[Congressional Record Volume 149, Number 73 (Thursday, May 15, 2003)]
[Senate]
[Pages S6518-S6567]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                           TEXT OF AMENDMENTS

  SA 623. Mr. ROCKEFELLER submitted an amendment intended to be 
proposed by him to the bill S. 1054, to provide for reconciliation 
pursuant to section 201 of the concurrent resolution on the budget for 
fiscal year 2004; which was ordered to lie on the table; as follows:

       On page 281, between lines 2 and 3, insert the following:

     SEC. ____. $2,500,000,000 INCREASE IN NEW MARKETS TAX CREDIT 
                   FOR 2003.

       (a) In General.--The table contained in paragraph (1) of 
     section 45D(f) (relating to national limitation on amount of 
     investments designated) is amended by redesignating 
     subparagraphs (C) and (D) as subparagraphs (D) and (E), 
     respectively, and by striking subparagraph (B) and inserting 
     the following new subparagraphs:
       ``(B) $1,500,000,000 for 2002,
       ``(C) $4,000,000,000 for 2003,''.
       (b) Allocation Rules.--Section 45D(f)(2) (relating to 
     allocation of limitation) is amended by adding at the end the 
     following new flush sentence:

     ``For purposes of the preceding sentence, $2,500,000,000 of 
     the new markets tax credit limitation for 2003 shall be 
     allocated within 18 months after the date of the enactment of 
     the Jobs and Growth Tax Relief Reconciliation Act of 2003 by 
     the Community Development Financial Institutions Fund.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to calendar years after 2002.
       On page 19, lines 12 and 13, strike ``(20 percent in the 
     case of taxable years beginning after 2007)'' and insert 
     ``(15 percent in the case of taxable years beginning after 
     2007 and 20 percent in the case of taxable years beginning 
     after 2008)''.
       On page 26, lines 18 and 19, strike ``(80 percent in the 
     case of taxable years beginning after 2007)'' and insert 
     ``(85 percent in the case of taxable years beginning after 
     2007 and 80 percent in the case of taxable years beginning 
     after 2008)''.
       On page 26, lines 21 and 22, strike ``(80 percent in the 
     case of taxable years beginning after 2007)'' and insert 
     ``(85 percent in the case of taxable years beginning after 
     2007 and 80 percent in the case of taxable years beginning 
     after 2008)''.
                                 ______
                                 
  SA 624. Mr. BAUCUS proposed an amendment SA 555 proposed by Mr. 
Grassley to the bill S. 1054, to provide for reconciliation pursuant to 
section 201 of the concurrent resolution on the budget for fiscal year 
2004; as follows:

       On page 2, strike line 13 and insert:
       (b) Increase in Penalties.--
       (1) Attempt to evade or defeat tax.--Section 7201 is 
     amended--
       (A) by striking ``$100,000'' and inserting ``$250,000'',
       (B) by striking ``$500,000'' and inserting ``$1,000,000'', 
     and
       (C) by striking ``5 years'' and inserting ``10 years''.
       (2) Willful failure to file return, supply information, or 
     pay tax.--Section 7203 is amended--
       (A) in the first sentence--
       (i) by striking ``misdemeanor'' and inserting ``felony'', 
     and
       (ii) by striking ``1 year'' and inserting ``10 years'', and
       (B) by striking the third sentence.
       (3) Fraud and false statements.--Section 7206(a) (as 
     redesignated by subsection (a)) is amended--
       (A) by striking ``$100,000'' and inserting ``$250,000'',
       (B) by striking ``$500,000'' and inserting ``$1,000,000'', 
     and
       (C) by striking ``3 years'' and inserting ``5 years''.
       (c) Effective Date.--The amendments made by

                           *   *   *   *   *

                                 ______
                                 
  SA 625. Mr. HATCH (for himself, Mr. Breaux, Mrs. Lincoln, Mr. Smith, 
and Mr. Allard) submitted an amendment intended to be proposed by him 
to the bill S. 1054, to provide for reconciliation pursuant to section 
201 of the concurrent resolution on the budget for fiscal year 2004; as 
follows:

       At the end of title V add the following:

      Subtitle D--Provisions Relating To S Corporation Reform and 
                             Simplification

       PART I--MAXIMUM NUMBER OF SHAREHOLDERS OF AN S CORPORATION

     SEC. 541. MEMBERS OF FAMILY TREATED AS 1 SHAREHOLDER.

       (a) In General.--Paragraph (1) of section 1361(c) (relating 
     to special rules for applying subsection (b)) is amended to 
     read as follows:
       ``(1) Members of family treated as 1 shareholder.--
       ``(A) In general.--For purpose of subsection (b)(1)(A)--
       ``(i) except as provided in clause (ii), a husband and wife 
     (and their estates) shall be treated as 1 shareholder, and
       ``(ii) in the case of a family with respect to which an 
     election is in effect under subparagraph (E), all members of 
     the family shall be treated as 1 shareholder.
       ``(B) Members of the family.--For purpose of subparagraph 
     (A)(ii), the term `members of the family' means the common 
     ancestor, lineal descendants of the common ancestor and the 
     spouses of such lineal descendants or common ancestor.
       ``(C) Common ancestor.--For purposes of this paragraph, an 
     individual shall not be considered a common ancestor if, as 
     of the later of the effective date of this paragraph or the 
     time the election under section 1362(a) is made, the 
     individual is more than 6 generations removed from the 
     youngest generation of shareholders.
       ``(D) Effect of adoption, etc.--In determining whether any 
     relationship specified in subparagraph (B) or (C) exists, the 
     rules of section 152(b)(2) shall apply.
       ``(E) Election.--An election under subparagraph (A)(ii)--
       ``(i) must be made with the consent of all persons who are 
     shareholders (including those that are family members) in the 
     corporation on the day the election is made,
       ``(ii) in the case of--

       ``(I) an electing small business trust, shall be made by 
     the trustee of the trust, and
       ``(II) a qualified subchapter S trust, shall be made by the 
     beneficiary of the trust,

       ``(iii) under regulations, shall remain in effect until 
     terminated, and
       ``(iv) shall apply only with respect to 1 family in any 
     corporation.''.
       (b) Relief From Inadvertent Invalid Election or 
     Termination.--Section 1362(f) (relating to inadvertent 
     invalid elections or terminations), as amended by this Act, 
     is amended--
       (1) by inserting ``or under section 1361(c)(1)(A)(ii)'' 
     after ``section 1361(b)(3)(B)(ii)'' in paragraph (1), and
       (2) by inserting ``or under section 1361(c)(1)(E)(iii)'' 
     after ``section 1361(b)(3)(C)'' in paragraph (1)(B).
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 542. INCREASE IN NUMBER OF ELIGIBLE SHAREHOLDERS TO 100.

       (a) In General.--Section 1361(b)(1)(A) (defining small 
     business corporation) is amended by striking ``75'' and 
     inserting ``100''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 543. NONRESIDENT ALIENS ALLOWED AS BENEFICIARIES OF AN 
                   ELECTING SMALL BUSINESS TRUST.

       (a) In General.--Section 1361(e)(1)(A)(i)(I) is amended by 
     inserting ``(including a nonresident alien individual)'' 
     after ``individual''.
       (b) Conforming Amendment.--Clause (v) of section 
     1361(c)(2)(B) is amended by adding at the end the following 
     new sentence: ``This clause shall not apply for purposes of 
     subsection (b)(1)(C).''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.

 PART II--TERMINATION OF ELECTION AND ADDITIONS TO TAX DUE TO PASSIVE 
                           INVESTMENT INCOME

     SEC. 544. MODIFICATIONS TO PASSIVE INCOME RULES.

       (a) Increased Percentage Limit.--
       (1) In general.--Subsection (a)(2) of section 1375 
     (relating to tax imposed when passive investment income of 
     corporation having accumulated earnings and profits exceeds 
     25 percent of gross receipts) is amended by striking ``25 
     percent'' and inserting ``60 percent''.

[[Page S6519]]

       (2) Conforming amendments.--
       (A) Section 26(b)(2)(J) is amended by striking ``25 
     percent'' and inserting ``60 percent''.
       (B) Section 1362(d)(3)(A)(i)(II) is amended by striking 
     ``25 percent'' and inserting ``60 percent''.
       (C) The heading for paragraph (3) of section 1362(d) is 
     amended by striking ``25 percent'' and inserting ``60 
     percent''.
       (D) Section 1375(b)(1)(A)(i) is amended by striking ``25 
     percent'' and inserting ``60 percent''.
       (E) The heading for section 1375 is amended by striking 
     ``25 PERCENT'' and inserting ``60 PERCENT''.
       (F) The table of sections for part III of subchapter S of 
     chapter 1 is amended by striking ``25 percent'' in the item 
     relating to section 1375 and inserting ``60 percent''.
       (b) Capital Gain Not Treated as Passive Investment 
     Income.--Section 1362(d)(3) is amended--
       (1) by striking ``annuities,'' and all that follows in 
     subparagraph (C)(i) and inserting ``and annuities.'', and
       (2) by striking subparagraphs (C)(iv) and (D) and by 
     redesignating subparagraph (E) as subparagraph (D).
       (c) Conforming amendments.--Section 1375(d) is amended by 
     striking ``subchapter C'' both places it appears and 
     inserting ``accumulated''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

           PART III--TREATMENT OF S CORPORATION SHAREHOLDERS

     SEC. 545. TRANSFER OF SUSPENDED LOSSES INCIDENT TO DIVORCE.

       (a) In General.--Section 1366(d) (relating to special rules 
     for losses and deductions) is amended by adding at the end 
     the following new paragraph:
       ``(4) Transfer of suspended losses and deductions when 
     stock is transferred incident to divorce.--For purposes of 
     paragraph (2), the transfer of any shareholder's stock in an 
     S corporation incident to a decree of divorce shall include 
     any loss or deduction described in such paragraph 
     attributable to such stock.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to transfers in taxable years beginning after 
     December 31, 2003.

     SEC. 546. USE OF PASSIVE ACTIVITY LOSS AND AT-RISK AMOUNTS BY 
                   QUALIFIED SUBCHAPTER S TRUST INCOME 
                   BENEFICIARIES.

       (a) In General.--Section 1361(d)(1) (relating to special 
     rule for qualified subchapter S trust) is amended--
       (1) by striking ``and'' at the end of subparagraph (A),
       (2) by striking the period at the end of subparagraph (B) 
     and inserting ``, and'', and
       (3) by adding at the end the following new subparagraph:
       ``(C) for purposes of applying sections 465 and 469(g) to 
     the beneficiary of the trust, the disposition of the S 
     corporation stock by the trust shall be treated as a 
     disposition by such beneficiary.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to transfers in taxable years beginning after 
     December 31, 2003.

     SEC. 547. DISREGARD OF UNEXERCISED POWERS OF APPOINTMENT IN 
                   DETERMINING POTENTIAL CURRENT BENEFICIARIES OF 
                   ESBT.

       (a) In General.--Section 1361(e)(2) (defining potential 
     current beneficiary) is amended by inserting ``(determined 
     without regard to any unexercised (in whole or in part) power 
     of appointment during such period)'' after ``of the trust'' 
     in the first sentence.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 548. CLARIFICATION OF ELECTING SMALL BUSINESS TRUST 
                   DISTRIBUTION RULES.

       (a) In General.--Section 641(c)(1) (relating to special 
     rules for taxation of electing small business trusts) is 
     amended--
       (1) by striking ``and'' at the end of subparagraph (A),
       (2) by redesignating subparagraph (B) as subparagraph (C), 
     and
       (3) by inserting after subparagraph (A) the following new 
     subparagraph:
       ``(B) any distribution attributable to the portion treated 
     as a separate trust shall be treated separately from any 
     distribution attributable to the portion not so treated, 
     and''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

                 PART IV--PROVISIONS RELATING TO BANKS

     SEC. 549. SALE OF STOCK IN IRA RELATING TO S CORPORATION 
                   ELECTION EXEMPT FROM PROHIBITED TRANSACTION 
                   RULES.

       (a) In General.--Section 4975(d) (relating to exemptions) 
     is amended by striking ``or'' at the end of paragraph (14), 
     by striking the period at the end of paragraph (15) and 
     inserting ``; or'', and by adding at the end the following 
     new paragraph:
       ``(16) a sale of stock held by a trust which constitutes an 
     individual retirement account under section 408(a) to the 
     individual for whose benefit such account is established if 
     such sale is pursuant to an election under section 
     1362(a).''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to sales of stock held by individual retirement 
     accounts on the date of the enactment of this Act.

     SEC. 550. EXCLUSION OF INVESTMENT SECURITIES INCOME FROM 
                   PASSIVE INCOME TEST FOR BANK S CORPORATIONS.

       (a) In General.--Section 1362(d)(3) (relating to where 
     passive investment income exceeds certain percentage of gross 
     receipts for 3 consecutive taxable years and corporation has 
     accumulated earnings and profits), as amended by this Act, is 
     amended by adding at the end the following new subparagraph:
       ``(E) Exception for banks; etc.--In the case of a bank (as 
     defined in section 581), a bank holding company (as defined 
     in section 246A(c)(3)(B)(ii)), or a qualified subchapter S 
     subsidiary which is a bank, the term `passive investment 
     income' shall not include--
       ``(i) interest income earned by such bank, bank holding 
     company, or qualified subchapter S subsidiary, or
       ``(ii) dividends on assets required to be held by such 
     bank, bank holding company, or qualified subchapter S 
     subsidiary to conduct a banking business, including stock in 
     the Federal Reserve Bank, the Federal Home Loan Bank, or the 
     Federal Agricultural Mortgage Bank or participation 
     certificates issued by a Federal Intermediate Credit Bank.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 551. TREATMENT OF QUALIFYING DIRECTOR SHARES.

       (a) In General.--Section 1361 (defining S corporation) is 
     amended by adding at the end the following new subsection:
       ``(f) Treatment of Qualifying Director Shares.--
       ``(1) In general.--For purposes of this subchapter--
       ``(A) qualifying director shares shall not be treated as a 
     second class of stock, and
       ``(B) no person shall be treated as a shareholder of the 
     corporation by reason of holding qualifying director shares.
       ``(2) Qualifying director shares defined.--For purposes of 
     this subsection, the term `qualifying director shares' means 
     any shares of stock in a bank (as defined in section 581) or 
     in a bank holding company registered as such with the Federal 
     Reserve System--
       ``(i) which are held by an individual solely by reason of 
     status as a director of such bank or company or its 
     controlled subsidiary; and
       ``(ii) which are subject to an agreement pursuant to which 
     the holder is required to dispose of the shares of stock upon 
     termination of the holder's status as a director at the same 
     price as the individual acquired such shares of stock.
       ``(3) Distributions.--A distribution (not in part or full 
     payment in exchange for stock) made by the corporation with 
     respect to qualifying director shares shall be includible as 
     ordinary income of the holder and deductible to the 
     corporation as an expense in computing taxable income under 
     section 1363(b) in the year such distribution is received.''.
       (b) Conforming Amendment.--Section 1366(a) is amended by 
     adding at the end the following new paragraph:
       ``(3) Allocation with respect to qualifying director 
     shares.--The holders of qualifying director shares (as 
     defined in section 1361(f)) shall not, with respect to such 
     shares of stock, be allocated any of the items described in 
     paragraph (1).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

              PART V--QUALIFIED SUBCHAPTER S SUBSIDIARIES

     SEC. 552. RELIEF FROM INADVERTENTLY INVALID QUALIFIED 
                   SUBCHAPTER S SUBSIDIARY ELECTIONS AND 
                   TERMINATIONS.

       (a) In General.--Section 1362(f) (relating to inadvertent 
     invalid elections or terminations) is amended--
       (1) by inserting ``or under section 1361(b)(3)(B)(ii)'' 
     after ``subsection (a)''in paragraph (1),
       (2) by inserting ``or under section 1361(b)(3)(C)'' after 
     ``subsection (d)'' in paragraph (1)(B),
       (3) by inserting ``or a qualified subchapter S subsidiary, 
     as the case may be'' after ``small business corporation'' in 
     paragraph (3)(A),
       (4) by inserting ``or a qualified subchapter S subsidiary, 
     as the case may be'' after ``S corporation'' in paragraph 
     (4), and
       (5) by inserting ``or a qualified subchapter S subsidiary, 
     as the case may be'' after ``S corporation'' in the matter 
     following paragraph (4).
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 553. INFORMATION RETURNS FOR QUALIFIED SUBCHAPTER S 
                   SUBSIDIARIES.

       (a) In General.--Section 1361(b)(3)(A) (relating to 
     treatment of certain wholly owned subsidiaries) is amended by 
     inserting ``and in the case of information returns required 
     under part III of subchapter A of chapter 61'' after 
     ``Secretary''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

                     PART VI--ADDITIONAL PROVISIONS

     SEC. 554. ELIMINATION OF ALL EARNINGS AND PROFITS 
                   ATTRIBUTABLE TO PRE-1983 YEARS.

       (a) In General.--Subsection (a) of section 1311 of the 
     Small Business Job Protection Act of 1996 is amended to read 
     as follows:
       ``(a) In General.--If a corporation was an electing small 
     business corporation under

[[Page S6520]]

     subchapter S of chapter 1 of the Internal Revenue Code of 
     1986 for any taxable year beginning before January 1, 1983, 
     the amount of such corporation's accumulated earnings and 
     profits (as of the beginning of the first taxable year 
     beginning after December 31, 2003) shall be reduced by an 
     amount equal to the portion (if any) of such accumulated 
     earnings and profits which were accumulated in any taxable 
     year beginning before January 1, 1983, for which such 
     corporation was an electing small business corporation under 
     such subchapter S.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.
                                 ______
                                 
  SA 626. Mr. HATCH submitted an amendment intended to be proposed by 
him to the bill S. 1054, to provide for reconciliation pursuant to 
section 201 of the concurrent resolution on the budget for fiscal year 
2004; as follows:

       At the appropriate place, add the following:

                       TITLE I--REIT CORRECTIONS

     SEC. 101. REVISIONS TO REIT ASSET TEST.

       (a) Expansion of Straight Debt Safe Harbor.--Section 856 
     (defining real estate investment trust) is amended--
       (1) in subsection (c) by striking paragraph (7), and
       (2) by adding at the end the following new subsection:
       ``(m) Safe Harbor in Applying Subsection (c)(4)--
       ``(1) In general.--In applying subclause (III) of 
     subsection (c)(4)(B)(iii), except as otherwise determined by 
     the Secretary in regulations, the following shall not be 
     considered securities held by the trust:
       ``(A) Straight debt securities of an issuer which meet the 
     requirements of paragraph (2).
       ``(B) Any loan to an individual or an estate.
       ``(C) Any section 467 rental agreement (as defined in 
     section 467(d)), other than with a person described in 
     subsection (d)(2)(B).
       ``(D) Any obligation to pay rents from real property (as 
     defined in subsection (d)(1)).
       ``(E) Any security issued by a State or any political 
     subdivision thereof, the District of Columbia, a foreign 
     government or any political subdivision thereof, or the 
     Commonwealth of Puerto Rico, but only if the determination of 
     any payment received or accrued under such security does not 
     depend in whole or in part on the profits of any entity not 
     described in this subparagraph or payments on any obligation 
     issued by such an entity.
       ``(F) Any security issued by a real estate investment 
     trust.
       ``(G) Any other arrangement as determined by the Secretary.
       ``(2) Special rules relating to straight debt securities.--
       ``(A) In general.--For purposes of paragraph (1)(A), 
     securities meet the requirements of this paragraph if such 
     securities are straight debt, as defined in section 
     1361(c)(5) (without regard to subparagraph (B)(iii) thereof).
       ``(B) Special rules relating to certain contingencies.--For 
     purposes of subparagraph (A), any interest or principal shall 
     not be treated as failing to satisfy section 1361(c)(5)(B)(i) 
     solely by reason of the fact that the time of payment of such 
     interest or principal is subject to a contingency, but only 
     if--
       ``(i) any such contingency does not have the effect of 
     changing the effective yield to maturity, as determined under 
     section 1272, other than a change in the annual yield to 
     maturity which either--
       ``(I) does not exceed the greater of 1/4 of 1 percent or 5 
     percent of the annual yield to maturity, or
       ``(II) results solely from a default or the exercise of a 
     prepayment right by the issuer of the debt, or
       ``(ii) neither the aggregate issue price nor the aggregate 
     face amount of the issuer's debt instruments held by the 
     trust exceeds $1,000,000 and not more than 12 months of 
     unaccrued interest can be required to be prepaid thereunder.
       ``(C) Special rules relating to corporate or partnership 
     issuers.--In the case of an issuer which is a corporation or 
     a partnership, securities that otherwise would be described 
     in paragraph (1)(A) shall be considered not to be so 
     described if the trust holding such securities and any of its 
     controlled taxable REIT subsidiaries (as defined in 
     subsection (d)(8)(A)(iv)) hold any securities of the issuer 
     which--
       ``(i) are not described in paragraph (1) (prior to the 
     application of paragraph (1)(C)), and
       ``(ii) have an aggregate value greater than 1 percent of 
     the issuer's outstanding securities.
       ``(3) Look-through rule for partnership securities.--
       ``(A) In general.--For purposes of applying subclause (III) 
     of subsection (c)(4)(B)(iii)--
       ``(i) a trust's interest as a partner in a partnership (as 
     defined in section 7701(a)(2)) shall not be considered a 
     security, and
       ``(ii) the trust shall be deemed to own its proportionate 
     share of each of the assets of the partnership.
       ``(B) Determination of trust's interest in partnership 
     assets.--For purposes of subparagraph (A), with respect to 
     any taxable year beginning after the date of the enactment of 
     this subparagraph--
       ``(i) the trust's interest in the partnership assets shall 
     be the trust's proportionate interest in any securities 
     issued by the partnership (determined without regard to 
     subparagraph (A)(i) and paragraph (4), but not including 
     securities described in paragraph (1)), and
       ``(ii) the value of any debt instrument shall be the 
     adjusted issue price thereof, as defined in section 
     1272(a)(4).
       ``(4) Certain partnership debt instruments not treated as a 
     security.--For purposes of applying subclause (III) of 
     subsection (c)(4)(B)(iii).--
       ``(A) any debt instrument issued by a partnership and not 
     described in paragraph (1) shall not be considered a security 
     to the extent of the trust's interest as a partner in the 
     partnership, and
       ``(B) any debt instrument issued by a partnership and not 
     described in paragraph (1) shall not be considered a security 
     if at least 75 percent of the partnership's gross income 
     (excluding gross income from prohibited transactions) is 
     derived from sources referred to in subsection (c)(3).
       ``(5) Secretarial guidance.--The Secretary is authorized to 
     provide guidance (including through the issuance of a written 
     determination, as defined in section 6110(b)) that an 
     arrangement shall not be considered a security held by the 
     trust for purposes of applying subclause (III) of subsection 
     (c)(4)(B)(iii) notwithstanding that such arrangement 
     otherwise could be considered a security under subparagraph 
     (F) of subsection (c)(5).''.

     SEC. 102. CLARIFICATION OF APPLICATION OF LIMITED RENTAL 
                   EXCEPTION.

       Subparagraph (A) of section 856(d)(8) (relating to special 
     rules for taxable REIT subsidiaries) is amended to read as 
     follows:
       ``(A) Limited rental exception.--
       ``(i) In general.--The requirements of this subparagraph 
     are met with respect to any property if at least 90 percent 
     of the leased space of the property is rented to persons 
     other than taxable REIT subsidiaries of such trust and other 
     than persons described in paragraph (2)(B).
       ``(ii) Rents must be substantially comparable.--Clause (i) 
     shall apply only to the extent that the amounts paid to the 
     trust as rents from real property (as defined in paragraph 
     (1) without regard to paragraph (2)(B)) from such property 
     are substantially comparable to such rents paid by the other 
     tenants of the trust's property for comparable space.
       ``(iii) Times for testing rent comparability.--The 
     substantial comparability requirement of clause (ii) shall be 
     treated as met with respect to a lease to a taxable REIT 
     subsidiary of the trust if such requirement is met under the 
     terms of the lease--
       ``(I) at the time such lease is entered into,
       ``(II) at the time of each extension of the lease, 
     including a failure to exercise a right to terminate, and
       ``(III) at the time of any modification of the lease 
     between the trust and the taxable REIT subsidiary if the rent 
     under such lease is effectively increased pursuant to such 
     modification.
       With respect to subclause (III), if the taxable REIT 
     subsidiary of the trust is a controlled taxable REIT 
     subsidiary of the trust, the term `rents from real property' 
     shall not in any event include rent under such lease to the 
     extent of the increase in such rent on account of such 
     modification.
       ``(iv) Controlled taxable Reit subsidiary.--For purposes of 
     clause (iii), the term `controlled taxable REIT subsidiary' 
     means, with respect to any real estate investment trust, any 
     taxable REIT subsidiary of such trust if such trust owns 
     directly or indirectly--
       ``(I) stock possessing more than 50 percent of the total 
     voting power of the outstanding stock of such subsidiary, or
       ``(II) stock having a value of more than 50 percent of the 
     total value of the outstanding stock of such subsidiary.
       ``(v) Continuing qualifications based on third party 
     actions.--If the requirements of clause (i) are met at a time 
     referred to in clause (iii), such requirements shall continue 
     to be treated as met so long as there is no increase in the 
     space leased to any taxable REIT subsidiary of such trust or 
     to any person described in paragraph (2)(B).
       ``(vi) Correction period.--If there is an increase referred 
     to in clause (v) during any calendar quarter with respect to 
     any property, the requirements of clause (iii) shall be 
     treated as met during the quarter and the succeeding quarter 
     if such requirements are met at the close of such succeeding 
     quarter.''.

     SEC. 103. DELETION OF CUSTOMARY SERVICES EXCEPTION.

       Subparagraph (B) of section 857(b)(7) (relating to 
     redetermined rents) is amended by striking clause (ii) and by 
     redesignating clauses (iii), (iv), (v), (vi), and (vii) as 
     clauses (ii), (iii), (iv), (v), and (vi), respectively.

     SEC. 104. CONFORMITY WITH GENERAL HEDGING DEFINITION.

       (a) Definition.--Subparagraph (G) of section 856(c)(5) 
     (relating to treatment of certain hedging instruments) is 
     amended to read as follows:
       ``(G) Treatment of certain hedging instruments--Except to 
     the extent provided by regulations, any income of a real 
     estate investment trust from a hedging transaction (as 
     defined in clause (ii) or (iii) of section 1221(b)(2)(A)) 
     which is clearly identified pursuant to section 1221(a)(7), 
     including gain from the sale or disposition of such a 
     transaction, shall not constitute gross income

[[Page S6521]]

     under paragraph (2) to the extent that the transaction hedges 
     any indebtedness incurred or to be incurred by the trust to 
     acquire or carry real estate assets.''

     SEC. 105. CONFORMITY WITH REGULATED INVESTMENT COMPANY RULES.

       Clause (i) of section 857(b)(5)(A) (relating to imposition 
     of tax in case of failure to meet certain requirements) is 
     amended by striking ``90 percent'' and inserting ``95 
     percent''.

     SEC. 106. PROHIBITED TRANSACTIONS PROVISIONS.

       (a) Expansion of Prohibited Transaction Safe Harbor.--
     Section 857(b)(6) (relating to income from prohibited 
     transactions) is amended by redesignating subparagraphs (D) 
     and (E) as subparagraphs (E) and (F), respectively, and by 
     inserting after subparagraph (C) the following new 
     subparagraph:
       ``(D) Certain sales not to constitute prohibited 
     transactions--For purposes of this part the term `prohibited 
     transaction' does not include a sale of property which is a 
     real estate asset (as defined in section 856(c)(5)(B)) if--
       ``(i) the trust held the property for not less than 4 years 
     in connection with the trade or business of producing timber,
       ``(ii) the aggregate expenditures made by the trust, or a 
     partner of the trust, during the 4-year period preceding the 
     date of sale which--
       ``(I) are includible in the basis of the property (other 
     than timberland acquisition expenditures), and
       ``(II) are directly related to operation of the property 
     for the production of timber or for the preservation of the 
     property for use as timberland,

     do not exceed 30 percent of the net selling price of the 
     property.

       ``(iii) the aggregate expenditures made by the trust, or a 
     partner of the trust, during the 4-year period preceding the 
     date of sale which--
       ``(I) are includible in the basis of the property (other 
     than timberland acquisition expenditures), and
       ``(II) are not directly related to operation of the 
     property for the production of timber, or for the 
     preservation of the property for use as timberland,

     do not exceed 5 percent of the net selling price of the 
     property,

       ``(iv)(I) during the taxable year the trust does not make 
     more than 7 sales of property (other than sales of 
     foreclosure property or sales to which section 1033 applies), 
     or
       ``(II) the aggregate adjusted bases (as determined for 
     purposes of computing earnings and profits) of property 
     (other than sales of foreclosure property or sales to which 
     section 1033 applies) sold during the taxable year does not 
     exceed 10 percent of the aggregate bases (as so determined) 
     of all of the assets of the trust as of the beginning of the 
     taxable year,
       ``(v) in the case that the requirement of clause (iv)(I) is 
     not satisfied, substantially all of the marketing 
     expenditures with respect to the property were made through 
     an independent contractor (as defined in section 856(d)(3)) 
     from whom the trust itself does not derive or receive any 
     income, and
       ``(vi) the sales price of the property sold by the trust to 
     its taxable REIT subsidiary is not base din whole or in part 
     on the income or profits of the subsidiary or the income or 
     profits that the subsidiary derives from the sale or 
     operation of such property.''

     SEC. 107. EFFECTIVE DATES.

       (a) In General.--Except as provided in subsection (b), the 
     amendments made by this title shall apply to taxable years 
     beginning after December 31, 2000.
       (b) Sections 105 Through 106--The amendments made by 
     sections 103, 104, 105 and 106 shall apply to taxable years 
     beginning after the date of the enactment of this Act.

                   TITLE III--REIT SAVINGS PROVISIONS

     SEC. 301. REVISIONS TO REIT PROVISIONS

       (a) Rules of Application for Failure to Satisfy Section 
     856(c)(4).--Section 856(c) (relating to definition of real 
     estate investment trust), as amended by section 101, is 
     amended by inserting after paragraph (6) the following new 
     paragraph:
       ``(7) Rules of application for failure to satisfy paragraph 
     (4)--
       ``(A) De minimis failure--A corporation, trust, or 
     association that fails to meet the requirements of paragraph 
     (4)(B)(iii) for a particular quarter shall nevertheless be 
     considered to have satisfied the requirements of such 
     paragraph for such quarter if--
       ``(i) such failure is due to the ownership of assets the 
     total value of which does not exceed the lesser of--
       ``(I) 1 percent of the total value of the trust's assets at 
     the end of the quarter for which such measurement is done, 
     and
       ``(II) $10,000,000, and
       ``(ii)(I) the corporation, trust, or association, following 
     the identification of such failure, disposes of assets in 
     order to meet the requirements of such paragraph within 6 
     months after the last day of the quarter in which the 
     corporation, trust or association's identification of the 
     failure to satisfy the requirements of such paragraph 
     occurred or such other time period prescribed by the 
     Secretary and in the manner prescribed by the Secretary, or
       ``(II) the requirements of such paragraph are otherwise met 
     within the time period specified in subclause (I).
       ``(B) Failures exceeding de minimis amount.--A corporation, 
     trust, or association that fails to meet the requirements of 
     paragraph (4) for a particular quarter shall nevertheless be 
     considered to have satisified the requirements of such 
     paragraph for such quarter if--
       ``(i) such failure involves the ownership of assets the 
     total value of which exceeds the de minimis standard 
     described in subparagraph (A)(i) at the end of the quarter 
     for which such measurement is done,
       ``(ii) following the corporation, trust, or association's 
     identification of the failure to satisfy the requirements of 
     such paragraph for a particular quarter, a description of 
     each asset that causes the corporation, trust, or association 
     to fail to satisfy the requirements of such paragraph at the 
     close of such quarter of any taxable year is set forth in a 
     schedule for such quarter filed in accordance with 
     regulations prescribed by the Secretary,
       ``(iii) the failure to meet the requirements of such 
     paragraph for a particular quarter is due to reasonable cause 
     and not due to willful neglect,
       ``(iv) the corporation, trust, and association pays a tax 
     computed under subparagraph (C), and
       ``(v)(I) the corporation, trust, or association disposes of 
     the assets set forth on the schedule specified in clause (ii) 
     within 6 months after the last day of the quarter in which 
     the corporation, trust or association's identification of the 
     failure to satisfy the requirements of such paragraph 
     occurred or such other time period prescribed by the 
     Secretary and in the manner prescribed by the Secretary, or
       ``(II) the requirements of such paragraph are otherwise met 
     within the time period specified in subclause (I).
       ``(C) Tax--For purposes of subparagraph (B)(iv)--
       ``(i) Tax Imposed.--If a corporation, trust, or association 
     elects the application of this subparagraph, there is hereby 
     imposed a tax on the failure described in subparagraph (B) of 
     such corporation, trust, or association. Such tax shall be 
     paid by the corporation, trust, or association.
       ``(ii) Tax computed.--The amount of the tax imposed by 
     clause (i) shall be the greater of--
       ``(I) $50,000, or
       ``(II) the amount determined (pursuant to regulations 
     promulgated by the Secretary) by multiplying the net income 
     generated by the assets described in the schedule specified 
     in subparagraph (B)(ii) for the period specified in clause 
     (iii) by the highest rate of tax specified in section 11.
       ``(iii) Period.--For purposes of clause (ii)(II), the 
     period described in this clause is the period beginning on 
     the first date that the failure to satisfy the requirements 
     of such paragraph (4) occurs as a result of the ownership of 
     such assets and ending on the earlier of the date on which 
     the trust disposes of such assets or the end of the first 
     quarter when there is no longer a failure to satisfy such 
     paragraph (4).
       ``(iv) Administrative provisions.--For purposes of subtitle 
     F, the taxes imposed by this subparagraph shall be treated as 
     excise taxes with respect to which the deficiency procedures 
     of such subtitle apply.''.
       (b) Modification of Rules of Application for Failure to 
     Satisfy Sections 856(c)(2) or 856(c)(3).--Paragraph (6) of 
     section 856(c) (relating to definition of real estate 
     investment trust) is amended by striking subparagraphs (A) 
     and (B), by redesignating subparagraph (C) as subparagraph 
     (B), and by inserting before subparagraph (B) (as so 
     redesignated) the following new subparagraph:
       ``(A) following the corporation, trust, or association's 
     identification of the failure to meet the requirements of 
     paragraph (2) or (3), or of both such paragraphs, for any 
     taxable year, a description of each item of its gross income 
     described in such paragraphs is set forth in a schedule for 
     such taxable year filed in accordance with regulations 
     prescribed by the Secretary, and''.
       (c) Reasonable Cause Exception to Loss of REIT Status if 
     Failure to Satisfy Requirements--Subsection (g) of section 
     856 (relating to termination of election) is amended--
       (1) in paragraph (1) by inserting before the period at the 
     end of the first sentence the following: `unless paragraph 
     (5) applies', and
       (2) by adding at the end the following new paragraph:
       ``(5) Entities to which paragraph applies--This paragraph 
     applies to a corporation, trust, or association--
       ``(A) which is not a real estate investment trust to which 
     the provisions of this part apply for the taxable year due to 
     one or more failures to comply with one or more of the 
     provisions of this part (other than subsection (c)(6) or 
     (c)(7) of section 856),
       ``(B) such failures are due to reasonable cause and not due 
     to willful neglect, and
       ``(C) if such corporation, trust, or association pays (as 
     prescribed by the Secretary in regulations and in the same 
     manner as tax) a penalty of $50,000 for each failure to 
     satisfy a provision of this part due to reasonable cause and 
     not willful neglect.''.
       (d) Deduction of Tax Paid From Amount Required To Be 
     Distributed--Subparagraph (E) of section 857(b)(2) is amended 
     by striking `(7)' and inserting `(7) of this subsection, 
     section 856(c)(7)(B)(iii), and section 856(g)(1).'.
       (e) Expansion of Deficiency Dividend Procedure--Subsection 
     (e) of section 860 is amended by striking `or' at the end of 
     paragraph (2), by striking the period at the end of paragraph 
     (3) and inserting `; or', and by adding at the end the 
     following new paragraph:

[[Page S6522]]

       ``(4) a statement by the taxpayer attached to its amendment 
     or supplement to a return of tax for the relevant tax 
     year.''.
       (f) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after date of 
     enactment.
                                 ______
                                 
  SA 627. Mr. HATCH submitted an amendment intended to be proposed by 
him to the bill S. 1054, to provide for reconciliation pursuant to 
section 201 of the concurrent resolution on the budget for fiscal year 
2004; as follows:

       At the end of subtitle C of title V, add the following:

     SEC. ____. EXCLUSION OF CERTAIN PUNITIVE DAMAGE AWARDS.

       (a) In General.--Section 104 (relating to compensation for 
     injuries or sickness) is amended by redesignating subsection 
     (d) as subsection (e), and by inserting after subsection (c) 
     the following new subsection:
       ``(d) Exclusion of Punitive Damages Paid to a State Under a 
     Split-Award Statute.--
       ``(1) In general.--The phrase `(other than punitive 
     damages)' in subsection (a) shall not apply to--
       ``(A) any portion of an award of punitive damages in a 
     civil action which is paid to a State under a split-award 
     statute, or
       ``(B) any attorneys' fees or other costs incurred by the 
     taxpayer in connection with obtaining an award of punitive 
     damages to which subparagraph (A) is applicable.
       ``(2) Split-award statute.--For purposes of this 
     subsection, the term `split-award statute' means a State law 
     that requires a fixed portion of an award of punitive damages 
     in a civil action to be paid to the State.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to awards made in taxable years ending after the 
     date of the enactment of this Act.
                                 ______
                                 
  SA 628. Mr. DORGAN submitted an amendment intended to be proposed by 
him to the bill S. 1054, to provide for reconciliation pursuant to 
section 201 of the concurrent resolution on the budget for fiscal year 
2004; which was ordered to lie on the table; as follows:

       On page 281, between lines 2 and 3, insert the following:

     SEC. ____. 5-YEAR EXTENSION OF CREDIT FOR ELECTRICITY 
                   PRODUCED FROM WIND.

       (a) In General.--Section 45(c)(3)(A) (relating to wind 
     facility) is amended by striking ``2004'' and inserting 
     ``2009''.
       (b) Delay in Acceleration of Top Rate Reduction In 
     Individual Income Tax Rates.--Notwithstanding the amendment 
     made by section 102(a) of this Act, in lieu of the percent 
     specified in the last column of the table in paragraph (2) of 
     section 1(i) of the Internal Revenue Code of 1986, as amended 
     by such section 102(a), for taxable years beginning during 
     calendar year 2003 ``37.6%'' shall be substituted for 
     ``35%''.
                                 ______
                                 
  SA 629. Mr. DORGAN submitted an amendment intended to be proposed by 
him to the bill S. 1054, to provide for reconciliation pursuant to 
section 201 of the concurrent resolution on the budget for fiscal year 
2004; which was ordered to lie on the table; as follows:

       Strike section 357.
                                 ______
                                 
  SA 630. Mr. DORGAN submitted an amendment intended to be proposed by 
him to the bill S. 1054, to provide for reconciliation pursuant to 
section 201 of the concurrent resolution on the budget for fiscal year 
2004; which was ordered to lie on the table; as follows:

       On page 281, between lines 2 and 3, insert the following:

     SEC. ____. 5-YEAR EXTENSION OF CREDIT FOR ELECTRICITY 
                   PRODUCED FROM WIND.

       Section 45(c)(3)(A) (relating to wind facility) is amended 
     by striking ``2004'' and inserting ``2009''.

       On page 19, line 13, strike ``2007'' and insert ``2008''.

       On page 26, line 19, strike ``2007'' and insert ``2008''.

       On page 26, line 22, strike ``2007'' and insert ``2008''.
                                 ______
                                 
  SA 631. Mr. DORGAN submitted an amendment intended to be proposed by 
him to the bill S. 1054, to provide for reconciliation pursuant to 
section 201 of the concurrent resolution on the budget for fiscal year 
2004; which was ordered to lie on the table; as follows:

       On page 8, strike the matter preceding line 1, and insert:


------------------------------------------------------------------------
                                 The corresponding percentages shall be
``In the case of taxable years       substituted for  the following
   beginning during calendar                  percentages:
             year:             -----------------------------------------
                                    28%        31%      36%      39.6%
------------------------------------------------------------------------
2001..........................     27.5%      30.5%    35.5%     39.1%
2002..........................     27.0%      30.0%    35.0%     38.6%
2003..........................     25.0%      28.0%    33.0%     35.3%
2004 and thereafter...........     25.0%      28.0%    33.0%    35.0%''.
------------------------------------------------------------------------

       Strike section 357.
                                 ______
                                 
  SA 632. Mr. DORGAN submitted an amendment intended to be proposed by 
him to the bill S. 1054, to provide for reconciliation pursuant to 
section 201 of the concurrent resolution on the budget for fiscal year 
2004; which was ordered to lie on the table; as follows:

       At the appropriate place, insert the following:

     SEC. ____. ENSURING DEFICIT REDUCTION.

