
organization' means an organization which is--
``(A) described in section 501(c)(3) and exempt from tax
under section 501(a),
``(B) registered by the Food and Drug Administration to
collect blood, and
``(C) primarily engaged in the activity of the collection
of blood.''.
(f) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply with respect to
excise taxes imposed on sales or uses occurring on or after
October 1, 2003.
(2) Refund of gasoline tax.--For purposes of section
6421(c) of the Internal Revenue Code of 1986 and any other
provision that allows for a refund or a payment in respect of
an excise tax payable at a level before the sale to a
qualified blood collector organization, the amendments made
by this section shall apply with respect to sales to a
qualified collector organization on or after October 1, 2003.
SEC. 315. PILOT PROJECT FOR FOREST CONSERVATION ACTIVITIES.
(a) Tax-Exempt Bond Financing.--
(1) In general.--For purposes of the Internal Revenue Code
of 1986, any qualified forest conservation bond shall be
treated as an exempt facility bond under section 142 of such
Code.
(2) Qualified forest conservation bond.--For purposes of
this section, the term ``qualified forest conservation bond''
means any bond issued as part of an issue if--
(A) 95 percent or more of the net proceeds (as defined in
section 150(a)(3) of such Code) of such issue are to be used
for qualified project costs,
(B) such bond is issued for a qualified organization, and
(C) such bond is issued before December 31, 2006.
(3) Limitation on aggregate amount issued.--
(A) In general.--The maximum aggregate face amount of bonds
which may be issued under this subsection shall not exceed
$2,000,000,000 for all projects (excluding refunding bonds).
(B) Allocation of limitation.--The limitation described in
subparagraph (A) shall be allocated by the Secretary of the
Treasury among qualified organizations based on criteria
established by the Secretary not later than 180 days after
the date of the enactment of this section, after consultation
with the Chief of the Forest Service.
(4) Qualified project costs.--For purposes of this
subsection, the term ``qualified project costs'' means the
sum of--
(A) the cost of acquisition by the qualified organization
from an unrelated person of forests and forest land which at
the time of acquisition or immediately thereafter are subject
to a conservation restriction described in subsection (c)(2),
(B) capitalized interest on the qualified forest
conservation bonds for the 3-year period beginning on the
date of issuance of such bonds, and
(C) credit enhancement fees which constitute qualified
guarantee fees (within the meaning of section 148 of such
Code).
(5) Special rules.--In applying the Internal Revenue Code
of 1986 to any qualified forest conservation bond, the
following modifications shall apply:
(A) Section 146 of such Code (relating to volume cap) shall
not apply.
(B) For purposes of section 147(b) of such Code (relating
to maturity may not exceed 120 percent of economic life), the
land and standing timber acquired with proceeds of qualified
forest conservation bonds shall have an economic life of 35
years.
(C) Subsections (c) and (d) of section 147 of such Code
(relating to limitations on acquisition of land and existing
property) shall not apply.
(D) Section 57(a)(5) of such Code (relating to tax-exempt
interest) shall not apply to interest on qualified forest
conservation bonds.
(6) Treatment of current refunding bonds.--Paragraphs
(2)(C) and (3) shall not apply to any bond (or series of
bonds) issued to refund a qualified forest conservation bond
issued before December 31, 2006, if--
(A) the average maturity date of the issue of which the
refunding bond is a part is not later than the average
maturity date of the bonds to be refunded by such issue,
(B) the amount of the refunding bond does not exceed the
outstanding amount of the refunded bond, and
(C) the net proceeds of the refunding bond are used to
redeem the refunded bond not later than 90 days after the
date of the issuance of the refunding bond.
For purposes of subparagraph (A), average maturity shall be
determined in accordance with section 147(b)(2)(A) of such
Code.
(7) Effective date.--This subsection shall apply to
obligations issued on or after the date which is 180 days
after the enactment of this Act.
(b) Items From Qualified Harvesting Activities Not Subject
to Tax or Taken Into Account.--
(1) In general.--Income, gains, deductions, losses, or
credits from a qualified harvesting activity conducted by a
qualified organization shall not be subject to tax or taken
into account under subtitle A of the Internal Revenue Code of
1986.
(2) Limitation.--The amount of income excluded from gross
income under paragraph (1) for any taxable year shall not
exceed the amount used by the qualified organization to make
debt service payments during such taxable year for qualified
forest conservation bonds.
(3) Qualified harvesting activity.--For purposes of
paragraph (1)--
(A) In general.--The term ``qualified harvesting activity''
means the sale, lease, or harvesting, of standing timber--
(i) on land owned by a qualified organization which was
acquired with proceeds of qualified forest conservation
bonds,
(ii) with respect to which a written acknowledgement has
been obtained by the qualified organization from the State or
local governments with jurisdiction over such land that the
acquisition lessens the burdens of such government with
respect to such land, and
(iii) pursuant to a qualified conservation plan adopted by
the qualified organization.
(B) Exceptions.--
(i) Cessation as qualified organization.--The term
``qualified harvesting activity'' shall not include any sale,
lease, or harvesting for any period during which the
organization ceases to qualify as a qualified organization.
(ii) Exceeding limits on harvesting.--The term ``qualified
harvesting activity'' shall not include any sale, lease, or
harvesting of standing timber on land acquired with proceeds
of qualified forest conservation bonds to the extent that--
(I) the average annual area of timber harvested from such
land exceeds 2.5 percent of the total area of such land or,
(II) the quantity of timber removed from such land exceeds
the quantity which can be removed from such land annually in
perpetuity on a sustained-yield basis with respect to such
land.