       (a) Trigger.--Notwithstanding any other provision of this 
     Act, the provisions as described in subsection (b) shall take 
     effect only as provided in subsection (c).
       (b) Provision Described.--A provision of this Act described 
     in this subsection is--
       (1) a provision of this Act that accelerates the scheduled 
     phase down of the top tax rate of 38.6 percent to 37.6 
     percent in 2004 and to 35 percent in 2006; and
       (2) a provision of this Act that provides a 10 percent 
     dividends exclusion between December 31, 2003, and December 
     31, 2007, and a 20 percent dividends exclusion after December 
     31, 2007.
       (c) Delay.--
       (1) In general.--Each year when the final monthly Treasury 
     report for the most recently ended fiscal year is released, 
     the Secretary of the Treasury shall certify whether the on-
     budget deficit exceeds $300,000,000,000 for such year.
       (2) Effective date.--The provisions described in subsection 
     (b) shall become effective on January 1 in the calendar year 
     following the issuance of the final Treasury report only if 
     the Secretary has determined that the on-budget deficit is 
     $300,000,000,000 or less for the recently ended fiscal year.
       (d) Discretionary Spending Limitation.--
       (1) In general.--Notwithstanding any other provision of 
     law, in any fiscal year subject to the delay provisions of 
     subsection (c)--
       (A) the amount of budget authority for discretionary 
     spending for Federal agency administrative overhead expenses 
     shall be limited to the level in the preceding fiscal year 
     minus 5 percent; and
       (B) with respect to a second or subsequent consecutive 
     fiscal year subject to this subsection, the amount of budget 
     authority for discretionary spending for Federal agency 
     administrative overhead expenses shall be limited to the 
     level in the preceding fiscal year.
       (2) Definition.--In this subsection, the term 
     ``administrative overhead expenses'' mean costs of resources 
     that are jointly or commonly used to produce 2 or more types 
     of outputs but are not specifically identifiable with any of 
     the outputs. Administrative overhead expenses include general 
     administrative services, general research and technology 
     support, rent, employee health and recreation facilities, and 
     operating and maintenance costs for buildings, equipment, and 
     utilities.
                                 ______
                                 
  SA 633. Mr. DORGAN submitted an amendment intended to be proposed by 
him to the bill S. 1054, to provide for reconciliation pursuant to 
section 201 of the concurrent resolution on the budget for fiscal year 
2004; which was ordered to lie on the table; as follows:

       At the appropriate place, insert the following:

     SEC. ____. MECHANISM TO PROTECT SOCIAL SECURITY

       (a) Certification.--
       (1) In general.--Each year, beginning in 2003, when the 
     Final Monthly Treasury Statement for the most recently 
     completed fiscal year is issued, the Secretary of the 
     Treasury shall--
       (A) certify whether there was a on-budget balance or 
     surplus in that fiscal year; and
       (B) estimate whether there would be an on-budget deficit in 
     any of the succeeding 10 fiscal years if the amendment made 
     by section 102 of this Act with respect to the highest 
     individual income tax rate takes effect January 1 of the 
     following year.
       (2) Estimate.--The calculations for the estimate under 
     paragraph (1)(B) shall be consistent with the baseline rules 
     specified in section 257 of the Balanced Budget and Emergency 
     Deficit Control Act of 1995, except for the assumption that 
     these provisions take effect and remain in effect 
     permanently.
       (b) Delay in Acceleration of Reduction of Highest 
     Individual Income Tax Rate.--Notwithstanding any other 
     provision of law or this Act, the amendment made by section 
     102 of this Act with respect to the highest individual income 
     tax rate shall not take effect until January 1 of the year 
     following--
       (1) a certification by the Secretary of the Treasury 
     pursuant to paragraph (a)(1)(A) that no on-budget deficit 
     existed in the preceding fiscal year; and
       (2) an estimate by the Secretary of the Treasury pursuant 
     to paragraph (a)(1)(B) that no on-budget deficits will occur 
     in any of the 10 succeeding fiscal years even if such 
     amendment takes effect.
                                 ______
                                 
  SA 634. Mr. DORGAN submitted an amendment intended to be proposed by 
him to the bill S. 1054, to provide for reconciliation pursuant to 
section 201 of the concurrent resolution on the budget for fiscal year 
2004; which was ordered to lie on the table; as follows:

       On page 281, between lines 2 and 3, insert the following:

[[Page S6523]]

                   Subtitle D--Medicare Improvements

     SEC. 531. EQUALIZING URBAN AND RURAL STANDARDIZED PAYMENT 
                   AMOUNTS UNDER THE MEDICARE INPATIENT HOSPITAL 
                   PROSPECTIVE PAYMENT SYSTEM.

       (a) In General.--Section 1886(d)(3)(A)(iv) of the Social 
     Security Act (42 U.S.C. 1395ww(d)(3)(A)(iv)) is amended--
       (1) by striking ``(iv) For discharges'' and inserting 
     ``(iv)(I) Subject to subclause (II), for discharges''; and
       (2) by adding at the end the following new subclause:
       ``(II) For discharges occurring in a fiscal year beginning 
     with fiscal year 2004, the Secretary shall compute a 
     standardized amount for hospitals located in any area within 
     the United States and within each region equal to the 
     standardized amount computed for the previous fiscal year 
     under this subparagraph for hospitals located in a large 
     urban area (or, beginning with fiscal year 2005, for 
     hospitals located in any area) increased by the applicable 
     percentage increase under subsection (b)(3)(B)(i) for the 
     fiscal year involved.''.
       (b) Conforming Amendments.--
       (1) Computing drg-specific rates.--Section 1886(d)(3)(D) of 
     the Social Security Act (42 U.S.C. 1395ww(d)(3)(D)) is 
     amended--
       (A) in the heading, by striking ``in different areas'';
       (B) in the matter preceding clause (i), by striking ``, 
     each of'';
       (C) in clause (i)--
       (i) in the matter preceding subclause (I), by inserting 
     ``for fiscal years before fiscal year 2004,'' before ``for 
     hospitals''; and
       (ii) in subclause (II), by striking ``and'' after the 
     semicolon at the end;
       (D) in clause (ii)--
       (i) in the matter preceding subclause (I), by inserting 
     ``for fiscal years before fiscal year 2004,'' before ``for 
     hospitals''; and
       (ii) in subclause (II), by striking the period at the end 
     and inserting ``; and''; and
       (E) by adding at the end the following new clause:
       ``(iii) for a fiscal year beginning after fiscal year 2003, 
     for hospitals located in all areas, to the product of--
       ``(I) the applicable standardized amount (computed under 
     subparagraph (A)), reduced under subparagraph (B), and 
     adjusted or reduced under subparagraph (C) for the fiscal 
     year; and
       ``(II) the weighting factor (determined under paragraph 
     (4)(B)) for that diagnosis-related group.''.
       (2) Technical conforming sunset.--Section 1886(d)(3) of the 
     Social Security Act (42 U.S.C. 1395ww(d)(3)) is amended--
       (A) in the matter preceding subparagraph (A), by inserting 
     ``, for fiscal years before fiscal year 1997,'' before ``a 
     regional adjusted DRG prospective payment rate''; and
       (B) in subparagraph (D), in the matter preceding clause 
     (i), by inserting ``, for fiscal years before fiscal year 
     1997,'' before ``a regional DRG prospective payment rate for 
     each region,''.

     SEC. 532. INCREASE IN LEVEL OF ADJUSTMENT FOR INDIRECT COSTS 
                   OF MEDICAL EDUCATION (IME).

       (a) In General.--Section 1886(d)(5)(B)(ii) of the Social 
     Security Act (42 U.S.C. 1395ww(d)(5)(B)(ii)) is amended--
       (1) in subclause (VI), by striking ``and'' at the end; and
       (2) by striking subclause (VII) and inserting the following 
     new subclauses:
       ``(VII) during fiscal year 2003, ``c'' is equal to 1.35.
       ``(VIII) during fiscal year 2004, ``c'' is equal to 1.85; 
     and
       ``(IX) on or after October 1, 2004, `c' is equal to 1.6.''.
       (b) Conforming Amendment Relating to Determination of 
     Standardized Amount.--Section 1886(d)(2)(C)(i) of the Social 
     Security Act (42 U.S.C. 1395ww(d)(2)(C)(i)) is amended--
       (1) by striking ``1999 or'' and inserting ``1999,''; and
       (2) by inserting ``, or of section 532(a) of the Jobs and 
     Growth Tax Relief Reconciliation Act of 2003'' after 
     ``2000''.

     SEC. 533. PERMANENT INCREASE IN MEDICARE PAYMENT FOR HOME 
                   HEALTH SERVICES FURNISHED IN A RURAL AREA.

       (a) In General.--Section 1895 of the Social Security Act 
     (42 U.S.C. 1395fff) is amended by adding at the end the 
     following new subsection:
       ``(f) Increase in Payment for Services Furnished in a Rural 
     Area.--
       ``(1) In general.--In the case of home health services 
     furnished in a rural area (as defined in section 
     1886(d)(2)(D)) on or after April 1, 2003, the Secretary shall 
     increase the payment amount otherwise made under this section 
     for such services by 10 percent.
       ``(2) Waiver of budget neutrality.--The Secretary shall not 
     reduce the standard prospective payment amount (or amounts) 
     under this section applicable to home health services 
     furnished during a period to offset the increase in payments 
     resulting from the application of paragraph (1).''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to services furnished on or after April 1, 2003.

     SEC. 534. 3-YEAR EXTENSION OF CERTAIN PAYMENT PROVISIONS FOR 
                   SKILLED NURSING FACILITY SERVICES UNDER THE 
                   MEDICARE PROGRAM.

       (a) 3-Year Extension of Temporary Increase in Nursing 
     Component of PPS Federal Rate.--Section 312(a) of Medicare, 
     Medicaid, and SCHIP Benefits Improvement and Protection Act 
     of 2000 (114 Stat. 2763A-498), as enacted into law by section 
     1(a)(6) of Public Law 106-554, is amended by striking ``, and 
     before October 1, 2002'' and inserting ``and before October 
     1, 2005''.
       (b) 3-Year Extension of Increase for Skilled Nursing 
     Facility Adjusted Federal Per Diem Rate Through Fiscal Year 
     2005.--Section 101(d) of the Medicare, Medicaid, and SCHIP 
     Balanced Budget Refinement Act of 1999 (113 Stat. 1501A-325), 
     as enacted into law by section 1000(a)(6) of Public Law 106-
     113, is amended--
       (1) in the heading, by striking ``and 2002'' and inserting 
     ``through 2005''; and
       (2) in paragraph (1), by striking ``and 2002'' and 
     inserting ``through 2005''.
       (c) Effective Date.--The amendments made by this section 
     shall be effective as if this section had been enacted before 
     October 1, 2002. The Secretary of Health and Human Services 
     shall promptly provide for such adjustments in payments as 
     may be required based on such amendments for services 
     furnished during periods before the date of implementation of 
     such amendments.

     SEC. 535. TWO-YEAR EXTENSION OF MORATORIUM ON THERAPY CAPS.

       Section 1833(g)(4) of the Social Security Act (42 U.S.C. 
     1395l(g)(4)) is amended by striking ``and 2002'' and 
     inserting ``2002, 2003, and 2004''.

     SEC. 536. COVERAGE OF IMMUNOSUPPRESSIVE DRUGS FOR ALL 
                   MEDICARE BENEFICIARIES.

       (a) In General.--Section 1861(s)(2)(J) (42 U.S.C. 
     1395x(s)(2)(J)) is amended by striking ``, to an individual 
     who receives'' and all that follows before the semicolon at 
     the end and inserting ``to an individual who has received an 
     organ transplant''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to drugs furnished on or after the date of the 
     enactment of this Act.

     SEC. 537. BUDGET PROVISIONS.

       (a) Inapplicability of Sunset.--The provisions of section 
     601(a) shall not apply to the provisions of, and amendments 
     made by, this subtitle.
       (b) Elimination of Acceleration of Top Rate Reduction In 
     Individual Income Tax Rates.--Notwithstanding the amendment 
     made by section 102(a) of this Act, in lieu of the percent 
     specified in the last column of the table in paragraph (2) of 
     section 1(i) of the Internal Revenue Code of 1986, as amended 
     by such section 102(a), for taxable years beginning during 
     calendar years 2003 and 2004, the following percentages shall 
     be substituted for such years:
       (1) For 2003, 38.6%.
       (2) For 2004, 37.6%.
                                 ______
                                 
  SA 635. Mr. LEVIN (for himself and Mr. Reid) submitted an amendment 
intended to be proposed by him to the bill S. 1054, to provide for 
reconciliation pursuant to section 201 of the concurrent resolution on 
the budget for fiscal year 2004; which was ordered to lie on the table; 
as follows:

       On page 15, line 8, strike ``$75,000'' and insert 
     ``$82,500''.
       Strike sections 341 and 342 of the bill and insert:

     SEC. 341. PREVENTION OF CORPORATE EXPATRIATION TO AVOID 
                   UNITED STATES INCOME TAX.

       (a) In General.--Paragraph (4) of section 7701(a) (defining 
     domestic) is amended to read as follows:
       ``(4) Domestic.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the term `domestic' when applied to a corporation or 
     partnership means created or organized in the United States 
     or under the law of the United States or of any State unless, 
     in the case of a partnership, the Secretary provides 
     otherwise by regulations.
       ``(B) Certain corporations treated as domestic.--
       ``(i) In general.--The acquiring corporation in a corporate 
     expatriation transaction shall be treated as a domestic 
     corporation.
       ``(ii) Corporate expatriation transaction.--For purposes of 
     this subparagraph, the term `corporate expatriation 
     transaction' means any transaction if--

       ``(I) a nominally foreign corporation (referred to in this 
     subparagraph as the `acquiring corporation') acquires, as a 
     result of such transaction, directly or indirectly 
     substantially all of the properties held directly or 
     indirectly by a domestic corporation, and
       ``(II) immediately after the transaction, more than 80 
     percent of the stock (by vote or value) of the acquiring 
     corporation is held by former shareholders of the domestic 
     corporation by reason of holding stock in the domestic 
     corporation.

       ``(iii) Lower stock ownership requirement in certain 
     cases.--Subclause (II) of clause (ii) shall be applied by 
     substituting `50 percent' for `80 percent' with respect to 
     any nominally foreign corporation if--

       ``(I) such corporation does not have substantial business 
     activities (when compared to the total business activities of 
     the expanded affiliated group) in the foreign country in 
     which or under the law of which the corporation is created or 
     organized, and
       ``(II) the stock of the corporation is publicly traded and 
     the principal market for the public trading of such stock is 
     in the United States.

       ``(iv) Partnership transactions.--The term `corporate 
     expatriation transaction' includes any transaction if--

       ``(I) a nominally foreign corporation (referred to in this 
     subparagraph as the `acquiring corporation') acquires, as a 
     result of such

[[Page S6524]]

     transaction, directly or indirectly properties constituting a 
     trade or business of a domestic partnership,
       ``(II) immediately after the transaction, more than 80 
     percent of the stock (by vote or value) of the acquiring 
     corporation is held by former partners of the domestic 
     partnership or related foreign partnerships (determined 
     without regard to stock of the acquiring corporation which is 
     sold in a public offering related to the transaction), and
       ``(III) the acquiring corporation meets the requirements of 
     subclauses (I) and (II) of clause (iii).

       ``(v) Special rules.--For purposes of this subparagraph--

       ``(I) a series of related transactions shall be treated as 
     1 transaction, and
       ``(II) stock held by members of the expanded affiliated 
     group which includes the acquiring corporation shall not be 
     taken into account in determining ownership.

       ``(vi) Other definitions.--For purposes of this 
     subparagraph--

       ``(I) Nominally foreign corporation.--The term `nominally 
     foreign corporation' means any corporation which would (but 
     for this subparagraph) be treated as a foreign corporation.
       ``(II) Expanded affiliated group.--The term `expanded 
     affiliated group' means an affiliated group (as defined in 
     section 1504(a) without regard to section 1504(b)).
       ``(III) Related foreign partnership.--A foreign partnership 
     is related to a domestic partnership if they are under common 
     control (within the meaning of section 482), or they shared 
     the same trademark or tradename.''

       (b) Effective Dates.--
       (1) In general.--The amendment made by this section shall 
     apply to corporate expatriation transactions completed after 
     September 11, 2001.
       (2) Special rule.--The amendment made by this section shall 
     also apply to corporate expatriation transactions completed 
     on or before September 11, 2001, but only with respect to 
     taxable years of the acquiring corporation beginning after 
     December 31, 2003.

     SEC. 342. EXCISE TAX ON STOCK COMPENSATION OF INSIDERS IN 
                   INVERTED CORPORATIONS.

       (a) In General.--Subtitle D is amended by adding at the end 
     the following new chapter:

 ``CHAPTER 48--STOCK COMPENSATION OF INSIDERS IN INVERTED CORPORATIONS

``Sec. 5000A. Stock compensation of insiders in inverted corporations.

     ``SEC. 5000A. STOCK COMPENSATION OF INSIDERS IN INVERTED 
                   CORPORATIONS.

       ``(a) Imposition of Tax.--In the case of an individual who 
     is a disqualified individual with respect to any inverted 
     corporation, there is hereby imposed on such person a tax 
     equal to 20 percent of the value (determined under subsection 
     (b)) of the specified stock compensation held (directly or 
     indirectly) by or for the benefit of such individual or a 
     member of such individual's family (as defined in section 
     267) at any time during the 12-month period beginning on the 
     date which is 6 months before the inversion date.
       ``(b) Value.--For purposes of subsection (a)--
       ``(1) In general.--The value of specified stock 
     compensation shall be--
       ``(A) in the case of a stock option (or other similar 
     right) or any stock appreciation right, the fair value of 
     such option or right, and
       ``(B) in any other case, the fair market value of such 
     compensation.
       ``(2) Date for determining value.--The determination of 
     value shall be made--
       ``(A) in the case of specified stock compensation held on 
     the inversion date, on such date,
       ``(B) in the case of such compensation which is canceled 
     during the 6 months before the inversion date, on the day 
     before such cancellation, and
       ``(C) in the case of such compensation which is granted 
     after the inversion date, on the date such compensation is 
     granted.
       ``(c) Tax To Apply Only if Shareholder Gain Recognized.--
     Subsection (a) shall apply to any disqualified individual 
     with respect to an inverted corporation only if gain (if any) 
     on any stock in such corporation is recognized in whole or 
     part by any shareholder by reason of the acquisition referred 
     to in section 7701(a)(4)(B)(ii)(I) with respect to such 
     corporation.
       ``(d) Exception Where Gain Recognized on Compensation.--
     Subsection (a) shall not apply to--
       ``(1) any stock option which is exercised on the inversion 
     date or during the 6-month period before such date and to the 
     stock acquired in such exercise, and
       ``(2) any specified stock compensation which is sold, 
     exchanged, or distributed during such period in a transaction 
     in which gain or loss is recognized in full.
       ``(e) Definitions.--For purposes of this section--
       ``(1) Disqualified individual.--The term `disqualified 
     individual' means, with respect to a corporation, any 
     individual who, at any time during the 12-month period 
     beginning on the date which is 6 months before the inversion 
     date--
       ``(A) is subject to the requirements of section 16(a) of 
     the Securities Exchange Act of 1934 with respect to such 
     corporation or any member of the expanded affiliated group 
     which includes such corporation, or
       ``(B) would be subject to such requirements if such 
     corporation or member were an issuer of equity securities 
     referred to in such section.
       ``(2) Inverted corporation; inversion date.--
       ``(A) Inverted corporation.--The term `inverted 
     corporation' means any corporation to which section 
     7701(a)(4)(B) applies. Such term includes any predecessor or 
     successor of such a corporation.
       ``(B) Inversion date.--The term `inversion date' means, 
     with respect to a corporation, the date on which the 
     corporation first becomes an inverted corporation.
       ``(3) Specified stock compensation.--
       ``(A) In general.--The term `specified stock compensation' 
     means payment (or right to payment) granted by the inverted 
     corporation (or by any member of the expanded affiliated 
     group which includes such corporation) to any person in 
     connection with the performance of services by a disqualified 
     individual for such corporation or member if the value of 
     such payment or right is based on (or determined by reference 
     to) the value (or change in value) of stock in such 
     corporation (or any such member).
       ``(B) Exceptions.--Such term shall not include--
       ``(i) any option to which part II of subchapter D of 
     chapter 1 applies, or
       ``(ii) any payment or right to payment from a plan referred 
     to in section 280G(b)(6).
       ``(4) Expanded affiliated group.--The term `expanded 
     affiliated group' means an affiliated group (as defined in 
     section 1504(a) without regard to section 1504(b)(3)); except 
     that section 1504(a) shall be applied by substituting `more 
     than 50 percent' for `at least 80 percent' each place it 
     appears.
       ``(f) Special Rules.--For purposes of this section--
       ``(1) Cancellation of restriction.--The cancellation of a 
     restriction which by its terms will never lapse shall be 
     treated as a grant.
       ``(2) Payment or reimbursement of tax by corporation 
     treated as specified stock compensation.--Any payment of the 
     tax imposed by this section directly or indirectly by the 
     inverted corporation or by any member of the expanded 
     affiliated group which includes such corporation--
       ``(A) shall be treated as specified stock compensation, and
       ``(B) shall not be allowed as a deduction under any 
     provision of chapter 1.
       ``(3) Certain restrictions ignored.--Whether there is 
     specified stock compensation, and the value thereof, shall be 
     determined without regard to any restriction other than a 
     restriction which by its terms will never lapse.
       ``(4) Property transfers.--Any transfer of property shall 
     be treated as a payment and any right to a transfer of 
     property shall be treated as a right to a payment.
       ``(5) Other administrative provisions.--For purposes of 
     subtitle F, any tax imposed by this section shall be treated 
     as a tax imposed by subtitle A.
       ``(g) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this section.''.
       (b) Denial of Deduction.--
       (1) In general.--Paragraph (6) of section 275(a) is amended 
     by inserting ``48,'' after ``46,''.
       (2) $1,000,000 limit on deductible compensation reduced by 
     payment of excise tax on specified stock compensation.--
     Paragraph (4) of section 162(m) is amended by adding at the 
     end the following new subparagraph:
       ``(G) Coordination with excise tax on specified stock 
     compensation.--The dollar limitation contained in paragraph 
     (1) with respect to any covered employee shall be reduced 
     (but not below zero) by the amount of any payment (with 
     respect to such employee) of the tax imposed by section 5000A 
     directly or indirectly by the inverted corporation (as 
     defined in such section) or by any member of the expanded 
     affiliated group (as defined in such section) which includes 
     such corporation.''.
       (c) Conforming Amendments.--
       (1) The last sentence of section 3121(v)(2)(A) is amended 
     by inserting before the period ``or to any specified stock 
     compensation (as defined in section 5000A) on which tax is 
     imposed by section 5000A''.
       (2) The table of chapters for subtitle D is amended by 
     adding at the end the following new item:

``Chapter 48. Stock compensation of insiders in inverted 
              corporations.''.

       (d) Effective Date.--The amendments made by this section 
     shall take effect on July 11, 2002, except that periods 
     before such date shall not be taken into account in applying 
     the periods in subsections (a) and (e)(1) of section 5000A of 
     the Internal Revenue Code of 1986, as added by this section.
                                 ______
                                 
  SA 636. Mr. EDWARDS submitted an amendment intended to be proposed by 
him to the bill S. 1054, to provide for reconciliation pursuant to 
section 201 of the concurrent resolution on the budget for fiscal year 
2004; which was ordered to lie on the table; as follows:

       At the end of subtitle C of title V, insert the following:

     SEC. ____. FAMILY LEAVE TAX CREDIT; REPEAL OF TAX BENEFITS 
                   RELATING TO COMPANY-OWNED LIFE INSURANCE.

       (a) In General.--
       (1) Allowance of credit.--Subpart A of part IV of 
     subchapter A of chapter 1 (relating to refundable credits) is 
     amended inserting after section 24 the following new section:

[[Page S6525]]

     ``SEC. 24A. FAMILY LEAVE CREDIT.

       ``(a) In General.--There shall be allowed as a credit 
     against the tax imposed by this chapter for the taxable year 
     with respect to each qualified child of the taxpayer an 
     amount equal to $500 ($1,000 in the case of taxable years 
     2005 and 2006, and $1,500 in the case of taxable years after 
     2006).
       ``(b) Limitation.--
       ``(1) In general.--The amount of the credit allowable under 
     subsection (a) shall be reduced (but not below zero) by $50 
     for each $1,000 (or fraction thereof) by which the taxpayer's 
     modified adjusted gross income exceeds the threshold amount. 
     For purposes of the preceding sentence, the term `modified 
     adjusted gross income' means adjusted gross income increased 
     by any amount excluded from gross income under section 911, 
     931, or 933.
       ``(2) Threshold amount.--For purposes of paragraph (1), the 
     term `threshold amount' means--
       ``(i) $110,000 in the case of a joint return,
       ``(ii) $75,000 in the case of an individual who is not 
     married, and
       ``(iii) $ 55,000 in the case of a married individual filing 
     a separate return.

     For purposes of this paragraph, marital status shall be 
     determined under section 7703.
       ``(c) Portion of Credit Refundable.--The aggregate credits 
     allowed to a taxpayer under subpart C shall be increased by 
     the lesser of--
       ``(1) the credit which would be allowed under this section 
     without regard to this subsection and the limitation under 
     section 26(a), or
       ``(2) the amount by which the aggregate amount of credits 
     allowed by this subpart (determined without regard to this 
     subsection) would increase if the limitation imposed by 
     section 26(a) were increased by the taxpayer's earned income 
     (within the meaning of section 32(c)(2)) over such 
     limitation.

     The amount of the credit allowed under this subsection shall 
     not be treated as a credit allowed under this subpart and 
     shall reduce the amount of credit otherwise allowable under 
     subsection (a) without regard to section 26(a).
       ``(d) Qualified Child.--For purposes of this section, the 
     term `qualified child' means with respect to any taxable 
     year--
       ``(1) except with respect to an individual described in 
     paragraph (2), any qualifying child (as defined in section 
     24(c) by substituting `age of 1' for `age of 17' in paragraph 
     (1)(B) thereof), and
       ``(2) any individual adopted by the taxpayer in such year 
     (within the meaning of section 23).
       ``(e) Inflation Adjustment.--
       ``(1) In general.--In the case of a taxable year beginning 
     after 2007, the $1,500 amount under subsection (a) shall be 
     increased by an amount equal to--
       ``(A) such dollar amount, multiplied by
       ``(B) the cost-of-living adjustment determined under 
     section 1(f)(3) for the calendar year in which the taxable 
     year begins, determined by substituting `calendar year 2006' 
     for calendar year `1992' in subparagraph (B) thereof.
       ``(2) Rounding.--If any amount as adjusted under 
     subparagraph (A) is not a multiple of $10, such amount shall 
     be rounded to the next lowest multiple of $10.''.
       (2) Credit Allowed Against Alternative Minimum Tax.--
       (A) In general.--Subsection (b) of section 24A (relating to 
     family leave credit), as added by paragraph (1), is amended 
     by adding at the end the following new paragraph:
       ``(3) Limitation based on amount of tax.--The credit 
     allowed under subsection (a) for any taxable year shall not 
     exceed the excess of--
       ``(A) the sum of the regular tax liability (as defined in 
     section 26(b)) plus the tax imposed by section 55, over
       ``(B) the sum of the credits allowable under this subpart 
     (other than this section and sections 23, 24, and 25B) and 
     section 27 for the taxable year.''.
       (B) Conforming amendments.--
       (i) The heading for section 24A(b) is amended to read as 
     follows: ``Limitations.--''.
       (B) The heading for section 24A(b)(1) is amended to read as 
     follows: ``Limitation based on adjusted gross income.--''.
       (C) Section 24A(c) is amended by striking ``section 26(a)'' 
     each place it appears and inserting ``subsection (b)(3)''.
       (D) Subparagraph (C) of section 25(e)(1) is amended by 
     inserting ``24A,'' after ``24,''.
       (E) Section 904(h) is amended by inserting ``24A,'' after 
     ``24,''.
       (F) Subsection (d) of section 1400C is amended by inserting 
     ``24A,'' after ``24,''.
       (3) Conforming amendment.--The table of sections for 
     subpart A of part IV of subchapter A of chapter 1 is amended 
     by inserting after the item relating to section 24 the 
     following new item:

``Sec. 24A. Family leave credit.''.

       (4) Effective Date.--
       (A) Except as provided in subparagraph (B), the amendments 
     made by this subsection shall apply to taxable years 
     beginning after December 31, 2002.
       (B) The amendments made by paragraph (2) shall apply to 
     taxable years beginning after December 31, 2003.
       (b) Repeal of Tax Benefits Relating to Company-Owned Life 
     Insurance.--
       (1) Inclusion of life insurance investment gains.--Section 
     72 (relating to annuities; certain proceeds of endowment and 
     life insurance contracts) is amended by inserting after 
     subsection (j) the following new subsection:
       ``(k) Treatment of Certain Company-Owned Life Insurance 
     Contracts.--In the case of a company-owned life insurance 
     contract, the income on the contract (as determined under 
     section 7702(g)) for any taxable year shall be includible in 
     gross income for such year unless the contract covers the 
     life solely of individuals who are key persons (as defined in 
     section 264(e)(3)).''.
       (2) Repeal of exclusion for death benefits.--Section 101 
     (relating to certain death benefits) is amended by adding at 
     the end the following new subsection:
       ``(j) Proceeds of Certain Company-Owned Life Insurance.--
     Notwithstanding any other provision of this section, there 
     shall be included in gross income of the beneficiary of a 
     company-owned life insurance contract (unless the contract 
     covers the life solely of individuals who are key persons (as 
     defined in section 264(e)(3)))--
       ``(1) amounts received during the taxable year under such 
     contract, less
       ``(2) the sum of amounts which the beneficiary establishes 
     as investment in the contract plus premiums paid under the 
     contract.

     Amounts included in gross income under the preceding sentence 
     shall be so included under section 72.''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to contracts entered into after the date of 
     enactment of this section.
       (c) Repeal of Dividend Exclusion.--The amendments made by 
     section 201 of this Act are repealed.
                                 ______
                                 
  SA 637. Mrs. BOXER submitted an amendment intended to be proposed by 
her to the bill S. 1054, to provide for reconciliation pursuant to 
section 201 of the concurrent resolution on the budget for fiscal year 
2004; which was ordered to lie on the table; as follows:

       On page 281, between lines 2 and 3, insert the following:

     SEC. . CHILD SUPPORT ENFORCEMENT.

       (a) No Effect on Rights and Liabilities.--Nothing in this 
     Act shall be construed to affect--
       (1) the right of an individual or State to receive any 
     child support payment; or
       (2) the obligation of an individual to pay child support.
       (b) Allowance of Bad Debt Deduction for Unpaid Child 
     Support Payments.--
       (1) In general.--Section 166 (relating to deduction for bad 
     debts) is amended by redesignating subsection (f) as 
     subsection (g) and by inserting after subsection (e) the 
     following new subsection:
       ``(f) Unpaid Child Support.--
       ``(1) In general.--In the case of a custodial parent who, 
     as of the close of the taxable year, is owed child support, 
     the amount of unpaid child support shall be deemed a canceled 
     debt as of such date, and shall be allowed as a deduction for 
     such taxable year.
       ``(2) Presumption of worthlessness.--Subsection (a) 
     (relating to worthless debts) shall not apply to child 
     support.
       ``(3) Subsequent payments.--If any unpaid child support 
     with respect to which a deduction was allowed under paragraph 
     (1) is subsequently paid to the custodial parent, the amount 
     of such payment shall not be included in the gross income of 
     the custodial parent, nor shall it be allowed as a deduction 
     to the delinquent debtor. The delinquent debtor shall be 
     neither required nor allowed to file an amended return in any 
     subsequent year to reflect the subsequent payment of unpaid 
     child support.
       ``(4) Full deduction from ordinary income.--Subsection (d) 
     (relating to the treatment of nonbusiness bad debt as a loss 
     from the sale or exchange of a capital asset) shall not apply 
     to the deductibility of unpaid child support.
       ``(5) Tax returns.--A custodial parent who wishes to deduct 
     the amount of unpaid child support shall include on the 
     return claiming the deduction the name and taxpayer 
     identification number of each child with respect to whom 
     child support payments to which this subsection applies are 
     required to be paid.
       ``(6) Information returns.--
       ``(A) In general.--A custodial parent who wishes to deduct 
     the amount of unpaid child support shall complete Form 1099-
     CS (or such other form as the Secretary may prescribe) and 
     provide such form to the Secretary, and (if the address is 
     known) to the delinquent debtor, within 45 days following the 
     close of the taxable year for which the deduction is claimed. 
     Failure to so file such form with the Secretary (or, if the 
     address is known, with the delinquent debtor) shall result in 
     disallowance of the deduction for the taxable year.
       ``(B) Contents of form.--The Form 1099-CS (or such other 
     form as the Secretary may prescribe) shall contain--
       ``(i) the total amount of child support owed (whether or 
     not paid) for such taxable year,
       ``(ii) the total amount of unpaid child support as of the 
     last day of such taxable year,
       ``(iii) the name, address (if known), and taxpayer 
     identification number of the delinquent debtor, and
       ``(iv) notice that the delinquent debtor is required to 
     include such total amount of unpaid child support in gross 
     income for the delinquent debtor's taxable year which 
     includes the last day of the custodial parent's taxable year.
       ``(C) Debtor's address unknown.--If the delinquent debtor's 
     address is not known to the custodial parent, the Form 1099-
     CS (or

[[Page S6526]]

     such other form as the Secretary may prescribe) shall 
     indicate that fact. In such a case, the Secretary may send 
     such notice if the address is available to the Secretary, and 
     the notice from the custodial parent to the delinquent debtor 
     under subparagraph (A) shall not be required.
       ``(7) Determination of whether child support is paid.--
       ``(A) Child support enforcement office records as 
     conclusive evidence of payment.--Child support shall be 
     treated as paid if such payment is recorded by the State 
     office of child support enforcement in which the custodial 
     parent is registered.
       ``(B) Timely mailing as timely payment.--A payment received 
     by the State office of child support enforcement in which the 
     custodial parent is registered after the last day of the 
     custodial parent's taxable year shall be treated for the 
     purpose of this subsection as paid on such day if the 
     postmark date falls on or before such day. The rules of 
     section 7502(f) and regulations issued thereunder shall apply 
     for purposes of this subparagraph.
       ``(8) Definitions.--For the purposes of this subsection--
       ``(A) Child support.--The term `child support' means--
       ``(i) any periodic payment of a fixed amount, or
       ``(ii) any payment of a medical expense, education expense, 
     insurance premium, or other similar item,
     which is required to be paid to a custodial parent by an 
     individual under a support instrument for the support of any 
     qualifying child of such individual. `Child support' does not 
     include any amount which is described in section 408(a)(3) of 
     the Social Security Act and which has been assigned to a 
     State.
       ``(B) Custodial parent.--The term `custodial parent' means 
     an individual who is entitled to receive child support and 
     who has registered with the appropriate State office of child 
     support enforcement charged with implementing section 454 of 
     the Social Security Act.
       ``(C) Delinquent debtor.--The term `delinquent debtor' 
     means a taxpayer who owes unpaid child support to a custodial 
     parent.
       ``(D) Qualifying child.--The term `qualifying child' means 
     a child of a custodial parent with respect to whom a 
     dependent deduction is allowable under section 151 for the 
     taxable year (or would be so allowable but for paragraph (2) 
     or (4) of section 152(e)).
       ``(E) Support instrument.--The term `support instrument' 
     means--
       ``(i) a decree of divorce or separate maintenance or a 
     written instrument incident to such a decree,
       ``(ii) a written separation agreement, or
       ``(iii) a decree (not described in clause (i)) of a court 
     or administrative agency requiring a parent to make payments 
     for the support or maintenance of 1 or more children of such 
     parent.
       ``(F) Unpaid child support.--The term `unpaid child 
     support' means child support that is payable for months 
     during a custodial parent's taxable year and unpaid as of the 
     last day of such taxable year, provided that such unpaid 
     amount as of such day equals or exceeds one-half of the total 
     amount of child support due to the custodial parent for such 
     year.''.
       (2) Deduction for nonitemizers.--Section 62(a) of such Code 
     is amended by inserting after paragraph (18) the following 
     new paragraph:
       ``(19) Unpaid child support payments.--The deduction 
     allowed by section 166(f).''.
       (3) Conforming amendment.--Section 166(d)(2) of such Code 
     is amended by striking ``or'' at the end of subparagraph (A), 
     by striking the period at the end of the subparagraph (B) and 
     by inserting ``, or'' and by adding at the end the following 
     new subparagraph:
       ``(C) a debt which constitutes unpaid child support payment 
     under subsection (f).''.
       (c) Inclusion in Income of Amount of Unpaid Child 
     Support.--Section 108 (relating to discharge of indebtedness 
     income) is amended by adding at the end the following new 
     subsection:
       ``(h) Unpaid Child Support.--
       ``(1) In general.--For purposes of this chapter, any unpaid 
     child support of a delinquent debtor for any taxable year 
     shall be treated as amounts includible in gross income of the 
     delinquent debtor for the taxable year.
       ``(2) Determination of whether child support is unpaid.--
       ``(A) In general.--Child support shall be treated as paid 
     if such payment is recorded by the State office of child 
     support enforcement in which the custodial parent is 
     registered.
       ``(B) Timely mailing as timely payment.--A payment received 
     by the State office of child support enforcement in which the 
     custodial parent is registered after the last day of the 
     custodial parent's taxable year shall be treated for the 
     purpose of this subsection as paid on such day if the 
     postmark date falls on or before such day. The rules of 
     section 7502(f) and regulations issued thereunder shall apply 
     for purposes of this subparagraph.
       ``(3) Definitions.--For the purposes of this subsection--
       ``(A) Child support.--The term `child support' means--
       ``(i) any periodic payment of a fixed amount, or
       ``(ii) any payment of a medical expense, education expense, 
     insurance premium, or other similar item,
     which is required to be paid to a custodial parent by an 
     individual under a support instrument for the support of any 
     qualifying child of such individual. `Child support' does not 
     include any amount which is described in section 408(a)(3) of 
     the Social Security Act and which has been assigned to a 
     State.
       ``(B) Custodial parent.--The term `custodial parent' means 
     an individual who is entitled to receive child support and 
     who has registered with the appropriate State office of child 
     support enforcement charged with implementing section 454 of 
     the Social Security Act.
       ``(C) Delinquent debtor.--The term `delinquent debtor' 
     means a taxpayer who owes unpaid child support to a custodial 
     parent.
       ``(D) Qualifying child.--The term `qualifying child' means 
     a child of a custodial parent with respect to whom a 
     dependent deduction is allowable under section 151 for the 
     taxable year (or would be so allowable but for paragraph (2) 
     or (4) of section 152(e)).
       ``(E) Support instrument.--The term `support instrument' 
     means--
       ``(i) a decree of divorce or separate maintenance or a 
     written instrument incident to such a decree,
       ``(ii) a written separation agreement, or
       ``(iii) a decree (not described in clause (i)) of a court 
     or administrative agency requiring a parent to make payments 
     for the support or maintenance of 1 or more children of such 
     parent.
       ``(F) Unpaid child support.--The term `unpaid child 
     support' means child support that is payable for months 
     during a custodial parent's taxable year and unpaid as of the 
     last day of such taxable year, provided that such unpaid 
     amount as of such day equals or exceeds one-half of the total 
     amount of child support due to the custodial parent for such 
     year.
       ``(4) Coordination with other laws.--Amounts treated as 
     income by paragraph (1) shall not be treated as income by 
     reason of paragraph (1) for the purposes of any provision of 
     law which is not an internal revenue law.''.
       (d) Taxpayer Information Regarding Child Support Not Basis 
     for Audit.--A discrepancy between the tax returns of a 
     custodial parent and a delinquent debtor concerning whether a 
     payment of child support has been made may not be used or 
     relied upon by the Internal Revenue Service in any way in 
     selecting an individual's tax return for a general audit.
       (e) Effective Date; Implementation.--The amendments made by 
     is section shall apply to taxable years beginning after 
     December 31, 2002. The Secretary of the Treasury shall 
     publish Form 1099-CS (or such other form that may be 
     prescribed to comply with the amendment made by subsection 
     (b)(1)) and regulations, if any, that may be deemed necessary 
     to carry out the purposes of this Act, not later than 90 days 
     after the date of enactment of this Act.

       On page 19, lines 12 and 13, strike ``(20 percent in the 
     case of taxable years beginning after 2007)''.

       On page 26, lines 18 and 19, strike ``(80 percent in the 
     case of taxable years beginning after 2007)''.