The limitations under subclauses (I) and (II) shall not apply
to post-fire restoration and rehabilitation or sanitation
harvesting of timber stands which are substantially damaged
by fire, windthrow, or other catastrophes, or which are in
imminent danger from insect or disease attack.
(4) Termination.--This subsection shall not apply to any
qualified harvesting activity of a qualified organization
occurring after the date on which there is no outstanding
qualified forest conservation bond with respect to such
qualified organization or any such bond ceases to be a tax-
exempt bond.
(5) Partial recapture of benefits if harvesting limit
exceeded.--If, as of the date that this subsection ceases to
apply under paragraph (3), the average annual area of timber
harvested from the land exceeds the requirement of paragraph
(3)(B)(ii)(I), the tax imposed by chapter 1 of the Internal
Revenue Code of 1986 shall be increased, under rules
prescribed by the Secretary of the Treasury, by the sum of
the tax benefits attributable to such excess and interest at
the underpayment rate under section 6621 of such Code for the
period of the underpayment.
(c) Definitions.--For purposes of this section--
(1) Qualified conservation plan.--The term ``qualified
conservation plan'' means a multiple land use program or plan
which--
(A) is designed and administered primarily for the purposes
of protecting and enhancing wildlife and fish, timber, scenic
attributes, recreation, and soil and water quality of the
forest and forest land,
(B) mandates that conservation of forest and forest land is
the single-most significant use of the forest and forest
land, and
(C) requires that timber harvesting be consistent with--
(i) restoring and maintaining reference conditions for the
region's ecotype,
(ii) restoring and maintaining a representative sample of
young, mid, and late successional forest age classes,
(iii) maintaining or restoring the resources' ecological
health for purposes of preventing damage from fire, insect,
or disease,
(iv) maintaining or enhancing wildlife or fish habitat, or
(v) enhancing research opportunities in sustainable
renewable resource uses.
(2) Conservation restriction.--The conservation restriction
described in this paragraph is a restriction which--
(A) is granted in perpetuity to an unrelated person which
is described in section 170(h)(3) of such Code and which, in
the case of a nongovernmental unit, is organized and operated
for conservation purposes,
(B) meets the requirements of clause (ii) or (iii)(II) of
section 170(h)(4)(A) of such Code,
(C) obligates the qualified organization to pay the costs
incurred by the holder of the conservation restriction in
monitoring compliance with such restriction, and
(D) requires an increasing level of conservation benefits
to be provided whenever circumstances allow it.
(3) Qualified organization.--The term ``qualified
organization'' means an organization--
(A) which is a nonprofit organization substantially all the
activities of which are charitable, scientific, or
educational, including acquiring, protecting, restoring,
managing, and developing forest lands and other
[[Page S5031]]
renewable resources for the long-term charitable,
educational, scientific and public benefit,
(B) more than half of the value of the property of which
consists of forests and forest land acquired with the
proceeds from qualified forest conservation bonds,
(C) which periodically conducts educational programs
designed to inform the public of environmentally sensitive
forestry management and conservation techniques,
(D) which has at all times a board of directors--
(i) at least 20 percent of the members of which represent
the holders of the conservation restriction described in
paragraph (2),
(ii) at least 20 percent of the members of which are public
officials, and
(iii) not more than one-third of the members of which are
individuals who are or were at any time within 5 years before
the beginning of a term of membership on the board, an
employee of, independent contractor with respect to, officer
of, director of, or held a material financial interest in, a
commercial forest products enterprise with which the
qualified organization has a contractual or other financial
arrangement,
(E) the bylaws of which require at least two-thirds of the
members of the board of directors to vote affirmatively to
approve the qualified conservation plan and any change
thereto, and
(F) upon dissolution, is required to dedicate its assets
to--
(i) an organization described in section 501(c)(3) of such
Code which is organized and operated for conservation
purposes, or
(ii) a governmental unit described in section 170(c)(1) of
such Code.
(4) Unrelated person.--The term ``unrelated person'' means
a person who is not a related person.
(5) Related person.--A person shall be treated as related
to another person if--
(A) such person bears a relationship to such other person
described in section 267(b) (determined without regard to
paragraph (9) thereof), or 707(b)(1), of such Code,
determined by substituting ``25 percent'' for ``50 percent''
each place it appears therein, and
(B) in the case such other person is a non-profit
organization, if such person controls directly or indirectly
more than 25 percent of the governing body of such
organization.
SEC. 316. CLARIFICATION OF TREATMENT OF JOHNNY MICHEAL SPANN
PATRIOT TRUSTS.
(a) Clarification of Tax-Exempt Status of Trusts.--
(1) In general.--Subsection (b) of section 601 of the
Homeland Security Act of 2002 is amended to read as follows:
``(b) Designation of Johnny Micheal Spann Patriot Trusts.--
Any charitable corporation, fund, foundation, or trust (or
separate fund or account thereof) which is described in
section 501(c)(3) of the Internal Revenue Code of 1986 and
exempt from tax under section 501(a) of such Code and meets
the requirements described in subsection (c) shall be
eligible to designate itself as a `Johnny Micheal Spann
Patriot trust'.''.
(2) Conforming amendment.--Section 601(c)(3) of such Act is
amended by striking ``based'' and all that follows through
``Trust''.
(b) Publicly Available Audits.--Section 601(c)(7) of the
Homeland Security Act of 2002 is amended by striking ``shall
be filed with the Internal Revenue Service, and shall be open
to public inspection'' and inserting ``shall be open to
public inspection consistent with section 6104(d)(1) of the
Internal Revenue Code of 1986''.
(c) Clarification of Required Distributions to Private
Foundation.--
(1) In general.--Section 601(c)(8) of the Homeland Security
Act of 2002 is amended by striking ``not placed'' and all
that follows and inserting ``not so distributed shall be
contributed to a private foundation which is described in
section 509(a) of the Internal Revenue Code of 1986 and
exempt from tax under section 501(a) of such Code and which
is dedicated to such beneficiaries not later than 36 months
after the end of the fiscal year in which such funds,
donations, or earnings are received.''.
(2) Conforming amendments.--Section 601(c) of such Act is
amended--
(A) by striking ``(or, if placed in a private foundation,
held in trust for)'' in paragraph (1) and inserting ``(or
contributed to a private foundation described in paragraph
(8) for the benefit of)'', and
(B) by striking ``invested in a private foundation'' in
paragraph (2) and inserting ``contributed to a private
foundation described in paragraph (8)''.
(d) Requirements for Distributions From Trusts.--Section
601(c)(9)(A) of the Homeland Security Act of 2002 is amended
by striking ``should'' and inserting ``shall''.
(e) Regulations Regarding Notification of Trust
Beneficiaries.--Section 601(f) of the Homeland Security Act
of 2002 is amended by striking ``this section'' and inserting
``subsection (e)''.
(f) Effective Date.--The amendments made by this section
shall take effect as if included in the enactment of section
601 of the Homeland Security Act of 2002.
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''
[[Page S5032]]
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. 7528. 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. 7528. 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
[[Page S5033]]
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--
[[Page S5034]]
(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.
[[Page S5035]]
``(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) Report Regarding Account Maintenance Fees.--The
Secretary of the Treasury shall study the adequacy of the
amount specified in section 45G(c)(2) of the Internal Revenue
Code of 1986 (as added by this section). Not later than
December 31, 2009, the Secretary of the Treasury shall report
the findings of the study described in the preceding sentence
to Congress.
(f) 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, as amended by this Act, is
amended by redesignating subsection (o) as subsection (p) and
by inserting after subsection (n) the following new
subsection:
``(o) 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
[[Page S5036]]
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:
[[Page S5037]]
``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(o)(1)) for the transaction giving
rise to the claimed benefit or the transaction was not
respected under section 7701(o)(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
[[Page S5038]]
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,
[[Page S5039]]
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.--
[[Page S5040]]
(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.
SEC. 723. SECURITIES CIVIL ENFORCEMENT PROVISIONS.
(a) Authority To Assess Civil Money Penalties.--
(1) Securities act of 1933.--Section 8A of the Securities
Act of 1933 (15 U.S.C. 77h-1) is amended by adding at the end
the following new subsection:
``(g) Authority of the Commission To Assess Money
Penalty.--
``(1) In general.--In any cease-and-desist proceeding under
subsection (a), the Commission may impose a civil monetary
penalty if it finds, on the record after notice and
opportunity for hearing, that a person is violating, has
violated, or is or was a cause of the violation of, any
provision of this title or any rule or regulation thereunder,
and that such penalty is in the public interest.
``(2) Maximum amount of penalty.--
``(A) First tier.--The maximum amount of penalty for each
act or omission described in paragraph (1) shall be $100,000
for a natural person or $250,000 for any other person.
``(B) Second tier.--Notwithstanding subparagraph (A), the
maximum amount of penalty for such act or omission described
in paragraph (1) shall be $500,000 for a natural person or
$1,000,000 for any other person, if the act or omission
involved fraud, deceit, manipulation, or deliberate or
reckless disregard of a statutory or regulatory requirement.
``(C) Third tier.--Notwithstanding subparagraphs (A) and
(B), the maximum amount of penalty for each act or omission
described in paragraph (1) shall be $1,000,000 for a natural
person or $2,000,000 for any other person, if--
``(i) the act or omission involved fraud, deceit,
manipulation, or deliberate or reckless disregard of a
statutory or regulatory requirement; and
``(ii) such act or omission directly or indirectly resulted
in substantial losses or created a significant risk of
substantial losses to other persons or resulted in
substantial pecuniary gain to the person who committed the
act or omission.
``(3) Evidence concerning ability to pay.--In any
proceeding in which the Commission or the appropriate
regulatory agency may impose a penalty under this section, a
respondent may present evidence of the ability of the
respondent to pay such penalty. The Commission or the
appropriate regulatory agency may, in its discretion,
consider such evidence in determining whether the penalty is
in the public interest. Such evidence may relate to the
extent of the person's ability to continue in business and
the collectability of a penalty, taking into account any
other claims of the United States or third parties upon the
assets of that person and the amount of the assets of that
person.''.
(2) Securities exchange act of 1934.--Section 21B(a) of the
Securities Exchange Act of 1934 (15 U.S.C. 78u-2(a)) is
amended--
(A) in paragraph (4), by striking ``supervision;'' and all
that follows through the end of the subsection and inserting
``supervision.'';
(B) by redesignating paragraphs (1) through (4) as
subparagraphs (A) through (D), respectively, and moving the
margins 2 ems to the right;
(C) by inserting ``that such penalty is in the public
interest and'' after ``hearing,'';
(D) by striking ``In any proceeding'' and inserting the
following:
``(1) In general.--In any proceeding''; and
(E) by adding at the end the following:
``(2) Other money penalties.--In any proceeding under
section 21C against any person, the Commission may impose a
civil monetary penalty if it finds, on the record after
notice and opportunity for hearing, that such person is
violating, has violated, or is or was a cause of the
violation of, any provision of this title or any rule or
regulation thereunder, and that such penalty is in the public
interest.''.