       On page 26, lines 21 and 22, strike ``(80 percent in the 
     case of taxable years beginning after 2007)''.
                                 ______
                                 
  SA 638. Mr. BUNNING submitted an amendment intended to be proposed by 
him to the bill S. 1054, to provide for reconciliation pursuant to 
section 201 of the concurrent resolution on the budget for fiscal year 
2004; which was ordered to lie on the table; as follows:

       At the appropriate place insert the following:

     SEC. ____. INCOME TAX CREDIT TO DISTILLED SPIRITS WHOLESALERS 
                   FOR COST OF CARRYING FEDERAL EXCISE TAXES ON 
                   BOTTLED DISTILLED SPIRITS.

       (a) In General.--Subpart A of part I of subchapter A of 
     chapter 51 of the Internal Revenue Code of 1986 (relating to 
     gallonage and occupational taxes) is amended by adding at the 
     end the following new section:

     ``SEC. 5011. INCOME TAX CREDIT FOR WHOLESALER'S AVERAGE COST 
                   OF CARRYING EXCISE TAX.

       ``(a) In General.--For purposes of section 38, in the case 
     of an eligible wholesaler, the amount of the distilled 
     spirits wholesalers credit for any taxable year is the amount 
     equal to the product of--
       ``(1) the number of cases of bottled distilled spirits--
       ``(A) which were bottled in the United States, and
       ``(B) which are purchased by such wholesaler during the 
     taxable year directly from the bottler of such spirits, and
       ``(2) the average tax-financing cost per case for the most 
     recent calendar year ending before the beginning of such 
     taxable year.
       ``(b) Eligible Wholesaler.--For purposes of this section, 
     the term `eligible wholesaler' means any person who holds--
       ``(1) a permit under the Federal Alcohol Administration Act 
     as a wholesaler of distilled spirits, or
       ``(2) a basic permit under such Act as a distiller, 
     rectifier, blender or warehouser and bottler of distilled 
     spirits and acts as a wholesaler selling distilled spirits to 
     a State agency.
       ``(c) Average Tax-Financing Cost.--
       ``(1) In general.--For purposes of this section, the 
     average tax-financing cost per case

[[Page S6527]]

     for any calendar year is the amount of interest which would 
     accrue at the deemed financing rate during a 60-day period on 
     an amount equal to the deemed Federal excise per case.
       ``(2) Deemed financing rate.--For purposes of paragraph 
     (1), the deemed financing rate for any calendar year is the 
     average of the corporate overpayment rates under paragraph 
     (1) of section 6621(a) (determined without regard to the last 
     sentence of such paragraph) for calendar quarters of such 
     year.
       ``(3) Deemed federal excise tax based on case of 12 80-
     proof 750ml bottles.--For purposes of paragraph (1), the 
     deemed Federal excise tax per case is $25.68.
       ``(4) Number of cases in lot.--For purposes of this 
     section, the number of cases in any lot of distilled spirits 
     shall be determined by dividing the number of liters in such 
     lot by 9.''.
       (b) Conforming Amendments.--
       (1) Subsection (b) of section 38 of the Internal Revenue 
     Code of 1986 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) in the case of an eligible wholesaler (as defined in 
     section 5011(b)), the distilled spirits wholesaler credit 
     determined under section 5011(a).''.
       (2) Subsection (d) of section 39 of such Code (relating to 
     carryback and carryforward of unused credits) is amended by 
     adding at the end the following new paragraph:
       ``(11) No carryback of section 5011 credit before january 
     1, 2003.--No portion of the unused business credit for any 
     taxable year which is attributable to the credit determined 
     under section 5011(a) may be carried back to a taxable year 
     beginning before January 1, 2003.''.
       (3) The table of sections for subpart A of part I of 
     subchapter A of chapter 51 of such Code is amended by adding 
     at the end the following new item:

``Sec. 5011. Income tax credit for wholesaler's average cost of 
              carrying excise tax.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2002.
                                 ______
                                 
  SA 639. Mr. SESSIONS (for himself and Mr. Allen) submitted an 
amendment intended to be proposed by him to the bill S. 1054, to 
provide for reconciliation pursuant to section 201 of the concurrent 
resolution on the budget for fiscal year 2004; as follows:

     Viz:
       Strike subsection (b) of section 601 and insert the 
     following:
       (b) Exceptions
       (1) Subsection (a) shall not apply to the provisions of, 
     and amendments made by, title I (other than section 107).
       (2) Subsection (a) shall not apply to Title III (other than 
     section 362) however the provisions within Title III shall 
     not apply to taxable years beginning after December 31, 2015.
                                 ______
                                 
  SA 640. Mr. KERRY submitted an amendment intended to be proposed by 
him to the bill S. 1054, to provide for reconciliation pursuant to 
section 201 of the concurrent resolution on the budget for fiscal year 
2004; which was ordered to lie on the table; as follows:

       On page 8, strike the matter preceding line 1, and insert:

------------------------------------------------------------------------
                                  The corresponding percentages shall be
                                      substituted for  the following
 ``In the case of taxable years                percentages:
 beginning during calendar year: ---------------------------------------
                                     28%       31%       36%      39.6%
------------------------------------------------------------------------
2001............................    27.5%     30.5%     35.5%     39.1%
2002............................    27.0%     30.0%     35.0%     38.6%
2003............................    25.0%     28.0%     33.0%     38.6%
2004 and 2005...................    25.0%     28.0%     33.0%     37.6%
2006 and thereafter.............    25.0%     28.0%     33.0%   35.0%''.
------------------------------------------------------------------------


       Strike title II.
       At the end of subtitle C of title V, insert:

     SEC. 529. REFUND OF EMPLOYEE PAYROLL TAXES.

       (a) Payment of Refunds.--
       (1) In general.--The Secretary of the Treasury shall pay, 
     out of any money in the Treasury not otherwise appropriated, 
     to each individual an amount equal to the lesser of--
       (A) $765, or
       (B) the amount of the individual's social security taxes 
     for 2001.
       (2) Payment in installments.--The Secretary of the Treasury 
     shall make the payment under paragraph (1) in two equal 
     installments--
       (A) the first of which shall be paid on the date which is 2 
     months after the date of the enactment of this Act, and
       (B) the second of which shall be paid on December 1, 2003.
     The Secretary may, after notice to the Senate and House of 
     Representatives, make adjustments in the timing of each 
     installment to the extent the adjustments are 
     administratively necessary.
       (3) No interest.--No interest shall be allowed on any 
     payment required by this subsection.
       (4) Certain individuals not eligible.--No payment shall be 
     made under this subsection to--
       (A) any estate or trust,
       (B) any nonresident alien, or
       (C) any individual with respect to whom a deduction under 
     section 151 of such Code is allowable to another taxpayer for 
     a taxable year beginning in 2001.
       (5) Social security taxes.--For purposes of this 
     subsection--
       (A) In general.--The term ``social security taxes'' has the 
     meaning given such term by section 24(d)(2) of the Internal 
     Revenue Code of 1986.
       (B) State and local employees not covered by social 
     security system.--In the case of any individual--
       (i) whose service is not treated as employment by reason of 
     section 3121(b)(7) of such Code (relating to exemption for 
     State and local employees), and
       (ii) who, without regard to this subparagraph, has no 
     social security taxes for 2001,
     the term ``social security taxes'' shall include the 
     individual's employee contributions to a governmental pension 
     plan by reason of the service described in clause (i).
       (b) 2002 Refund for Individuals Not Receiving Full 2001 
     Refund.--Subchapter B of chapter 65 (relating to abatements, 
     credits, and refunds) is amended by adding at the end the 
     following new section:

     ``SEC. 6429. REFUND OF CERTAIN 2002 PAYROLL TAXES.

       ``(a) In General.--Each eligible individual shall be 
     treated as having made a payment against the tax imposed by 
     chapter 1 for such individual's first taxable year beginning 
     in 2002 in an amount equal to the payroll tax refund amount 
     for such taxable year.
       ``(b) Payroll Tax Refund Amount.--For purposes of 
     subsection (a), the payroll tax refund amount is the excess 
     (if any) of--
       ``(1) the lesser of--
       ``(A) $765, or
       ``(B) the amount of the individual's social security taxes 
     for 2002, over
       ``(2) the amount of the payment to the individual under 
     section 529(a) of the Jobs and Growth Tax Relief 
     Reconciliation Act of 2003.
       ``(c) Eligible Individual.--For purposes of this section, 
     the term `eligible individual' means any individual other 
     than--
       ``(1) any estate or trust,
       ``(2) any nonresident alien, or
       ``(3) any individual with respect to whom a deduction under 
     section 151 is allowable to another taxpayer for a taxable 
     year beginning in 2002.
       ``(d) Timing of Payments.--In the case of any overpayment 
     attributable to this section, the Secretary shall, subject to 
     the provisions of this title, refund or credit such 
     overpayment as rapidly as possible and, to the extent 
     practicable, before December 31, 2003.
       ``(e) No Interest.--No interest shall be allowed on any 
     overpayment attributable to this section.
       ``(f) Social Security Taxes.--For purposes of this section, 
     the term `social security taxes' has the meaning given such 
     term by section 529(a)(5) of the Jobs and Growth Tax Relief 
     Reconciliation Act of 2003.''
       (c) Clerical Amendment.--The table of sections for 
     subchapter B of chapter 65 of such Code is amended by adding 
     at the end the following new item:

``Sec. 6429. Refund of certain 2002 payroll taxes.''
                                 ______
                                 
  SA 641. Mr. KERRY submitted an amendment intended to be proposed by 
him to the bill S. 1054, to provide for reconciliation pursuant to 
section 201 of the concurrent resolution on the budget for fiscal year 
2004; which was ordered to lie on the table; as follows:

       At the end of subtitle A of title IV, insert:

     SEC. ____. DEFERRED PAYMENT OF TAX BY CERTAIN SMALL 
                   BUSINESSES.

       (a) In General.--Subchapter B of chapter 62 (relating to 
     extensions of time for payment of tax) is amended by adding 
     at the end the following new section:

     ``SEC. 6168. EXTENSION OF TIME FOR PAYMENT OF TAX FOR CERTAIN 
                   SMALL BUSINESSES.

       ``(a) In General.--An eligible small business may elect to 
     pay the tax imposed by chapter 1 in 4 equal installments.
       ``(b) Limitation.--The maximum amount of tax which may be 
     paid in installments under this section for any taxable year 
     shall not exceed whichever of the following is the least:
       ``(1) The tax imposed by chapter 1 for the taxable year.
       ``(2) The amount contributed by the taxpayer into a BRIDGE 
     Account during such year.
       ``(3) The excess of $250,000 over the aggregate amount of 
     tax for which an election under this section was made by the 
     taxpayer (or any predecessor) for all prior taxable years.
       ``(c) Eligible Small Business.--For purposes of this 
     section--
       ``(1) In general.--The term `eligible small business' 
     means, with respect to any taxable year, any person if--
       ``(A) such person meets the active business requirements of 
     section 1202(e) throughout such taxable year,
       ``(B) the taxpayer has gross receipts of $10,000,000 or 
     less for the taxable year,
       ``(C) the gross receipts of the taxpayer for such taxable 
     year are at least 10 percent greater than the average annual 
     gross receipts of the taxpayer (or any predecessor) for the 2 
     prior taxable years, and
       ``(D) the taxpayer uses an accrual method of accounting.

[[Page S6528]]

       ``(2) Certain rules to apply.--Rules similar to the rules 
     of paragraphs (2) and (3) of section 448(c) shall apply for 
     purposes of this subsection.
       ``(d) Date for Payment of Installments; Time for Payment of 
     Interest.--
       ``(1) Date for payment of installments.--
       ``(A) In general.--If an election is made under this 
     section for any taxable year, the first installment shall be 
     paid on or before the due date for such installment and each 
     succeeding installment shall be paid on or before the date 
     which is 1 year after the date prescribed by this paragraph 
     for payment of the preceding installment.
       ``(B) Due date for first installment.--The due date for the 
     first installment for a taxable year shall be whichever of 
     the following is the earliest:
       ``(i) The date selected by the taxpayer.
       ``(ii) The date which is 2 years after the date prescribed 
     by section 6151(a) for payment of the tax for such taxable 
     year.
       ``(2) Time for payment of interest.--If the time for 
     payment of any amount of tax has been extended under this 
     section--
       ``(A) Interest for period before due date of first 
     installment.--Interest payable under section 6601 on any 
     unpaid portion of such amount attributable to the period 
     before the due date for the first installment shall be paid 
     annually.
       ``(B) Interest during installment period.--Interest payable 
     under section 6601 on any unpaid portion of such amount 
     attributable to any period after such period shall be paid at 
     the same time as, and as a part of, each installment payment 
     of the tax.
       ``(C) Interest in the case of certain deficiencies.--In the 
     case of a deficiency to which subsection (e)(3) applies for a 
     taxable year which is assessed after the due date for the 
     first installment for such year, interest attributable to the 
     period before such due date, and interest assigned under 
     subparagraph (B) to any installment the date for payment of 
     which has arrived on or before the date of the assessment of 
     the deficiency, shall be paid upon notice and demand from the 
     Secretary.
       ``(e) Special Rules.--
       ``(1) Application of limitation to partners and s 
     corporation shareholders.--
       ``(A) In general.--In applying this section to a 
     partnership which is an eligible small business--
       ``(i) the election under subsection (a) shall be made by 
     the partnership,
       ``(ii) the amount referred to in subsection (b)(1) shall be 
     the sum of each partner's tax which is attributable to 
     items of the partnership and assuming the highest marginal 
     rate under section 1, and
       ``(iii) the partnership shall be treated as the taxpayer 
     referred to in paragraphs (2) and (3) of subsection (b).
       ``(B) Overall limitation also applied at partner level.--In 
     the case of a partner in a partnership, the limitation under 
     subsection (b)(3) shall be applied at the partnership and 
     partner levels.
       ``(C) Similar rules for s corporations.--Rules similar to 
     the rules of subparagraphs (A) and (B) shall apply to 
     shareholders in an S corporation.
       ``(2) Acceleration of payment in certain cases.--
       ``(A) In general.--If--
       ``(i) the taxpayer ceases to meet the requirement of 
     subsection (c)(1)(A), or
       ``(ii) there is an ownership change with respect to the 
     taxpayer,

     then the extension of time for payment of tax provided in 
     subsection (a) shall cease to apply, and the unpaid portion 
     of the tax payable in installments shall be paid on or before 
     the due date for filing the return of tax imposed by chapter 
     1 for the first taxable year following such cessation.
       ``(B) Ownership change.--For purposes of subparagraph, in 
     the case of a corporation, the term `ownership change' has 
     the meaning given to such term by section 382. Rules similar 
     to the rules applicable under the preceding sentence shall 
     apply to a partnership.
       ``(3) Proration of deficiency to installments.--Rules 
     similar to the rules of section 6166(e) shall apply for 
     purposes of this section.
       ``(f) BRIDGE Account.--For purposes of this section--
       ``(1) In general.--The term `BRIDGE Account' means a trust 
     created or organized in the United States for the exclusive 
     benefit of an eligible small business, but only if the 
     written governing instrument creating the trust meets the 
     following requirements:
       ``(A) No contribution will be accepted for any taxable year 
     in excess of the amount allowed as a deferral under 
     subsection (b) for such year.
       ``(B) The trustee is a bank (as defined in section 408(n)) 
     or another person who demonstrates to the satisfaction of the 
     Secretary that the manner in which such person will 
     administer the trust will be consistent with the requirements 
     of this section.
       ``(C) The assets of the trust consist entirely of cash or 
     of obligations which have adequate stated interest (as 
     defined in section 1274(c)(2)) and which pay such interest 
     not less often than annually.
       ``(D) The assets of the trust will not be commingled with 
     other property except in a common trust fund or common 
     investment fund.
       ``(E) Amounts in the trust may be used only--
       ``(i) as security for a loan to the business or for 
     repayment of such loan, or
       ``(ii) to pay the installments under this section.
       ``(2) Account taxed as grantor trust.--The grantor of a 
     BRIDGE Account shall be treated for purposes of this title as 
     the owner of such Account and shall be subject to tax thereon 
     in accordance with subpart E of part I of subchapter J of 
     this chapter (relating to grantors and others treated as 
     substantial owners).
       ``(3) Time when payments deemed made.--For purposes of this 
     section, a taxpayer shall be deemed to have made a payment to 
     a BRIDGE Account on the last day of a taxable year if such 
     payment is made on account of such taxable year and is made 
     within 3\1/2\ months after the close of such taxable year.
       ``(g) Reports.--The Secretary may require such reporting as 
     the Secretary determines to be appropriate to carry out this 
     section.
       ``(h) Application of Section.--This section shall apply to 
     taxes imposed for taxable years beginning after December 31, 
     2002, and before January 1, 2006.''.
       (b) Priority of Lender.--Subsection (b) of section 6323 
     (relating to protection for certain interests even though 
     notice filed) is amended by adding at the end the following 
     new paragraph:
       ``(11) Loans secured by bridge accounts.--With respect to a 
     BRIDGE account (as defined in section 6168(f)) with any bank 
     (as defined in section 408(n)), to the extent of any loan 
     made by such bank without actual notice or knowledge of the 
     existence of such lien, as against such bank, if such loan is 
     secured by such account.''.
       (c) Clerical Amendment.--The table of sections for 
     subchapter B of chapter 62 is amended by adding at the end 
     the following new item:

``Sec.  6168. Extension of time for payment of tax for certain small 
              businesses.''.

       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2002.
                                 ______
                                 
  SA 642. Mr. KERRY submitted an amendment intended to be proposed by 
him to the bill S. 1054, to provide for reconciliation pursuant to 
section 201 of the concurrent resolution on the budget for fiscal year 
2004; which was ordered to lie on the table; as follows:

       On page 8, strike the matter preceding line 1, and insert:

------------------------------------------------------------------------
                                  The corresponding percentages shall be
                                      substituted for  the following
 ``In the case of taxable years                percentages:
beginning during calendar year: ----------------------------------------
                                    28%       31%       36%      39.6%
------------------------------------------------------------------------
  2001.........................    27.5%     30.5%     35.5%     39.1%
  2002.........................    27.0%     30.0%     35.0%     38.6%
  2003.........................    25.0%     28.0%     33.0%     38.6%
  2004 and 2005................    25.0%     28.0%     33.0%     37.6%
  2006 and thereafter..........    25.0%     28.0%     33.0%    35.0%''.
------------------------------------------------------------------------

       Strike title II.

       At the end of subtitle C of title V, insert:

     SEC. ____. MINIMUM TAX NOT TO APPLY TO INDIVIDUALS WITH 
                   ADJUSTED GROSS INCOME UNDER THRESHOLD AMOUNT.

       (a) Exemption.--Section 55 is amended by adding at the end 
     the following:
       ``(e) Exclusion of Individuals.--
       ``(1) In general.--In the case of any natural person, no 
     tax shall be imposed by this section if the adjusted gross 
     income of the taxpayer for the taxable year does not exceed 
     the threshold amount.
       ``(2) Threshold amount.--For purposes of this subsection, 
     the term `threshold amount' means--
       ``(A) $100,000 in the case of--
       ``(i) a joint return, or
       ``(ii) a surviving spouse,
       ``(B) $70,000 in the case of an individual who--
       ``(i) is not married, and
       ``(ii) is not a surviving spouse, and
       ``(C) $50,000 in the case of a married individual filing a 
     separate return.''
       (b) Conforming Amendment.--Section 55(a) is amended by 
     striking ``There'' and inserting ``Except as provided in 
     subsection (e), there''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2002.
                                 ______
                                 
  SA 643. Mr. KERRY submitted an amendment intended to be proposed by 
him to the bill S. 1054, to provide for reconciliation pursuant to 
section 201 of the concurrent resolution on the budget for fiscal year 
2004; which was ordered to lie on the table; as follows:

       On page 8, strike the matter preceding line 1, and insert:


------------------------------------------------------------------------
                                  The corresponding percentages shall be
                                      substituted for  the following
 ``In the case of taxable years                percentages:
 beginning during calendar year: ---------------------------------------
                                     28%       31%       36%      39.6%
------------------------------------------------------------------------
2001............................    27.5%     30.5%     35.5%     39.1%
2002............................    27.0%     30.0%     35.0%     38.6%
2003............................    25.0%     28.0%     33.0%     38.6%
2004 and 2005...................    25.0%     28.0%     33.0%     37.6%
2006 and thereafter.............    25.0%     28.0%     33.0%   35.0%''.
------------------------------------------------------------------------

       At the end of subtitle C of title V, insert:

[[Page S6529]]

     SEC.  . INCOME TAX CREDIT FOR EMPLOYERS HIRING NEW EMPLOYEES 
                   OR INCREASING WAGES IN 2003.

       (a) In General.--Subpart F of part IV of subchapter A of 
     chapter 1 (relating to rules for computing work opportunity 
     credit) is amended by inserting after section 51A the 
     following new section:

     ``SEC. 51B. REFUND OF PAYROLL TAXES ATTRIBUTABLE TO NEW 
                   EMPLOYEES AND INCREASED WAGES DURING 2003.

       ``(a) General Rule.--In the case of an employee's first 
     taxable year beginning in 2003, the amount of the work 
     opportunity credit determined under section 51 (without 
     regard to this section) for the taxable year shall be 
     increased by the increased wages payroll tax rebate amount.
       ``(b) Increased Wages Payroll Tax Rebate Amount.--For 
     purposes of this section, the term `increased wages payroll 
     tax rebate amount' means an amount equal to 10 percent of the 
     excess (if any) of--
       ``(1) the wages paid or incurred by the employer with 
     respect to employment during 2003, over
       ``(2) the sum of--
       ``(A) the wages paid or incurred by the employer with 
     respect to employment during 2002, plus
       ``(B) an amount equal to the amount determined under 
     subparagraph (A) multiplied by a percentage equal to the 
     percentage change in the contribution and benefit base under 
     section 230 of the Social Security Act from 2002 to 2003.
       ``(c) Other Definitions and Rules.--For purposes of this 
     section--
       ``(1) Wages.--
       ``(A) In general.--The term `wages' has the meaning given 
     such term by section 3121(a).
       ``(B) Special role for railroad employers.--In the case of 
     any employer subject to tax under chapter 22 with respect to 
     any employee, the term `wages' includes compensation within 
     the meaning of section 3231(e).
       ``(2) Predecessors.--Any reference in this section to an 
     employer shall include a reference to a predecessor.
       ``(3) Other rules.--Rules similar to the rules of sections 
     51(k) and 52 shall apply.
       ``(d) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary to carry out this section, 
     including regulations for the application of this section in 
     the case of acquisitions and dispositions.''
       (b) Conforming Amendment.--The table of sections for 
     subpart F of part IV of subchapter A of chapter 1 is amended 
     by inserting after the item relating to section 51A the 
     following new item:

``Sec. 51B. Refund of payroll taxes attributable to new employees and 
              increased wages during 2003.''
                                 ______
                                 
  SA 644. Mr. BAUCUS (for himself and Mr. Grassley) submitted an 
amendment intended to be proposed by him to the bill S. 1054, to 
provide for reconciliation pursuant to section 201 of the concurrent 
resolution on the budget for fiscal year 2004; as follows:

       At the end, insert the following:

          TITLE VII--EXTENSIONS OF CERTAIN EXPIRING PROVISIONS

             Subtitle A--Extensions of Expiring Provisions

     SEC. 701. PARITY IN THE APPLICATION OF CERTAIN LIMITS TO 
                   MENTAL HEALTH BENEFITS.

       (a) In General.--Subsection (f) of section 9812 is amended 
     by striking ``2003'' and inserting ``2004''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to plan years beginning after December 31, 2002.

     SEC. 702. ALLOWANCE OF NONREFUNDABLE PERSONAL CREDITS AGAINST 
                   REGULAR AND MINIMUM TAX LIABILITY.

       (a) In General.--Paragraph (2) of section 26(a) is 
     amended--
       (1) by striking ``rule for 2000, 2001, 2002, and 2003.--'' 
     and inserting ``rule for 2000, 2001, 2002, 2003, and 2004.--
     '', and
       (2) by striking ``during 2000, 2001, 2002, or 2003,'' and 
     inserting ``during 2000, 2001, 2002, 2003, or 2004''.
       (b) Conforming Amendments.--
       (1) Section 904(h) is amended by striking ``during 2000, 
     2001, 2002, or 2003'' and inserting ``during 2000, 2001, 
     2002, 2003, or 2004''.
       (2) The amendments made by sections 201(b), 202(f), and 
     618(b) of the Economic Growth and Tax Relief Reconciliation 
     Act of 2001 shall not apply to taxable years beginning during 
     2004.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2002.

     SEC. 703. CREDIT FOR ELECTRICITY PRODUCED FROM CERTAIN 
                   RENEWABLE RESOURCES.

       (a) In General.--Subparagraphs (A), (B), and (C) of section 
     45(c)(3) are each amended by striking ``2004'' and inserting 
     ``2005''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to facilities placed in service after December 
     31, 2002.

     SEC. 704. WORK OPPORTUNITY CREDIT.

       (a) In General.--Subparagraph (B) of section 51(c)(4) is 
     amended by striking ``2003'' and inserting ``2004''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to individuals who begin work for the employer 
     after December 31, 2002.

     SEC. 705. WELFARE-TO-WORK CREDIT.

       (a) In General.--Subsection (f) of section 51A is amended 
     by striking ``2003'' and inserting ``2004''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to individuals who begin work for the employer 
     after December 31, 2002.

     SEC. 706. TAXABLE INCOME LIMIT ON PERCENTAGE DEPLETION FOR 
                   OIL AND NATURAL GAS PRODUCED FROM MARGINAL 
                   PROPERTIES.

       (a) In General.--Subparagraph (H) of section 613A(c)(6) is 
     amended by striking ``2004'' and inserting ``2005''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to taxable years beginning after December 31, 
     2002.

     SEC. 707. QUALIFIED ZONE ACADEMY BONDS.

       (a) In General.--Paragraph (1) of section 1397E(e) is 
     amended by striking ``2000, 2001, 2002, and 2003'' and 
     inserting ``2000, 2001, 2002, 2003, and 2004''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to obligations issued after the date of the 
     enactment of this Act.

     SEC. 708. COVER OVER OF TAX ON DISTILLED SPIRITS.

       (a) In General.--Paragraph (1) of section 7652(f) is 
     amended by striking ``January 1, 2004'' and inserting 
     ``January 1, 2005''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to articles brought into the United States after 
     December 31, 2002.

     SEC. 709. DEDUCTION FOR CORPORATE DONATIONS OF COMPUTER 
                   TECHNOLOGY.

       (a) Extension of Deduction.--Section 170(e)(6)(G) (relating 
     to termination) is amended by striking ``December 31, 2003'' 
     and inserting ``December 31, 2004''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to contributions made after December 31, 2002.

     SEC. 710. CREDIT FOR QUALIFIED ELECTRIC VEHICLES.

       (a) In General.--Section 30 is amended--
       (1) in subsection (b)(2)--
       (A) by striking ``December 31, 2003,'' and inserting 
     ``December 31, 2004,'', and
       (B) in subparagraphs (A), (B), and (C), by striking 
     ``2004'', ``2005'', and ``2006'', respectively, and inserting 
     ``2005'', ``2006'', and ``2007'', respectively.
       (2) in subsection (e), by striking ``December 31, 2006'' 
     and inserting ``December 31, 2007''.
       (b) Conforming Amendments.--Clause (iii) of section 
     280F(a)(1)(C) is amended by striking ``2007'' and inserting 
     ``2008''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after December 31, 
     2002.

     SEC. 711. DEDUCTION FOR CLEAN-FUEL VEHICLES AND CERTAIN 
                   REFUELING PROPERTY.

       (a) In General.--Section 179A is amended--
       (1) in subsection (b)(1)(B)--
       (A) by striking ``December 31, 2003,'' and inserting 
     ``December 31, 2004,'', and
       (B) in clauses (i), (ii), and (iii), by striking ``2004'', 
     ``2005'', and ``2006'', respectively, and inserting ``2005'', 
     ``2006'', and ``2007'', respectively, and
       (2) in subsection (f), by striking ``December 31, 2006'' 
     and inserting ``December 31, 2007''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to property placed in service after December 31, 
     2002.

     SEC. 712. DEDUCTION FOR CERTAIN EXPENSES OF SCHOOL TEACHERS.

       (a) In General.--Subparagraph (D) of section 62(a)(2) is 
     amended by striking ``during 2002 or 2003'' and inserting 
     ``during 2002, 2003, or 2004''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to taxable years beginning after December 31, 
     2002.

     SEC. 713. AVAILABILITY OF MEDICAL SAVINGS ACCOUNTS.

       (a) In General.--Paragraphs (2) and (3)(B) of section 
     220(i) (defining cut-off year) are each amended by striking 
     ``2003'' each place it appears and inserting ``2004''.
       (b) Conforming Amendments.--
       (1) Paragraph (2) of section 220(j) is amended by striking 
     ``1998, 1999, 2001, or 2002'' each place it appears and 
     inserting ``1998, 1999, 2001, 2002, or 2003''.
       (2) Subparagraph (A) of section 220(j)(4) is amended by 
     striking ``and 2002'' and inserting ``2002, and 2003''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect on January 1, 2003.

     SEC. 714. EXPENSING OF ENVIRONMENTAL REMEDIATION COSTS.

       (a) Extension of Termination Date.--Subsection (h) of 
     section 198 is amended by striking ``2003'' and inserting 
     ``2004''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to expenditures paid or incurred after December 
     31, 2002.

     SEC. 715. DISTRICT OF COLUMBIA INVESTMENT INCENTIVES.

       (a) In General.--The following provisions are amended by 
     striking ``2003'' each place it appears and inserting 
     ``2004'':
       (1) Section 1400(f ).
       (2) Section 1400A(b).
       (b) Zero Capital Gains Rate.--Section 1400B (relating to 
     zero percent capital gains rate) is amended by striking 
     ``2004'' each place it appears and inserting ``2005''.
       (c) Extension of DC Homebuyer Credit.--Section 1400C(i) 
     (relating to application of section) is amended by striking 
     ``2004'' and inserting ``2005''.

                Subtitle B--Delay of Dividend Exclusion

     SEC. 721. DELAY OF DIVIDEND EXCLUSION.

       (a) In General.--Subparagraph (B) of section 116(a)(2) 
     (relating to partial exclusion of

[[Page S6530]]

     dividend received by individuals), as added by section 201 of 
     this Act, is amended by striking ``2007'' and inserting 
     ``2009''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to taxable years beginning after December 31, 
     2003.
                                 ______
                                 
  SA 645. Mr. BAUCUS submitted an amendment intended to be proposed by 
him to the bill S. 1054, to provide for reconciliation pursuant to 
section 201 of the concurrent resolution on the budget for fiscal year 
2004; which was ordered to lie on the table; as follows:

       At the end of subtitle C of title V add the following:

     SEC.  . INCREASED BONUS DEPRECIATION.

       (a) In General.--Subsection (k) of section 168 (relating to 
     accelerated cost recovery system) is amended--
       (1) by adding at the end of paragraph (1) the following new 
     flush sentence:

     ``In the case of any qualified property acquired by the 
     taxpayer pursuant to a written binding contract which was 
     entered into on or after the date of the enactment of the 
     Jobs and Growth Tax Relief Reconciliation Act of 2003, 
     subparagraph (A) shall be applied by substituting `50 
     percent' for `30 percent'.'',
       (2) by striking ``September 11, 2004'' each place it 
     appears and inserting ``January 1, 2005'',
       (3) by striking ``September 11, 2004'' and inserting 
     ``January 1, 2005'', and
       (4) by striking ``pre-september 11, 2004'' and inserting 
     ``pre-january 1, 2005''.
       (b) Conforming Amendments.--
       (1) The heading for clause (i) of section 1400L(b)(2)(C) is 
     amended by striking ``30 percent additional'' and inserting 
     ``Additional''.
       (2) Section 1400L(b)(2)(D) is amended by inserting ``(as in 
     effect on the day after the date of the enactment of this 
     section)'' after ``section 168(k)(2)(D)''.
       (c) Revision of Partial Exclusion of Dividends Received By 
     Individuals.--Section 116(a)(2)(B), as added by section 201 
     of this Act, is amended by striking ``2007'' and inserting 
     ``2010''.
       (d) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to property 
     acquired on or after the date of the enactment of this Act
       (2) Revision.--The amendment made by subsection (c) shall 
     apply to taxable years beginning after December 31, 2006.
                                 ______
                                 
  SA 646. Mr. BUNNING submitted an amendment intended to be proposed by 
him to the bill S. 1054, to provide for reconciliation pursuant to 
section 201 of the concurrent resolution on the budget for fiscal year 
2004; as follows:

       On page 281, between lines 2 and 3, insert the following:

     SEC. ____. INCOME TAX CREDIT FOR DISTILLED SPIRITS 
                   WHOLESALERS AND FOR DISTILLED SPIRITS IN 
                   CONTROL STATE BAILMENT WAREHOUSES FOR COSTS OF 
                   CARRYING FEDERAL EXCISE TAXES ON BOTTLED 
                   DISTILLED SPIRITS.

       (a) In General.--Subpart A of part I of subchapter A of 
     chapter 51 (relating to gallonage and occupational taxes) is 
     amended by adding at the end the following new section:

     ``SEC. 5011. INCOME TAX CREDIT FOR AVERAGE COST OF CARRYING 
                   EXCISE TAX.

       ``(a) In General.--For purposes of section 38, the amount 
     of the distilled spirits credit for any taxable year is the 
     amount equal to the product of--
       ``(1) in the case of--
       ``(A) any eligible wholesaler--
       ``(i) the number of cases of bottled distilled spirits--

       ``(I) which were bottled in the United States, and
       ``(II) which are purchased by such wholesaler during the 
     taxable year directly from the bottler of such spirits, or

       ``(B) any person which is subject to section 5005 and which 
     is not an eligible wholesaler, the number of cases of bottled 
     distilled spirits which are stored in a warehouse operated 
     by, or on behalf of, a State, or agency or political 
     subdivision thereof, on which title has not passed on an 
     unconditional sale basis, and
       ``(2) the average tax-financing cost per case for the most 
     recent calendar year ending before the beginning of such 
     taxable year.
       ``(b) Eligible Wholesaler.--For purposes of this section, 
     the term `eligible wholesaler' means any person which holds a 
     permit under the Federal Alcohol Administration Act as a 
     wholesaler of distilled spirits which is not a State, or 
     agency or political subdivision thereof.
       ``(c) Average Tax-Financing Cost.--
       ``(1) In general.--For purposes of this section, the 
     average tax-financing cost per case for any calendar year is 
     the amount of interest which would accrue at the deemed 
     financing rate during a 60-day period on an amount equal to 
     the deemed Federal excise tax per case.
       ``(2) Deemed financing rate.--For purposes of paragraph 
     (1), the deemed financing rate for any calendar year is the 
     average of the corporate overpayment rates under paragraph 
     (1) of section 6621(a) (determined without regard to the last 
     sentence of such paragraph) for calendar quarters of such 
     year.
       ``(3) Deemed federal excise tax per case.--For purposes of 
     paragraph (1), the deemed Federal excise tax per case is 
     $25.68.
       ``(d) Other Definitions and Special Rules.--For purposes of 
     this section--
       ``(1) Case.--The term `case' means 12 80-proof 750 
     milliliter bottles.
       ``(2) Number of cases in lot.--The number of cases in any 
     lot of distilled spirits shall be determined by dividing the 
     number of liters in such lot by 9.''.
       (b) Conforming Amendments.--
       (1) Subsection (b) of section 38 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 distilled spirits credit determined under 
     section 5011(a).''.
       (2) Subsection (d) of section 39 (relating to carryback and 
     carryforward of unused credits) is amended by adding at the 
     end the following new paragraph:
       ``(11) No carryback of section 5011 credit before january 
     1, 2003.--No portion of the unused business credit for any 
     taxable year which is attributable to the credit determined 
     under section 5011(a) may be carried back to a taxable year 
     beginning before January 1, 2003.''.
       (3) The table of sections for subpart A of part I of 
     subchapter A of chapter 51 is amended by adding at the end 
     the following new item:

``Sec. 5011. Income tax credit for average cost of carrying excise 
              tax.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2002.
                                 ______
                                 
  SA 647. Mr. DURBIN submitted an amendment intended to be proposed by 
him to the bill S. 1054, to provide for reconciliation pursuant to 
section 201 of the concurrent resolution on the budget for fiscal year 
2004; which was ordered to lie on the table; as follows:

       On page 281, between lines 2 and 3, insert the following:

                   Subtitle D--Medicare Improvements

     SEC. 531. INCREASE IN LEVEL OF ADJUSTMENT FOR INDIRECT COSTS 
                   OF MEDICAL EDUCATION (IME).

       (a) In General.--Section 1886(d)(5)(B)(ii) of the Social 
     Security Act (42 U.S.C. 1395ww(d)(5)(B)(ii)) is amended--
       (1) in subclause (VI), by striking ``and'' at the end; and
       (2) by striking subclause (VII) and inserting the following 
     new subclauses:
       ``(VII) during fiscal year 2003, ``c'' is equal to 1.35.
       ``(VIII) during fiscal year 2004, ``c'' is equal to 1.85; 
     and
       ``(IX) on or after October 1, 2004, `c' is equal to 1.6.''.
       (b) Conforming Amendment Relating to Determination of 
     Standardized Amount.--Section 1886(d)(2)(C)(i) of the Social 
     Security Act (42 U.S.C. 1395ww(d)(2)(C)(i)) is amended--
       (1) by striking ``1999 or'' and inserting ``1999,''; and
       (2) by inserting ``, or of section 531(a) of the Jobs and 
     Growth Tax Relief Reconciliation Act of 2003'' after 
     ``2000''.

     SEC. 532. PERMANENT INCREASE IN MEDICARE PAYMENT FOR HOME 
                   HEALTH SERVICES FURNISHED IN A RURAL AREA.

       (a) In General.--Section 1895 of the Social Security Act 
     (42 U.S.C. 1395fff) is amended by adding at the end the 
     following new subsection:
       ``(f) Increase in Payment for Services Furnished in a Rural 
     Area.--
       ``(1) In general.--In the case of home health services 
     furnished in a rural area (as defined in section 
     1886(d)(2)(D)) on or after April 1, 2003, the Secretary shall 
     increase the payment amount otherwise made under this section 
     for such services by 10 percent.
       ``(2) Waiver of budget neutrality.--The Secretary shall not 
     reduce the standard prospective payment amount (or amounts) 
     under this section applicable to home health services 
     furnished during a period to offset the increase in payments 
     resulting from the application of paragraph (1).''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to services furnished on or after April 1, 2003.

     SEC. 533. 3-YEAR EXTENSION OF CERTAIN PAYMENT PROVISIONS FOR 
                   SKILLED NURSING FACILITY SERVICES UNDER THE 
                   MEDICARE PROGRAM.

       (a) 3-Year Extension of Temporary Increase in Nursing 
     Component of PPS Federal Rate.--Section 312(a) of Medicare, 
     Medicaid, and SCHIP Benefits Improvement and Protection Act 
     of 2000 (114 Stat. 2763A-498), as enacted into law by section 
     1(a)(6) of Public Law 106-554, is amended by striking ``, and 
     before October 1, 2002'' and inserting ``and before October 
     1, 2005''.
       (b) 3-Year Extension of Increase for Skilled Nursing 
     Facility Adjusted Federal Per Diem Rate Through Fiscal Year 
     2005.--Section 101(d) of the Medicare, Medicaid, and SCHIP 
     Balanced Budget Refinement Act of 1999 (113 Stat. 1501A-325), 
     as enacted into law by section 1000(a)(6) of Public Law 106-
     113, is amended--
       (1) in the heading, by striking ``and 2002'' and inserting 
     ``through 2005''; and
       (2) in paragraph (1), by striking ``and 2002'' and 
     inserting ``through 2005''.
       (c) Effective Date.--The amendments made by this section 
     shall be effective as if this section had been enacted before 
     October 1, 2002. The Secretary of Health and Human Services 
     shall promptly provide for such adjustments in payments as 
     may be required

[[Page S6531]]

     based on such amendments for services furnished during 
     periods before the date of implementation of such amendments.

     SEC. 534. TWO-YEAR EXTENSION OF MORATORIUM ON THERAPY CAPS.

       Section 1833(g)(4) of the Social Security Act (42 U.S.C. 
     1395l(g)(4)) is amended by striking ``and 2002'' and 
     inserting ``2002, 2003, and 2004''.

     SEC. 535. COVERAGE OF IMMUNOSUPPRESSIVE DRUGS FOR ALL 
                   MEDICARE BENEFICIARIES.

       (a) In General.--Section 1861(s)(2)(J) (42 U.S.C. 
     1395x(s)(2)(J)) is amended by striking ``, to an individual 
     who receives'' and all that follows before the semicolon at 
     the end and inserting ``to an individual who has received an 
     organ transplant''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to drugs furnished on or after the date of the 
     enactment of this Act.

     SEC. 536. BUDGET PROVISIONS.