(3) Investment company act of 1940.--Section 9(d)(1) of the
Investment Company Act of 1940 (15 U.S.C. 80a-9(d)(1)) is
amended--
(A) in subparagraph (C), by striking ``therein;'' and all
that follows through the end of the paragraph and inserting
``supervision.'';
[[Page S5041]]
(B) by redesignating subparagraphs (A) through (C) as
clauses (i) through (iii), respectively, and moving the
margins 2 ems to the right;
(C) by inserting ``that such penalty is in the public
interest and'' after ``hearing,'';
(D) by striking ``In any proceeding'' and inserting the
following:
``(A) In general.--In any proceeding''; and
(E) by adding at the end the following:
``(B) Other money penalties.--In any proceeding under
subsection (f) against any person, the Commission may impose
a civil monetary penalty if it finds, on the record after
notice and opportunity for hearing, that such person is
violating, has violated, or is or was a cause of the
violation of, any provision of this title or any rule or
regulation thereunder, and that such penalty is in the public
interest.''.
(4) Investment advisers act of 1940.--Section 203(i)(1) of
the Investment Advisers Act of 1940 (15 U.S.C. 80b-3(i)(1))
is amended--
(A) in subparagraph (D), by striking ``supervision;'' and
all that follows through the end of the paragraph and
inserting ``supervision.'';
(B) by redesignating subparagraphs (A) through (D) as
clauses (i) through (iv), respectively, and moving the
margins 2 ems to the right;
(C) by inserting ``that such penalty is in the public
interest and'' after ``hearing,'';
(D) by striking ``In any proceeding'' and inserting the
following:
``(A) In general.--In any proceeding''; and
(E) by adding at the end the following:
``(B) Other money penalties.--In any proceeding under
subsection (k) against any person, the Commission may impose
a civil monetary penalty if it finds, on the record after
notice and opportunity for hearing, that such person is
violating, has violated, or is or was a cause of the
violation of, any provision of this title or any rule or
regulation thereunder, and that such penalty is in the public
interest.''.
(b) Increased Maximum Civil Money Penalties.--
(1) Securities act of 1933.--Section 20(d)(2) of the
Securities Act of 1933 (15 U.S.C. 77t(d)(2)) is amended--
(A) in subparagraph (A)(i)--
(i) by striking ``$5,000'' and inserting ``$100,000''; and
(ii) by striking ``$50,000'' and inserting ``$250,000'';
(B) in subparagraph (B)(i)--
(i) by striking ``$50,000'' and inserting ``$500,000''; and
(ii) by striking ``$250,000'' and inserting ``$1,000,000'';
and
(C) in subparagraph (C)(i)--
(i) by striking ``$100,000'' and inserting ``$1,000,000'';
and
(ii) by striking ``$500,000'' and inserting ``$2,000,000''.
(2) Securities exchange act of 1934.--
(A) Penalties.--Section 32 of the Securities Exchange Act
of 1934 (15 U.S.C. 78ff) is amended--
(i) in subsection (b), by striking ``$100'' and inserting
``$10,000''; and
(ii) in subsection (c)--
(I) in paragraph (1)(B), by striking ``$10,000'' and
inserting ``$500,000''; and
(II) in paragraph (2)(B), by striking ``$10,000'' and
inserting ``$500,000''.
(B) Insider trading.--Section 21A(a)(3) of the Securities
Exchange Act of 1934 (15 U.S.C. 78u-1(a)(3)) is amended by
striking ``$1,000,000'' and inserting ``$2,000,000''.
(C) Administrative proceedings.--Section 21B(b) of the
Securities Exchange Act of 1934 (15 U.S.C. 78u-2(b)) is
amended--
(i) in paragraph (1)--
(I) by striking ``$5,000'' and inserting ``$100,000''; and
(II) by striking ``$50,000'' and inserting ``$250,000'';
(ii) in paragraph (2)--
(I) by striking ``$50,000'' and inserting ``$500,000''; and
(II) by striking ``$250,000'' and inserting ``$1,000,000'';
and
(iii) in paragraph (3)--
(I) by striking ``$100,000'' and inserting ``$1,000,000'';
and
(II) by striking ``$500,000'' and inserting ``$2,000,000''.
(D) Civil actions.--Section 21(d)(3)(B) of the Securities
Exchange Act of 1934 (15 U.S.C. 78u(d)(3)(B)) is amended--
(i) in clause (i)--
(I) by striking ``$5,000'' and inserting ``$100,000''; and
(II) by striking ``$50,000'' and inserting ``$250,000'';
(ii) in clause (ii)--
(I) by striking ``$50,000'' and inserting ``$500,000''; and
(II) by striking ``$250,000'' and inserting ``$1,000,000'';
and
(iii) in clause (iii)--
(I) by striking ``$100,000'' and inserting ``$1,000,000'';
and
(II) by striking ``$500,000'' and inserting ``$2,000,000''.
(3) Investment company act of 1940.--
(A) Ineligibility.--Section 9(d)(2) of the Investment
Company Act of 1940 (15 U.S.C. 80a-9(d)(2)) is amended--
(i) in subparagraph (A)--
(I) by striking ``$5,000'' and inserting ``$100,000''; and
(II) by striking ``$50,000'' and inserting ``$250,000'';
(ii) in subparagraph (B)--
(I) by striking ``$50,000'' and inserting ``$500,000''; and
(II) by striking ``$250,000'' and inserting ``$1,000,000'';
and
(iii) in subparagraph (C)--
(I) by striking ``$100,000'' and inserting ``$1,000,000'';
and
(II) by striking ``$500,000'' and inserting ``$2,000,000''.
(B) Enforcement of investment company act.--Section
42(e)(2) of the Investment Company Act of 1940 (15 U.S.C.
80a-41(e)(2)) is amended--
(i) in subparagraph (A)--
(I) by striking ``$5,000'' and inserting ``$100,000''; and
(II) by striking ``$50,000'' and inserting ``$250,000'';
(ii) in subparagraph (B)--
(I) by striking ``$50,000'' and inserting ``$500,000''; and
(II) by striking ``$250,000'' and inserting ``$1,000,000'';
and
(iii) in subparagraph (C)--
(I) by striking ``$100,000'' and inserting ``$1,000,000'';
and
(II) by striking ``$500,000'' and inserting ``$2,000,000''.
(4) Investment advisers act of 1940.--
(A) Registration.--Section 203(i)(2) of the Investment
advisers Act of 1940 (15 U.S.C. 80b-3(i)(2)) is amended--
(i) in subparagraph (A)--
(I) by striking ``$5,000'' and inserting ``$100,000''; and
(II) by striking ``$50,000'' and inserting ``$250,000'';
(ii) in subparagraph (B)--
(I) by striking ``$50,000'' and inserting ``$500,000''; and
(II) by striking ``$250,000'' and inserting ``$1,000,000'';
and
(iii) in subparagraph (C)--
(I) by striking ``$100,000'' and inserting ``$1,000,000'';
and
(II) by striking ``$500,000'' and inserting ``$2,000,000''.
(B) Enforcement of investment advisers act.--Section
209(e)(2) of the Investment advisers Act of 1940 (15 U.S.C.
80b-9(e)(2)) is amended--
(i) in subparagraph (A)--
(I) by striking ``$5,000'' and inserting ``$100,000''; and
(II) by striking ``$50,000'' and inserting ``$250,000'';
(ii) in subparagraph (B)--
(I) by striking ``$50,000'' and inserting ``$500,000''; and
(II) by striking ``$250,000'' and inserting ``$1,000,000'';
and
(iii) in subparagraph (C)--
(I) by striking ``$100,000'' and inserting ``$1,000,000'';
and
(II) by striking ``$500,000'' and inserting ``$2,000,000''.
(c) Authority To Obtain Financial Records.--Section 21(h)
of the Securities Exchange Act of 1934 (15 U.S.C. 78u(h)) is
amended--
(1) by striking paragraphs (2) through (8);
(2) in paragraph (9), by striking ``(9)(A)'' and all that
follows through ``(B) The'' and inserting ``(3) The'';
(3) by inserting after paragraph (1), the following:
``(2) Access to financial records.--
``(A) In general.--Notwithstanding section 1105 or 1107 of
the Right to Financial Privacy Act of 1978, the Commission
may obtain access to and copies of, or the information
contained in, financial records of any person held by a
financial institution, including the financial records of a
customer, without notice to that person, when it acts
pursuant to a subpoena authorized by a formal order of
investigation of the Commission and issued under the
securities laws or pursuant to an administrative or judicial
subpoena issued in a proceeding or action to enforce the
securities laws.
``(B) Nondisclosure of requests.--If the Commission so
directs in its subpoena, no financial institution, or
officer, director, partner, employee, shareholder,
representative or agent of such financial institution, shall,
directly or indirectly, disclose that records have been
requested or provided in accordance with subparagraph (A), if
the Commission finds reason to believe that such disclosure
may--
``(i) result in the transfer of assets or records outside
the territorial limits of the United States;
``(ii) result in improper conversion of investor assets;
``(iii) impede the ability of the Commission to identify,
trace, or freeze funds involved in any securities
transaction;
``(iv) endanger the life or physical safety of an
individual;
``(v) result in flight from prosecution;
``(vi) result in destruction of or tampering with evidence;
``(vii) result in intimidation of potential witnesses; or
``(viii) otherwise seriously jeopardize an investigation or
unduly delay a trial.
``(C) Transfer of records to government authorities.--The
Commission may transfer financial records or the information
contained therein to any government authority, if the
Commission proceeds as a transferring agency in accordance
with section 1112 of the Right to Financial Privacy Act of
1978 (12 U.S.C. 3412), except that a customer notice shall
not be required under subsection (b) or (c) of that section
1112, if the Commission determines that there is reason to
believe that such notification may result in or lead to any
of the factors identified under clauses (i) through (viii) of
subparagraph (B) of this paragraph.'';
(4) by striking paragraph (10); and
[[Page S5042]]
(5) by redesignating paragraphs (11), (12), and (13) as
paragraphs (4), (5), and (6), respectively.
SEC. 724. REVIEW OF STATE AGENCY BLINDNESS AND DISABILITY
DETERMINATIONS.
Section 1633 of the Social Security Act (42 U.S.C. 1383b)
is amended by adding at the end the following:
``(e)(1) The Commissioner of Social Security shall review
determinations, made by State agencies pursuant to subsection
(a) in connection with applications for benefits under this
title on the basis of blindness or disability, that
individuals who have attained 18 years of age are blind or
disabled as of a specified onset date. The Commissioner of
Social Security shall review such a determination before any
action is taken to implement the determination.