       (a) Inapplicability of Sunset.--The provisions of section 
     601(a) shall not apply to the provisions of, and amendments 
     made by, this subtitle.
       (b) Elimination of Acceleration of Top Rate Reduction In 
     Individual Income Tax Rates.--Notwithstanding the amendment 
     made by section 102(a) of this Act, in lieu of the percent 
     specified in the last column of the table in paragraph (2) of 
     section 1(i) of the Internal Revenue Code of 1986, as amended 
     by such section 102(a), for taxable years beginning during 
     calendar years 2003 and 2004, the following percentages shall 
     be substituted for such years:
       (1) For 2003, 38.6%.
       (2) For 2004, 37.6%.
                                 ______
                                 
  SA 648. Mr. SANTORUM submitted an amendment intended to be proposed 
by him to the bill S. 1054, to provide for reconciliation pursuant to 
section 201 of the concurrent resolution on the budget for fiscal year 
2004; as follows:

       On page 281, between lines 2 and 3, insert the following:

     SEC. ____. CLARIFICATION OF THE TREATMENT OF NET OPERATING 
                   LOSSES.

       (a) In General.--Subparagraph (A) of section 108(b)(2) 
     (relating to tax attributes affected; order of reduction) is 
     amended to read as follows:
       ``(A) NOL.--Any net operating loss (in the case of a 
     taxpayer which is a member of an affiliated group of 
     corporations which files a consolidated return under section 
     1501, any consolidated net operating loss, as defined in 
     regulations prescribed by the Secretary) for the taxable year 
     of the discharge, and any net operating loss carryover to 
     such taxable year.''.
       (b) Effective date.--The amendment made by subsection (a) 
     shall apply to discharges of indebtedness occurring after May 
     8, 2003, except that discharges of indebtedness under any 
     plan of reorganization in a case under title 11, United 
     States Code, shall be deemed to occur on the date such plan 
     is confirmed.
                                 ______
                                 
  SA 649. Mr. GRAHAM of Florida submitted an amendment intended to be 
proposed by him to the bill S. 1054, to provide for reconciliation 
pursuant to section 201 of the concurrent resolution on the budget for 
fiscal year 2004; as follows:

       At the appropriate place insert the following:

     SEC.   . CITRUS CANKER TREE RELIEF.

       (a) Ratable Inclusion.
       (1) In general.--Part I of subchapter Q of chapter 1 
     (relating to income averaging) is amended by inserting after 
     section 1301 the following new section:

     ``SEC. 1302. RATABLE INCOME INCLUSION FOR CITRUS CANKER TREE 
                   PAYMENTS.

       ``(a) In general.--At the election of the taxpayer, any 
     amount taken into account as income or gain by reason of 
     receiving a citrus canker tree payment shall be included in 
     the income of the taxpayer ratably over the 10-year period 
     beginning with the taxable year in which the payment is 
     received or accrued by the taxpayer. Such election shall be 
     made on the return of tax for such taxable year in such 
     manner as the Secretary prescribed, and, once made shall be 
     irrevocable.
       ``(b) Citrus Canker Tree Payment.--For purposes of 
     subsection (a), the term `citrus canker tree payment' means a 
     payment made to an owner of a commercial citrus grove to 
     recover income that was lost as a result of the removal of 
     commercial citrus trees to control canker under the 
     amendments to the citrus canker regulations (7 C.F.R. 301) 
     made by the final rule published in the Federal Register by 
     the Secretary of Agriculture on June 18, 2001 (66 Fed. Reg. 
     32713, Docket No. 00-37-4).''
       (2) Clerical amendment.--The table of sections for part I 
     of subchapter Q of chapter is amended by inserting after the 
     item relating to section 1301 the following new item:

     SEC. 1302. RATABLE INCOME INCLUSION FOR CITRUS CANKER TREE 
                   PAYMENTS.''.

       (b) Expansion of period within which converted Citrus Tree 
     Property Must be Replaced.--Section 1033 (relating to period 
     within which property must be replaced) is amended by 
     redesignating subsection (k) as subsection (1) and by 
     inserting after subsection (j) the following new subsection:
       ``(k) Commercial Trees Destroyed Because of Citrus Tree 
     Canker.--In the case of commercial citrus trees which are 
     compulsorily or involuntarily converted under a public order 
     as a result of the citrus tree canker, clause (i) of 
     subsection (a)(2)(B) shall be applied as if such clause 
     reads: `4 years after close of the first taxable year in 
     which any part of the gain upon conversion is realized, or 
     such additional period after the close of such taxable year 
     as determined appropriate by the Secretary on a regional 
     basis if a State or Federal plant health authority determines 
     with respect to such region that the land on which such trees 
     grew is not free from the bacteria that causes citrus tree 
     canker'.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning before, on, or after 
     the date of the enactment of this Act.
                                 ______
                                 
  SA 650. Mr. KENNEDY (for himself, Mr. Feingold, and Mrs. Feinstein) 
submitted an amendment intended to be proposed by him to the bill H.R. 
1298, to provide assistance to foreign countries to combat HIV AIDS, 
tuberculosis, and malaria, and for other purposes; which was ordered to 
lie on the table; as follows:

       On page 54, strike lines 7 through 24, and insert the 
     following: ``medicines to treat opportunistic infections, at 
     the lowest possible price for products of assured quality (as 
     provided for in subparagraph (D)). Such procurement shall be 
     made anywhere in the world notwithstanding any provision of 
     law restricting procurement of goods to domestic sources.
       ``(B) Mechanisms for quality control and sustainable 
     supply.--Mechanisms to ensure that such HIV/AIDS 
     pharmaceuticals, antiviral therapies, and other appropriate 
     medicines are quality-controlled and sustainably supplied.
       ``(C) Distribution.--The distribution of such HIV/AIDS 
     pharmaceuticals, antiviral therapies, and other appropriate 
     medicines (including medicines to treat opportunistic 
     infections) to qualified national, regional, or local 
     organizations for the treatment of individuals with HIV/AIDS 
     in accordance with appropriate HIV/AIDS testing and 
     monitoring requirements and treatment protocols and for the 
     prevention of mother-to-child transmission of the HIV 
     infection.
       ``(D) Lowest possible price and assured quality.--
       ``(i) Lowest possible price.--With respect to an HIV/AIDS 
     pharmaceutical, an antiviral therapy, or any other 
     appropriate medicine, including a medicine to treat 
     opportunistic infections, the lowest possible price means the 
     lowest price at which such medicine (which includes all 
     products of assured quality with the same active ingredients) 
     may be obtained in sufficient quantity in either the United 
     States or elsewhere on the world market.
       ``(ii) Assured quality.--An HIV/AIDS pharmaceutical, an 
     antiviral therapy, or any other appropriate medicine, 
     including a medicine to treat opportunistic infections, shall 
     be considered a product of assured quality if it is--

       ``(I) approved by the Food and Drug Administration;
       ``(II) authorized for marketing by the European Commission;
       ``(III) on the most recent edition of the list of HIV-
     related medicines prequalified for procurement by the World 
     Health Organization's Pilot Procurement Quality and Sourcing 
     Project; or
       ``(IV) during the period that begins on the date of 
     enactment of this section and ending on December 31, 2004, 
     authorized for use by the national regulatory authority of 
     the country where the product will be used.

       ``(iii) Intellectual property protections.--An HIV/AIDS 
     pharmaceutical, an antiviral therapy, or any other 
     appropriate medicine, including a medicine to treat 
     opportunistic infections, at the lowest possible price may 
     include any product in compliance with--

       ``(I) the intellectual property laws of the country where 
     the product is manufactured;
       ``(II) the intellectual property laws of the country where 
     the product will be used; and
       ``(III) applicable international obligations in the field 
     of intellectual property, to the extent consistent with the 
     flexibilities provided in the Agreement on Trade-Related 
     Aspects of Intellectual Property Rights (TRIPS), as 
     interpreted in the Declaration on the TRIPS Agreement and 
     Public Health, adopted by the World Trade Organization at the 
     Fourth Ministerial Conference at Doha, Qatar on November 14, 
     2001.

       ``(iv) Prices publicly available.--Prices paid for 
     purchases of HIV/AIDS pharmaceuticals, antiviral therapies, 
     and other appropriate medicines, including medicines to treat 
     opportunistic infections, of assured quality shall be made 
     publicly available.
       ``(v) Application to appropriated funds.--Funds 
     appropriated under title IV of the United States Leadership 
     Against HIV/AIDS, Tuberculosis, and Malaria Act of 2003 that 
     are used for the procurement of HIV/AIDS pharmaceuticals, 
     antiviral therapies, and other appropriate medicines, 
     including medicines to treat opportunistic infections, shall 
     be used to procure products of assured quality at the lowest 
     possible price, as determined under this subparagraph.
                                 ______
                                 
  SA 651. Mr. SCHUMER (for himself, Mr. DeWine, and Ms. Landrieu) 
submitted an amendment intended to be proposed by him to the bill S. 
1054, to

[[Page S6532]]

provide for reconciliation pursuant to section 201 of the concurrent 
resolution on the budget for fiscal year 2004; as follows:

       At the end of subtitle C of title V, insert the following:

     SEC. ____. EXPANSION OF DESIGNATED RENEWAL COMMUNITY AREA 
                   BASED ON 2000 CENSUS DATA.

       (a) Renewal Communities.--
       (1) In general.--Section 1400E (relating to designation of 
     renewal communities) is amended by adding at the end the 
     following new subsection:
       ``(g) Expansion of Designated Areas.--
       ``(1) Expansion based on 2000 Census.--At the request of 
     the nominating entity with respect to a renewal community, 
     the Secretary of Housing and Urban Development may expand the 
     area of a renewal community to include any census tract--
       ``(A) which, at the time such community was nominated, met 
     the requirements of this section for inclusion in such 
     community but for the failure of such tract to meet 1 or more 
     of the population and poverty rate requirements of this 
     section using 1990 census data, and
       ``(B) which meets all failed population and poverty rate 
     requirements of this section using 2000 census data.
       ``(2) Expansion to certain areas which do not meet 
     population requirements.--
       ``(A) In general.--At the request of 1 or more local 
     governments and the State or States in which an area 
     described in subparagraph (B) is located, the Secretary of 
     Housing and Urban Development may expand a designated area to 
     include such area.
       ``(B) Area.--An area is described in this subparagraph if--
       ``(i) the area is adjacent to at least 1 other area 
     designated as a renewal community,
       ``(ii) the area has a population less than the population 
     required under subsection (c)(2)(C), and
       ``(a) the area meets the requirements of subparagraphs (A) 
     and (B) of subsection (c)(2) and subparagraph (A) of 
     subsection (c)(3), or (b) the area contains a population of 
     less than 100 people.
       ``(3) Applicability.--Any expansion of a renewal community 
     under this section shall take effect as provided in 
     subsection (b).''.
       (2) Effective Date.--The amendment made by this subsection 
     shall take effect as if included in the amendments made by 
     section 101 of the Community Renewal Tax Relief Act of 2000.
       (b) Change of Top Income Rate.--
       (1) In general.--The table in paragraph (2) of section 1(i) 
     (relating to reductions in rates after June 30, 2001), as 
     amended by section 102 of this Act, is amended by striking 
     ``35.0%'' in the last column and inserting ``37.6%''.
       (2) Effective date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2002.
       (3) Application of EGTRRA.--The amendment made by this 
     subsection shall be subject to title IX of the Economic 
     Growth and Tax Relief Reconciliation Act of 2001 to the same 
     extent and in the same manner as the provision of such Act to 
     which such amendment relates.
                                 ______
                                 
  SA 652. Mrs. CLINTON (for herself and Mrs. Boxer) proposed an 
amendment to the bill H.R. 1298, to provide assistance to foreign 
countries to combat HIV AIDS, tuberculosis, and malaria, and for other 
purposes: as follows:

       On page 23, line 24, insert before the semicolon the 
     following: ``, including the pursuit of sexual relations with 
     adolescent girls''.

       On page 24, strike lines 2 through 4, and insert the 
     following: ``developed to address the access of women and 
     adolescent girls to employment opportunities, income, 
     education and training, productive resources, and 
     microfinance programs;''.

       On page 27, strike lines 19 through 23, and insert the 
     following:
       (W) An analysis of strategies to reduce deaths from 
     cervical cancer caused by high risk strains of human 
     papillomavirus in women over 30 living in sub-Saharan Africa.
       (X) A description of a comprehensive 5-year global AIDS 
     plan that shall be developed by the President to address 
     issue effecting, and promote specific strategies to overcome, 
     the extreme vulnerability of adolescent girls to HIV 
     infection, including self esteem, access to education, safe 
     employment and livelihood opportunities, pressures to marry 
     at an early age and bear children, and norms that do not 
     allow for safe and supportive family life and marriages.
       (Y) A description of the programs, and the number of women 
     and girls reached through these programs--
       (i) to increase women's access to currently available 
     prevention technologies and the steps taken to increase the 
     availability of such technologies;
       (ii) that provide prevention education and training for 
     women and girls;
       (iii) addressing violence and coercion; and
       (iv) increasing access to treatment.
       (Z) A description of the progress made on developing a 
     safe, effective, and user-friendly microbicide.

       On page 51, line 8, strike ``and''.

       On page 51, line 12, strike the period and insert a 
     semicolon.

       On page 51, between lines 12 and 13, insert the following:
       ``(I) assistance for programs to dramatically increase 
     women's access to currently available female-controlled 
     prevention technologies and to microbicides when these become 
     available, and for the training and skills needed to use 
     these methods effectively;
       ``(J) assistance for research to develop safe, effective, 
     and usable microbicides;
       ``(K) assistance for programs to provide comprehensive 
     education for women and girls, including health education 
     that emphasizes skills building on negotiation and the 
     prevention of sexually transmitted infections and other 
     related reproductive health risks and strategies that 
     emphasize the delay of sexual debut;
       ``(L) assistance for strategies to prevent and address 
     gender-based violence and sexual coercion of women and 
     minors;
       ``(M) assistance to reduce the vulnerability of HIV/AIDS 
     for women, young people, and children who are refugees or 
     internally displaced persons; and
       ``(N) assistance for community-based strategies to reduce 
     the stigma faced by women affected by HIV and AIDS.

       On page 52, line 3, strike ``; and'' and insert a 
     semicolon.

       On page 52, line 10, strike the period and insert a 
     semicolon.

       On page 52, between lines 10 and 11, insert the following:
       ``(D) assistance for programs that promote equitable access 
     to treatment and care for all women, by--
       ``(i) reducing economic and social barriers faced 
     disproportionately by women;
       ``(ii) directly increase women's access to affordable 
     drugs; and
       ``(iii) providing adequate pre- and post-natal care to 
     pregnant women and mothers infected with HIV or living with 
     AIDS to prevent an increase in the number of AIDS orphans; 
     and
       ``(E) assistance to increase resources for households 
     headed by females caring for AIDS orphans.

       On page 81, after line 24, add the following:
       (9) At the United Nations Special Session on HIV/AIDS in 
     June 2001, the United States also committed itself to the 
     specific goals with respect to reducing HIV prevalence among 
     youth, as specified in the Declaration of Commitment on HIV/
     AIDS adopted by the United Nations General Assembly at the 
     Special Session.
                                 ______
                                 
  SA 653. Mr. BAUCUS submitted an amendment intended to be proposed by 
him to the bill S. 1054, to provide for reconciliation pursuant to 
section 201 of the concurrent resolution on the budget for fiscal year 
2004; which was ordered to lie on the table; as follows:
       On page 15, line 18, insert ``, plus 50 percent of the 
     aggregate cost not otherwise taken into account for such 
     taxable year for section 179 property placed in service after 
     the date of the enactment of the Jobs and Growth Tax Relief 
     Reconciliation Act of 2003, and before January 1, 2005'' 
     after ``$75,000''.

       On page 19, line 13, strike ``2007'' and insert ``2010''.
       On page 26, line 19, strike ``2007'' and insert ``2010''.
       On page 26, line 22, strike ``2007'' and insert ``2010''.
                                 ______
                                 
  SA 654. Mr. BINGAMAN (for himself, Mr. Enzi, Mrs. Lincoln, Mr. Smith, 
and Mr. Nelson of Nebraska) submitted an amendment intended to be 
proposed by him to the bill S. 1054, to provide for reconciliation 
pursuant to section 201 of the concurrent resolution on the budget for 
fiscal year 2004; which was ordered to lie on the table; as follows:

       At the end of subtitle F of title III, add the following:

     SEC. ____ . MEDICAID DSH ALLOTMENTS.

       (a) Temporary Increase in Floor for Treatment as an 
     Extremely Low DSH State under the Medicaid Program.--
       (1) In general.--Section 1923(f)(5) of the Social Security 
     Act (42 U.S.C. 1396r-4(f)(5)) is amended--
       (A) by striking ``In the case of'' and inserting the 
     following:
       ``(A) In general.--In the case of''; and
       (B) by adding at the end the following:
       ``(B) Temporary increase in floor for fiscal year 2004.--
     During the period that begins on October 1, 2003, and ends on 
     September 30, 2004, subparagraph (A) shall be applied--
       ``(i) by substituting `fiscal year 2002' for `fiscal year 
     1999';
       ``(iii) by substituting `Centers for Medicare & Medicaid 
     Services' for `Health Care Financing Administration';
       ``(ii) by substituting `August 31, 2003' for `August 31, 
     2000';
       ``(iv) by substituting `3 percent' for `1 percent' each 
     place it appears;
       ``(v) by substituting `fiscal year 2004' for `fiscal year 
     2001'; and
       ``(vi) without regard to the second sentence.''.
       (2) Effective date.--The amendments made by paragraph (1) 
     take effect on October 1, 2003, and apply to DSH allotments 
     under title XIX of the Social Security Act only with respect 
     to fiscal year 2004.
       (b) Allotment Adjustment for Certain States.--
       (1) In general.--Section 1923(f) of the Social Security Act 
     (42 U.S.C. 1396r-4(f)) is amended--

[[Page S6533]]

       (A) by redesignating paragraph (6) as paragraph (7); and
       (B) by inserting after paragraph (5) the following:
       ``(6) Allotment adjustment for certain states.--
       ``(A) Tennessee.--Only with respect to fiscal year 2004, if 
     the statewide waiver approved under section 1115 for the 
     State of Tennessee with respect to the requirements of this 
     title (as in effect on the date of enactment of this 
     paragraph) is revoked or terminated, the Secretary shall--
       ``(i) permit the State of Tennessee to submit an amendment 
     to its State plan that would describe the methodology to be 
     used by the State (after the effective date of such 
     revocation or termination) to identify and make payments to 
     disproportionate share hospitals, including children's 
     hospitals and institutions for mental diseases or other 
     mental health facilities (other than State-owned institutions 
     or facilities), on the basis of the proportion of patients 
     served by such hospitals that are low-income patients with 
     special needs; and
       ``(ii) provide for purposes of this subsection for 
     computation of an appropriate DSH allotment for the State for 
     fiscal year 2004 that provides for the maximum amount 
     (permitted consistent with paragraph (3)(B)(ii)) that does 
     not result in greater expenditures under this title than 
     would have been made if such waiver had not been revoked or 
     terminated.
       ``(B) Hawaii.--The Secretary shall compute a DSH allotment 
     for the State of Hawaii for each of fiscal year 2004 in the 
     same manner as DSH allotments are determined with respect to 
     those States to which paragraph (5) applies (but without 
     regard to the requirement under such paragraph that total 
     expenditures under the State plan for disproportionate share 
     hospital adjustments for any fiscal year exceeds 0).''.
       (2) Treatment of institutions for mental diseases.--Section 
     1923(h)(1) of the Social Security Act (42 U.S.C. 1396r-
     4(h)(1)) is amended--
       (A) in paragraph (1), in the matter preceding subparagraph 
     (A), by striking ``Payment'' and inserting ``Subject to 
     paragraph (3), payment''; and
       (B) by adding at the end the following:
       ``(3) Special rule.--The limitation of paragraph (1) shall 
     not apply in the case of Tennessee with respect to fiscal 
     year 2004 in the case of a revocation or termination of its 
     statewide waiver described in subsection (f)(6)(A).''.
       (3) Effective date.--The amendments made by this subsection 
     shall take effect as if enacted on October 1, 2002.
                                 ______
                                 
  SA 655. Mr. REID submitted an amendment intended to be proposed by 
him to the bill S. 1054, to provide for reconciliation pursuant to 
section 201 of the concurrent resolution on the budget for fiscal year 
2004; which was ordered to lie on the table; as follows:

       At the end of subtitle C of title V, add the following:

     SEC. ____ . RESTORATION OF DEDUCTION FOR TRAVEL EXPENSES OF 
                   SPOUSE, ETC. ACCOMPANYING TAXPAYER ON BUSINESS 
                   TRAVEL.

       (a) In General.--Subsection (m) of section 274 (relating to 
     additional limitations on travel expenses) is amended by 
     striking paragraph (3).
       (b) Effective Date.--The amendment made by this section 
     shall apply to amounts paid or incurred after the date of the 
     enactment of this Act.
                                 ______
                                 
  SA 656. Mr. DASCHLE proposed an amendment to the bill S. 1054, to 
provide for reconciliation pursuant to section 201 of the concurrent 
resolution on the budget for fiscal year 2004; as follows:

       Strike all after the enacting clause up to subtitle D and 
     insert the following:

     SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE; TABLE OF 
                   CONTENTS.

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

Sec. 1. Short title; amendment of 1986 Code; table of contents.

             TITLE I--TAX CREDIT FOR EVERY WORKING AMERICAN

Sec. 101. Tax credit for every working American.

                       TITLE II--CHILD TAX CREDIT

Sec. 201. Acceleration of increase in, and refundability of, child tax 
              credit.

                   TITLE III--MARRIAGE PENALTY RELIEF

Sec. 301. Acceleration of marriage penalty relief for earned income 
              credit.
Sec. 302. Acceleration of increase in standard deduction for married 
              taxpayers filing joint returns.

                       TITLE IV--BUSINESS TAX CUT

Sec. 401. Small business tax credit for 50 percent of health premiums.
Sec. 402. Increased bonus depreciation.
Sec. 403. Modifications to expensing under section 179.
Sec. 404. Broadband Internet access tax credit.

                      TITLE V--STATE FISCAL RELIEF

Sec. 501. General revenue sharing with States and their local 
              governments.
Sec. 502. Temporary State FMAP relief.

                  TITLE VI--UNEMPLOYMENT COMPENSATION

      Subtitle A--Extension and Enhancement of Temporary Extended 
                       Unemployment Compensation

Sec. 601. Extension of the temporary extended unemployment compensation 
              act of 2002.
Sec. 602. Entitlement to additional weeks of temporary extended 
              unemployment compensation.

    Subtitle B--Temporary Enhanced Regular Unemployment Compensation

Sec. 611. Federal-state agreements.
Sec. 612. Payments to States having agreements under this title.
Sec. 613. Financing provisions.
Sec. 614. Definitions.
Sec. 615. Applicability.
Sec. 616. Coordination with the Temporary Extended Unemployment 
              Compensation Act of 2002.

                 TITLE VII--LONG-TERM FISCAL DISCIPLINE

        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 Corporate Governance Provisions

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

      Subtitle C--Provisions to Discourage Corporate Expatriation

Sec. 731. Tax treatment of inverted corporate entities.
Sec. 732. Excise tax on stock compensation of insiders in inverted 
              corporations.
Sec. 733. Reinsurance of United States risks in foreign jurisdictions.

              Subtitle D--Imposition of Customs User Fees

Sec. 741. Customs user fees.

                   Subtitle E--Budget Points of Order

Sec. 751. Extension of pay-as-you-go enforcement in the Senate.
Sec. 752. Application of EGTRRA sunset to various titles.
Sec. 753. Sunset.

             TITLE I--TAX CREDIT FOR EVERY WORKING AMERICAN

     SEC. 101. TAX CREDIT FOR EVERY WORKING AMERICAN.

       (a) In General.--The Secretary of the Treasury shall pay, 
     out of any money in the Treasury not otherwise appropriated, 
     to each eligible taxpayer an amount equal to 10 percent of 
     the eligible portion of the taxpayer's adjusted gross income 
     (as defined in section 62 of the Internal Revenue Code of 
     1986) for a taxable year beginning in 2002.
       (b) Eligible Taxpayer.--For purposes of this section, the 
     term ``eligible taxpayer'' means any individual other than--
       (1) any estate or trust,
       (2) any nonresident alien, or
       (3) any individual with respect to whom a deduction under 
     section 151 of such Code is allowable to another taxpayer for 
     a taxable year beginning in 2003.

[[Page S6534]]

       (c) Eligible Portion.--For purposes of this section--
       (1) In general.--With respect to each eligible taxpayer, 
     the eligible portion shall be equal to the sum of--
       (A) $3,000 ($6,000 in the case of a taxpayer filing a joint 
     return under section 6013 of such Code), plus
       (B) $3,000 for each qualifying child of the taxpayer, not 
     to exceed $6,000.
       (2) Qualifying child.--The term ``qualifying child'' has 
     the meaning given such term by section 24(c) of such Code.
       (d) Remittance of Payment.--The Secretary of the Treasury 
     shall remit the payment described in subsection (a) to the 
     taxpayer as soon as practicable after the date of the 
     enactment of this section.

                       TITLE II--CHILD TAX CREDIT

     SEC. 201. ACCELERATION OF INCREASE IN, AND REFUNDABILITY OF, 
                   CHILD TAX CREDIT.

       (a) Acceleration of Increase in Credit.--The table 
     contained in section 24(a)(2) (relating to per child amount) 
     is amended to read as follows:

  The per child amount is--e year beginning in--
  2003......................................................$  700 ....

  2004, 2005, 2006, 2007, 2008, or 2009......................  800 ....

  2010 or thereafter......................................1,000.''.....

       (b) Expansion of Credit Refundability.--Section 
     24(d)(1)(B)(i) (relating to portion of credit refundable) is 
     amended by striking ``(10 percent in the case of taxable 
     years beginning before January 1, 2005)''.
       (c) Advance Payment of Portion of Increased Credit in 
     2003.--
       (1) In general.--Subchapter B of chapter 65 (relating to 
     abatements, credits, and refunds) is amended by adding at the 
     end the following new section:

     ``SEC. 6429. ADVANCE PAYMENT OF PORTION OF INCREASED CHILD 
                   CREDIT FOR 2003.

       ``(a) In General.--Each taxpayer who claimed a credit under 
     section 24 on the return for the taxpayer's first taxable 
     year beginning in 2002 shall be treated as having made a 
     payment against the tax imposed by chapter 1 for such taxable 
     year in an amount equal to the child tax credit refund amount 
     (if any) for such taxable year.
       ``(b) Child Tax Credit Refund Amount.--For purposes of this 
     section, the child tax credit refund amount is the amount by 
     which the aggregate credits allowed under part IV of 
     subchapter A of chapter 1 for such first taxable year would 
     have been increased if--
       ``(1) the per child amount under section 24(a)(2) for such 
     year were $700,
       ``(2) only qualifying children (as defined in section 
     24(c)) of the taxpayer for such year who had not attained age 
     17 as of December 31, 2003, were taken into account, and
       ``(3) section 24(d)(1)(B)(ii) did not apply.
       ``(c) Timing of Payments.--In the case of any overpayment 
     attributable to this section, the Secretary shall, subject to 
     the provisions of this title, refund or credit such 
     overpayment as rapidly as possible and, to the extent 
     practicable, before October 1, 2003. No refund or credit 
     shall be made or allowed under this section after December 
     31, 2003.
       ``(d) Coordination with Child Tax Credit.--
       ``(1) In general.--The amount of credit which would (but 
     for this subsection and section 26) be allowed under section 
     24 for the taxpayer's first taxable year beginning in 2003 
     shall be reduced (but not below zero) by the payments made to 
     the taxpayer under this section. Any failure to so reduce the 
     credit shall be treated as arising out of a mathematical or 
     clerical error and assessed according to section 6213(b)(1).
       ``(2) Joint returns.--In the case of a payment under this 
     section with respect to a joint return, half of such payment 
     shall be treated as having been made to each individual 
     filing such return.
       ``(e) No Interest.--No interest shall be allowed on any 
     overpayment attributable to this section.''.
       (2) Clerical amendment.--The table of sections for 
     subchapter B of chapter 65 is amended by adding at the end 
     the following new item:

``Sec. 6429. Advance payment of portion of increased child credit for 
              2003.''.

       (d) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to taxable years 
     beginning after December 31, 2002.
       (2) Subsection (c).--The amendments made by subsection (c) 
     shall take effect on the date of the enactment of this Act.

                   TITLE III--MARRIAGE PENALTY RELIEF

     SEC. 301. ACCELERATION OF MARRIAGE PENALTY RELIEF FOR EARNED 
                   INCOME CREDIT.

       (a) In General.--Section 32(b)(2)(B) (relating to joint 
     returns) is amended by striking ```increased by--'' and all 
     that follows and inserting ``increased by $3,000.''.
       (b) Inflation Adjustment.--Clause (ii) of section 32( 
     j)(1)(B) (relating to inflation adjustments) is amended to 
     read as follows:
       ``(ii) in the case of the $3,000 amount in subsection 
     (b)(2)(B), by substituting `calendar year 2003' for `calendar 
     year 1992' in subparagraph (B) of such section 1.''.
       (c) Conforming Amendment.--Section 303(i)(2) of the 
     Economic Growth and Tax Relief Reconciliation Act of 2001 is 
     amended by striking ``2004'' and inserting ``2003''.
       (d) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to taxable years 
     beginning after December 31, 2002.
       (2) Conforming amendment.--The amendment made by subsection 
     (c) shall take effect on January 1, 2003.

     SEC. 302. ACCELERATION OF INCREASE IN STANDARD DEDUCTION FOR 
                   MARRIED TAXPAYERS FILING JOINT RETURNS.

       (a) In General.--Paragraph (2) of section 63(c) (relating 
     to basic standard deduction) is amended to read as follows:
       ``(2) Basic standard deduction.--For purposes of paragraph 
     (1), the basic standard deduction is--
       ``(A) 200 percent of the dollar amount in effect under 
     subparagraph (C) for the taxable year in the case of--
       ``(i) a joint return, or
       ``(ii) a surviving spouse (as defined in section 2(a)),
       ``(B) $4,400 in the case of a head of household (as defined 
     in section 2(b)), or
       ``(C) $3,000 in any other case.''.
       (b) Conforming Amendments.--
       (1) Section 63(c)(4) is amended by striking ``(2)(D)'' each 
     place it occurs and inserting ``(2)(C)''.
       (2) Section 63(c) is amended by striking paragraph (7).
       (3) Section 301(d) of the Economic Growth and Tax Relief 
     Reconciliation Act of 2001 is amended by striking ``2004'' 
     and inserting ``2002''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2002.

                       TITLE IV--BUSINESS TAX CUT

     SEC. 401. SMALL BUSINESS TAX CREDIT FOR 50 PERCENT OF HEALTH 
                   PREMIUMS.

       (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:

     ``SEC. 45G. EMPLOYEE HEALTH INSURANCE EXPENSES.

       ``(a) General Rule.--For purposes of section 38, in the 
     case of a qualified small employer, the employee health 
     insurance expenses credit determined under this section is an 
     amount equal to the applicable percentage of the amount paid 
     by the taxpayer during the taxable year for qualified 
     employee health insurance expenses.
       ``(b) Applicable Percentage.--For purposes of subsection 
     (a), the applicable percentage is equal to--
       ``(1) 50 percent in the case of an employer with less than 
     26 qualified employees,
       ``(2) 40 percent in the case of an employer with more than 
     25 but less than 36 qualified employees, and
       ``(3) 30 percent in the case of an employer with more than 
     35 but less than 51 qualified employees.
       ``(c) Per Employee Dollar Limitation.--The amount of 
     qualified employee health insurance expenses taken into 
     account under subsection (a) with respect to any qualified 
     employee for any taxable year shall not exceed the maximum 
     employer contribution for self-only coverage or family 
     coverage (as applicable) determined under section 8906(a) of 
     title 5, United States Code, for the calendar year in which 
     such taxable year begins.
       ``(d) Definitions and Special Rules.--For purposes of this 
     section--
       ``(1) Qualified small employer.--
       ``(A) In general.--The term `qualified small employer' 
     means any small employer which provides eligibility for 
     health insurance coverage (after any waiting period (as 
     defined in section 9801(b)(4)) to all qualified employees of 
     the employer.
       ``(B) Small employer.--
       ``(i) In general.--For purposes of this paragraph, the term 
     `small employer' means, with respect to any calendar year, 
     any employer if such employer employed an average of not less 
     than 2 and not more than 50 qualified employees on business 
     days during either of the 2 preceding calendar years. For 
     purposes of the preceding sentence, a preceding calendar year 
     may be taken into account only if the employer was in 
     existence throughout such year.
       ``(ii) Employers not in existence in preceding year.--In 
     the case of an employer which was not in existence throughout 
     the 1st preceding calendar year, the determination under 
     clause (i) shall be based on the average number of qualified 
     employees that it is reasonably expected such employer will 
     employ on business days in the current calendar year.
       ``(2) Qualified employee health insurance expenses.--
       ``(A) In general.--The term `qualified employee health 
     insurance expenses' means any amount paid by an employer for 
     health insurance coverage to the extent such amount is 
     attributable to coverage provided to any employee while such 
     employee is a qualified employee.
       ``(B) Exception for amounts paid under salary reduction 
     arrangements.--No amount paid or incurred for health 
     insurance coverage pursuant to a salary reduction arrangement 
     shall be taken into account under subparagraph (A).
       ``(C) Health insurance coverage.--The term `health 
     insurance coverage' has the meaning given such term by 
     paragraph (1) of section 9832(b) (determined by disregarding 
     the last sentence of paragraph (2) of such section).
       ``(3) Qualified employee.--The term `qualified employee' 
     means an employee of an employer who, with respect to any 
     period,

[[Page S6535]]

     is not provided health insurance coverage under--
       ``(A) a health plan of the employee's spouse,
       ``(B) title XVIII, XIX, or XXI of the Social Security Act,
       ``(C) chapter 17 of title 38, United States Code,
       ``(D) chapter 55 of title 10, United States Code,
       ``(E) chapter 89 of title 5, United States Code, or
       ``(F) any other provision of law.
       ``(4) Employee--The term `employee'--
       ``(A) means any individual, with respect to any calendar 
     year, who is reasonably expected to receive at least $5,000 
     of compensation from the employer during such year,
       ``(B) does not include an employee within the meaning of 
     section 401(c)(1), and
       ``(C) includes a leased employee within the meaning of 
     section 414(n).
       ``(5) Compensation.--The term `compensation' means amounts 
     described in section 6051(a)(3).
       ``(e) Certain Rules Made Applicable.--For purposes of this 
     section, rules similar to the rules of section 52 shall 
     apply.
       ``(f) Denial of Double Benefit.--No deduction or credit 
     under any other provision of this chapter shall be allowed 
     with respect to qualified employee health insurance expenses 
     taken into account under subsection (a).
       ``(g) Termination.--This section shall not apply to taxable 
     years beginning after December 31, 2003.''.
       (b) Credit To Be Part of General 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:
       ``(16) the employee health insurance expenses credit 
     determined under section 45G.''.
       (c) Credit Allowed Against Minimum Tax.--
       (1) In general.--Subsection (c) of section 38 (relating to 
     limitation based on amount of tax) is amended by 
     redesignating paragraph (3) as paragraph (4) and by inserting 
     after paragraph (2) the following new paragraph:
       ``(3) Special rules for employee health insurance credit.--
       ``(A) In general.--In the case of the employee health 
     insurance credit--
       ``(i) this section and section 39 shall be applied 
     separately with respect to the credit, and
       ``(ii) in applying paragraph (1) to the credit--

       ``(I) the amounts in subparagraphs (A) and (B) thereof 
     shall be treated as being zero, and
       ``(II) the limitation under paragraph (1) (as modified by 
     subclause (I)) shall be reduced by the credit allowed under 
     subsection (a) for the taxable year (other than the employee 
     health insurance credit).

       ``(B) Employee health insurance credit.--For purposes of 
     this subsection, the term `employee health insurance credit' 
     means the credit allowable under subsection (a) by reason of 
     section 45G(a).''.
       (2) Conforming amendment.--Subclause (II) of section 
     38(c)(2)(A)(ii) is amended by striking ``(other'' and all 
     that follows through ``credit)'' and inserting ``(other than 
     the empowerment zone employment credit or the employee health 
     insurance credit)''.
       (d) 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 employee health 
     insurance expenses credit determined under section 45G may be 
     carried back to a taxable year ending before the date of the 
     enactment of section 45G.''.
       (e) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1 is amended by 
     adding at the end the following:

``Sec. 45G. Employee health insurance expenses.''.

       (f) Employer Outreach.--The Internal Revenue Service shall, 
     in conjunction with the Small Business Administration, 
     develop materials and implement an educational program to 
     ensure that business personnel are aware of--
       (1) the eligibility criteria for the tax credit provided 
     under section 45G of the Internal Revenue Code of 1986 (as 
     added by this section),
       (2) the methods to be used in calculating such credit,
       (3) the documentation needed in order to claim such credit, 
     and
       (4) any available health plan purchasing alliances 
     established under title II,

     so that the maximum number of eligible businesses may claim 
     the tax credit.
       (g) Effective Date.--The amendments made by this section 
     shall apply to amounts paid or incurred in taxable years 
     beginning after December 31, 2002.

     SEC. 402. INCREASED BONUS DEPRECIATION.

       (a) In General.--Subsection (k) of section 168 (relating to 
     accelerated cost recovery system) is amended--
       (1) by adding at the end of paragraph (1) the following new 
     flush sentence:

     ``In the case of any qualified property acquired by the 
     taxpayer pursuant to a written binding contract which was 
     entered into after December 31, 2002, subparagraph (A) shall 
     be applied by substituting `50 percent' for `30 percent'.'',
       (2) by striking ``September 11, 2004'' each place it 
     appears and inserting ``January 1, 2004'',
       (3) by striking ``September 11, 2004'' and inserting 
     ``January 1, 2004'', and
       (4) by striking ``pre-september 11, 2004'' and inserting 
     ``pre-january 1, 2004''.
       (b) Conforming Amendments.--
       (1) The heading for clause (i) of section 1400L(b)(2)(C) of 
     the Internal Revenue Code of 1986 is amended by striking ``30 
     percent additional'' and inserting ``Additional''.
       (2) Section 1400L(b)(2)(D) of such Code is amended by 
     inserting ``(as in effect on the day after the date of the 
     enactment of this section)'' after ``section 168(k)(2)(D)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to property acquired after December 31, 2002.

     SEC. 403. MODIFICATIONS TO EXPENSING UNDER SECTION 179.

       (a) Increase of Amount Which May Be Expensed.--
       (1) In general.--Paragraph (1) of section 179(b) (relating 
     to dollar limitation) is amended to read as follows:
       ``(1) Dollar limitation.--The aggregate cost which may be 
     taken into account under subsection (a) for any taxable year 
     shall not exceed $25,000 ($75,000 in the case of any taxable 
     year beginning in 2003).''
       (2) Increase in phaseout threshold.--Paragraph (2) of 
     section 179(b) is amended by striking ``$200,000'' and 
     inserting ``$200,000 ($325,000 in the case of any taxable 
     year beginning in 2003)''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to property placed in service in taxable years 
     beginning after December 31, 2002.

     SEC. 404. BROADBAND INTERNET ACCESS TAX CREDIT.

       (a) In General.--Subpart E of part IV of chapter 1 
     (relating to rules for computing investment credit) is 
     amended by inserting after section 48 the following new 
     section:

     ``SEC. 48A. BROADBAND INTERNET ACCESS CREDIT.