``(2)(A) In carrying out paragraph (1), the Commissioner of
Social Security shall review--
``(i) at least 25 percent of all determinations referred to
in paragraph (1) that are made in fiscal year 2004; and
``(ii) at least 50 percent of all such determinations that
are made in fiscal year 2005 or thereafter.
``(B) In carrying out subparagraph (A), the Commissioner of
Social Security shall, to the extent feasible, select for
review the determinations which the Commissioner of Social
Security identifies as being the most likely to be
incorrect.''.
TITLE VIII--COMPASSION CAPITAL FUND
SEC. 801. SUPPORT FOR NONPROFIT COMMUNITY-BASED
ORGANIZATIONS; DEPARTMENT OF HEALTH AND HUMAN
SERVICES.
(a) Support for Nongovernmental Organizations.--The
Secretary of Health and Human Services (referred to in this
section as ``the Secretary'') may award grants to and enter
into cooperative agreements with nongovernmental
organizations, to--
(1) provide technical assistance for community-based
organizations, which may include--
(A) grant writing and grant management assistance, which
may include assistance provided through workshops and other
guidance;
(B) legal assistance with incorporation;
(C) legal assistance to obtain tax-exempt status; and
(D) information on, and referrals to, other nongovernmental
organizations that provide expertise in accounting, on legal
issues, on tax issues, in program development, and on a
variety of other organizational topics;
(2) provide information and assistance for community-based
organizations on capacity building;
(3) provide for community-based organizations information
on and assistance in identifying and using best practices for
delivering assistance to persons, families, and communities
in need;
(4) provide information on and assistance in utilizing
regional intermediary organizations to increase and
strengthen the capabilities of nonprofit community-based
organizations;
(5) assist community-based organizations in replicating
social service programs of demonstrated effectiveness; and
(6) encourage research on the best practices of social
service organizations.
(b) Support for States.--The Secretary--
(1) may award grants to and enter into cooperative
agreements with States and political subdivisions of States
to provide seed money to establish State and local offices of
faith-based and community initiatives; and
(2) shall provide technical assistance to States and
political subdivisions of States in administering the
provisions of this Act.
(c) Applications.--To be eligible to receive a grant or
enter into a cooperative agreement under this section, a
nongovernmental organization, State, or political subdivision
shall submit an application to the Secretary at such time, in
such manner, and containing such information as the Secretary
may require.
(d) Limitation.--In order to widely disburse limited
resources, no community-based organization (other than a
direct recipient of a grant or cooperative agreement from the
Secretary) may receive more than 1 grant or cooperative
agreement under this section for the same purpose.
(e) Authorization of Appropriations.--There are authorized
to be appropriated to carry out this section $85,000,000 for
fiscal year 2003, and such sums as may be necessary for each
of fiscal years 2004 through 2007.
(f) Definition.--In this section, the term ``community-
based organization'' means a nonprofit corporation or
association that has--
(1) not more than 6 full-time equivalent employees who are
engaged in the provision of social services; or
(2) a current annual budget (current as of the date the
entity seeks assistance under this section) for the provision
of social services, compiled and adopted in good faith, of
less than $450,000.
SEC. 802. SUPPORT FOR NONPROFIT COMMUNITY-BASED
ORGANIZATIONS; CORPORATION FOR NATIONAL AND
COMMUNITY SERVICE.
(a) Support for Nongovernmental Organizations.--The
Corporation for National and Community Service (referred to
in this section as ``the Corporation'') may award grants to
and enter into cooperative agreements with nongovernmental
organizations and State Commissions on National and Community
Service established under section 178 of the National and
Community Service Act of 1990 (42 U.S.C. 12638), to--
(1) provide technical assistance for community-based
organizations, which may include--
(A) grant writing and grant management assistance, which
may include assistance provided through workshops and other
guidance;
(B) legal assistance with incorporation;
(C) legal assistance to obtain tax-exempt status; and
(D) information on, and referrals to, other nongovernmental
organizations that provide expertise in accounting, on legal
issues, on tax issues, in program development, and on a
variety of other organizational topics;
(2) provide information and assistance for community-based
organizations on capacity building;
(3) provide for community-based organizations information
on and assistance in identifying and using best practices for
delivering assistance to persons, families, and communities
in need;
(4) provide information on and assistance in utilizing
regional intermediary organizations to increase and
strengthen the capabilities of community-based organizations;
(5) assist community-based organizations in replicating
social service programs of demonstrated effectiveness; and
(6) encourage research on the best practices of social
service organizations.
(b) Applications.--To be eligible to receive a grant or
enter into a cooperative agreement under this section, a
nongovernmental organization, State Commission, State, or
political subdivision shall submit an application to the
Corporation at such time, in such manner, and containing such
information as the Corporation may require.
(c) Limitation.--In order to widely disburse limited
resources, no community-based organization (other than a
direct recipient of a grant or cooperative agreement from the
Secretary) may receive more than 1 grant or cooperative
agreement under this section for the same purpose.
(d) Authorization of Appropriations.--There are authorized
to be appropriated to carry out this section $15,000,000 for
fiscal year 2003, and such sums as may be necessary for each
of fiscal years 2004 through 2007.
(e) Definition.--In this section, the term ``community-
based organization'' means a nonprofit corporation or
association that has--
(1) not more than 6 full-time equivalent employees who are
engaged in the provision of social services; or
(2) a current annual budget (current as of the date the
entity seeks assistance under this section) for the provision
of social services, compiled and adopted in good faith, of
less than $450,000.
SEC. 803. SUPPORT FOR NONPROFIT COMMUNITY-BASED
ORGANIZATIONS; DEPARTMENT OF JUSTICE.
(a) Support for Nongovernmental Organizations.--The
Attorney General may award grants to and enter into
cooperative agreements with nongovernmental organizations,
to--
(1) provide technical assistance for community-based
organizations, which may include--
(A) grant writing and grant management assistance, which
may include assistance provided through workshops and other
guidance;
(B) legal assistance with incorporation;
(C) legal assistance to obtain tax-exempt status; and
(D) information on, and referrals to, other nongovernmental
organizations that provide expertise in accounting, on legal
issues, on tax issues, in program development, and on a
variety of other organizational topics;
(2) provide information and assistance for community-based
organizations on capacity building;
(3) provide for community-based organizations information
on and assistance in identifying and using best practices for
delivering assistance to persons, families, and communities
in need;
(4) provide information on and assistance in utilizing
regional intermediary organizations to increase and
strengthen the capabilities of nonprofit community-based
organizations;
(5) assist community-based organizations in replicating
social service programs of demonstrated effectiveness; and
(6) encourage research on the best practices of social
service organizations.
(b) Applications.--To be eligible to receive a grant or
enter into a cooperative agreement under this section, a
nongovernmental organization, State, or political subdivision
shall submit an application to the Attorney General at such
time, in such manner, and containing such information as the
Attorney General may require.
(c) Limitation.--In order to widely disburse limited
resources, no community-based organization (other than a
direct recipient of a grant or cooperative agreement from the
Attorney General) may receive more than 1 grant or
cooperative agreement under this section for the same
purpose.
(d) Authorization of Appropriations.--There are authorized
to be appropriated to carry out this section $35,000,000 for
fiscal year 2003, and such sums as may be necessary for each
of fiscal years 2004 through 2007.
(e) Definition.--In this section, the term ``community-
based organization'' means a nonprofit corporation or
association that has--
[[Page S5043]]
(1) not more than 6 full-time equivalent employees who are
engaged in the provision of social services; or
(2) a current annual budget (current as of the date the
entity seeks assistance under this section) for the provision
of social services, compiled and adopted in good faith, of
less than $450,000.
SEC. 804. SUPPORT FOR NONPROFIT COMMUNITY-BASED
ORGANIZATIONS; DEPARTMENT OF HOUSING AND URBAN
DEVELOPMENT.
(a) Support for Nongovernmental Organizations.--The
Secretary of Housing and Urban Development (referred to in
this section ``the Secretary'') may award grants to and enter
into cooperative agreements with nongovernmental
organizations, to--
(1) provide technical assistance for community-based
organizations, which may include--
(A) grant writing and grant management assistance, which
may include assistance provided through workshops and other
guidance;
(B) legal assistance with incorporation;
(C) legal assistance to obtain tax-exempt status; and
(D) information on, and referrals to, other nongovernmental
organizations that provide expertise in accounting, on legal
issues, on tax issues, in program development, and on a
variety of other organizational topics;
(2) provide information and assistance for community-based
organizations on capacity building;
(3) provide for community-based organizations information
on and assistance in identifying and using best practices for
delivering assistance to persons, families, and communities
in need;
(4) provide information on and assistance in utilizing
regional intermediary organizations to increase and
strengthen the capabilities of community-based organizations;
(5) assist community-based organizations in replicating
social service programs of demonstrated effectiveness; and
(6) encourage research on the best practices of social
service organizations.
(b) Applications.--To be eligible to receive a grant or
enter into a cooperative agreement under this section, a
nongovernmental organization, State, or political subdivision
shall submit an application to the Secretary at such time, in
such manner, and containing such information as the Secretary
may require.
(c) Limitation.--In order to widely disburse limited
resources, no community-based organization (other than a
direct recipient of a grant or cooperative agreement from the
Secretary) may receive more than 1 grant or cooperative
agreement under this section for the same purpose.
(d) Authorization of Appropriations.--There are authorized
to be appropriated to carry out this section $15,000,000 for
fiscal year 2003, and such sums as may be necessary for each
of fiscal years 2004 through 2007.
(e) Definition.--In this section, the term ``community-
based organization'' means a nonprofit corporation or
association that has--
(1) not more than 6 full-time equivalent employees who are
engaged in the provision of social services; or
(2) a current annual budget (current as of the date the
entity seeks assistance under this section) for the provision
of social services, compiled and adopted in good faith, of
less than $450,000.
SEC. 805. COORDINATION.
The Secretary of Health and Human Services, the Corporation
for National and Community Service, the Attorney General, and
the Secretary of Housing and Urban Development shall
coordinate their activities under this title to ensure--
(1) nonduplication of activities under this title; and
(2) an equitable distribution of resources under this
title.
TITLE IX--MATERNITY GROUP HOMES
SEC. 901. MATERNITY GROUP HOMES.
(a) Permissible Use of Funds.--Section 322 of the Runaway
and Homeless Youth Act (42 U.S.C. 5714-2) is amended--
(1) in subsection (a)(1), by inserting ``(including
maternity group homes)'' after ``group homes''; and
(2) by adding at the end the following:
``(c) Maternity Group Home.--In this part, the term
`maternity group home' means a community-based, adult-
supervised group home that provides young mothers and their
children with a supportive and supervised living arrangement
in which such mothers are required to learn parenting skills,
including child development, family budgeting, health and
nutrition, and other skills to promote their long-term
economic independence and the well-being of their
children.''.