       ``(a) General Rule.--For purposes of section 46, the 
     broadband credit for any taxable year is the sum of--
       ``(1) the current generation broadband credit, plus
       ``(2) the next generation broadband credit.
       ``(b) Current Generation Broadband Credit; Next Generation 
     Broadband Credit.--For purposes of this section--
       ``(1) Current generation broadband credit.--The current 
     generation broadband credit for any taxable year is equal to 
     10 percent of the qualified expenditures incurred with 
     respect to qualified equipment providing current generation 
     broadband services to qualified subscribers and taken into 
     account with respect to such taxable year.
       ``(2) Next generation broadband credit.--The next 
     generation broadband credit for any taxable year is equal to 
     20 percent of the qualified expenditures incurred with 
     respect to qualified equipment providing next generation 
     broadband services to qualified subscribers and taken into 
     account with respect to such taxable year.
       ``(c) When Expenditures Taken Into Account.--For purposes 
     of this section--
       ``(1) In general.--Qualified expenditures with respect to 
     qualified equipment shall be taken into account with respect 
     to the first taxable year in which--
       ``(A) current generation broadband services are provided 
     through such equipment to qualified subscribers, or
       ``(B) next generation broadband services are provided 
     through such equipment to qualified subscribers.
       ``(2) Limitation.--
       ``(A) In general.--Qualified expenditures shall be taken 
     into account under paragraph (1) only with respect to 
     qualified equipment--
       ``(i) the original use of which commences with the 
     taxpayer, and
       ``(ii) which is placed in service,
     after December 31, 2002.
       ``(B) Sale-leasebacks.--For purposes of subparagraph (A), 
     if property--
       ``(i) is originally placed in service after December 31, 
     2002, by a person, and
       ``(ii) sold and leased back by such person within 3 months 
     after the date such property was originally placed in 
     service,
     such property shall be treated as originally placed in 
     service not earlier than the date on which such property is 
     used under the leaseback referred to in clause (ii).
       ``(d) Special Allocation Rules.--
       ``(1) Current generation broadband services.--For purposes 
     of determining the current generation broadband credit under 
     subsection (a)(1) with respect to qualified equipment through 
     which current generation broadband services are provided, if 
     the qualified equipment is capable of serving both qualified 
     subscribers and other subscribers, the qualified expenditures 
     shall be multiplied by a fraction--
       ``(A) the numerator of which is the sum of the number of 
     potential qualified subscribers within the rural areas and 
     the underserved areas which the equipment is capable of 
     serving with current generation broadband services, and
       ``(B) the denominator of which is the total potential 
     subscriber population of the area which the equipment is 
     capable of serving with current generation broadband 
     services.
       ``(2) Next generation broadband services.--For purposes of 
     determining the next

[[Page S6536]]

     generation broadband credit under subsection (a)(2) with 
     respect to qualified equipment through which next generation 
     broadband services are provided, if the qualified equipment 
     is capable of serving both qualified subscribers and other 
     subscribers, the qualified expenditures shall be multiplied 
     by a fraction--
       ``(A) the numerator of which is the sum of--
       ``(i) the number of potential qualified subscribers within 
     the rural areas and underserved areas, plus
       ``(ii) the number of potential qualified subscribers within 
     the area consisting only of residential subscribers not 
     described in clause (i),

     which the equipment is capable of serving with next 
     generation broadband services, and
       ``(B) the denominator of which is the total potential 
     subscriber population of the area which the equipment is 
     capable of serving with next generation broadband services.
       ``(e) Definitions.--For purposes of this section--
       ``(1) Antenna.--The term `antenna' means any device used to 
     transmit or receive signals through the electromagnetic 
     spectrum, including satellite equipment.
       ``(2) Cable operator.--The term `cable operator' has the 
     meaning given such term by section 602(5) of the 
     Communications Act of 1934 (47 U.S.C. 522(5)).
       ``(3) Commercial mobile service carrier.--The term 
     `commercial mobile service carrier' means any person 
     authorized to provide commercial mobile radio service as 
     defined in section 20.3 of title 47, Code of Federal 
     Regulations.
       ``(4) Current generation broadband service.--The term 
     `current generation broadband service' means the transmission 
     of signals at a rate of at least 1,000,000 bits per second to 
     the subscriber and at least 128,000 bits per second from the 
     subscriber.
       ``(5) Multiplexing or demultiplexing.--The term 
     `multiplexing' means the transmission of 2 or more signals 
     over a single channel, and the term `demultiplexing' means 
     the separation of 2 or more signals previously combined by 
     compatible multiplexing equipment.
       ``(6) Next generation broadband service.--The term `next 
     generation broadband service' means the transmission of 
     signals at a rate of at least 22,000,000 bits per second to 
     the subscriber and at least 5,000,000 bits per second from 
     the subscriber.
       ``(7) Nonresidential subscriber.--The term `nonresidential 
     subscriber' means a person who purchases broadband services 
     which are delivered to the permanent place of business of 
     such person.
       ``(8) Open video system operator.--The term `open video 
     system operator' means any person authorized to provide 
     service under section 653 of the Communications Act of 1934 
     (47 U.S.C. 573).
       ``(9) Other wireless carrier.--The term `other wireless 
     carrier' means any person (other than a telecommunications 
     carrier, commercial mobile service carrier, cable operator, 
     open video system operator, or satellite carrier) providing 
     current generation broadband services or next generation 
     broadband service to subscribers through the wireless 
     transmission of energy through radio or light waves.
       ``(10) Packet switching.--The term `packet switching' means 
     controlling or routing the path of a digitized transmission 
     signal which is assembled into packets or cells.
       ``(11) Provider.--The term `provider' means, with respect 
     to any qualified equipment--
       ``(A) a cable operator,
       ``(B) a commercial mobile service carrier,
       ``(C) an open video system operator,
       ``(D) a satellite carrier,
       ``(E) a telecommunications carrier, or
       ``(F) any other wireless carrier,
     providing current generation broadband services or next 
     generation broadband services to subscribers through such 
     qualified equipment.
       ``(12) Provision of services.--A provider shall be treated 
     as providing services to a subscriber if--
       ``(A) a subscriber has been passed by the provider's 
     equipment and can be connected to such equipment for a 
     standard connection fee,
       ``(B) the provider is physically able to deliver current 
     generation broadband services or next generation broadband 
     services, as applicable, to such subscribers without making 
     more than an insignificant investment with respect to any 
     such subscriber,
       ``(C) the provider has made reasonable efforts to make such 
     subscribers aware of the availability of such services,
       ``(D) such services have been purchased by one or more such 
     subscribers, and
       ``(E) such services are made available to such subscribers 
     at average prices comparable to those at which the provider 
     makes available similar services in any areas in which the 
     provider makes available such services.
       ``(13) Qualified equipment.--
       ``(A) In general.--The term `qualified equipment' means 
     equipment which provides current generation broadband 
     services or next generation broadband services--
       ``(i) at least a majority of the time during periods of 
     maximum demand to each subscriber who is utilizing such 
     services, and
       ``(ii) in a manner substantially the same as such services 
     are provided by the provider to subscribers through equipment 
     with respect to which no credit is allowed under subsection 
     (a)(1).
       ``(B) Only certain investment taken into account.--Except 
     as provided in subparagraph (C) or (D), equipment shall be 
     taken into account under subparagraph (A) only to the extent 
     it--
       ``(i) extends from the last point of switching to the 
     outside of the unit, building, dwelling, or office owned or 
     leased by a subscriber in the case of a telecommunications 
     carrier,
       ``(ii) extends from the customer side of the mobile 
     telephone switching office to a transmission/receive antenna 
     (including such antenna) owned or leased by a subscriber in 
     the case of a commercial mobile service carrier,
       ``(iii) extends from the customer side of the headend to 
     the outside of the unit, building, dwelling, or office owned 
     or leased by a subscriber in the case of a cable operator or 
     open video system operator, or
       ``(iv) extends from a transmission/receive antenna 
     (including such antenna) which transmits and receives signals 
     to or from multiple subscribers, to a transmission/receive 
     antenna (including such antenna) on the outside of the unit, 
     building, dwelling, or office owned or leased by a subscriber 
     in the case of a satellite carrier or other wireless carrier, 
     unless such other wireless carrier is also a 
     telecommunications carrier.
       ``(C) Packet switching equipment.--Packet switching 
     equipment, regardless of location, shall be taken into 
     account under subparagraph (A) only if it is deployed in 
     connection with equipment described in subparagraph (B) and 
     is uniquely designed to perform the function of packet 
     switching for current generation broadband services or next 
     generation broadband services, but only if such packet 
     switching is the last in a series of such functions performed 
     in the transmission of a signal to a subscriber or the first 
     in a series of such functions performed in the transmission 
     of a signal from a subscriber.
       ``(D) Multiplexing and demultiplexing equipment.--
     Multiplexing and demultiplexing equipment shall be taken into 
     account under subparagraph (A) only to the extent it is 
     deployed in connection with equipment described in 
     subparagraph (B) and is uniquely designed to perform the 
     function of multiplexing and demultiplexing packets or cells 
     of data and making associated application adaptions, but only 
     if such multiplexing or demultiplexing equipment is located 
     between packet switching equipment described in subparagraph 
     (C) and the subscriber's premises.
       ``(14) Qualified expenditure.--
       ``(A) In general.--The term `qualified expenditure' means 
     any amount--
       ``(i) chargeable to capital account with respect to the 
     purchase and installation of qualified equipment (including 
     any upgrades thereto) for which depreciation is allowable 
     under section 168, and
       ``(ii) incurred after December 31, 2002, and before January 
     1, 2004.
       ``(B) Certain satellite expenditures excluded.--Such term 
     shall not include any expenditure with respect to the 
     launching of any satellite equipment.
       ``(15) Qualified subscriber.--The term `qualified 
     subscriber' means--
       ``(A) with respect to the provision of current generation 
     broadband services--
       ``(i) a nonresidential subscriber maintaining a permanent 
     place of business in a rural area or underserved area, or
       ``(ii) a residential subscriber residing in a dwelling 
     located in a rural area or underserved area which is not a 
     saturated market, and
       ``(B) with respect to the provision of next generation 
     broadband services--
       ``(i) a nonresidential subscriber maintaining a permanent 
     place of business in a rural area or underserved area, or
       ``(ii) a residential subscriber.
       ``(16) Residential subscriber.--The term `residential 
     subscriber' means an individual who purchases broadband 
     services which are delivered to such individual's dwelling.
       ``(17) Rural area.--The term `rural area' means any census 
     tract which--
       ``(A) is not within 10 miles of any incorporated or census 
     designated place containing more than 25,000 people, and
       ``(B) is not within a county or county equivalent which has 
     an overall population density of more than 500 people per 
     square mile of land.
       ``(18) Rural subscriber.--The term `rural subscriber' means 
     a residential subscriber residing in a dwelling located in a 
     rural area or nonresidential subscriber maintaining a 
     permanent place of business located in a rural area.
       ``(19) Satellite carrier.--The term `satellite carrier' 
     means any person using the facilities of a satellite or 
     satellite service licensed by the Federal Communications 
     Commission and operating in the Fixed-Satellite Service under 
     part 25 of title 47 of the Code of Federal Regulations or the 
     Direct Broadcast Satellite Service under part 100 of title 47 
     of such Code to establish and operate a channel of 
     communications for distribution of signals, and owning or 
     leasing a capacity or service on a satellite in order to 
     provide such distribution.
       ``(20) Saturated market.--The term `saturated market' means 
     any census tract in which, as of the date of the enactment of 
     this section--
       ``(A) current generation broadband services have been 
     provided by one or more providers to 85 percent or more of 
     the total number of potential residential subscribers 
     residing in

[[Page S6537]]

     dwellings located within such census tract, and
       ``(B) such services can be utilized--
       ``(i) at least a majority of the time during periods of 
     maximum demand by each such subscriber who is utilizing such 
     services, and
       ``(ii) in a manner substantially the same as such services 
     are provided by the provider to subscribers through equipment 
     with respect to which no credit is allowed under subsection 
     (a)(1).
       ``(21) Subscriber.--The term `subscriber' means a person 
     who purchases current generation broadband services or next 
     generation broadband services.
       ``(22) Telecommunications carrier.--The term 
     `telecommunications carrier' has the meaning given such term 
     by section 3(44) of the Communications Act of 1934 (47 U.S.C. 
     153(44)), but--
       ``(A) includes all members of an affiliated group of which 
     a telecommunications carrier is a member, and
       ``(B) does not include a commercial mobile service carrier.
       ``(23) Total potential subscriber population.--The term 
     `total potential subscriber population' means, with respect 
     to any area and based on the most recent census data, the 
     total number of potential residential subscribers residing in 
     dwellings located in such area and potential nonresidential 
     subscribers maintaining permanent places of business located 
     in such area.
       ``(24) Underserved area.--The term `underserved area' means 
     any census tract which is located in--
       ``(A) an empowerment zone or enterprise community 
     designated under section 1391,
       ``(B) the District of Columbia Enterprise Zone established 
     under section 1400,
       ``(C) a renewal community designated under section 1400E, 
     or
       ``(D) a low-income community designated under section 45D.
       ``(25) Underserved subscriber.--The term `underserved 
     subscriber' means a residential subscriber residing in a 
     dwelling located in an underserved area or nonresidential 
     subscriber maintaining a permanent place of business located 
     in an underserved area.''.
       (b) Credit To Be Part of Investment Credit.--Section 46 
     (relating to the amount of investment credit) is amended by 
     striking ``and'' at the end of paragraph (2), by striking the 
     period at the end of paragraph (3) and inserting ``, and'', 
     and by adding at the end the following:
       ``(4) the broadband Internet access credit.''
       (c) Special Rule for Mutual or Cooperative Telephone 
     Companies.--Section 501(c)(12)(B) (relating to list of exempt 
     organizations) is amended by striking ``or'' at the end of 
     clause (iii), by striking the period at the end of clause 
     (iv) and inserting ``, or'', and by adding at the end the 
     following new clause:
       ``(v) from the sale of property subject to a lease 
     described in section 48A(c)(2)(B), but only to the extent 
     such income does not in any year exceed an amount equal to 
     the credit for qualified expenditures which would be 
     determined under section 48A for such year if the mutual or 
     cooperative telephone company was not exempt from taxation 
     and was treated as the owner of the property subject to such 
     lease.''.
       (d) Conforming Amendment.--The table of sections for 
     subpart E of part IV of subchapter A of chapter 1 is amended 
     by inserting after the item relating to section 48 the 
     following:

``Sec. 48A. Broadband internet access credit.''.

       (e) Designation of Census Tracts.--
       (1) In general.--The Secretary of the Treasury shall, not 
     later than 90 days after the date of the enactment of this 
     Act, designate and publish those census tracts meeting the 
     criteria described in paragraphs (17) and (24) of section 
     48A(e) of the Internal Revenue Code of 1986 (as added by this 
     section). In making such designations, the Secretary of the 
     Treasury shall consult with such other departments and 
     agencies as the Secretary determines appropriate.
       (2) Saturated market.--
       (A) In general.--For purposes of designating and publishing 
     those census tracts meeting the criteria described in 
     subsection (e)(20) of such section 48A--
       (i) the Secretary of the Treasury shall prescribe not later 
     than 30 days after the date of the enactment of this Act the 
     form upon which any provider which takes the position that it 
     meets such criteria with respect to any census tract shall 
     submit a list of such census tracts (and any other 
     information required by the Secretary) not later than 60 days 
     after the date of the publication of such form, and
       (ii) the Secretary of the Treasury shall publish an 
     aggregate list of such census tracts submitted and the 
     applicable providers not later than 30 days after the last 
     date such submissions are allowed under clause (i).
       (B) No subsequent lists required.--The Secretary of the 
     Treasury shall not be required to publish any list of census 
     tracts meeting such criteria subsequent to the list described 
     in subparagraph (A)(ii).
       (C) Penalties for submission of false information.--The 
     Secretary of the Treasury shall designate appropriate 
     penalties for knowingly submitting false information on the 
     form described in subparagraph (A)(i).
       (f) Other Regulatory Matters.--
       (1) Prohibition.--No Federal or State agency or 
     instrumentality shall adopt regulations or ratemaking 
     procedures that would have the effect of confiscating any 
     credit or portion thereof allowed under section 48A of the 
     Internal Revenue Code of 1986 (as added by this section) or 
     otherwise subverting the purpose of this section.
       (2) Treasury regulatory authority.--It is the intent of 
     Congress in providing the broadband Internet access credit 
     under section 48A of the Internal Revenue Code of 1986 (as 
     added by this section) to provide incentives for the 
     purchase, installation, and connection of equipment and 
     facilities offering expanded broadband access to the Internet 
     for users in certain low income and rural areas of the United 
     States, as well as to residential users nationwide, in a 
     manner that maintains competitive neutrality among the 
     various classes of providers of broadband services. 
     Accordingly, the Secretary of the Treasury shall prescribe 
     such regulations as may be necessary or appropriate to carry 
     out the purposes of section 48A of such Code, including--
       (A) regulations to determine how and when a taxpayer that 
     incurs qualified expenditures satisfies the requirements of 
     section 48A of such Code to provide broadband services, and
       (B) regulations describing the information, records, and 
     data taxpayers are required to provide the Secretary to 
     substantiate compliance with the requirements of section 48A 
     of such Code.
       (g) Effective Date.--The amendments made by this section 
     shall apply to expenditures incurred after December 31, 2002, 
     and before January 1, 2004.

                      TITLE V--STATE FISCAL RELIEF

     SEC. 501. GENERAL REVENUE SHARING WITH STATES AND THEIR LOCAL 
                   GOVERNMENTS.

       (a) Appropriation.--There is authorized to be appropriated 
     and is appropriated to carry out this section $20,000,000,000 
     for fiscal year 2003.
       (b) Allotments.--From the amount appropriated under 
     subsection (a) for fiscal year 2003, the Secretary of the 
     Treasury shall, as soon as practicable after the date of the 
     enactment of this Act, allot to each of the States as 
     follows, except that no State shall receive less than \1/2\ 
     of 1 percent of such amount:
       (1) State level.--$16,000,000,000 shall be allotted among 
     such States on the basis of the relative population of each 
     such State, as determined by the Secretary on the basis of 
     the most recent satisfactory data.
       (2) Local government level.--$4,000,000,000 shall be 
     allotted among such States as determined under paragraph (1) 
     for distribution to the various units of general local 
     government within such States on the basis of the relative 
     population of each such unit within each such State, as 
     determined by the Secretary on the basis of the most recent 
     satisfactory data.
       (c) Definitions.--For purposes of this section--
       (1) State.--The term ``State'' means any of the several 
     States, the District of Columbia, and the Commonwealth of 
     Puerto Rico.
       (2) Unit of general local government.--
       (A) In general.--The term ``unit of general local 
     government'' means--
       (i) a county, parish, township, city, or political 
     subdivision of a county, parish, township, or city, that is a 
     unit of general local government as determined by the 
     Secretary of Commerce for general statistical purposes; and
       (ii) the District of Columbia, the Commonwealth of Puerto 
     Rico, and the recognized governing body of an Indian tribe or 
     Alaskan native village that carries out substantial 
     governmental duties and powers.
       (B) Treatment of subsumed areas.--For purposes of 
     determining a unit of general local government under this 
     section, the rules under section 6720(c) of title 31, United 
     States Code, shall apply.

     SEC. 502. TEMPORARY STATE FMAP RELIEF.

       (a) Permitting Maintenance of Fiscal Year 2002 FMAP for 
     Last 2 Calendar Quarters of Fiscal Year 2003.--
     Notwithstanding any other provision of law, but subject to 
     subsection (e), if the FMAP determined without regard to this 
     subsection for a State for fiscal year 2003 is less than the 
     FMAP as so determined for fiscal year 2002, the FMAP for the 
     State for fiscal year 2002 shall be substituted for the 
     State's FMAP for the third and fourth calendar quarters of 
     fiscal year 2003, before the application of this section.
       (b) Permitting Maintenance of Fiscal Year 2003 FMAP for 
     Each Calendar Quarter of Fiscal Year 2004.--Notwithstanding 
     any other provision of law, but subject to subsection (e), if 
     the FMAP determined without regard to this subsection for a 
     State for fiscal year 2004 is less than the FMAP as so 
     determined for fiscal year 2003, the FMAP for the State for 
     fiscal year 2003 shall be substituted for the State's FMAP 
     for each calendar quarter of fiscal year 2004, before the 
     application of this section.
       (c) General 4.95 Percentage Points Increase for Last 2 
     Calendar Quarters of Fiscal Year 2003 and Each Calendar 
     Quarter of Fiscal Year 2004.--Notwithstanding any other 
     provision of law, but subject to subsections (e) and (f), for 
     each State for the third and fourth calendar quarters of 
     fiscal year 2003 and each calendar quarter of fiscal year 
     2004, the FMAP (taking into account the application of 
     subsections (a) and (b)) shall be increased by 4.95 
     percentage points.
       (d) Increase in Cap on Medicaid Payments To Territories.--
     Notwithstanding any other provision of law, but subject to 
     subsection (f), with respect to the third and

[[Page S6538]]

     fourth calendar quarters of fiscal year 2003 and each 
     calendar quarter of fiscal year 2004, the amounts otherwise 
     determined for Puerto Rico, the Virgin Islands, Guam, the 
     Northern Mariana Islands, and American Samoa under 
     subsections (f) and (g) of section 1108 of the Social 
     Security Act (42 U.S.C. 1308) shall each be increased by an 
     amount equal to 9.90 percent of such amounts.
       (e) Scope of Application.--The increases in the FMAP for a 
     State under this section shall apply only for purposes of 
     title XIX of the Social Security Act and shall not apply with 
     respect to--
       (1) disproportionate share hospital payments described in 
     section 1923 of such Act (42 U.S.C. 1396r-4);
       (2) payments under title IV or XXI of such Act (42 U.S.C. 
     601 et seq. and 1397aa et seq.); or
       (3) the percentage described in the third sentence of 
     section 1905(b) of the Social Security Act (42 U.S.C. 
     1396d(b)) (relating to amounts expended as medical assistance 
     for services received through an Indian Health Service 
     facility whether operated by the Indian Health Service or by 
     an Indian tribe or tribal organization (as defined in section 
     4 of the Indian Health Care Improvement Act)).
       (f) State Eligibility.--
       (1) In general.--Subject to paragraph (2), a State is 
     eligible for an increase in its FMAP under subsection (c) or 
     an increase in a cap amount under subsection (d) only if the 
     eligibility under its State plan under title XIX of the 
     Social Security Act (including any waiver under such title or 
     under section 1115 of such Act (42 U.S.C. 1315)) is no more 
     restrictive than the eligibility under such plan (or waiver) 
     as in effect on July 1, 2003.
       (2) State reinstatement of eligibility permitted.--A State 
     that has restricted eligibility under its State plan under 
     title XIX of the Social Security Act (including any waiver 
     under such title or under section 1115 of such Act (42 U.S.C. 
     1315)) after July 1, 2003, but prior to the date of enactment 
     of this Act is eligible for an increase in its FMAP under 
     subsection (c) or an increase in a cap amount under 
     subsection (d) in the first calendar quarter (and any 
     subsequent calendar quarters) in which the State has 
     reinstated eligibility that is no more restrictive than the 
     eligibility under such plan (or waiver) as in effect on July 
     1, 2003.
       (3) Rule of construction.--Nothing in paragraph (1) or (2) 
     shall be construed as affecting a State's flexibility with 
     respect to benefits offered under the State medicaid program 
     under title XIX of the Social Security Act (42 U.S.C. 1396 et 
     seq.) (including any waiver under such title or under section 
     1115 of such Act (42 U.S.C. 1315)).
       (g) Definitions.--In this section:
       (1) FMAP.--The term ``FMAP'' means the Federal medical 
     assistance percentage, as defined in section 1905(b) of the 
     Social Security Act (42 U.S.C. 1396d(b)).
       (2) State.--The term ``State'' has the meaning given such 
     term for purposes of title XIX of the Social Security Act (42 
     U.S.C. 1396 et seq.).
       (h) Repeal.--Effective as of October 1, 2004, this section 
     is repealed.

                  TITLE VI--UNEMPLOYMENT COMPENSATION

      Subtitle A--Extension and Enhancement of Temporary Extended 
                       Unemployment Compensation

     SEC. 601. EXTENSION OF THE TEMPORARY EXTENDED UNEMPLOYMENT 
                   COMPENSATION ACT OF 2002.

       (a) In General.--Section 208 of the Temporary Extended 
     Unemployment Compensation Act of 2002 (Public Law 107-147; 
     116 Stat. 30), as amended by Public Law 108-1 (117 Stat. 3), 
     is amended--
       (1) in subsection (a)(2), by striking ``before June 1'' and 
     inserting ``on or before November 30'';
       (2) in subsection (b)(1), by striking ``May 31, 2003'' and 
     inserting ``November 30, 2003'';
       (3) in subsection (b)(2)--
       (A) in the heading, by striking ``may 31, 2003'' and 
     inserting ``november 30, 2003''; and
       (B) by striking ``May 31, 2003'' and inserting ``November 
     30, 2003''; and
       (4) in subsection (b)(3), by striking ``August 30, 2003'' 
     and inserting ``February 28, 2004''.
       (b) Effective Date.--The amendments made by this section 
     shall take effect as if included in the enactment of the 
     Temporary Extended Unemployment Compensation Act of 2002 
     (Public Law 107-147; 116 Stat. 21).

     SEC. 602. ENTITLEMENT TO ADDITIONAL WEEKS OF TEMPORARY 
                   EXTENDED UNEMPLOYMENT COMPENSATION.

       (a) Entitlement to Additional Weeks.--
       (1) In general.--Paragraph (1) of section 203(b) of the 
     Temporary Extended Unemployment Compensation Act of 2002 
     (Public Law 107-147; 116 Stat. 28) is amended--
       (A) in subparagraph (A), by striking ``50 percent'' and 
     inserting ``100 percent''; and
       (B) in subparagraph (B), by striking ``13 times'' and 
     inserting ``26 times''.
       (2) Repeal of restriction on augmentation during 
     transitional period.--Section 208(b) of the Temporary 
     Extended Unemployment Compensation Act of 2002 (Public Law 
     107-147), as amended by Public Law 108-1 (117 Stat. 3) and 
     section 601(a), is amended--
       (A) in paragraph (1)--
       (i) by striking ``paragraphs (2) and (3)'' and inserting 
     ``paragraph (2)''; and
       (ii) by inserting before the period at the end the 
     following: ``, including such compensation payable by reason 
     of amounts deposited in such account after such date pursuant 
     to the application of subsection (c) of such section'';
       (B) by striking paragraph (2); and
       (C) by redesignating paragraph (3) as paragraph (2).
       (3) Extension of transition limitation.--Section 208(b)(2) 
     of the Temporary Extended Unemployment Compensation Act of 
     2002 (Public Law 107-147), as amended by Public Law 108-1 
     (117 Stat. 3) and section 601(a)(4) and as redesignated by 
     paragraph (2), is amended by striking ``February 28, 2004'' 
     and inserting ``May 29, 2004''.
       (4) Conforming amendment for augmented benefits.--Section 
     203(c)(1) of the Temporary Extended Unemployment Compensation 
     Act of 2002 (Public Law 107-147; 116 Stat. 28) is amended by 
     striking ``the amount originally established in such account 
     (as determined under subsection (b)(1))'' and inserting ``7 
     times the individual's average weekly benefit amount for the 
     benefit year''.
       (b) Effective Date and Application.--
       (1) In general.--The amendments made by subsection (a) 
     shall apply with respect to weeks of unemployment beginning 
     on or after the date of enactment this Act.
       (2) TEUC-X amounts deposited in account prior to date of 
     enactment deemed to be the additional teuc amounts provided 
     by this section.--In applying the amendments made by 
     subsection (a) under the Temporary Extended Unemployment 
     Compensation Act of 2002 (Public Law 107-147; 116 Stat. 26), 
     the Secretary of Labor shall deem any amounts deposited into 
     an individual's temporary extended unemployment compensation 
     account by reason of section 203(c) of such Act (commonly 
     known as ``TEUC-X amounts'') prior to the date of enactment 
     of this Act to be amounts deposited in such account by reason 
     of section 203(b) of such Act, as amended by subsection (a) 
     (commonly known as ``TEUC amounts'').
       (3) Application to exhaustees and current beneficiaries.--
       (A) Exhaustees.--In the case of any individual--
       (i) to whom any temporary extended unemployment 
     compensation was payable for any week beginning before the 
     date of enactment of this Act; and
       (ii) who exhausted such individual's rights to such 
     compensation (by reason of the payment of all amounts in such 
     individual's temporary extended unemployment compensation 
     account) before such date,

     such individual's eligibility for any additional weeks of 
     temporary extended unemployment compensation by reason of the 
     amendments made by subsection (a) shall apply with respect to 
     weeks of unemployment beginning on or after the date of 
     enactment of this Act.
       (B) Current beneficiaries.--In the case of any individual--
       (i) to whom any temporary extended unemployment 
     compensation was payable for any week beginning before the 
     date of enactment of this Act; and
       (ii) as to whom the condition described in subparagraph 
     (A)(ii) does not apply,

     such individual shall be eligible for temporary extended 
     unemployment compensation (in accordance with the provisions 
     of the Temporary Extended Unemployment Compensation Act of 
     2002, as amended by subsection (a)) with respect to weeks of 
     unemployment beginning on or after the date of enactment of 
     this Act.
       (4) Redetermination of eligibility for augmented amounts 
     for individuals for whom such a determination was made prior 
     to the date of enactment.--Any determination of whether the 
     individual's State is in an extended benefit period under 
     section 203(c) of the Temporary Extended Unemployment 
     Compensation Act of 2002 (Public Law 107-147; 116 Stat. 28) 
     made prior to the date of enactment of this Act shall be 
     disregarded and the determination under such section shall be 
     made as follows:
       (A) Individuals who exhausted all teuc and teuc-x amounts 
     prior to the date of enactment.--In the case of an individual 
     whose temporary extended unemployment account has, prior to 
     the date of enactment of this Act, been both augmented under 
     such section 203(c) and exhausted of all amounts by which it 
     was so augmented, the determination shall be made as of such 
     date of enactment.
       (B) All other individuals.--In the case of an individual 
     who is not described in subparagraph (A), the determination 
     shall be made at the time that the individual's account 
     established under such section 203, as amended by subsection 
     (a), is exhausted.
       (5) No effect on provisions related to displaced airline 
     related workers.--The amendments made by this section and 
     section 601 shall have no effect on the provisions of section 
     4002 of the Emergency Wartime Supplemental Appropriations 
     Act, 2003 (Public Law 108-11).

    Subtitle B--Temporary Enhanced Regular Unemployment Compensation

     SEC. 611. FEDERAL-STATE AGREEMENTS.

       (a) In General.--Any State which desires to do so may enter 
     into and participate in an agreement under this title with 
     the Secretary of Labor (in this title referred to as the 
     ``Secretary''). Any State which is a party to an agreement 
     under this title may, upon providing 30 days' written notice 
     to the Secretary, terminate such agreement.
       (b) Provisions of Agreement.--
       (1) In general.--Subject to paragraph (3), any agreement 
     under subsection (a) shall provide that the State agency of 
     the State,

[[Page S6539]]

     in addition to any amounts of regular compensation to which 
     an individual may be entitled under the State law, shall make 
     payments of temporary enhanced regular unemployment 
     compensation to an individual in an amount and to the extent 
     that the individual would be entitled to regular compensation 
     if the State law were applied with the modifications 
     described in paragraph (2).
       (2) Modifications described.--The modifications described 
     in this paragraph are as follows:
       (A) In the case of an individual who is not eligible for 
     regular compensation under the State law because of the use 
     of a definition of base period that does not count wages 
     earned in the most recently completed calendar quarter, then 
     eligibility for compensation shall be determined by applying 
     a base period ending at the close of the most recently 
     completed calendar quarter.
       (B) In the case of an individual who is not eligible for 
     regular compensation under the State law because such 
     individual does not meet requirements relating to 
     availability for work, active search for work, or refusal to 
     accept work, because such individual is seeking, or is 
     available for, less than full-time work, then compensation 
     shall not be denied by such State to an otherwise eligible 
     individual who seeks less than full-time work or fails to 
     accept full-time work.
       (3) Reduction of amounts of regular compensation available 
     for individuals who sought part-time work or failed to accept 
     full-time work.--Any agreement under subsection (a) shall 
     provide that the State agency of the State shall reduce the 
     amount of regular compensation available to an individual who 
     has received temporary enhanced regular unemployment 
     compensation as a result of the application of the 
     modification described in paragraph (2)(B) by the amount of 
     such temporary enhanced regular unemployment compensation.
       (c) Coordination Rule.--The modifications described in 
     subsection (b)(2) shall also apply in determining the amount 
     of benefits payable under any Federal law to the extent that 
     those benefits are determined by reference to regular 
     compensation payable under the State law of the State 
     involved.

     SEC. 612. PAYMENTS TO STATES HAVING AGREEMENTS UNDER THIS 
                   TITLE.

       (a) General Rule.--There shall be paid to each State which 
     has entered into an agreement under this title an amount 
     equal to--
       (1) 100 percent of any temporary enhanced regular 
     unemployment compensation; and
       (2) 100 percent of any regular compensation which is paid 
     to individuals by such State by reason of the fact that its 
     State law contains provisions comparable to the modifications 
     described in subparagraphs (A) and (B) of section 611(b)(2), 
     but only to the extent that those amounts would, if such 
     amounts were instead payable by virtue of the State law's 
     being deemed to be so modified pursuant to section 611(b)(1), 
     have been reimbursable under paragraph (1).
       (b) Determination of Amount.--Sums under subsection (a) 
     payable to any State by reason of such State having an 
     agreement under this title shall be payable, either in 
     advance or by way of reimbursement (as may be determined by 
     the Secretary), in such amounts as the Secretary estimates 
     the State will be entitled to receive under this title for 
     each calendar month, reduced or increased, as the case may 
     be, by any amount by which the Secretary finds that the 
     Secretary's estimates for any prior calendar month were 
     greater or less than the amounts which should have been paid 
     to the State. Such estimates may be made on the basis of such 
     statistical, sampling, or other method as may be agreed upon 
     by the Secretary and the State agency of the State involved.

     SEC. 613. FINANCING PROVISIONS.

       (a) In General.--Funds in the extended unemployment 
     compensation account (as established by section 905(a) of the 
     Social Security Act (42 U.S.C. 1105(a))), and the Federal 
     unemployment account (as established by section 904(g) of 
     such Act (42 U.S.C. 1104(g))), of the Unemployment Trust Fund 
     (as established by section 904(a) of such Act (42 U.S.C. 
     1104(a))) shall be used for the making of payments to States 
     having agreements entered into under this title.
       (b) Certification.--The Secretary shall from time to time 
     certify to the Secretary of the Treasury for payment to each 
     State the sums which are payable to such State under this 
     title. The Secretary of the Treasury, prior to audit or 
     settlement by the General Accounting Office, shall make 
     payments to the State in accordance with such certification 
     by transfers from the extended unemployment compensation 
     account (as so established), or, to the extent that there are 
     insufficient funds in that account, from the Federal 
     unemployment account, to the account of such State in the 
     Unemployment Trust Fund (as so established).
       (c) Assistance to States.--There are appropriated out of 
     the employment security administration account of the 
     Unemployment Trust Fund (as established by section 901(a) of 
     the Social Security Act (42 U.S.C. 1101(a))) $500,000,000 to 
     reimburse States for the costs of the administration of 
     agreements under this title (including any improvements in 
     technology in connection therewith) and to provide 
     reemployment services to unemployment compensation claimants 
     in States having agreements under this title. Each State's 
     share of the amount appropriated by the preceding sentence 
     shall be determined by the Secretary according to the factors 
     described in section 302(a) of the Social Security Act (42 
     U.S.C. 502(a)) and certified by the Secretary to the 
     Secretary of the Treasury.
       (d) Appropriations for Certain Payments.--There are 
     appropriated from the general fund of the Treasury, without 
     fiscal year limitation, to the extended unemployment 
     compensation account (as so established) of the Unemployment 
     Trust Fund (as so established) such sums as the Secretary 
     estimates to be necessary to make the payments under this 
     section in respect of--
       (1) compensation payable under chapter 85 of title 5, 
     United States Code; and
       (2) compensation payable on the basis of services to which 
     section 3309(a)(1) of the Internal Revenue Code of 1986 
     applies.

     Amounts appropriated pursuant to the preceding sentence shall 
     not be required to be repaid.

     SEC. 614. DEFINITIONS.

       For purposes of this title, the terms ``compensation'', 
     ``base period'', ``regular compensation'', ``State'', ``State 
     agency'', ``State law'', and ``week'' have the respective 
     meanings given such terms under section 205 of the Federal-
     State Extended Unemployment Compensation Act of 1970.

     SEC. 615. APPLICABILITY.

       (a) In General.--Except as provided in subsection (b), an 
     agreement entered into under this title shall apply to weeks 
     of unemployment--
       (1) beginning after the date on which such agreement is 
     entered into; and
       (2) ending before July 1, 2004.
       (b) Phase-Out of TERUC.--
       (1) In general.--Subject to paragraph (2), in the case of 
     an individual who has established eligibility for temporary 
     enhanced regular unemployment compensation, but who has not 
     exhausted all rights to such compensation, as of the last day 
     of the week ending before July 1, 2004, such compensation 
     shall continue to be payable to such individual for any week 
     beginning after such date for which the individual meets the 
     eligibility requirements of this title.
       (2) Limitation.--No compensation shall be payable by reason 
     of paragraph (1) for any week beginning after December 31, 
     2004.

     SEC. 616. COORDINATION WITH THE TEMPORARY EXTENDED 
                   UNEMPLOYMENT COMPENSATION ACT OF 2002.

       (a) In General.--The Temporary Extended Unemployment 
     Compensation Act of 2002 (Public Law 107-147; 116 Stat. 30) 
     is amended--
       (1) in section 202(b)(1), by inserting ``, and who have 
     exhausted all rights to temporary enhanced regular 
     unemployment compensation'' before the semicolon at the end;
       (2) in section 202(b)(2), by inserting ``, temporary 
     enhanced regular unemployment compensation,'' after ``regular 
     compensation'';
       (3) in section 202(c), by inserting ``(or, as the case may 
     be, such individual's rights to temporary enhanced regular 
     unemployment compensation)'' after ``State law'' in the 
     matter preceding paragraph (1);
       (4) in section 202(c)(1), by inserting ``and no payments of 
     temporary enhanced regular unemployment compensation can be 
     made'' after ``under such law'';
       (5) in section 202(d)(1), by inserting ``or the amount of 
     any temporary enhanced regular unemployment compensation 
     (including dependents' allowances) payable to such individual 
     for such a week,'' after ``total unemployment'';
       (6) in section 202(d)(2)(A), by inserting ``, or, as the 
     case may be, to temporary enhanced regular unemployment 
     compensation,'' after ``State law'';
       (7) in section 203(b)(1)(A), by inserting ``plus the amount 
     of any temporary enhanced regular unemployment compensation 
     payable to such individual for such week,'' after ``under 
     such law''; and
       (8) in section 203(b)(2), by inserting ``or the amount of 
     any temporary enhanced regular unemployment compensation 
     payable to such individual for such week,'' after ``total 
     unemployment''.
       (b) Amount of TEUC Offset by Amount of TERUC.--Section 
     203(b)(1) of the Temporary Extended Unemployment Compensation 
     Act of 2002 (Public Law 107-147; 116 Stat. 28) is amended--
       (1) in subparagraph (B), by striking the period at the end 
     and inserting a comma; and
       (2) by adding at the end the following:
     ``minus the number of weeks in which the individual was 
     entitled to temporary enhanced regular unemployment 
     compensation as a result of the application of the 
     modification described in section 611(b)(2)(A) of the Jobs, 
     Opportunity, and Prosperity Act of 2003 (relating to the 
     alternative base period) multiplied by the individual's 
     average weekly benefit amount for the benefit year.''.
       (c) Temporary Enhanced Regular Unemployment Compensation 
     Defined.--Section 207 of the Temporary Extended Unemployment 
     Compensation Act of 2002 (Public Law 107-147; 116 Stat. 30) 
     is amended to read as follows:

     ``SEC. 207. DEFINITIONS.

       ``In this title:
       ``(1) General definitions.--The terms `compensation', 
     `regular compensation', `extended compensation', `additional 
     compensation', `benefit year', `base period', `State', `State 
     agency', `State law', and `week' have the respective meanings 
     given such terms under section 205 of the Federal-State 
     Extended Unemployment Compensation Act of 1970 (26 U.S.C. 
     3304 note).
       ``(2) Temporary enhanced regular unemployment 
     compensation.--The term `temporary enhanced regular 
     unemployment

[[Page S6540]]

     compensation' means temporary enhanced regular unemployment 
     benefits payable under title II of the Jobs, Opportunity, and 
     Prosperity Act of 2003.''.

                  TITLE V--LONG-TERM FISCAL DISCIPLINE

        Subtitle A--Provisions Designed To Curtail Tax Shelters

     SEC. 701. CLARIFICATION OF ECONOMIC SUBSTANCE DOCTRINE.

       (a) In General.--Section 7701 is amended by redesignating 
     subsection (n) as subsection (o) and by inserting after 
     subsection (m) the following new subsection:
       ``(n) 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) 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.

     In applying subclause (II), a purpose of achieving a 
     financial accounting benefit shall not be taken into account 
     in determining whether a transaction has a substantial nontax 
     purpose if the origin of such financial accounting benefit is 
     a reduction of income tax.
       ``(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.--A lessor of tangible property 
     subject to a lease shall be treated as satisfying the 
     requirements of paragraph (1)(B)(ii) with respect to the 
     leased property if such lease satisfies such requirements as 
     provided by the Secretary.
       ``(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 the date of 
     the enactment of this Act.