(b) Contract for Evaluation.--Part B of the Runaway and
Homeless Youth Act (42 U.S.C. 5701 et seq.) is amended by
adding at the end the following:
``SEC. 323. CONTRACT FOR EVALUATION.
``(a) In General.--The Secretary shall enter into a
contract with a public or private entity for an evaluation of
the maternity group homes that are supported by grant funds
under this Act.
``(b) Information.--The evaluation described in subsection
(a) shall include the collection of information about the
relevant characteristics of individuals who benefit from
maternity group homes such as those that are supported by
grant funds under this Act and what services provided by
those maternity group homes are most beneficial to such
individuals.
``(c) Report.--Not later than 2 years after the date on
which the Secretary enters into a contract for an evaluation
under subsection (a), and biennially thereafter, the entity
conducting the evaluation under this section shall submit to
Congress a report on the status, activities, and
accomplishments of maternity group homes that are supported
by grant funds under this Act.''.
(c) Authorization of Appropriations.--Section 388 of the
Runaway and Homeless Youth Act (42 U.S.C. 5751) is amended--
(1) in subsection (a)(1)--
(A) by striking ``There'' and inserting the following:
``(A) In general.--There'';
(B) in subparagraph (A), as redesignated, by inserting
``and the purpose described in subparagraph (B)'' after
``other than part E''; and
(C) by adding at the end the following:
``(B) Maternity group homes.--There is authorized to be
appropriated, for maternity group homes eligible for
assistance under section 322(a)(1)--
``(i) $33,000,000 for fiscal year 2003; and
``(ii) such sums as may be necessary for fiscal year
2004.''; and
(2) in subsection (a)(2)(A), by striking ``paragraph (1)''
and inserting ``paragraph (1)(A)''.
Passed the Senate April 9, 2003.
Attest:
Secretary.
The PRESIDING OFFICER (Mr. Talent). Under the previous order, S. 476
will be held at the desk.
Mr. GRASSLEY. Madam President, I want to take a brief moment to thank
the many, many people that helped bring President Bush's words
supporting charities and charitable giving into reality.
First, I thank my colleague, Senator Baucus. I appreciate his
bipartisanship on this matter. The people of Montana are well served by
his leadership on the Senate Finance Committee. In addition, I thank
the Democratic staff on the Finance Committee, Russ Sullivan, Pat Heck
and Jon Selib, for their work.
At this time, I should also commend the work of my staff on the
Finance Committee, Dean Zerbe for the charitable provisions and Ed
McClellan for the corporate shelter legislation. In addition, Mark
Prater, Elizabeth Paris, Christy Mistr and Diann Howland were critical
in putting this bill together.
It is clear that without the drive and energy of Senators Santorum
and Lieberman we would not have had this success. I thank them for
their efforts and their staff: Randy Brandt and Chuck Ludlam.
I also thank all those behind the scenes who have toiled on the CARE
Act. Roger Colvineaux, Ron Schultz, Joe Naga from the Joint Committee
on Taxation, as well as Mark Mathiesen from Legislative Counsel who did
all the drafting.
Finally, let me note just a few of the members of the administration
who ably served the President in this effort: Jim Towey, David Kuo, and
Susan Brown at Treasury.
Thanks to all for their efforts.
Mr. MILLER. Mr. President, I rise today to express my thanks for the
Senate's passage of S. 476, the CARE Act, which included my amendment
requiring chief executive officers to sign their company's tax returns.
And I especially thank Senator Grassley and Senator Baucus and their
staffs for working with me on this issue.
I offered this amendment last summer when we were debating the
corporate governance bill amid the corporate scandals involving Enron,
World Com, and others. In these corporate scandals, the corporate big
shots got the gold mine while the poor employees and innocent
stockholders got the shaft.
Now, I am as probusiness as anyone in this body. As Governor and
Senator I have worked to give tax cuts and tax incentives and pay for
the training of their employees, all to provide a probusiness
environment in which the entrepreneurial spirit can thrive and prosper
and create jobs.
But folks, there comes a time when so much greed and so many lies
become so bad--even if it is by only a few--that something has to be
done. The corporate governance bill we passed last summer will go a
long way to protect the investor, provide some security for the worker
and restore confidence in the market place.
My amendment today will help even more. It is only two short
paragraphs, but it goes to the very essence of fairness. It simply says
that when the tax man cometh, we all--workers and high-dollar bosses
alike--must face him just alike without any go-betweens, liability
firewalls or corporate veils.
[[Page S5044]]
The standard 1040 tax form that individuals must fill out each year
says:
Under penalties of perjury, I declare that I have examined
this return and accompanying schedules and statements, and to
the best of my knowledge and belief they are true, correct
and complete.
If Joe Sixpack is required to sign this oath for his family, why
shouldn't Josepheus Chardonnay be required to sign that same oath for
his big corporation?
So, my amendment simply requires that henceforth the chief executive
officer of all publicly owned and publicly traded corporations must
sign the corporation's annual Federal tax return.
Currently, there is an IRS rule that corporations can designate any
corporate officer to sign their tax return. But that won't get it, Mr.
president. Let's be specific. The CEO is the one who must sign the tax
return and must be accountable for it.
Where I come from it is expected that those being paid to mind the
store should at least know whether the store is losing or making money.
If any CEO is not willing to sign the company tax return if they are
not willing to take steps to satisfy themselves that their corporation
is accurately reporting financial information--then those CEOs have no
right to the prestige and respect that goes with the position they
hold.
What is good for the goose is good for the gander.
So, I thank my colleagues for holding our CEOs to the same standard
that we now impose upon our average wage earners.
____________________