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

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

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

       ``(a) Imposition of Penalty.--Any person who fails to 
     include on any return or statement any information with 
     respect to a reportable transaction which is required under 
     section 6011 to be included with such return or statement 
     shall pay a penalty in the amount determined under subsection 
     (b).
       ``(b) Amount of Penalty.--
       ``(1) In general.--Except as provided in paragraphs (2) and 
     (3), the amount of the penalty under subsection (a) shall be 
     $50,000.
       ``(2) Listed transaction.--The amount of the penalty under 
     subsection (a) with respect to a listed transaction shall be 
     $100,000.
       ``(3) Increase in penalty for large entities and high net 
     worth individuals.--
       ``(A) In general.--In the case of a failure under 
     subsection (a) by--
       ``(i) a large entity, or
       ``(ii) a high net worth individual,

     the penalty under paragraph (1) or (2) shall be twice the 
     amount determined without regard to this paragraph.
       ``(B) Large entity.--For purposes of subparagraph (A), the 
     term `large entity' means, with respect to any taxable year, 
     a person (other than a natural person) with gross receipts in 
     excess of $10,000,000 for the taxable year in which the 
     reportable transaction occurs or the preceding taxable year. 
     Rules similar to the rules of paragraph (2) and subparagraphs 
     (B), (C), and (D) of paragraph (3) of section 448(c) shall 
     apply for purposes of this subparagraph.
       ``(C) High net worth individual.--For purposes of 
     subparagraph (A), the term `high net worth individual' means, 
     with respect to a reportable 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

[[Page S6541]]

     consolidated with another person for purposes of such 
     reports, and
       ``(2) which--
       ``(A) is required to pay a penalty under this section with 
     respect to a listed transaction,
       ``(B) is required to pay a penalty under section 6662A with 
     respect to any reportable transaction at a rate prescribed 
     under section 6662A(c), or
       ``(C) is required to pay a penalty under section 6662B with 
     respect to any noneconomic substance transaction,

     the requirement to pay such penalty shall be disclosed in 
     such reports filed by such person for such periods as the 
     Secretary shall specify. Failure to make a disclosure in 
     accordance with the preceding sentence shall be treated as a 
     failure to which the penalty under subsection (b)(2) applies.
       ``(f) Coordination With Other Penalties.--The penalty 
     imposed by this section is in addition to any penalty imposed 
     under this title.''.
       (b) Conforming Amendment.--The table of sections for part I 
     of subchapter B of chapter 68 is amended by inserting after 
     the item relating to section 6707 the following:

``Sec. 6707A. Penalty for failure to include reportable transaction 
              information with return or statement.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to returns and statements the due date for which 
     is after the date of the enactment of this Act.

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

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

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

       ``(a) Imposition of Penalty.--If a taxpayer has a 
     reportable transaction understatement for any taxable year, 
     there shall be added to the tax an amount equal to 20 percent 
     of the amount of such understatement.
       ``(b) Reportable Transaction Understatement.--For purposes 
     of this section--
       ``(1) In general.--The term `reportable transaction 
     understatement' means the sum of--
       ``(A) the product of--
       ``(i) the amount of the increase (if any) in taxable income 
     which results from a difference between the proper tax 
     treatment of an item to which this section applies and the 
     taxpayer's treatment of such item (as shown on the taxpayer's 
     return of tax), and
       ``(ii) the highest rate of tax imposed by section 1 
     (section 11 in the case of a taxpayer which is a 
     corporation), and
       ``(B) the amount of the decrease (if any) in the aggregate 
     amount of credits determined under subtitle A which results 
     from a difference between the taxpayer's treatment of an item 
     to which this section applies (as shown on the taxpayer's 
     return of tax) and the proper tax treatment of such item.

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

  ``For reporting of section 6662A(c) penalty to the Securities and 
Exchange Commission, see section 6707A(e).''.

       (b) Determination of Other Understatements.--Subparagraph 
     (A) of section 6662(d)(2) is amended by adding at the end the 
     following flush sentence:

     ``The excess under the preceding sentence shall be determined 
     without regard to items to which section 6662A applies and 
     without regard to items with respect to which a penalty is 
     imposed by section 6662B.''.
       (c) Reasonable Cause Exception.--
       (1) In general.--Section 6664 is amended by adding at the 
     end the following new subsection:
       ``(d) Reasonable Cause Exception for Reportable Transaction 
     Understatements.--
       ``(1) In general.--No penalty shall be imposed under 
     section 6662A with respect to any portion of a reportable 
     transaction understatement if it is shown that there was a 
     reasonable cause for such portion and that the taxpayer acted 
     in good faith with respect to such portion.
       ``(2) Special rules.--Paragraph (1) shall not apply to any 
     reportable transaction understatement unless--
       ``(A) the relevant facts affecting the tax treatment of the 
     item are adequately disclosed in accordance with the 
     regulations prescribed under section 6011,
       ``(B) there is or was substantial authority for such 
     treatment, and
       ``(C) the taxpayer reasonably believed that such treatment 
     was more likely than not the proper treatment.

     A taxpayer failing to adequately disclose in accordance with 
     section 6011 shall be treated as meeting the requirements of 
     subparagraph (A) if the penalty for such failure was 
     rescinded under section 6707A(d).
       ``(3) Rules relating to reasonable belief.--For purposes of 
     paragraph (2)(C)--
       ``(A) In general.--A taxpayer shall be treated as having a 
     reasonable belief with respect to the tax treatment of an 
     item only if such belief--
       ``(i) is based on the facts and law that exist at the time 
     the return of tax which includes such tax treatment is filed, 
     and
       ``(ii) relates solely to the taxpayer's chances of success 
     on the merits of such treatment and does not take into 
     account the possibility that a return will not be audited, 
     such treatment will not be raised on audit, or such treatment 
     will be resolved through settlement if it is raised.
       ``(B) Certain opinions may not be relied upon.--
       ``(i) In general.--An opinion of a tax advisor may not be 
     relied upon to establish the reasonable belief of a taxpayer 
     if--

       ``(I) the tax advisor is described in clause (ii), or
       ``(II) the opinion is described in clause (iii).

       ``(ii) Disqualified tax advisors.--A tax advisor is 
     described in this clause if the tax advisor--

       ``(I) is a material advisor (within the meaning of section 
     6111(b)(1)) who participates in the organization, management, 
     promotion, or sale of the transaction or who is related 
     (within the meaning of section 267(b) or 707(b)(1)) to any 
     person who so participates,
       ``(II) is compensated directly or indirectly by a material 
     advisor with respect to the transaction,
       ``(III) has a fee arrangement with respect to the 
     transaction which is contingent on all or part of the 
     intended tax benefits from the transaction being sustained, 
     or
       ``(IV) as determined under regulations prescribed by the 
     Secretary, has a continuing financial interest with respect 
     to the transaction.

       ``(iii) Disqualified opinions.--For purposes of clause (i), 
     an opinion is disqualified if the opinion--

       ``(I) is based on unreasonable factual or legal assumptions 
     (including assumptions as to future events),

[[Page S6542]]

       ``(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 would apply without regard to this paragraph.
       ``(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(n)(1)) for the transaction giving 
     rise to the claimed benefit or the transaction was not 
     respected under section 7701(n)(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 the date of 
     the enactment of this Act.

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

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

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

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

     SEC. 707. DISCLOSURE OF REPORTABLE TRANSACTIONS.

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

     ``SEC. 6111. DISCLOSURE OF REPORTABLE TRANSACTIONS.

       ``(a) In General.--Each material advisor with respect to 
     any reportable transaction shall make a return (in such form 
     as the Secretary may prescribe) setting forth--
       ``(1) information identifying and describing the 
     transaction,
       ``(2) information describing any potential tax benefits 
     expected to result from the transaction, and
       ``(3) such other information as the Secretary may 
     prescribe.

     Such return shall be filed not later than the date specified 
     by the Secretary.
       ``(b) Definitions.--For purposes of this section--
       ``(1) Material advisor.--
       ``(A) In general.--The term `material advisor' means any 
     person--
       ``(i) who provides any material aid, assistance, or advice 
     with respect to organizing, promoting, selling, implementing, 
     or carrying out any reportable transaction, and
       ``(ii) who directly or indirectly derives gross income in 
     excess of the threshold amount for such aid, assistance, or 
     advice.
       ``(B) Threshold amount.--For purposes of subparagraph (A), 
     the threshold amount is--
       ``(i) $50,000 in the case of a reportable transaction 
     substantially all of the tax benefits from which are provided 
     to natural persons, and
       ``(ii) $250,000 in any other case.
       ``(2) Reportable transaction.--The term `reportable 
     transaction' has the meaning given to such term by section 
     6707A(c).
       ``(c) Regulations.--The Secretary may prescribe regulations 
     which provide--
       ``(1) that only 1 person shall be required to meet the 
     requirements of subsection (a) in

[[Page S6543]]

     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 listed transaction before the date the 
     return including the transaction is filed under section 6111.

     Subparagraph (B) shall be applied by substituting `75 
     percent' for `50 percent' in the case of an intentional 
     failure or act described in subsection (a).
       ``(c) Rescission Authority.--The provisions of section 
     6707A(d) (relating to authority of Commissioner to rescind 
     penalty) shall apply to any penalty imposed under this 
     section.
       ``(d) Reportable and Listed Transactions.--The terms 
     `reportable transaction' and `listed transaction' have the 
     respective meanings given to such terms by section 
     6707A(c).''.
       (b) Clerical Amendment.--The item relating to section 6707 
     in the table of sections for part I of subchapter B of 
     chapter 68 is amended by striking ``tax shelters'' and 
     inserting ``reportable transactions''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to returns the due date for which is after the 
     date of the enactment of this Act.

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

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

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

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

     the court may enjoin such person from engaging in such 
     conduct or in any other activity subject to penalty under 
     this title.
       ``(c) Specified Conduct.--For purposes of this section, the 
     term `specified conduct' means any action, or failure to take 
     action, subject to penalty under section 6700, 6701, 6707, or 
     6708.''.
       (b) Conforming Amendments.--
       (1) The heading for section 7408 is amended to read as 
     follows:

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

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

``Sec. 7408. Actions to enjoin specified conduct related to tax 
              shelters and reportable transactions.''.

       (c) Effective Date.--The amendment made by this section 
     shall take effect on the day after the date of the enactment 
     of this Act.

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

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

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

       (a) In General.--Section 5321(a)(5) of title 31, United 
     States Code, is amended to read as follows:
       ``(5) Foreign financial agency transaction violation.--
       ``(A) Penalty authorized.--The Secretary of the Treasury 
     may impose a civil money penalty on any person who violates, 
     or causes any violation of, any provision of section 5314.
       ``(B) Amount of penalty.--
       ``(i) In general.--Except as provided in subparagraph (C), 
     the amount of any civil penalty imposed under subparagraph 
     (A) shall not exceed $5,000.
       ``(ii) Reasonable cause exception.--No penalty shall be 
     imposed under subparagraph (A) with respect to any violation 
     if--

       ``(I) such violation was due to reasonable cause, and
       ``(II) the amount of the transaction or the balance in the 
     account at the time of the transaction was properly reported.

       ``(C) Willful violations.--In the case of any person 
     willfully violating, or willfully causing any violation of, 
     any provision of section 5314--

[[Page S6544]]

       ``(i) the maximum penalty under subparagraph (B)(i) shall 
     be increased to the greater of--

       ``(I) $25,000, or
       ``(II) the amount (not exceeding $100,000) determined under 
     subparagraph (D), and

       ``(ii) subparagraph (B)(ii) shall not apply.
       ``(D) Amount.--The amount determined under this 
     subparagraph is--
       ``(i) in the case of a violation involving a transaction, 
     the amount of the transaction, or
       ``(ii) in the case of a violation involving a failure to 
     report the existence of an account or any identifying 
     information required to be provided with respect to an 
     account, the balance in the account at the time of the 
     violation.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to violations occurring after the date of the 
     enactment of this Act.

     SEC. 713. FRIVOLOUS TAX SUBMISSIONS.

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

     ``SEC. 6702. FRIVOLOUS TAX SUBMISSIONS.

       ``(a) Civil Penalty for Frivolous Tax Returns.--A person 
     shall pay a penalty of $5,000 if--
       ``(1) such person files what purports to be a return of a 
     tax imposed by this title but which--
       ``(A) does not contain information on which the substantial 
     correctness of the self-assessment may be judged, or
       ``(B) contains information that on its face indicates that 
     the self-assessment is substantially incorrect; and
       ``(2) the conduct referred to in paragraph (1)--
       ``(A) is based on a position which the Secretary has 
     identified as frivolous under subsection (c), or
       ``(B) reflects a desire to delay or impede the 
     administration of Federal tax laws.
       ``(b) Civil Penalty for Specified Frivolous Submissions.--
       ``(1) Imposition of penalty.--Except as provided in 
     paragraph (3), any person who submits a specified frivolous 
     submission shall pay a penalty of $5,000.
       ``(2) Specified frivolous submission.--For purposes of this 
     section--
       ``(A) Specified frivolous submission.--The term `specified 
     frivolous submission' means a specified submission if any 
     portion of such submission--
       ``(i) is based on a position which the Secretary has 
     identified as frivolous under subsection (c), or
       ``(ii) reflects a desire to delay or impede the 
     administration of Federal tax laws.
       ``(B) Specified submission.--The term `specified 
     submission' means--
       ``(i) a request for a hearing under--

       ``(I) section 6320 (relating to notice and opportunity for 
     hearing upon filing of notice of lien), or
       ``(II) section 6330 (relating to notice and opportunity for 
     hearing before levy), and

       ``(ii) an application under--

       ``(I) section 6159 (relating to agreements for payment of 
     tax liability in installments),
       ``(II) section 7122 (relating to compromises), or
       ``(III) section 7811 (relating to taxpayer assistance 
     orders).

       ``(3) Opportunity to withdraw submission.--If the Secretary 
     provides a person with notice that a submission is a 
     specified frivolous submission and such person withdraws such 
     submission within 30 days after such notice, the penalty 
     imposed under paragraph (1) shall not apply with respect to 
     such submission.
       ``(c) Listing of Frivolous Positions.--The Secretary shall 
     prescribe (and periodically revise) a list of positions which 
     the Secretary has identified as being frivolous for purposes 
     of this subsection. The Secretary shall not include in such 
     list any position that the Secretary determines meets the 
     requirement of section 6662(d)(2)(B)(ii)(II).
       ``(d) Reduction of Penalty.--The Secretary may reduce the 
     amount of any penalty imposed under this section if the 
     Secretary determines that such reduction would promote 
     compliance with and administration of the Federal tax laws.
       ``(e) Penalties in Addition to Other Penalties.--The 
     penalties imposed by this section shall be in addition to any 
     other penalty provided by law.''.
       (b) Treatment of Frivolous Requests for Hearings Before 
     Levy.--
       (1) Frivolous requests disregarded.--Section 6330 (relating 
     to notice and opportunity for hearing before levy) is amended 
     by adding at the end the following new subsection:
       ``(g) Frivolous Requests for Hearing, Etc.--Notwithstanding 
     any other provision of this section, if the Secretary 
     determines that any portion of a request for a hearing under 
     this section or section 6320 meets the requirement of clause 
     (i) or (ii) of section 6702(b)(2)(A), then the Secretary may 
     treat such portion as if it were never submitted and such 
     portion shall not be subject to any further administrative or 
     judicial review.''.
       (2) Preclusion from raising frivolous issues at hearing.--
     Section 6330(c)(4) is amended--
       (A) by striking ``(A)'' and inserting ``(A)(i)'';
       (B) by striking ``(B)'' and inserting ``(ii)'';
       (C) by striking the period at the end of the first sentence 
     and inserting ``; or''; and
       (D) by inserting after subparagraph (A)(ii) (as so 
     redesignated) the following:
       ``(B) the issue meets the requirement of clause (i) or (ii) 
     of section 6702(b)(2)(A).''.
       (3) Statement of grounds.--Section 6330(b)(1) is amended by 
     striking ``under subsection (a)(3)(B)'' and inserting ``in 
     writing under subsection (a)(3)(B) and states the grounds for 
     the requested hearing''.
       (c) Treatment of Frivolous Requests for Hearings Upon 
     Filing of Notice of Lien.--Section 6320 is amended--
       (1) in subsection (b)(1), by striking ``under subsection 
     (a)(3)(B)'' and inserting ``in writing under subsection 
     (a)(3)(B) and states the grounds for the requested hearing'', 
     and
       (2) in subsection (c), by striking ``and (e)'' and 
     inserting ``(e), and (g)''.
       (d) Treatment of Frivolous Applications for Offers-in-
     Compromise and Installment Agreements.--Section 7122 is 
     amended by adding at the end the following new subsection:
       ``(e) Frivolous Submissions, Etc.--Notwithstanding any 
     other provision of this section, if the Secretary determines 
     that any portion of an application for an offer-in-compromise 
     or installment agreement submitted under this section or 
     section 6159 meets the requirement of clause (i) or (ii) of 
     section 6702(b)(2)(A), then the Secretary may treat such 
     portion as if it were never submitted and such portion shall 
     not be subject to any further administrative or judicial 
     review.''.
       (e) Clerical Amendment.--The table of sections for part I 
     of subchapter B of chapter 68 is amended by striking the item 
     relating to section 6702 and inserting the following new 
     item:

``Sec. 6702. Frivolous tax submissions.''.

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

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

       (a) Censure; Imposition of Penalty.--
       (1) In general.--Section 330(b) of title 31, United States 
     Code, is amended--
       (A) by inserting ``, or censure,'' after ``Department'', 
     and
       (B) by adding at the end the following new flush sentence:

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

     SEC. 715. PENALTY ON PROMOTERS OF TAX SHELTERS.

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

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

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

[[Page S6545]]

     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 Corporate Governance 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.

      Subtitle C--Provisions to Discourage Corporate Expatriation

     SEC. 731. TAX TREATMENT OF INVERTED CORPORATE ENTITIES.

       (a) In General.--Subchapter C of chapter 80 (relating to 
     provisions affecting more than one subtitle) is amended by 
     adding at the end the following new section:

     ``SEC. 7874. RULES RELATING TO INVERTED CORPORATE ENTITIES.

       ``(a) Inverted Corporations Treated as Domestic 
     Corporations.--
       ``(1) In general.--If a foreign incorporated entity is 
     treated as an inverted domestic corporation, then, 
     notwithstanding section 7701(a)(4), such entity shall be 
     treated for purposes of this title as a domestic corporation.
       ``(2) Inverted domestic corporation.--For purposes of this 
     section, a foreign incorporated entity shall be treated as an 
     inverted domestic corporation if, pursuant to a plan (or a 
     series of related transactions)--
       ``(A) the entity completes after March 20, 2002, the direct 
     or indirect acquisition of substantially all of the 
     properties held directly or indirectly by a domestic 
     corporation or substantially all of the properties 
     constituting a trade or business of a domestic partnership,
       ``(B) after the acquisition at least 80 percent of the 
     stock (by vote or value) of the entity is held--
       ``(i) in the case of an acquisition with respect to a 
     domestic corporation, by former shareholders of the domestic 
     corporation by reason of holding stock in the domestic 
     corporation, or
       ``(ii) in the case of an acquisition with respect to a 
     domestic partnership, by former partners of the domestic 
     partnership by reason of holding a capital or profits 
     interest in the domestic partnership, and
       ``(C) the expanded affiliated group which after the 
     acquisition includes the entity does not have substantial 
     business activities in the foreign country in which or under 
     the law of which the entity is created or organized when 
     compared to the total business activities of such expanded 
     affiliated group.

     Except as provided in regulations, an acquisition of 
     properties of a domestic corporation shall not be treated as 
     described in subparagraph (A) if none of the corporation's 
     stock was readily tradeable on an established securities 
     market at any time during the 4-year period ending on the 
     date of the acquisition.
       ``(b) Preservation of Domestic Tax Base In Certain 
     Inversion Transactions To Which Subsection (a) Does Not 
     Apply.--
       ``(1) In general.--If a foreign incorporated entity would 
     be treated as an inverted domestic corporation with respect 
     to an acquired entity if either--
       ``(A) subsection (a)(2)(A) were applied by substituting 
     `after December 31, 1996, and on or before March 20, 2002' 
     for `after March 20, 2002' and subsection (a)(2)(B) were 
     applied by substituting `more than 50 percent' for `at least 
     80 percent', or
       ``(B) subsection (a)(2)(B) were applied by substituting 
     `more than 50 percent' for `at least 80 percent',

     then the rules of subsection (c) shall apply to any inversion 
     gain of the acquired entity during the applicable period and 
     the rules of subsection (d) shall apply to any related party 
     transaction of the acquired entity during the applicable 
     period. This subsection shall not apply for any taxable year 
     if subsection (a) applies to such foreign incorporated entity 
     for such taxable year.
       ``(2) Acquired entity.--For purposes of this section--
       ``(A) In general.--The term `acquired entity' means the 
     domestic corporation or partnership substantially all of the 
     properties of which are directly or indirectly acquired in an 
     acquisition described in subsection (a)(2)(A) to which this 
     subsection applies.
       ``(B) Aggregation rules.--Any domestic person bearing a 
     relationship described in section 267(b) or 707(b) to an 
     acquired entity shall be treated as an acquired entity with 
     respect to the acquisition described in subparagraph (A).
       ``(3) Applicable period.--For purposes of this section--
       ``(A) In general.--The term `applicable period' means the 
     period--
       ``(i) beginning on the first date properties are acquired 
     as part of the acquisition described in subsection (a)(2)(A) 
     to which this subsection applies, and
       ``(ii) ending on the date which is 10 years after the last 
     date properties are acquired as part of such acquisition.
       ``(B) Special rule for inversions occurring before march 
     21, 2002.--In the case of any acquired entity to which 
     paragraph (1)(A) applies, the applicable period shall be the 
     10-year period beginning on January 1, 2003.
       ``(c) Tax on Inversion Gains May Not Be Offset.--If 
     subsection (b) applies--
       ``(1) In general.--The taxable income of an acquired entity 
     (or any expanded affiliated group which includes such entity) 
     for any taxable year which includes any portion of the 
     applicable period shall in no event be less than the 
     inversion gain of the entity for the taxable year.
       ``(2) Credits not allowed against tax on inversion gain.--
     Credits shall be allowed against the tax imposed by this 
     chapter on an acquired entity for any taxable year described 
     in paragraph (1) only to the extent such tax exceeds the 
     product of--
       ``(A) the amount of the inversion gain for the taxable 
     year, and
       ``(B) the highest rate of tax specified in section 
     11(b)(1).

     For purposes of determining the credit allowed by section 901 
     inversion gain shall be treated as from sources within the 
     United States.
       ``(3) Special rules for partnerships.--In the case of an 
     acquired entity which is a partnership--
       ``(A) the limitations of this subsection shall apply at the 
     partner rather than the partnership level,
       ``(B) the inversion gain of any partner for any taxable 
     year shall be equal to the sum of--
       ``(i) the partner's distributive share of inversion gain of 
     the partnership for such taxable year, plus
       ``(ii) income or gain required to be recognized for the 
     taxable year by the partner under section 367(a), 741, or 
     1001, or under any other provision of chapter 1, by reason of 
     the transfer during the applicable period of any partnership 
     interest of the partner in such partnership to the foreign 
     incorporated entity, and
       ``(C) the highest rate of tax specified in the rate 
     schedule applicable to the partner under chapter 1 shall be 
     substituted for the rate of tax under paragraph (2)(B).
       ``(4) Inversion gain.--For purposes of this section, the 
     term `inversion gain' means any income or gain required to be 
     recognized under section 304, 311(b), 367, 1001, or 1248, or 
     under any other provision of chapter 1, by reason of the 
     transfer during the applicable period of stock or other 
     properties by an acquired entity--
       ``(A) as part of the acquisition described in subsection 
     (a)(2)(A) to which subsection (b) applies, or
       ``(B) after such acquisition to a foreign related person.

     The Secretary may provide that income or gain from the sale 
     of inventories or other transactions in the ordinary course 
     of a trade or business shall not be treated as inversion gain 
     under subparagraph (B) to the

[[Page S6546]]

     extent the Secretary determines such treatment would not be 
     inconsistent with the purposes of this section.
       ``(5) Coordination with section 172 and minimum tax.--Rules 
     similar to the rules of paragraphs (3) and (4) of section 
     860E(a) shall apply for purposes of this section.
       ``(6) Statute of limitations.--
       ``(A) In general.--The statutory period for the assessment 
     of any deficiency attributable to the inversion gain of any 
     taxpayer for any pre-inversion year shall not expire before 
     the expiration of 3 years from the date the Secretary is 
     notified by the taxpayer (in such manner as the Secretary may 
     prescribe) of the acquisition described in subsection 
     (a)(2)(A) to which such gain relates and such deficiency may 
     be assessed before the expiration of such 3-year period 
     notwithstanding the provisions of any other law or rule of 
     law which would otherwise prevent such assessment.
       ``(B) Pre-inversion year.--For purposes of subparagraph 
     (A), the term `pre-inversion year' means any taxable year 
     if--
       ``(i) any portion of the applicable period is included in 
     such taxable year, and
       ``(ii) such year ends before the taxable year in which the 
     acquisition described in subsection (a)(2)(A) is completed.
       ``(d) Special Rules Applicable to Related Party 
     Transactions.--
       ``(1) Annual application for agreements on return 
     positions.--
       ``(A) In general.--Each acquired entity to which subsection 
     (b) applies shall file with the Secretary an application for 
     an approval agreement under subparagraph (D) for each taxable 
     year which includes a portion of the applicable period. Such 
     application shall be filed at such time and manner, and shall 
     contain such information, as the Secretary may prescribe.
       ``(B) Secretarial action.--Within 90 days of receipt of an 
     application under subparagraph (A) (or such longer period as 
     the Secretary and entity may agree upon), the Secretary 
     shall--
       ``(i) enter into an agreement described in subparagraph (D) 
     for the taxable year covered by the application,
       ``(ii) notify the entity that the Secretary has determined 
     that the application was filed in good faith and 
     substantially complies with the requirements for the 
     application under subparagraph (A), or
       ``(iii) notify the entity that the Secretary has determined 
     that the application was not filed in good faith or does not 
     substantially comply with such requirements.

     If the Secretary fails to act within the time prescribed 
     under the preceding sentence, the entity shall be treated for 
     purposes of this paragraph as having received notice under 
     clause (ii).
       ``(C) Failures to comply.--If an acquired entity fails to 
     file an application under subparagraph (A), or the acquired 
     entity receives a notice under subparagraph (B)(iii), for any 
     taxable year, then for such taxable year--
       ``(i) there shall not be allowed any deduction, or addition 
     to basis or cost of goods sold, for amounts paid or incurred, 
     or losses incurred, by reason of a transaction between the 
     acquired entity and a foreign related person,
       ``(ii) any transfer or license of intangible property (as 
     defined in section 936(h)(3)(B)) between the acquired entity 
     and a foreign related person shall be disregarded, and
       ``(iii) any cost-sharing arrangement between the acquired 
     entity and a foreign related person shall be disregarded.
       ``(D) Approval agreement.--For purposes of subparagraph 
     (A), the term `approval agreement' means a prefiling, advance 
     pricing, or other agreement specified by the Secretary which 
     contains such provisions as the Secretary determines 
     necessary to ensure that the requirements of sections 163(j), 
     267(a)(3), 482, and 845, and any other provision of this 
     title applicable to transactions between related persons and 
     specified by the Secretary, are met.
       ``(E) Tax court review.--
       ``(i) In general.--The Tax Court shall have jurisdiction 
     over any action brought by an acquired entity receiving a 
     notice under subparagraph (B)(iii) to determine whether the 
     issuance of the notice was an abuse of discretion, but only 
     if the action is brought within 30 days after the date of the 
     mailing (determined under rules similar to section 6213) of 
     the notice.
       ``(ii) Court action.--The Tax Court shall issue its 
     decision within 30 days after the filing of the action under 
     clause (i) and may order the Secretary to issue a notice 
     described in subparagraph (B)(ii).
       ``(iii) Review.--An order of the Tax Court under this 
     subparagraph shall be reviewable in the same manner as any 
     other decision of the Tax Court.
       ``(2) Modifications of limitation on interest deduction.--
     In the case of an acquired entity to which subsection (b) 
     applies, section 163(j) shall be applied--
       ``(A) without regard to paragraph (2)(A)(ii) thereof, and
       ``(B) by substituting `25 percent' for `50 percent' each 
     place it appears in paragraph (2)(B) thereof.
       ``(e) Other Definitions and Special Rules.--For purposes of 
     this section--
       ``(1) Rules for application of subsection (a)(2).--In 
     applying subsection (a)(2) for purposes of subsections (a) 
     and (b), the following rules shall apply:
       ``(A) Certain stock disregarded.--There shall not be taken 
     into account in determining ownership for purposes of 
     subsection (a)(2)(B)--
       ``(i) stock held by members of the expanded affiliated 
     group which includes the foreign incorporated entity, or
       ``(ii) stock of such entity which is sold in a public 
     offering or private placement related to the acquisition 
     described in subsection (a)(2)(A).
       ``(B) Plan deemed in certain cases.--If a foreign 
     incorporated entity acquires directly or indirectly 
     substantially all of the properties of a domestic corporation 
     or partnership during the 4-year period beginning on the date 
     which is 2 years before the ownership requirements of 
     subsection (a)(2)(B) are met with respect to such domestic 
     corporation or partnership, such actions shall be treated as 
     pursuant to a plan.
       ``(C) Certain transfers disregarded.--The transfer of 
     properties or liabilities (including by contribution or 
     distribution) shall be disregarded if such transfers are part 
     of a plan a principal purpose of which is to avoid the 
     purposes of this section.
       ``(D) Special rule for related partnerships.--For purposes 
     of applying subsection (a)(2) to the acquisition of a 
     domestic partnership, except as provided in regulations, all 
     partnerships which are under common control (within the 
     meaning of section 482) shall be treated as 1 partnership.
       ``(E) Treatment of certain rights.--The Secretary shall 
     prescribe such regulations as may be necessary--
       ``(i) to treat warrants, options, contracts to acquire 
     stock, convertible debt instruments, and other similar 
     interests as stock, and
       ``(ii) to treat stock as not stock.
       ``(2) Expanded affiliated group.--The term `expanded 
     affiliated group' means an affiliated group as defined in 
     section 1504(a) but without regard to section 1504(b)(3), 
     except that section 1504(a) shall be applied by substituting 
     `more than 50 percent' for `at least 80 percent' each place 
     it appears.
       ``(3) Foreign incorporated entity.--The term `foreign 
     incorporated entity' means any entity which is, or but for 
     subsection (a)(1) would be, treated as a foreign corporation 
     for purposes of this title.
       ``(4) Foreign related person.--The term `foreign related 
     person' means, with respect to any acquired entity, a foreign 
     person which--
       ``(A) bears a relationship to such entity described in 
     section 267(b) or 707(b), or
       ``(B) is under the same common control (within the meaning 
     of section 482) as such entity.
       ``(5) Subsequent acquisitions by unrelated domestic 
     corporations.--
       ``(A) In general.--Subject to such conditions, limitations, 
     and exceptions as the Secretary may prescribe, if, after an 
     acquisition described in subsection (a)(2)(A) to which 
     subsection (b) applies, a domestic corporation stock of which 
     is traded on an established securities market acquires 
     directly or indirectly any properties of one or more acquired 
     entities in a transaction with respect to which the 
     requirements of subparagraph (B) are met, this section shall 
     cease to apply to any such acquired entity with respect to 
     which such requirements are met.
       ``(B) Requirements.--The requirements of the subparagraph 
     are met with respect to a transaction involving any 
     acquisition described in subparagraph (A) if--
       ``(i) before such transaction the domestic corporation did 
     not have a relationship described in section 267(b) or 
     707(b), and was not under common control (within the meaning 
     of section 482), with the acquired entity, or any member of 
     an expanded affiliated group including such entity, and
       ``(ii) after such transaction, such acquired entity--

       ``(I) is a member of the same expanded affiliated group 
     which includes the domestic corporation or has such a 
     relationship or is under such common control with any member 
     of such group, and
       ``(II) is not a member of, and does not have such a 
     relationship and is not under such common control with any 
     member of, the expanded affiliated group which before such 
     acquisition included such entity.

       ``(f) Regulations.--The Secretary shall provide such 
     regulations as are necessary to carry out this section, 
     including regulations providing for such adjustments to the 
     application of this section as are necessary to prevent the 
     avoidance of the purposes of this section, including the 
     avoidance of such purposes through--
       ``(1) the use of related persons, pass-through or other 
     noncorporate entities, or other intermediaries, or
       ``(2) transactions designed to have persons cease to be (or 
     not become) members of expanded affiliated groups or related 
     persons.''.
       (b) Treatment of Agreements.--
       (1) Confidentiality.--
       (A) Treatment as return information.--Section 6103(b)(2) 
     (relating to return information) is amended by striking 
     ``and'' at the end of subparagraph (C), by inserting ``and'' 
     at the end of subparagraph (D), and by inserting after 
     subparagraph (D) the following new subparagraph:
       ``(E) any approval agreement under section 7874(d)(1) to 
     which any preceding subparagraph does not apply and any 
     background information related to the agreement or any 
     application for the agreement,''.
       (B) Exception from public inspection as written 
     determination.--Section 6110(b)(1)(B) is amended by striking 
     ``or (D)'' and inserting ``, (D), or (E)''.

[[Page S6547]]

       (2) Reporting.--The Secretary of the Treasury shall include 
     with any report on advance pricing agreements required to be 
     submitted after the date of the enactment of this Act under 
     section 521(b) of the Ticket to Work and Work Incentives 
     Improvement Act of 1999 (Public Law 106-170) a report 
     regarding approval agreements under section 7874(d)(1) of the 
     Internal Revenue Code of 1986. Such report shall include 
     information similar to the information required with respect 
     to advance pricing agreements and shall be treated for 
     confidentiality purposes in the same manner as the reports on 
     advance pricing agreements are treated under section 
     521(b)(3) of such Act.
       (c) Information Reporting.--The Secretary of the Treasury 
     shall exercise the Secretary's authority under the Internal 
     Revenue Code of 1986 to require entities involved in 
     transactions to which section 7874 of such Code (as added by 
     subsection (a)) applies to report to the Secretary, 
     shareholders, partners, and such other persons as the 
     Secretary may prescribe such information as is necessary to 
     ensure the proper tax treatment of such transactions.
       (d) Conforming Amendment.--The table of sections for 
     subchapter C of chapter 80 is amended by adding at the end 
     the following new item:

``Sec. 7874. Rules relating to inverted corporate entities.''.

       (e) Transition Rule for Certain Regulated Investment 
     Companies and Unit Investment Trusts.--Notwithstanding 
     section 7874 of the Internal Revenue Code of 1986 (as added 
     by subsection (a)), a regulated investment company, or other 
     pooled fund or trust specified by the Secretary of the 
     Treasury, may elect to recognize gain by reason of section 
     367(a) of such Code with respect to a transaction under which 
     a foreign incorporated entity is treated as an inverted 
     domestic corporation under section 7874(a) of such Code by 
     reason of an acquisition completed after March 20, 2002, and 
     before January 1, 2004.

     SEC. 732. EXCISE TAX ON STOCK COMPENSATION OF INSIDERS IN 
                   INVERTED CORPORATIONS.

       (a) In General.--Subtitle D is amended by adding at the end 
     the following new chapter:

 ``CHAPTER 48--STOCK COMPENSATION OF INSIDERS IN INVERTED CORPORATIONS

``Sec. 5000A. Stock compensation of insiders in inverted corporations 
              entities.

     ``SEC. 5000A. STOCK COMPENSATION OF INSIDERS IN INVERTED 
                   CORPORATIONS.

       ``(a) Imposition of Tax.--In the case of an individual who 
     is a disqualified individual with respect to any inverted 
     corporation, there is hereby imposed on such person a tax 
     equal to 20 percent of the value (determined under subsection 
     (b)) of the specified stock compensation held (directly or 
     indirectly) by or for the benefit of such individual or a 
     member of such individual's family (as defined in section 
     267) at any time during the 12-month period beginning on the 
     date which is 6 months before the inversion date.
       ``(b) Value.--For purposes of subsection (a)--
       ``(1) In general.--The value of specified stock 
     compensation shall be--
       ``(A) in the case of a stock option (or other similar 
     right) or any stock appreciation right, the fair value of 
     such option or right, and
       ``(B) in any other case, the fair market value of such 
     compensation.
       ``(2) Date for determining value.--The determination of 
     value shall be made--
       ``(A) in the case of specified stock compensation held on 
     the inversion date, on such date,
       ``(B) in the case of such compensation which is canceled 
     during the 6 months before the inversion date, on the day 
     before such cancellation, and
       ``(C) in the case of such compensation which is granted 
     after the inversion date, on the date such compensation is 
     granted.
       ``(c) Tax To Apply Only if Shareholder Gain Recognized.--
     Subsection (a) shall apply to any disqualified individual 
     with respect to an inverted corporation only if gain (if any) 
     on any stock in such corporation is recognized in whole or 
     part by any shareholder by reason of the acquisition referred 
     to in section 7874(a)(2)(A) (determined by substituting `July 
     10, 2002' for `March 20, 2002') with respect to such 
     corporation.
       ``(d) Exception Where Gain Recognized on Compensation.--
     Subsection (a) shall not apply to--
       ``(1) any stock option which is exercised on the inversion 
     date or during the 6-month period before such date and to the 
     stock acquired in such exercise, and
       ``(2) any specified stock compensation which is sold, 
     exchanged, or distributed during such period in a transaction 
     in which gain or loss is recognized in full.
       ``(e) Definitions.--For purposes of this section--
       ``(1) Disqualified individual.--The term `disqualified 
     individual' means, with respect to a corporation, any 
     individual who, at any time during the 12-month period 
     beginning on the date which is 6 months before the inversion 
     date--
       ``(A) is subject to the requirements of section 16(a) of 
     the Securities Exchange Act of 1934 with respect to such 
     corporation or any member of the expanded affiliated group 
     which includes such corporation, or
       ``(B) would be subject to such requirements if such 
     corporation or member were an issuer of equity securities 
     referred to in such section.
       ``(2) Inverted corporation; inversion date.--
       ``(A) Inverted corporation.--The term `inverted 
     corporation' means any corporation to which subsection (a) or 
     (b) of section 7874 applies determined--
       ``(i) by substituting `July 10, 2002' for `March 20, 2002' 
     in section 7874(a)(2)(A), and
       ``(ii) without regard to subsection (b)(1)(A).

     Such term includes any predecessor or successor of such a 
     corporation.
       ``(B) Inversion date.--The term `inversion date' means, 
     with respect to a corporation, the date on which the 
     corporation first becomes an inverted corporation.
       ``(3) Specified stock compensation.--
       ``(A) In general.--The term `specified stock compensation' 
     means payment (or right to payment) granted by the inverted 
     corporation (or by any member of the expanded affiliated 
     group which includes such corporation) to any person in 
     connection with the performance of services by a disqualified 
     individual for such corporation or member if the value of 
     such payment or right is based on (or determined by reference 
     to) the value (or change in value) of stock in such 
     corporation (or any such member).
       ``(B) Exceptions.--Such term shall not include--
       ``(i) any option to which part II of subchapter D of 
     chapter 1 applies, or
       ``(ii) any payment or right to payment from a plan referred 
     to in section 280G(b)(6).
       ``(4) Expanded affiliated group.--The term `expanded 
     affiliated group' means an affiliated group (as defined in 
     section 1504(a) without regard to section 1504(b)(3)); except 
     that section 1504(a) shall be applied by substituting `more 
     than 50 percent' for `at least 80 percent' each place it 
     appears.
       ``(f) Special Rules.--For purposes of this section--
       ``(1) Cancellation of restriction.--The cancellation of a 
     restriction which by its terms will never lapse shall be 
     treated as a grant.
       ``(2) Payment or reimbursement of tax by corporation 
     treated as specified stock compensation.--Any payment of the 
     tax imposed by this section directly or indirectly by the 
     inverted corporation or by any member of the expanded 
     affiliated group which includes such corporation--
       ``(A) shall be treated as specified stock compensation, and
       ``(B) shall not be allowed as a deduction under any 
     provision of chapter 1.
       ``(3) Certain restrictions ignored.--Whether there is 
     specified stock compensation, and the value thereof, shall be 
     determined without regard to any restriction other than a 
     restriction which by its terms will never lapse.
       ``(4) Property transfers.--Any transfer of property shall 
     be treated as a payment and any right to a transfer of 
     property shall be treated as a right to a payment.
       ``(5) Other administrative provisions.--For purposes of 
     subtitle F, any tax imposed by this section shall be treated 
     as a tax imposed by subtitle A.
       ``(g) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this section.''.
       (b) Denial of Deduction.--
       (1) In general.--Paragraph (6) of section 275(a) is amended 
     by inserting ``48,'' after ``46,''.
       (2) $1,000,000 limit on deductible compensation reduced by 
     payment of excise tax on specified stock compensation.--
     Paragraph (4) of section 162(m) is amended by adding at the 
     end the following new subparagraph:
       ``(G) Coordination with excise tax on specified stock 
     compensation.--The dollar limitation contained in paragraph 
     (1) with respect to any covered employee shall be reduced 
     (but not below zero) by the amount of any payment (with 
     respect to such employee) of the tax imposed by section 5000A 
     directly or indirectly by the inverted corporation (as 
     defined in such section) or by any member of the expanded 
     affiliated group (as defined in such section) which includes 
     such corporation.''.
       (c) Conforming Amendments.--
       (1) The last sentence of section 3121(v)(2)(A) is amended 
     by inserting before the period ``or to any specified stock 
     compensation (as defined in section 5000A) on which tax is 
     imposed by section 5000A''.
       (2) The table of chapters for subtitle D is amended by 
     adding at the end the following new item:

``Chapter 48. Stock compensation of insiders in inverted 
              corporations.''.

       (d) Effective Date.--The amendments made by this section 
     shall take effect on July 11, 2002; except that periods 
     before such date shall not be taken into account in applying 
     the periods in subsections (a) and (e)(1) of section 5000A of 
     the Internal Revenue Code of 1986, as added by this section.

     SEC. 733. REINSURANCE OF UNITED STATES RISKS IN FOREIGN 
                   JURISDICTIONS.

       (a) In General.--Section 845(a) (relating to allocation in 
     case of reinsurance agreement involving tax avoidance or 
     evasion) is amended by striking ``source and character'' and 
     inserting ``amount, source, or character''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to any risk reinsured after April 11, 2002.

[[Page S6548]]

              Subtitle D--Imposition of Customs User Fees

     SEC. 741. CUSTOMS USER FEES.

       Section 13031(j)(3) of the Consolidated Omnibus Budget 
     Reconciliation Act of 1985 (19 U.S.C. 58c(j)(3)) is amended 
     by striking ``September 30, 2003'' and inserting ``September 
     30, 2013''.

                   Subtitle E--Budget Points of Order

     SEC. 751. EXTENSION OF PAY-AS-YOU-GO ENFORCEMENT IN THE 
                   SENATE.

       Section 2 of Senate Resolution 304 (107th Congress) is 
     amended--
       (1) in subsection (a)(1), by striking ``April 15, 2003'' 
     and inserting ``the end of the 108th Congress''; and
       (2) in subsection (b)(1)(B), by striking ``April 15, 2003'' 
     and inserting ``at the end of the 108th Congress''.

     SEC. 752. APPLICATION OF EGTRRA SUNSET TO VARIOUS TITLES.

       Each amendment made by titles II and III shall be subject 
     to title IX of the Economic Growth and Tax Relief 
     Reconciliation Act of 2001 to the same extent and in the same 
     manner as the provision of such Act to which such amendment 
     relates.

     SEC. 753. SUNSET.

       (a) In General.--Except as otherwise provided, the 
     provisions of, and amendments made, by this Act shall not 
     apply to taxable years beginning after December 31, 2012, and 
     the Internal Revenue Code of 1986 shall be applied and 
     administered to such years as if such amendments had never 
     been enacted.
       (b) Exceptions.--Subsection (a) shall not apply to this 
     title and titles II and III.
                                 ______
                                 
  SA 657. Mr. INOUYE submitted an amendment intended to be proposed by 
him to the bill S. 1054, to provide for reconciliation pursuant to 
section 201 of the concurrent resolution on the budget for fiscal year 
2004; as follows:
       At the end of subtitle C of title V, insert the following:

     SEC. __. CERTAIN SIGHTSEEING FLIGHTS EXEMPT FROM TAXES ON AIR 
                   TRANSPORTATION.

       (a) In General.--Section 4281 (relating to small aircraft 
     on nonestablished lines) is amended by adding at the end the 
     following new sentence: ``For purposes of this section, an 
     aircraft shall not be considered as operated on an 
     established line if such aircraft is operated on a flight the 
     sole purpose of which is sightseeing.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply with respect to transportation beginning on or 
     after the date of the enactment of this Act, but shall not 
     apply to any amount paid before such date.
                                 ______
                                 
  SA 658. Mr. INOUYE submitted an amendment intended to be proposed by 
him to the bill S. 1054, to provide for reconciliation pursuant to 
section 201 of the concurrent resolution on the budget for fiscal year 
2004; which was ordered to lie on the table; as follows:
       At the end of subtitle C of title V, insert the following:

     SEC. . EXEMPTION OF CERTAIN HELICOPTER USES FROM TAXES ON 
                   TRANSPORTATION BY AIR.

       (a) In General.--Section 4261 (relating to imposition of 
     tax) is amended by redesignating subsection (i) as subsection 
     (j) and by inserting after subsection (h) the following new 
     subsection:
       ``(i) Additional Exemption for Certain Helicopter Uses.--No 
     tax shall be imposed under this section or section 4271 on 
     air transportation by helicopter for the purpose of 
     transporting individuals and cargo to and from sites for the 
     purpose of conducting removal and environmental restoration 
     activities relating to unexploded ordnance.''.
       (b) Conforming Amendment.--Section 4041(l) is amended by 
     striking ``(f) or (g)'' and inserting ``(f), (g), or (i)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to transportation beginning after June 30, 1997, 
     and before August 1, 2005.
                                 ______
                                 
  SA 659. Mr. SCHUMER submitted an amendment intended to be proposed by 
him to the bill S. 1054, to provide for reconciliation pursuant to 
section 201 of the concurrent resolution on the budget for fiscal year 
2004; as follows:
       At the end of subtitle C of title V, insert the following:

     SEC. . MODIFICATION OF INVOLUNTARY CONVERSION RULES FOR 
                   BUSINESSES AFFECTED BY THE SEPTEMBER 11TH 
                   TERRORIST ATTACKS.

       (a) In General.--Subsection (g) of section 1400L is amended 
     to read as follows:
       ``(g) Modification of Rules Applicable to Nonrecognition of 
     Gain.--In the case of property which is compulsorily or 
     involuntarily converted as a result of the terrorist attacks 
     on September 11, 2001, in the New York Liberty Zone--
       ``(1) which was held by a corporation which is a member of 
     an affiliated group filing a consolidated return, such 
     corporation shall be treated as satisfying the purchase 
     requirement of section 1033(a)(2) with respect to such 
     property to the extent such requirement is satisfied by 
     another member of the group, and
       ``(2) notwithstanding subsections (g) and (h) of section 
     1033, clause (i) of section 1033(a)(2)(B) shall be applied by 
     substituting `5 years' for `2 years' but only if 
     substantially all of the use of the replacement property is 
     in the City of New York, New York.''.
       (b) Effective Date.--The amendments made by this Act shall 
     apply to involuntary conversions occurring on or after 
     September 11, 2001.
       On page 19, line 13, strike ``2007'' and insert ``2008''.
                                 ______
                                 
  SA 660. Mr. SCHUMER submitted an amendment intended to be proposed by 
him to the bill S. 1054, to provide for reconciliation pursuant to 
section 201 of the concurrent resolution on the budget for fiscal year 
2004; which was ordered to lie on the table; as follows:

       On page 19, line 13, strike ``2007'' and insert ``2008''.
       At the end of subtitle C of title V, insert the following:

     SEC. ____. TAX TREATMENT OF FOREIGN CORPORATIONS RELOCATING 
                   TO WORLD TRADE CENTER AREA.

       (a) In General.--Subchapter Y of chapter 1 (relating to New 
     York Liberty Zone benefits) is amended by adding at the end 
     the following new section:

     ``SEC. 1400M. NO ADDITIONAL CORPORATE INCOME TAXES ON FOREIGN 
                   CORPORATIONS RELOCATING HEADQUARTERS OPERATIONS 
                   TO NEW YORK LIBERTY ZONE.

       ``(a) General Rule.--If there is a qualified headquarters 
     relocation of an eligible foreign corporation, any qualified 
     headquarters activities of the corporation conducted in the 
     New York Liberty Zone shall be treated as conducted outside 
     the United States for purposes of determining--
       ``(1) the amount of any tax imposed by this chapter, or the 
     amount of withholding tax under chapter 3, on the 
     corporation, or
       ``(2) whether the corporation has a permanent establishment 
     within the United States for purposes of any applicable 
     income tax treaty between the United States and any foreign 
     country.
       ``(b) Qualified Headquarters Relocation.--For purposes of 
     this section--
       ``(1) In general.--The term `qualified headquarters 
     relocation' means any relocation of an eligible foreign 
     corporation's qualified headquarters activities to the New 
     York Liberty Zone but only if the corporation with respect to 
     such relocation--
       ``(A) before September 11, 2007, enters into a contract--
       ``(i) under which the corporation agrees to acquire, lease, 
     sublease, or otherwise occupy office space located in the New 
     York Liberty Zone for use in the conduct of the activities to 
     be relocated, and
       ``(ii) which requires a substantial financial commitment or 
     provides a substantial cancellation penalty, and
       ``(B) before September 11, 2009--
       ``(i) transfers to the New York Liberty Zone qualified 
     headquarters activities meeting the requirements of paragraph 
     (2), and
       ``(ii) locates employees in the New York Liberty Zone in 
     accordance with the requirements of paragraph (3).
       ``(2) Transfer of qualified headquarters activities.--The 
     requirements of this paragraph are met if the transfer of 
     qualified headquarters activities includes at least the 
     transfer of a substantial part of the following activities 
     which the eligible foreign corporation was performing for 
     members of its expanded affiliated group immediately before 
     the requirement of paragraph (1)(A) is met:
       ``(A) The activities described in clause (ii) of subsection 
     (c)(2)(A).
       ``(B) High-level activities described in clause (iii) of 
     subsection (c)(2)(A).
       ``(C) The activities described in clause (iv) of subsection 
     (c)(2)(A).
       ``(3) Transfer of employees.--
       ``(A) In general.--The requirements of this paragraph are 
     met if the eligible foreign corporation locates in the New 
     York Liberty Zone a number of employees equal to or greater 
     than the lesser of--
       ``(i) 200 employees, or
       ``(ii) the greater of--

       ``(I) 10 percent of the employees of the corporation and 
     the members of its expanded affiliated group for which the 
     corporation performs headquarters activities (as of the date 
     the requirements of paragraph (1)(B) are first met), or
       ``(II) 50 employees.

       ``(B) High-level employees.--The requirements of this 
     paragraph shall be treated as met only if the eligible 
     foreign corporation locates in the New York Liberty Zone at 
     least--
       ``(i) 50 percent of the senior officers of the corporation, 
     and
       ``(ii) 50 percent of the senior business development 
     personnel of the corporation.
       ``(C) Current u.s. employees not counted.--For purposes of 
     determining whether the requirements of this paragraph are 
     first met, and continue to be met during the 2-year period 
     after the date on which the requirements are first met, there 
     shall not be taken into account any individual who was an 
     employee of the eligible foreign corporation or any member of 
     its expanded affiliated group who was located in the United 
     States at any time during the 1-year period ending on the 
     later of--
       ``(i) the date the requirements of subsection (b)(1)(B) are 
     first met, or
       ``(ii) the date the employee is first located in the New 
     York Liberty Zone.

     Any period during which an individual was located in the New 
     York Liberty Zone solely as part of a qualified headquarters 
     relocation

[[Page S6549]]

     shall not be taken into account for purposes of the preceding 
     sentence.
       ``(D) Located.--An employee shall be treated as located in 
     the New York Liberty Zone or the United States for any period 
     if the services performed by the employee during the period 
     are performed primarily in the New York Liberty Zone or the 
     United States, respectively.
       ``(c) Eligible Foreign Corporation; Qualified Headquarters 
     Activities.--For purposes of this section--
       ``(1) Eligible foreign corporation.--The term `eligible 
     foreign corporation' means a foreign corporation which--
       ``(A) performs qualified headquarters activities for 1 or 
     more members of an expanded affiliated group including such 
     corporation, and
       ``(B) agrees to furnish to the Secretary (at such time and 
     in such manner as the Secretary may prescribe) such 
     information as the Secretary may require to carry out this 
     section, including the gross revenue of the corporation 
     derived from qualified headquarters activities.
       ``(2) Qualified headquarters activities.--
       ``(A) In general.--The term `qualified headquarters 
     activities' means, with respect to any eligible foreign 
     corporation--
       ``(i) the ownership and management of any member of the 
     expanded affiliated group of which it is a member,
       ``(ii) the conduct of any treasury function of a member of 
     the expanded affiliated group of which it is a member, 
     including the borrowing of funds, financing of members of the 
     group and related entities, and investment of excess 
     corporate funds, but not including the taking of deposits 
     from, or the making of loans to, the public,
       ``(iii) marketing and branding functions,
       ``(iv) senior business management and development, and
       ``(v) any other activity incidental to any activity 
     described in clauses (i) through (iv).
       ``(B) Certain activities previously conducted in u.s. not 
     included.--
       ``(i) In general.--Such term shall not include any activity 
     which the eligible foreign corporation or any member of its 
     expanded affiliated group engaged in through an office or 
     fixed place of business in the United States at any time 
     during the 3-year period ending on the date the requirements 
     of subsection (b)(1)(B) are first met.
       ``(ii) Exception for relocation activities.--The conduct of 
     any activity as part of a qualified headquarters relocation 
     shall not be taken into account in determining whether clause 
     (i) applies to the activity.
       ``(iii) Exclusion ceases to apply if activity not conducted 
     in u.s. for 5 years.--

       ``(I) In general.--Clause (i) shall not apply to any 
     activity conducted in the New York Liberty Zone during the 
     taxable year described in subclause (II) or any succeeding 
     taxable year.
       ``(II) Applicable taxable year.--A taxable year is 
     described in this subclause with respect to any activity if 
     such year is the first taxable year in which ends a 
     consecutive 5-year period which begins after the date the 
     requirements of subsection (b)(1)(B) are first met and during 
     which the eligible foreign corporation or any member of its 
     expanded affiliated group did not engage in such activity 
     through an office or fixed place of business within the 
     United States.

       ``(iv) Special rules for acquired entities.--

       ``(I) In general.--If an acquired entity engaged in an 
     activity described in subparagraph (A) through an office or 
     fixed place of business in the United States (other than an 
     activity which was a qualified headquarters activity of the 
     acquired entity for purposes of subsection (a)) at any time 
     during the 1-year period preceding the first date on which 
     the acquired entity became a member of the expanded 
     affiliated group of the eligible foreign corporation, such 
     activity shall be treated as an activity engaged in by the 
     eligible foreign corporation on the day preceding the first 
     day the requirements of subsection (b)(1)(B) are met.
       ``(II) Activities not conducted in u.s for 5 years.--If 
     subclause (I) applies to an activity, clause (iii) shall be 
     applied to the activity by substituting the date the acquired 
     entity became a member of the expanded affiliated group of 
     the eligible foreign corporation for the first day the 
     requirements of subsection (b)(1)(B) are met.
       ``(III) Acquired entity.--The term `acquired entity' means 
     any corporation or partnership which became a member of the 
     eligible foreign corporation's expanded affiliated group 
     after the first date the requirements of subsection (b)(1)(B) 
     are met.

       ``(v) Predecessor entities.--For purposes of this 
     subparagraph, any activity conducted by a predecessor or 
     related person with respect to a member of an expanded 
     affiliated group shall be treated as conducted by the member.
       ``(d) Termination and Recapture of Tax Benefits.--
       ``(1) In general.--This section shall not apply to any 
     qualified headquarters activities of an eligible foreign 
     corporation for any taxable year if the corporation at any 
     time during the taxable year or any preceding taxable year 
     fails to--
       ``(A) conduct the qualified headquarters activities 
     described in subsection (b)(2), or
       ``(B) meet the requirements of subsection (b)(3).

     The Secretary may waive the application of this paragraph in 
     the case of a de minimis or inadvertent failure which is 
     corrected within a reasonable period of time after discovery.
       ``(2) Recapture of tax on certain eligible foreign 
     corporations.--
       ``(A) In general.--In addition to any tax imposed by this 
     chapter for the first taxable year during which this section 
     does not apply to an eligible foreign corporation by reason 
     of paragraph (1), there is hereby imposed on the eligible 
     foreign corporation a tax equal to the recapture amount 
     described in subparagraph (B).
       ``(B) Recapture amount.--
       ``(i) In general.--The recapture amount described in this 
     subparagraph shall be the sum of the amounts determined for 
     each of the 4 taxable years preceding the first taxable year 
     to which this section does not apply by reason of paragraph 
     (1) by multiplying the qualified tax benefits for each such 
     year by the following recapture percentage:

  
``In the case of--                                        The recapture
                                                        percentage is--
  The immediately preceding taxable year.......................80% ....

  The second preceding taxable year............................60% ....

  The third preceding taxable year.............................40% ....

  The fourth preceding taxable year............................20%.....

       ``(ii) Qualified tax benefits.--For purposes of this 
     subparagraph, the term `qualified tax benefits' means, with 
     respect to any taxable year described in clause (i), an 
     amount equal to the excess (if any) of--

       ``(I) the amount of the tax liability which a foreign 
     corporation would have had for the taxable year under this 
     chapter and chapter 3 if this section had not applied, over
       ``(II) the amount of such tax liability for such 
     corporation for such taxable year without regard to this 
     paragraph.

       ``(C) Interest.--
       ``(i) In general.--In addition to the tax imposed by 
     subparagraph (A), an eligible foreign corporation shall pay 
     interest on the recapture amount.
       ``(ii) Calculation of interest.--The amount of interest 
     under clause (i) shall be determined--

       ``(I) at the underpayment rate specified in section 6621,
       ``(II) separately for each taxable year, and
       ``(III) for the period beginning on the due date for the 
     tax return of the corporation for such taxable year (without 
     regard to extensions) and ending on the due date for the tax 
     return of the corporation for the first taxable year to which 
     this section ceases to apply.

       ``(e) Expanded Affiliated Group.--For purposes of this 
     section--
       ``(1) In general.--The term `expanded affiliated group' 
     means an affiliated group as defined in section 1504(a) but 
     without regard to paragraphs (2) and (3) of section 1504(b), 
     except that section 1504(a) shall be applied by substituting 
     `50 percent' for `80 percent' each place it appears.
       ``(2) Partnerships.--Such term includes any partnership in 
     which the eligible foreign corporation or its expanded 
     affiliated group owns directly or indirectly more than 50 
     percent of the capital or profit interests.
       ``(f) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this section, including regulations--
       ``(1) which exclude from qualified headquarters activities 
     any activities of a type not ordinarily performed by a 
     corporation performing headquarters activities,
       ``(2) to apply this section in the case of eligible foreign 
     corporations that conduct activities in the United States 
     other than qualified headquarters activities, and
       ``(3) which prevent qualified foreign corporations from 
     expanding the benefits available by reason of this paragraph 
     through intercompany transactions.''
       (b) Conforming Amendment.--The table of sections for 
     subchapter Y of chapter 1 is amended by adding at the end the 
     following new item:

``Sec. 1400M. No additional corporate income taxes on foreign 
              corporations relocating headquarters operations to New 
              York Liberty Zone.''
                                 ______
                                 
  SA 661. Mr. McCAIN (for himself and Mr. Baucus) submitted an 
amendment intended to be proposed by him to the bill S. 1054, to 
provide for reconciliation pursuant to section 201 of the concurrent 
resolution on the budget for fiscal year 2004; as follows:

       At the appropriate place, insert the following:

         TITLE VI--IMPROVING TAX EQUITY FOR MILITARY PERSONNEL

     SEC. 600. SHORT TITLE.

       This title may be cited as the ``Armed Forces Tax Fairness 
     Act of 2003''.

     SEC. 601. EXCLUSION OF GAIN FROM SALE OF A PRINCIPAL 
                   RESIDENCE BY A MEMBER OF THE UNIFORMED SERVICES 
                   OR THE FOREIGN SERVICE.

       (a) In General.--Subsection (d) of section 121 (relating to 
     exclusion of gain from sale of principal residence) is 
     amended by redesignating paragraph (9) as paragraph (10) and 
     by inserting after paragraph (8) the following new paragraph:
       ``(9) Members of uniformed services and foreign service.--
       ``(A) In general.--At the election of an individual with 
     respect to a property, the running of the 5-year period 
     described in subsections (a) and (c)(1)(B) and paragraph (7) 
     of this subsection with respect to such property

[[Page S6550]]

     shall be suspended during any period that such individual or 
     such individual's spouse is serving on qualified official 
     extended duty as a member of the uniformed services or of the 
     Foreign Service of the United States.
       ``(B) Maximum period of suspension.--The 5-year period 
     described in subsection (a) shall not be extended more than 
     10 years by reason of subparagraph (A).
       ``(C) Qualified official extended duty.--For purposes of 
     this paragraph--
       ``(i) In general.--The term `qualified official extended 
     duty' means any extended duty while serving at a duty station 
     which is at least 50 miles from such property or while 
     residing under Government orders in Government quarters.
       ``(ii) Uniformed services.--The term `uniformed services' 
     has the meaning given such term by section 101(a)(5) of title 
     10, United States Code, as in effect on the date of the 
     enactment of this paragraph.
       ``(iii) Foreign service of the united states.--The term 
     `member of the Foreign Service of the United States' has the 
     meaning given the term `member of the Service' by paragraph 
     (1), (2), (3), (4), or (5) of section 103 of the Foreign 
     Service Act of 1980, as in effect on the date of the 
     enactment of this paragraph.
       ``(iv) Extended duty.--The term `extended duty' means any 
     period of active duty pursuant to a call or order to such 
     duty for a period in excess of 90 days or for an indefinite 
     period.
       ``(D) Special rules relating to election.--
       ``(i) Election limited to 1 property at a time.--An 
     election under subparagraph (A) with respect to any property 
     may not be made if such an election is in effect with respect 
     to any other property.
       ``(ii) Revocation of election.--An election under 
     subparagraph (A) may be revoked at any time.''.
       (b) Effective Date; Special Rule.--
       (1) Effective date.--The amendments made by this section 
     shall take effect as if included in the amendments made by 
     section 312 of the Taxpayer Relief Act of 1997.
       (2) Waiver of limitations.--If refund or credit of any 
     overpayment of tax resulting from the amendments made by this 
     section is prevented at any time before the close of the 1-
     year period beginning on the date of the enactment of this 
     Act by the operation of any law or rule of law (including res 
     judicata), such refund or credit may nevertheless be made or 
     allowed if claim therefor is filed before the close of such 
     period.

     SEC. 602. EXCLUSION FROM GROSS INCOME OF CERTAIN DEATH 
                   GRATUITY PAYMENTS.

       (a) In General.--Subsection (b)(3) of section 134 (relating 
     to certain military benefits) is amended by adding at the end 
     the following new subparagraph:
       ``(C) Exception for death gratuity adjustments made by 
     law.--Subparagraph (A) shall not apply to any adjustment to 
     the amount of death gratuity payable under chapter 75 of 
     title 10, United States Code, which is pursuant to a 
     provision of law enacted after September 9, 1986.''.
       (b) Conforming Amendment.--Subparagraph (A) of section 
     134(b)(3) is amended by striking ``subparagraph (B)'' and 
     inserting ``subparagraphs (B) and (C)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply with respect to deaths occurring after September 
     10, 2001.

     SEC. 603. EXCLUSION FOR AMOUNTS RECEIVED UNDER DEPARTMENT OF 
                   DEFENSE HOMEOWNERS ASSISTANCE PROGRAM.

       (a) In General.--Section 132(a) (relating to the exclusion 
     from gross income of certain fringe benefits) is amended by 
     striking ``or'' at the end of paragraph (6), by striking the 
     period at the end of paragraph (7) and inserting ``, or'', 
     and by adding at the end the following new paragraph:
       ``(8) qualified military base realignment and closure 
     fringe.''.
       (b) Qualified Military Base Realignment and Closure 
     Fringe.--Section 132 is amended by redesignating subsection 
     (n) as subsection (o) and by inserting after subsection (m) 
     the following new subsection:
       ``(n) Qualified Military Base Realignment and Closure 
     Fringe.--For purposes of this section--
       ``(1) In general.--The term `qualified military base 
     realignment and closure fringe' means 1 or more payments 
     under the authority of section 1013 of the Demonstration 
     Cities and Metropolitan Development Act of 1966 (42 U.S.C. 
     3374) (as in effect on the date of the enactment of this 
     subsection) to offset the adverse effects on housing values 
     as a result of a military base realignment or closure.
       ``(2) Limitation.--With respect to any property, such term 
     shall not include any payment referred to in paragraph (1) to 
     the extent that the sum of all of such payments related to 
     such property exceeds the maximum amount described in clause 
     (1) of subsection (c) of such section (as in effect on such 
     date).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to payments made after the date of the enactment 
     of this Act.

     SEC. 604. EXPANSION OF COMBAT ZONE FILING RULES TO 
                   CONTINGENCY OPERATIONS.

       (a) In General.--Section 7508(a) (relating to time for 
     performing certain acts postponed by reason of service in 
     combat zone) is amended--
       (1) by inserting ``, or when deployed outside the United 
     States away from the individual's permanent duty station 
     while participating in an operation designated by the 
     Secretary of Defense as a contingency operation (as defined 
     in section 101(a)(13) of title 10, United States Code) or 
     which became such a contingency operation by operation of 
     law'' after ``section 112'',
       (2) by inserting in the first sentence ``or at any time 
     during the period of such contingency operation'' after ``for 
     purposes of such section'',
       (3) by inserting ``or operation'' after ``such an area'', 
     and
       (4) by inserting ``or operation'' after ``such area''.
       (b) Conforming Amendments.--
       (1) Section 7508(d) is amended by inserting ``or 
     contingency operation'' after ``area''.
       (2) The heading for section 7508 is amended by inserting 
     ``OR CONTINGENCY OPERATION'' after ``COMBAT ZONE''.
       (3) The item relating to section 7508 in the table of 
     sections for chapter 77 is amended by inserting ``or 
     contingency operation'' after ``combat zone''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to any period for performing an act which has not 
     expired before the date of the enactment of this Act.

     SEC. 605. MODIFICATION OF MEMBERSHIP REQUIREMENT FOR 
                   EXEMPTION FROM TAX FOR CERTAIN VETERANS' 
                   ORGANIZATIONS.

       (a) In General.--Subparagraph (B) of section 501(c)(19) 
     (relating to list of exempt organizations) is amended by 
     striking ``or widowers'' and inserting ``, widowers, 
     ancestors, or lineal descendants''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.

     SEC. 606. CLARIFICATION OF THE TREATMENT OF CERTAIN DEPENDENT 
                   CARE ASSISTANCE PROGRAMS.

       (a) In General.--Section 134(b) (defining qualified 
     military benefit) is amended by adding at the end the 
     following new paragraph:
       ``(4) Clarification of certain benefits.--For purposes of 
     paragraph (1), such term includes any dependent care 
     assistance program (as in effect on the date of the enactment 
     of this paragraph) for any individual described in paragraph 
     (1)(A).''.
       (b) Conforming Amendments.--
       (1) Section 134(b)(3)(A), as amended by section 102, is 
     amended by inserting ``and paragraph (4)'' after 
     ``subparagraphs (B) and (C)''.
       (2) Section 3121(a)(18) is amended by striking ``or 129'' 
     and inserting ``, 129, or 134(b)(4)''.
       (3) Section 3306(b)(13) is amended by striking ``or 129'' 
     and inserting ``, 129, or 134(b)(4)''.
       (4) Section 3401(a)(18) is amended by striking ``or 129'' 
     and inserting ``, 129, or 134(b)(4)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2002.
       (d) No Inference.--No inference may be drawn from the 
     amendments made by this section with respect to the tax 
     treatment of any amounts under the program described in 
     section 134(b)(4) of the Internal Revenue Code of 1986 (as 
     added by this section) for any taxable year beginning before 
     January 1, 2003.

     SEC. 607. CLARIFICATION RELATING TO EXCEPTION FROM ADDITIONAL 
                   TAX ON CERTAIN DISTRIBUTIONS FROM QUALIFIED 
                   TUITION PROGRAMS, ETC. ON ACCOUNT OF ATTENDANCE 
                   AT MILITARY ACADEMY.

       (a) In General.--Subparagraph (B) of section 530(d)(4) 
     (relating to exceptions from additional tax for distributions 
     not used for educational purposes) is amended by striking 
     ``or'' at the end of clause (iii), by redesignating clause 
     (iv) as clause (v), and by inserting after clause (iii) the 
     following new clause:
       ``(iv) made on account of the attendance of the designated 
     beneficiary at the United States Military Academy, the United 
     States Naval Academy, the United States Air Force Academy, 
     the United States Coast Guard Academy, or the United States 
     Merchant Marine Academy, to the extent that the amount of the 
     payment or distribution does not exceed the costs of advanced 
     education (as defined by section 2005(e)(3) of title 10, 
     United States Code, as in effect on the date of the enactment 
     of this section) attributable to such attendance, or''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2002.

     SEC. 608. SUSPENSION OF TAX-EXEMPT STATUS OF TERRORIST 
                   ORGANIZATIONS.

       (a) In General.--Section 501 (relating to exemption from 
     tax on corporations, certain trusts, etc.) is amended by 
     redesignating subsection (p) as subsection (q) and by 
     inserting after subsection (o) the following new subsection:
       ``(p) Suspension of Tax-Exempt Status of Terrorist 
     Organizations.--
       ``(1) In general.--The exemption from tax under subsection 
     (a) with respect to any organization described in paragraph 
     (2), and the eligibility of any organization described in 
     paragraph (2) to apply for recognition of exemption under 
     subsection (a), shall be suspended during the period 
     described in paragraph (3).
       ``(2) Terrorist organizations.--An organization is 
     described in this paragraph if such organization is 
     designated or otherwise individually identified--

[[Page S6551]]

       ``(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.

     SEC. 609. ABOVE-THE-LINE DEDUCTION FOR OVERNIGHT TRAVEL 
                   EXPENSES OF NATIONAL GUARD AND RESERVE MEMBERS.

       (a) Deduction Allowed.--Section 162 (relating to certain 
     trade or business expenses) is amended by redesignating 
     subsection (p) as subsection (q) and inserting after 
     subsection (o) the following new subsection:
       ``(p) Treatment of Expenses of Members of Reserve Component 
     of Armed Forces of the United States.--For purposes of 
     subsection (a)(2), in the case of an individual who performs 
     services as a member of a reserve component of the Armed 
     Forces of the United States at any time during the taxable 
     year, such individual shall be deemed to be away from home in 
     the pursuit of a trade or business for any period during 
     which such individual is away from home in connection with 
     such service.''.
       (b) Deduction Allowed Whether or Not Taxpayer Elects To 
     Itemize.--Section 62(a)(2) (relating to certain trade and 
     business deductions of employees) is amended by adding at the 
     end the following new subparagraph:
       ``(E) Certain expenses of members of reserve components of 
     the armed forces of the united states.--The deductions 
     allowed by section 162 which consist of expenses, determined 
     at a rate not in excess of the rates for travel expenses 
     (including per diem in lieu of subsistence) authorized for 
     employees of agencies under subchapter I of chapter 57 of 
     title 5, United States Code, paid or incurred by the taxpayer 
     in connection with the performance of services by such 
     taxpayer as a member of a reserve component of the Armed 
     Forces of the United States for any period during which such 
     individual is more than 100 miles away from home in 
     connection with such services.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to amounts paid or incurred in taxable years 
     beginning after December 31, 2002.

     SEC. 610. TAX RELIEF AND ASSISTANCE FOR FAMILIES OF SPACE 
                   SHUTTLE COLUMBIA HEROES.

       (a) Income Tax Relief.--
       (1) In general.--Subsection (d) of section 692 (relating to 
     income taxes of members of Armed Forces and victims of 
     certain terrorist attacks on death) is amended by adding at 
     the end the following new paragraph:
       ``(5) Relief with respect to astronauts.--The provisions of 
     this subsection shall apply to any astronaut whose death 
     occurs in the line of duty, except that paragraph (3)(B) 
     shall be applied by using the date of the death of the 
     astronaut rather than September 11, 2001.''.
       (2) Conforming amendments.--
       (A) Section 5(b)(1) is amended by inserting ``, 
     astronauts,'' after ``Forces''.
       (B) Section 6013(f)(2)(B) is amended by inserting ``, 
     astronauts,'' after ``Forces''.
       (3) Clerical amendments.--
       (A) The heading of section 692 is amended by inserting ``, 
     ASTRONAUTS,'' after ``FORCES''.
       (B) The item relating to section 692 in the table of 
     sections for part II of subchapter J of chapter 1 is amended 
     by inserting ``, astronauts,'' after ``Forces''.
       (4) Effective date.--The amendments made by this subsection 
     shall apply with respect to any astronaut whose death occurs 
     after December 31, 2002.
       (b) Death Benefit Relief.--
       (1) In general.--Subsection (i) of section 101 (relating to 
     certain death benefits) is amended by adding at the end the 
     following new paragraph:
       ``(4) Relief with respect to astronauts.--The provisions of 
     this subsection shall apply to any astronaut whose death 
     occurs in the line of duty.''.
       (2) Clerical amendment.--The heading for subsection (i) of 
     section 101 is amended by inserting ``or Astronauts'' after 
     ``Victims''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to amounts paid after December 31, 2002, with 
     respect to deaths occurring after such date.
       (c) Estate Tax Relief.--
       (1) In general.--Section 2201(b) (defining qualified 
     decedent) is amended by striking ``and'' at the end of 
     paragraph (1)(B), by striking the period at the end of 
     paragraph (2) and inserting ``, and'', and by adding at the 
     end the following new paragraph:
       ``(3) any astronaut whose death occurs in the line of 
     duty.''.
       (2) Clerical amendments.--
       (A) The heading of section 2201 is amended by inserting ``, 
     DEATHS OF ASTRONAUTS,'' after ``FORCES''.
       (B) The item relating to section 2201 in the table of 
     sections for subchapter C of chapter 11 is amended by 
     inserting ``, deaths of astronauts,'' after ``Forces''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to estates of decedents dying after December 31, 
     2002.
                                 ______
                                 
  SA 662. Mr. EDWARDS (for himself, Mr. McCain, and Mr. Graham of South 
Carolina) submitted an amendment intended to be proposed by him to the 
bill S. 1054, to provide for reconciliation pursuant to section 201 of 
the concurrent resolution on the budget for fiscal year 2004; as 
follows:

       At the end of subtitle C of title V, insert the following:

     SEC. ____. REPEAL OF TAX BENEFITS RELATING TO COMPANY-OWNED 
                   LIFE INSURANCE.

       Repeal of Tax Benefits Relating to Company-Owned Life 
     Insurance.--
       (1) Inclusion of life insurance investment gains.--Section 
     72 (relating to annuities; certain proceeds of endowment and 
     life insurance contracts) is amended by inserting after 
     subsection (j) the following new subsection:
       ``(k) Treatment of Certain Company-Owned Life Insurance 
     Contracts.--In the case of a company-owned life insurance 
     contract, the income on the contract (as determined under 
     section 7702(g)) for any taxable year shall be includible in 
     gross income for such year unless the contract covers the 
     life solely of individuals who are key persons (as defined in 
     section 264(e)(3)).''.
       (2) Repeal of exclusion for death benefits.--Section 101 
     (relating to certain death benefits) is amended by adding at 
     the end the following new subsection:
       ``(j) Proceeds of Certain Company-Owned Life Insurance.--
     Notwithstanding any other provision of this section, there 
     shall be included in gross income of the beneficiary of a 
     company-owned life insurance contract (unless the contract 
     covers the life solely of individuals who are key persons (as 
     defined in section 264(e)(3)))--
       ``(1) amounts received during the taxable year under such 
     contract, less

[[Page S6552]]

       ``(2) the sum of amounts which the beneficiary establishes 
     as investment in the contract plus premiums paid under the 
     contract.

     Amounts included in gross income under the preceding sentence 
     shall be so included under section 72.''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to contracts entered into after the date of 
     enactment of this section.
                                 ______
                                 
  SA 663. Mr. BREAUX proposed an amendment to the bill S. 1054, to 
provide for reconciliation pursuant to section 201 of the concurrent 
resolution on the budget for fiscal year 2004; as follows:

       Strike Sec. 350;
       On page 19, line 11, strike ``100'' and insert ``65.''
                                 ______
                                 
  SA 664. Mr. NICKLES (for himself, Mr. Miller, Mr. Kyl, Mr. Lott, Mr. 
Bunning, Mr. Crapo, Mr. Graham of South Carolina, Mr. Bennett, Mr. 
Frist, Mr. McConnell, Mr. Santorum, Mr. Ensign, Mr. Smith, Mr. Thomas, 
Mr. Domenici, and Mr. Allard) proposed an amendment to the bill S. 
1054, to provide for reconciliation pursuant to section 201 of the 
concurrent resolution on the budget for fiscal year 2004; as follows:

       Beginning on page 9, line 16, strike all through page 12, 
     line 9, and insert:

     SEC. 104. ACCELERATION OF INCREASE IN STANDARD DEDUCTION FOR 
                   MARRIED TAXPAYERS FILING JOINT RETURNS.

       (a) In General.--Paragraph (7) of section 63(c) (relating 
     to standard deduction) is amended to read as follows:
       ``(7) Applicable percentage.--For purposes of paragraph 
     (2), the applicable percentage shall be determined in 
     accordance with the following table:
``For taxable years beginning in calendar year--         The applicable
                                                        percentage is--
2003...............................................................195 
2004...............................................................200 
2005...............................................................174 
2006...............................................................184 
2007...............................................................187 
2008...............................................................190 
2009 and thereafter.............................................200.''.
       (b) Conforming Amendment.--Section 301(d) of the Economic 
     Growth and Tax Relief Reconciliation Act of 2001 is amended 
     by striking ``2004'' and inserting ``2002''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2002.

     SEC. 105. ACCELERATION OF 15-PERCENT INDIVIDUAL INCOME TAX 
                   RATE BRACKET EXPANSION FOR MARRIED TAXPAYERS 
                   FILING JOINT RETURNS.

       (a) In General.--Subparagraph (B) of section 1(f )(8) 
     (relating to phaseout of marriage penalty in 15-percent 
     bracket) is amended to read as follows:
       ``(B) Applicable percentage.--For purposes of subparagraph 
     (A), the applicable percentage shall be determined in 
     accordance with the following table:
``For taxable years beginning in calendar year--         The applicable
                                                        percentage is--
2003...............................................................195 
2004...............................................................200 
2005...............................................................180 
2006...............................................................187 
2007...............................................................193 
2008 and thereafter.............................................200.''.
       (b) Conforming Amendment.--Section 302(c) of the Economic 
     Growth and Tax Relief Reconciliation Act of 2001 is amended 
     by striking ``2004'' and inserting ``2002''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2002.
       Beginning on page 15, line 12, strike all through page 18, 
     line 11, and insert:

     SEC. 107. INCREASED EXPENSING FOR SMALL BUSINESS.

       (a) In General.--Paragraph (1) of section 179(b) (relating 
     to dollar limitation) is amended to read as follows:
       ``(1) Dollar limitation.--The aggregate cost which may be 
     taken into account under subsection (a) for any taxable year 
     shall not exceed $25,000 ($100,000 in the case of taxable 
     years beginning after 2002 and before 2008).''.
       (b) Increase in Qualifying Investment at Which Phaseout 
     Begins.--Paragraph (2) of section 179(b) (relating to 
     reduction in limitation) is amended by inserting ``($400,000 
     in the case of taxable years beginning after 2002 and before 
     2008)'' after ``$200,000''.
       (c) Off-the-Shelf Computer Software.--Paragraph (1) of 
     section 179(d) (defining section 179 property) is amended to 
     read as follows:
       ``(1) Section 179 property.--For purposes of this section, 
     the term `section 179 property' means property--
       ``(A) which is--
       ``(i) tangible property (to which section 168 applies), or
       ``(ii) computer software (as defined in section 
     197(e)(3)(B)) which is described in section 197(e)(3)(A)(i), 
     to which section 167 applies, and which is placed in service 
     in a taxable year beginning after 2002 and before 2008,
       ``(B) which is section 1245 property (as defined in section 
     1245(a)(3)), and
       ``(C) which is acquired by purchase for use in the active 
     conduct of a trade or business.
     Such term shall not include any property described in section 
     50(b) and shall not include air conditioning or heating 
     units.''.
       (d) Adjustment of Dollar Limit and Phaseout Threshold for 
     Inflation.--Subsection (b) of section 179 (relating to 
     limitations) is amended by adding at the end the following 
     new paragraph:
       ``(5) Inflation adjustments.--
       ``(A) In general.--In the case of any taxable year 
     beginning in a calendar year after 2003 and before 2008, the 
     $100,000 and $400,000 amounts in paragraphs (1) and (2) shall 
     each 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) for the calendar year in which the taxable 
     year begins, by substituting `calendar year 2002' for 
     `calendar year 1992' in subparagraph (B) thereof.
       ``(B) Rounding.--
       ``(i) Dollar limitation.--If the amount in paragraph (1) as 
     increased under subparagraph (A) is not a multiple of $1,000, 
     such amount shall be rounded to the nearest multiple of 
     $1,000.
       ``(ii) Phaseout amount.--If the amount in paragraph (2) as 
     increased under subparagraph (A) is not a multiple of 
     $10,000, such amount shall be rounded to the nearest multiple 
     of $10,000.''.
       (e) Revocation of Election.--Paragraph (2) of section 
     179(c) (relating to election irrevocable) is amended to read 
     as follows:
       ``(2) Revocation of election.--An election under paragraph 
     (1) with respect to any taxable year beginning after 2002 and 
     before 2008, and any specification contained in any such 
     election, may be revoked by the taxpayer with respect to any 
     property. Such revocation, once made, shall be 
     irrevocable.''.
       (f) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2002.
       On page 19, line 5, insert ``the applicable percentage of'' 
     before ``qualified''.
       On page 19, strike lines 7 through 15, and insert:
       ``(2) Applicable percentage.--For purposes of this 
     subsection, the applicable percentage is--
       ``(A) 50 percent in the case of taxable years beginning in 
     2003,
       ``(B) 100 percent in the case of taxable years beginning in 
     2004, 2005, and 2006, and
       ``(C) zero percent in the case of any other taxable year.
       On page 21, beginning with line 21, strike all through page 
     22, line 2, and redesignate accordingly.
       On page 26, strike lines 17 through 22, and insert:
       (4) Section 531 is amended--
       (A) by inserting ``the taxable percentage of'' after 
     ``equal to'', and
       (B) by adding at the end the following: ``For purposes of 
     this section, the taxable percentage is 100 percent minus the 
     applicable percentage (as defined in section 116(a)(2)).''
       (5) Section 541 is amended--
       (A) by inserting ``the taxable percentage of'' after 
     ``equal to'', and
       (B) by adding at the end the following: ``For purposes of 
     this section, the taxable percentage is 100 percent minus the 
     applicable percentage (as defined in section 116(a)(2)).''
       On page 27, between lines 16 and 17, insert:
       (9)(A) Section 1059(a) is amended by striking 
     ``corporation'' each place it appears and inserting 
     ``taxpayer''.
       (B)(i) The heading for section 1059 is amended by striking 
     ``CORPORATE''.
       (ii) The item relating to section 1059 in the table of 
     sections for part IV of subchapter O of chapter 1 is amended 
     by striking ``Corporate shareholder's'' and inserting 
     ``Shareholder's''.
       On page 27, line 19, strike ``2003'' and insert ``2002''.
                                 ______
                                 
  SA 665. Mr. REID (for himself and Mr. Graham of Florida) submitted an 
amendment intended to be proposed by him to the bill S. 1054, to 
provide for reconciliation pursuant to section 201 of the concurrent 
resolution on the budget for fiscal year 2004; as follows:
       At the end of subtitle C of title V, add the following:

     SEC. ____. RESTORATION OF DEDUCTION FOR TRAVEL EXPENSES OF 
                   SPOUSE, ETC. ACCOMPANYING TAXPAYER ON BUSINESS 
                   TRAVEL.

       (a) In General.--Subsection (m) of section 274 (relating to 
     additional limitations on travel expenses) is amended by 
     striking paragraph (3)(A).
       (b) Effective Date.--The amendment made by this section 
     shall apply to amounts paid or incurred after the date of the 
     enactment of this Act, and on or before December 31, 2004.
                                 ______
                                 
  SA 666. Mr. DORGAN submitted an amendment intended to be proposed by 
him to the bill S. 1054, to provide for reconciliation pursuant to 
section 201 of the concurrent resolution on the budget for fiscal year 
2004; as follows:

       On page 8, strike the matter preceding line 1, and insert:

[[Page S6553]]


------------------------------------------------------------------------
                                  The corresponding percentages shall be
                                      substituted for  the following
 ``In the case of taxable years                percentages:
beginning during calendar year: ----------------------------------------
                                    28%       31%       36%      39.6%
------------------------------------------------------------------------
2001...........................    27.5%     30.5%     35.5%     39.1%
2002...........................    27.0%     30.0%     35.0%     38.6%
2003...........................    25.0%     28.0%     33.0%     35.4%
2004 and thereafter............    25.0%     28.0%     33.0%    35.0%''.
------------------------------------------------------------------------

       Strike section 357.
                                 ______
                                 
  SA 667. Mrs. BOXER proposed an amendment to the bill S. 1054, to 
provide for reconciliation pursuant to section 201 of the concurrent 
resolution on the budget for fiscal year 2004; as follows:

       At the end of subtitle C of title V, add the following:

     SEC. ____. CHILD SUPPORT ENFORCEMENT.

       (a) Inclusion in Income of Amount of Unpaid Child 
     Support.--Section 108 (relating to discharge of indebtedness 
     income) is amended by adding at the end the following new 
     subsection:
       ``(h) Unpaid Child Support.--
       ``(1) In general.--For purposes of this chapter, any unpaid 
     child support of a delinquent debtor for any taxable year 
     shall be treated as amounts includible in gross income of the 
     delinquent debtor for the taxable year.
       ``(2) Definitions.--For the purposes of this subsection--
       ``(A) Child support.--The term `child support' means--
       ``(i) any periodic payment of a fixed amount, or
       ``(ii) any payment of a medical expense, education expense, 
     insurance premium, or other similar item,
     which is required to be paid to a custodial parent by an 
     individual under a support instrument for the support of any 
     qualifying child of such individual. `Child support' does not 
     include any amount which is described in section 408(a)(3) of 
     the Social Security Act and which has been assigned to a 
     State.
       ``(B) Custodial parent.--The term `custodial parent' means 
     an individual who is entitled to receive child support and 
     who has registered with the appropriate State office of child 
     support enforcement charged with implementing section 454 of 
     the Social Security Act.
       ``(C) Delinquent debtor.--The term `delinquent debtor' 
     means a taxpayer who owes unpaid child support to a custodial 
     parent.
       ``(D) Qualifying child.--The term `qualifying child' means 
     a child of a custodial parent with respect to whom a 
     dependent deduction is allowable under section 151 for the 
     taxable year (or would be so allowable but for paragraph (2) 
     or (4) of section 152(e)).
       ``(E) Support instrument.--The term `support instrument' 
     means--
       ``(i) a decree of divorce or separate maintenance or a 
     written instrument incident to such a decree,
       ``(ii) a written separation agreement, or
       ``(iii) a decree (not described in clause (i)) of a court 
     or administrative agency requiring a parent to make payments 
     for the support or maintenance of 1 or more children of such 
     parent.
       ``(F) Unpaid child support.--The term `unpaid child 
     support' means child support that is payable for months 
     during a custodial parent's taxable year and unpaid as of the 
     last day of such taxable year, provided that such unpaid 
     amount as of such day equals or exceeds one-half of the total 
     amount of child support due to the custodial parent for such 
     year.
       ``(3) Coordination with other laws.--Amounts treated as 
     income by paragraph (1) shall not be treated as income by 
     reason of paragraph (1) for the purposes of any provision of 
     law which is not an internal revenue law.''.
       (b) Effective Date; Implementation.--The amendments made by 
     is section shall apply to taxable years beginning after 
     December 31, 2002. The Secretary of the Treasury shall 
     publish Form 1099-CS (or such other form that may be 
     prescribed to comply with the amendment made by subsection 
     (b)(1)) and regulations, if any, that may be deemed necessary 
     to carry out the purposes of this Act, not later than 90 days 
     after the date of enactment of this Act.
                                 ______
                                 
  SA 668. Mr. DORGAN submitted an amendment intended to be proposed by 
him to the bill S. 1054, to provide for reconciliation pursuant to 
section 201 of the concurrent resolution on the budget for fiscal year 
2004; as follows:

       At the appropriate place, insert the following:

     SEC. ____. ENSURING DEFICIT REDUCTION.

       (a) Trigger.--Notwithstanding any other provision of this 
     Act, the provisions as described in subsection (b) shall take 
     effect only as provided in subsection (c).
       (b) Provision Described.--A provision of this Act described 
     in this subsection is--
       (1) a provision of this Act that accelerates the scheduled 
     phase down of the top tax rate of 38.6 percent to 37.6 
     percent in 2004 and to 35 percent in 2006; and
       (2) a provision of this Act that provides a 50 percent 
     dividends exclusion between December 31, 2002, and December 
     31, 2003, and a 100 percent dividends exclusion between 
     December 31, 2003 and December 31, 2006.
       (c) Delay.--
       (1) In general.--Each year when the final monthly Treasury 
     report for the most recently ended fiscal year is released, 
     the Secretary of the Treasury shall certify whether the on-
     budget deficit exceeds $300,000,000,000 for such year.
       (2) Effective date.--The provisions described in subsection 
     (b) shall become effective on January 1 in the calendar year 
     following the issuance of the final Treasury report only if 
     the Secretary has determined that the on-budget deficit is 
     $300,000,000,000 or less for the recently ended fiscal year.
       (d) Discretionary Spending Limitation.--
       (1) In general.--Notwithstanding any other provision of 
     law, in any fiscal year subject to the delay provisions of 
     subsection (c)--
       (A) the amount of budget authority for discretionary 
     spending for Federal agency administrative overhead expenses 
     shall be limited to the level in the preceding fiscal year 
     minus 5 percent; and
       (B) with respect to a second or subsequent consecutive 
     fiscal year subject to this subsection, the amount of budget 
     authority for discretionary spending for Federal agency 
     administrative overhead expenses shall be limited to the 
     level in the preceding fiscal year.
       (2) Definition.--In this subsection, the term 
     ``administrative overhead expenses'' mean costs of resources 
     that are jointly or commonly used to produce 2 or more types 
     of outputs but are not specifically identifiable with any of 
     the outputs. Administrative overhead expenses include general 
     administrative services, general research and technology 
     support, rent, employee health and recreation facilities, and 
     operating and maintenance costs for buildings, equipment, and 
     utilities.
                                 ______
                                 
  SA 669. Mr. DURBIN proposed an amendment to the bill S. 1054, to 
provide for reconciliation pursuant to section 201 of the concurrent 
resolution on the budget for fiscal year 2004; as follows:

       At the appropriate place, insert the following:

     SEC. ____. HEALTH CARE COVERAGE FOR CAREGIVERS

       (a) In General.--The Public Health Service Act (42 U.S.C. 
     201 et seq.) is amended by adding at the end the following:

           ``TITLE XXIX--HEALTH CARE COVERAGE FOR CAREGIVERS

     ``SEC. 2901. PURPOSE; STATE PLANS.

       ``(a) Purpose.--The purpose of this title is to provide 
     funds to States to enable them to--
       ``(1) expand the availability of health insurance coverage 
     to those individuals involved in providing care for children, 
     the disabled, and the elderly; and
       (2) provide incentives to attract and retain quality 
     caregivers.
       ``(b) State Plan Required.--A State is not eligible for 
     payment under section 2905 unless the State has submitted to 
     the Secretary under section 2906 a plan that--
       ``(1) sets forth how the State intends to use the funds 
     provided under this title to provide health insurance or 
     health care assistance through title XIX of the Social 
     Security Act, or other State or local health care assistance 
     or insurance programs, or to provide assistance through the 
     Federal Employees Health Benefits Program if permitted under 
     law, to eligible caregivers consistent with the provisions of 
     this title, and
       ``(2) has been approved under section 2906.
       ``(c) State Entitlement.--This title constitutes budget 
     authority in advance of appropriations Acts and represents 
     the obligation of the Federal Government to provide for the 
     payment to States of amounts provided under section 2904.
       ``(d) Effective Date.--No State is eligible for payments 
     under section 2905 for health care assistance for coverage 
     provided for periods beginning before October 1, 2003.

     ``SEC. 2902. GENERAL CONTENTS OF STATE PLAN; ELIGIBILITY; 
                   OUTREACH.

       ``(a) General Background and Description.--A State plan 
     shall include a description, consistent with the requirements 
     of this title, of--
       ``(1) the extent to which, and manner in which, eligible 
     caregivers in the State, currently have creditable health 
     coverage (as defined in section 2910(c)(2));
       ``(2) current State efforts to provide or obtain creditable 
     health coverage for eligible caregivers, including the steps 
     the State is taking to identify and enroll all such 
     caregivers who are eligible to participate in public health 
     insurance programs and health insurance programs that involve 
     public-private partnerships;
       ``(3) how the plan is designed to be coordinated with such 
     efforts to increase coverage of such caregivers under 
     creditable health coverage;
       ``(4) the health care assistance provided under the plan 
     for eligible caregivers and the dependent children of such 
     caregivers, including the proposed methods of delivery, and 
     utilization control systems;
       ``(5) eligibility standards consistent with subsection (b);
       ``(6) outreach activities consistent with subsection (c); 
     and
       ``(7) methods (including monitoring) used--
       ``(A) to assure the quality and appropriateness of care 
     provided under the plan, and
       ``(B) to assure access to covered services, including 
     emergency services.
       ``(b) General Description of Eligibility Standards and 
     Methodology.--

[[Page S6554]]

       ``(1) Eligibility standards.--
       ``(A) In general.--The plan shall include a description of 
     the standards used to determine the eligibility of caregivers 
     for health care assistance under the plan. Such standards may 
     include (to the extent consistent with this title) those 
     relating to the geographic areas to be served by the plan, 
     age, income and resources (including any standards relating 
     to spenddowns and disposition of resources), residency, 
     disability status (so long as any standard relating to such 
     status does not restrict eligibility), access to or coverage 
     under other health coverage, and duration of eligibility. 
     Such standards may not discriminate on the basis of 
     diagnosis.
       ``(B) Limitations on eligibility standards.--Such 
     eligibility standards--
       ``(i) shall, within any defined group of covered eligible 
     caregivers, not cover such caregivers with a higher family 
     income without covering caregivers with a lower family 
     income, and
       ``(ii) may not deny eligibility based on a caregiver having 
     a preexisting medical condition.
       ``(2) Methodology.--The plan shall include a description of 
     methods of establishing and continuing eligibility and 
     enrollment.
       ``(3) Eligibility screening; coordination with other health 
     coverage programs.--The plan shall include a description of 
     procedures to be used to ensure--
       ``(A) through both intake and followup screening, that only 
     eligible caregivers are furnished health care assistance 
     under the State plan;
       ``(B) that eligible caregivers found through the screening 
     to be eligible for medical assistance under the State 
     medicaid plan under title XIX of the Social Security Act are 
     enrolled for such assistance under such plan;
       ``(C) that the insurance provided under the State plan does 
     not substitute for coverage under group health plans;
       ``(D) the provision of health care assistance to eligible 
     caregivers in the State who are Indians (as defined in 
     section 4(c) of the Indian Health Care Improvement Act (25 
     U.S.C. 1603(c))); and
       ``(E) coordination with other public and private programs 
     providing creditable coverage for eligible caregivers.
       ``(4) Nonentitlement.--Nothing in this title shall be 
     construed as providing an individual with an entitlement to 
     health care assistance under a State plan.
       ``(c) Outreach and Coordination.--A State plan shall 
     include a description of the procedures to be used by the 
     State to accomplish the following:
       ``(1) Outreach.--Outreach to caregivers likely to be 
     eligible for health care assistance under the plan or under 
     other public or private health coverage programs to inform 
     such care givers of the availability of, and to assist them 
     in enrolling in, such a program.
       ``(2) Coordination with other health insurance programs.--
     Coordination of the administration of the State program under 
     this title with other public and private health insurance 
     programs.
       ``(d) Payment or Premiums.--Nothing in this title shall be 
     construed to prohibit a State from paying the eligible 
     caregiver's share of premiums required for health care 
     assistance provided to the caregiver under the State plan.

     ``SEC. 2903. COVERAGE REQUIREMENTS FOR HEALTH CARE 
                   ASSISTANCE.

       ``The health care assistance provided to an eligible 
     caregiver under the plan in the form described in paragraph 
     (1) of section 2901(a) shall consist of any of the types of 
     coverage, the benchmark benefit packages, the categories of 
     services, existing programs, the cost sharing requirements, 
     and the preexisting condition limitations described in 
     section 2103 of the Social Security Act, and shall provide 
     coverage for the dependent children of the eligible 
     caregiver.

     ``SEC. 2904. ALLOTMENTS.

       ``(a) Appropriation.--For purpose of enabling States to 
     provide assistance under this title, there is appropriated, 
     out of any money in the Treasury not otherwise appropriated, 
     $3,500,000,000 for each of fiscal years 2004 through 2011.
       ``(b) Allotments to 50 States and District of Columbia.--
       ``(1) In general.--Of the amount available for allotment 
     under subsection (a) for a fiscal year, reduced by the amount 
     of allotments made under subsection (c) for such fiscal year, 
     the Secretary shall allot to each State an amount the bears 
     that same ratio to such available amount as the population of 
     the State in such fiscal year bears to the total populations 
     of all States in such fiscal year.
       ``(5) Adjustment for geographic variations in health 
     costs.--In making allotments under this subsection, the 
     Secretary shall adjust a State's allotment based on section 
     2104(b)(3) of the Social Security Act to reflect the 
     geographic variations in health costs.
       ``(c) Allotments to Territories.--
       ``(1) In general.--Of the amount available for allotment 
     under subsection (a) for a fiscal year, the Secretary shall 
     allot 0.25 percent among each of the commonwealths and 
     territories described in paragraph (3) in the same proportion 
     as the percentage specified in paragraph (2) for such 
     commonwealth or territory bears to the sum of such 
     percentages for all such commonwealths or territories so 
     described.
       ``(2) Percentage.--The percentage specified in this 
     paragraph for--
       ``(A) Puerto Rico is 91.6 percent,
       ``(B) Guam is 3.5 percent,
       ``(C) the Virgin Islands is 2.6 percent,
       ``(D) American Samoa is 1.2 percent, and
       ``(E) the Northern Mariana Islands is 1.1 percent.
       ``(3) Commonwealths and territories.--A commonwealth or 
     territory described in this paragraph is any of the following 
     if it has a State plan approved under this title:
       ``(A) Puerto Rico.
       ``(B) Guam.
       ``(C) The Virgin Islands.
       ``(D) American Samoa.
       ``(E) The Northern Mariana Islands.
       ``(d) 3-Year Availability of Amounts Allotted.--Amounts 
     allotted to a State pursuant to this section for a fiscal 
     year shall remain available for expenditure by the State 
     through the end of the second succeeding fiscal year; except 
     that amounts reallotted to a State under subsection (e) shall 
     be available for expenditure by the State through the end of 
     the fiscal year in which they are reallotted.
       ``(e) Procedure for Redistribution of Unused Allotments.--
     The Secretary shall determine an appropriate procedure for 
     redistribution of allotments from States that were provided 
     allotments under this section for a fiscal year but that do 
     not expend all of the amount of such allotments during the 
     period in which such allotments are available for expenditure 
     under subsection (d), to States that have fully expended the 
     amount of their allotments under this section.

     ``SEC. 2905. PAYMENTS TO STATES.

       ``(a) In General.--Subject to the succeeding provisions of 
     this section, the Secretary shall pay to each State with a 
     plan approved under this title, from its allotment for a 
     fiscal year under section 2904, an amount for each quarter 
     equal to the enhanced FMAP of expenditures in the quarter--
       ``(1) for health care assistance under the plan for 
     eligible caregivers in the form of providing health benefits 
     coverage that meets the requirements of section 2903; and
       ``(2) only to the extent permitted consistent with 
     subsection (c)--
       ``(A) for payment for other health care assistance for such 
     caregivers;
       ``(B) for expenditures for health services initiatives 
     under the plan for improving the health of such caregivers;
       ``(C) for expenditures for outreach activities as provided 
     in section 2902(c)(1) under the plan; and
       ``(D) for other reasonable costs incurred by the State to 
     administer the plan.
       ``(b) Enhanced FMAP.--For purposes of subsection (a), the 
     `enhanced FMAP', for a State for a fiscal year, is equal to 
     the Federal medical assistance percentage (as defined in the 
     first sentence of section 1905(b) of the Social Security Act) 
     for the State increased by a number of percentage points 
     equal to 30 percent of the number of percentage points by 
     which (1) such Federal medical assistance percentage for the 
     State, is less than (2) 100 percent; but in no case shall the 
     enhanced FMAP for a State exceed 85 percent.
       ``(c) Limitation on Certain Payments for Certain 
     Expenditures.--
       ``(1) General limitations.--Funds provided to a State under 
     this title shall only be used to carry out the purposes of 
     this title (as described in section 2901).
       ``(2) Use of non-federal funds for state matching 
     requirement.--Amounts provided by the Federal Government, or 
     services assisted or subsidized to any significant extent by 
     the Federal Government, may not be included in determining 
     the amount of non-Federal contributions required under 
     subsection (a).
       ``(3) Offset of receipts attributable to premiums and other 
     cost-sharing.--For purposes of subsection (a), the amount of 
     the expenditures under the plan shall be reduced by the 
     amount of any premiums and other cost-sharing received by the 
     State.
       ``(4) Prevention of duplicative payments.--
       ``(A) Other health plans.--No payment shall be made to a 
     State under this section for expenditures for health care 
     assistance provided for an eligible caregiver under its plan 
     to the extent that a private insurer (as defined by the 
     Secretary by regulation and including a group health plan (as 
     defined in section 607(1) of the Employee Retirement Income 
     Security Act of 1974), a service benefit plan, and a health 
     maintenance organization) would have been obligated to 
     provide such assistance but for a provision of its insurance 
     contract which has the effect of limiting or excluding such 
     obligation because the individual is eligible for or is 
     provided health care assistance under the plan.
       ``(B) Other federal governmental programs.--Except as 
     otherwise provided by law, no payment shall be made to a 
     State under this section for expenditures for health care 
     assistance provided for an eligible caregiver under its plan 
     to the extent that payment has been made or can reasonably be 
     expected to be made promptly (as determined in accordance 
     with regulations) under any other federally operated or 
     financed health care insurance program, other than an 
     insurance program operated or financed by the Indian Health 
     Service, as identified by the Secretary. For purposes of this 
     paragraph, rules similar to the rules for overpayments under 
     section 1903(d)(2) of the Social Security Act shall apply.
       ``(d) Maintenance of Effort.--
       ``(1) In medicaid eligibility standards.--No payment may be 
     made under subsection (a) with respect to health care 
     assistance

[[Page S6555]]

     provided under a State plan if the State adopts income and 
     resource standards and methodologies for purposes of 
     determining a caregiver's eligibility for medical assistance 
     under the State plan under title XIX of the Social Security 
     Act that are more restrictive than those applied as of June 
     1, 1997.
       ``(2) In amounts of payment expended for certain state-
     funded health insurance programs.--
       ``(A) In general.--The amount of the allotment for a State 
     in a fiscal year (beginning with fiscal year 2004) shall be 
     reduced by the amount by which--
       ``(i) the total of the State health insurance expenditures 
     for caregivers in the preceding fiscal year, is less than
       ``(ii) the total of such expenditures in fiscal year 2003.
       ``(B) State health insurance expenditures for caregivers.--
     The term `State health insurance expenditures for caregivers' 
     means the following:
       ``(i) The State share of expenditures under this title.
       ``(ii) The State share of expenditures under title XIX of 
     the Social Security Act that are attributable to an enhanced 
     FMAP under section 1905(u) of such Act.
       ``(iii) State expenditures under health benefits coverage 
     under an existing comprehensive State-based program.
       ``(e) Advance Payment; Retrospective Adjustment.--The 
     Secretary may make payments under this section for each 
     quarter on the basis of advance estimates of expenditures 
     submitted by the State and such other investigation as the 
     Secretary may find necessary, and may reduce or increase the 
     payments as necessary to adjust for any overpayment or 
     underpayment for prior quarters.
       ``(f) Flexibility in Submittal of Claims.--Nothing in this 
     section or subsections (d) and (e) of section 2904 shall be 
     construed as preventing a State from claiming as expenditures 
     in the quarter expenditures that were incurred in a previous 
     quarter.

     ``SEC. 2906. PROCESS FOR SUBMISSION, APPROVAL, AND AMENDMENT 
                   OF STATE PLANS.

       ``(a) Initial Plan.--
       ``(1) In general.--As a condition of receiving payment 
     under section 2905, a State shall submit to the Secretary a 
     State plan that meets the applicable requirements of this 
     title.
       ``(2) Approval.--Except as the Secretary may provide under 
     subsection (e), a State plan submitted under paragraph (1)--
       ``(A) shall be approved for purposes of this title, and
       ``(B) shall be effective beginning with a calendar quarter 
     that is specified in the plan, but in no case earlier than 
     October 1, 2003.
       ``(b) Plan Amendments.--The provisions of section 2106(b) 
     of the Social Security Act shall apply with respect to the 
     amendment of a State plan under this title.
       ``(c) Disapproval of Plans and Plan Amendments.--
       ``(1) Prompt review of plan submittals.--The Secretary 
     shall promptly review State plans and plan amendments 
     submitted under this section to determine if they 
     substantially comply with the requirements of this title.
       ``(2) 90-day approval deadlines.--A State plan or plan 
     amendment is considered approved unless the Secretary 
     notifies the State in writing, within 90 days after receipt 
     of the plan or amendment, that the plan or amendment is 
     disapproved (and the reasons for disapproval) or that 
     specified additional information is needed.
       ``(3) Correction.--In the case of a disapproval of a plan 
     or plan amendment, the Secretary shall provide a State with a 
     reasonable opportunity for correction before taking financial 
     sanctions against the State on the basis of such disapproval.
       ``(d) Program Operation.--
       ``(1) In general.--The State shall conduct the program in 
     accordance with the plan (and any amendments) approved under 
     subsection (c) and with the requirements of this title.
       ``(2) Violations.--The Secretary shall establish a process 
     for enforcing requirements under this title. Such process 
     shall provide for the withholding of funds in the case of 
     substantial noncompliance with such requirements. In the case 
     of an enforcement action against a State under this 
     paragraph, the Secretary shall provide a State with a 
     reasonable opportunity for correction before taking financial 
     sanctions against the State on the basis of such an action.
       ``(e) Continued Approval.--An approved State caregivers 
     health plan shall continue in effect unless and until the 
     State amends the plan under subsection (b) or the Secretary 
     finds, under subsection (d), substantial noncompliance of the 
     plan with the requirements of this title.

     ``SEC. 2907. STRATEGIC OBJECTIVES AND PERFORMANCE GOALS; PLAN 
                   ADMINISTRATION.

       ``(a) Strategic Objectives and Performance Goals.--
       ``(1) Description.--A State plan shall include a 
     description of--
       ``(A) the strategic objectives,
       ``(B) the performance goals, and
       ``(C) the performance measures,
     the State has established for providing health care 
     assistance to eligible caregivers under the plan and 
     otherwise for maximizing health benefits coverage for other 
     caregivers generally in the State.
       ``(2) Strategic objectives.--Such plan shall identify 
     specific strategic objectives relating to increasing the 
     extent of creditable health coverage among eligible 
     caregivers.
       ``(3) Performance goals.--Such plan shall specify 1 or more 
     performance goals for each such strategic objective so 
     identified.
       ``(4) Performance measures.--Such plan shall describe how 
     performance under the plan will be--
       ``(A) measured through objective, independently verifiable 
     means, and
       ``(B) compared against performance goals, in order to 
     determine the State's performance under this title.
       ``(b) Records, Reports, Audits, and Evaluation.--
       ``(1) Data collection, records, and reports.--A State plan 
     shall include an assurance that the State will collect the 
     data, maintain the records, and furnish the reports to the 
     Secretary, at the times and in the standardized format the 
     Secretary may require in order to enable the Secretary to 
     monitor State program administration and compliance and to 
     evaluate and compare the effectiveness of State plans under 
     this title.
       ``(2) State assessment and study.--A State plan shall 
     include a description of the State's plan for the annual 
     assessments and reports under section 2908(a) and the 
     evaluation required by section 2908(b).
       ``(3) Audits.--A State plan shall include an assurance that 
     the State will afford the Secretary access to any records or 
     information relating to the plan for the purposes of review 
     or audit.
       ``(c) Program Development Process.--A State plan shall 
     include a description of the process used to involve the 
     public in the design and implementation of the plan and the 
     method for ensuring ongoing public involvement.
       ``(d) Program Budget.--A State plan shall include a 
     description of the budget for the plan. The description shall 
     be updated periodically as necessary and shall include 
     details on the planned use of funds and the sources of the 
     non-Federal share of plan expenditures, including any 
     requirements for cost-sharing by beneficiaries.
       ``(e) Application of Certain General Provisions.--The 
     following sections of the Social Security Act shall apply to 
     States under this title in the same manner as they apply to a 
     State under title XIX or title XI of such Act, as 
     appropriate:
       ``(1) Title xix provisions.--
       ``(A) Section 1902(a)(4)(C) (relating to conflict of 
     interest standards).
       ``(B) Paragraphs (2), (16), and (17) of section 1903(i) 
     (relating to limitations on payment).
       ``(C) Section 1903(w) (relating to limitations on provider 
     taxes and donations).
       ``(2) Title xi provisions.--
       ``(A) Section 1115 (relating to waiver authority).
       ``(B) Section 1116 (relating to administrative and judicial 
     review), but only insofar as consistent with this title.
       ``(C) Section 1124 (relating to disclosure of ownership and 
     related information).
       ``(D) Section 1126 (relating to disclosure of information 
     about certain convicted individuals).
       ``(E) Section 1128A (relating to civil monetary penalties).
       ``(F) Section 1128B(d) (relating to criminal penalties for 
     certain additional charges).
       ``(G) Section 1132 (relating to periods within which claims 
     must be filed).

     ``SEC. 2908. ANNUAL REPORTS; EVALUATIONS.

       ``(a) Annual Report.--The State shall--
       ``(1) assess the operation of the State plan under this 
     title in each fiscal year, including the progress made in 
     reducing the number of uncovered eligible caregivers; and
       ``(2) report to the Secretary, by January 1 following the 
     end of the fiscal year, on the result of the assessment.
       ``(b) State Evaluations.--
       ``(1) In general.--By March 31, 2005, each State that has a 
     State plan shall submit to the Secretary an evaluation that 
     includes each of the following:
       ``(A) An assessment of the effectiveness of the State plan 
     in increasing the number of caregivers with creditable health 
     coverage.
       ``(B) A description and analysis of the effectiveness of 
     elements of the State plan, including--
       ``(i) the characteristics of the caregivers assisted under 
     the State plan including family income, and the assisted 
     caregiver's access to or coverage by other health insurance 
     prior to the State plan and after eligibility for the State 
     plan ends,
       ``(ii) the quality of health coverage provided including 
     the types of benefits provided,
       ``(iii) the amount and level (including payment of part or 
     all of any premium) of assistance provided by the State,
       ``(iv) the service area of the State plan,
       ``(v) the time limits for coverage of a caregiver under the 
     State plan,
       ``(vi) the State's choice of health benefits coverage and 
     other methods used for providing health care assistance, and
       ``(vii) the sources of non-Federal funding used in the 
     State plan.
       ``(C) An assessment of the effectiveness of other public 
     and private programs in the State in increasing the 
     availability of affordable quality individual and family 
     health insurance for caregivers.
       ``(D) A review and assessment of State activities to 
     coordinate the plan under this title with other public and 
     private programs providing health care and health care 
     financing, including medicaid and maternal and child health 
     services.

[[Page S6556]]

       ``(E) An analysis of changes and trends in the State that 
     affect the provision of accessible, affordable, quality 
     health insurance and health care to caregivers.
       ``(F) A description of any plans the State has for 
     improving the availability of health insurance and health 
     care for caregivers.
       ``(G) Recommendations for improving the program under this 
     title.
       ``(H) Any other matters the State and the Secretary 
     consider appropriate.
       ``(2) Report of the secretary.--The Secretary shall submit 
     to Congress and make available to the public by December 31, 
     2005, a report based on the evaluations submitted by States 
     under paragraph (1), containing any conclusions and 
     recommendations the Secretary considers appropriate.

     ``SEC. 2909. MISCELLANEOUS PROVISIONS.

       ``(a) HIPAA.--Health benefits coverage provided under 
     section 2901(a)(1) shall be treated as creditable coverage 
     for purposes of part 7 of subtitle B of title I of the 
     Employee Retirement Income Security Act of 1974, title XXVII 
     of the Public Health Service Act, and subtitle K of the 
     Internal Revenue Code of 1986.
       ``(b) ERISA.--Nothing in this title shall be construed as 
     affecting or modifying section 514 of the Employee Retirement 
     Income Security Act of 1974 with respect to a group health 
     plan (as defined in section 2791(a)(1) of this Act.
       ``(c) Limitation on Entities.--Notwithstanding any other 
     provision of this title, a State may limit the application of 
     this title to eligible caregivers who are employed by 
     entities that provide services to a specific percentage of 
     individuals who receive assistance under, or through, Federal 
     or State assistance programs.

     ``SEC. 2910. DEFINITIONS.

       (a) Health Care Assistance.--For purposes of this title, 
     the term `health care assistance' means payment for part or 
     all of the cost of health benefits coverage for eligible 
     caregivers (and the dependent children of such caregivers) 
     that includes any of the following (and includes, in the case 
     described in section 2905(a)(2)(A), payment for part or all 
     of the cost of providing any of the following), as specified 
     under the State plan:
       ``(1) Inpatient hospital services.
       ``(2) Outpatient hospital services.
       ``(3) Physician services.
       ``(4) Surgical services.
       ``(5) Clinic services (including health center services) 
     and other ambulatory health care services.
       ``(6) Prescription drugs and biologicals and the 
     administration of such drugs and biologicals, only if such 
     drugs and biologicals are not furnished for the purpose of 
     causing, or assisting in causing, the death, suicide, 
     euthanasia, or mercy killing of a person.
       ``(7) Over-the-counter medications.
       ``(8) Laboratory and radiological services.
       ``(9) Prenatal care and prepregnancy family planning 
     services and supplies.
       ``(10) Inpatient mental health services, other than 
     services described in paragraph (18) but including services 
     furnished in a State-operated mental hospital and including 
     residential or other 24-hour therapeutically planned 
     structured services.
       ``(11) Outpatient mental health services, other than 
     services described in paragraph (19) but including services 
     furnished in a State-operated mental hospital and including 
     community-based services.
       ``(12) Durable medical equipment and other medically-
     related or remedial devices (such as prosthetic devices, 
     implants, eyeglasses, hearing aids, dental devices, and 
     adaptive devices).
       ``(13) Disposable medical supplies.
       ``(14) Home and community-based health care services and 
     related supportive services (such as home health nursing 
     services, home health aide services, personal care, 
     assistance with activities of daily living, chore services, 
     day care services, respite care services, training for family 
     members, and minor modifications to the home).
       ``(15) Nursing care services (such as nurse practitioner 
     services, nurse midwife services, advanced practice nurse 
     services, private duty nursing care, pediatric nurse 
     services, and respiratory care services) in a home, school, 
     or other setting.
       ``(16) Dental services.
       ``(17) Inpatient substance abuse treatment services and 
     residential substance abuse treatment services.
       ``(18) Outpatient substance abuse treatment services.
       ``(19) Case management services.
       ``(20) Care coordination services.
       ``(21) Physical therapy, occupational therapy, and services 
     for individuals with speech, hearing, and language disorders.
       ``(22) Hospice care.
       ``(23) Any other medical, diagnostic, screening, 
     preventive, restorative, remedial, therapeutic, or 
     rehabilitative services (whether in a facility, home, school, 
     or other setting) if recognized by State law and only if the 
     service is--
       ``(A) prescribed by or furnished by a physician or other 
     licensed or registered practitioner within the scope of 
     practice as defined by State law,
       ``(B) performed under the general supervision or at the 
     direction of a physician, or
       ``(C) furnished by a health care facility that is operated 
     by a State or local government or is licensed under State law 
     and operating within the scope of the license.
       ``(24) Premiums for private health care insurance coverage.
       ``(25) Medical transportation.
       ``(26) Enabling services (such as transportation, 
     translation, and outreach services) only if designed to 
     increase the accessibility of primary and preventive health 
     care services for eligible low-income individuals.
       ``(27) Any other health care services or items specified by 
     the Secretary and not excluded under this section.
       ``(b) Eligible Caregiver Defined.--For purposes of this 
     title, the term `eligible caregiver' means an individual--
       ``(1) who has been determined eligible by the State under 
     this title for assistance under the State plan;
       ``(2) who--
       ``(A) subject to section 2909(c)--
       ``(i) is employed as a child care provider, an adult day 
     care provider, a personal attendant for disabled individuals, 
     a nursing home aide, a home health aide, or in any other 
     caregiving position determined appropriate by the State, with 
     an entity that is licensed or certified under State law, or 
     is otherwise providing services under a State license or 
     certification; and
       ``(ii) is certified by, or enrolled in, an accredited 
     program recognized by the State as having received training 
     necessary in order to be employed in a position described in 
     subparagraph (A); or
       ``(B)(i) is providing caregiver services on a full-time 
     basis for a relative; and
       ``(ii) does not otherwise have access to employer-sponsored 
     health insurance coverage;
       ``(3) who is not found to be eligible for medical 
     assistance under title XIX of the Social Security Act or 
     covered under a group health plan or under health insurance 
     coverage (as such terms are defined in section 2791 of this 
     Act); and
       ``(4) who meets any other criteria determined appropriate 
     by the State.
       ``(c) Additional Definitions.--For purposes of this title:
       ``(1) Creditable health coverage.--The term `creditable 
     health coverage' has the meaning given the term `creditable 
     coverage' under section 2701(c) of this Act and includes 
     coverage that meets the requirements of section 2903 provided 
     to an eligible caregiver under this title.
       ``(2) Group health plan; health insurance coverage; etc.--
     The terms `group health plan', `group health insurance 
     coverage', and `health insurance coverage' have the meanings 
     given such terms in section 2791 of this Act.
       ``(3) Poverty line defined.--The term `poverty line' has 
     the meaning given such term in section 673(2) of the 
     Community Services Block Grant Act (42 U.S.C. 9902(2)), 
     including any revision required by such section.
       ``(4) Preexisting condition exclusion.--The term 
     `preexisting condition exclusion' has the meaning given such 
     term in section 2701(b)(1)(A) of this Act.
       ``(5) State plan; plan.--Unless the context otherwise 
     requires, the terms `State plan' and `plan' mean a State plan 
     approved under section 2906.''.
       (b) Elimination of Acceleration of Top Rate Reduction In 
     Individual Income Tax Rates.--Notwithstanding the amendment 
     made by section 102(a) of this Act, in lieu of the percent 
     specified in the last column of the table in paragraph (2) of 
     section 1(i) of the Internal Revenue Code of 1986, as amended 
     by such section 102(a), for taxable years beginning during 
     calendar years 2003, 2004, and 2005, the following 
     percentages shall be substituted for such years:
       (1) For 2003, 38.6%.
       (2) For 2004 and 2005, 37.6%.
                                 ______
                                 
  SA 670. Mr. SANTORUM (for himself and Mr. Nelson of Nebraska) 
proposed an amendment to the bill S. 1054, to provide for 
reconciliation pursuant to section 201 of the concurrent resolution on 
the budget for fiscal year 2004; as follows:

       Strike title II and insert:

TITLE II--DIVIDEND EXCLUSION TO ELIMINATE DOUBLE TAXATION OF CORPORATE 
                                EARNINGS

     SEC. 201. DIVIDEND EXCLUSION TO ELIMINATE DOUBLE TAXATION OF 
                   CORPORATE EARNINGS.

       (a) In General.--Part III of subchapter B of chapter 1 is 
     amended by inserting after section 115 the following new 
     section:

     ``SEC. 116. DIVIDEND EXCLUSION TO ELIMINATE DOUBLE TAXATION 
                   OF CORPORATE EARNINGS.

       ``(a) Exclusion.--Gross income does not include the 
     excludable portion (as defined in section 281) of any amount 
     received as a dividend.
       ``(b) Reporting to Shareholders.--For reporting to 
     shareholders, see section 6042.''
       (b) Clerical Amendment.--The table of sections for such 
     part III is amended by inserting after the item relating to 
     section 115 the following new item:

``Sec. 116. Dividend exclusion to eliminate double taxation of 
              corporate earnings.''

     SEC. 202. RULES FOR APPLICATION OF DIVIDEND EXCLUSION.

       (a) In General.--Subchapter B of chapter 1 (as amended by 
     subsection (d)) is amended by inserting after part IX the 
     following new part:

         ``PART X--RULES FOR APPLICATION OF DIVIDEND EXCLUSION

``Sec. 281. Excludable portion of dividends.

[[Page S6557]]

``Sec. 282. Special rules for credits and refunds.
``Sec. 283. Special rules for foreign corporations and shareholders.
``Sec. 284. Other special rules.
``Sec. 285. Regulations.
``Sec. 286. Phasein and Termination.

     ``SEC. 281. EXCLUDABLE PORTION OF DIVIDENDS.

       ``(a) Excludable Portion.--For purposes of section 116, the 
     term `excludable portion' means, with respect to any dividend 
     paid by a corporation in a calendar year, an amount which 
     bears the same ratio to such dividend as the excludable 
     dividend amount of such corporation for the calendar year 
     bears to the total amount of dividends paid by such 
     corporation in such calendar year.
       ``(b) Excludable Dividend Amount.--For purposes of this 
     part and section 116--
       ``(1) In general.--The term `excludable dividend amount' 
     means, with respect to any corporation for any calendar year, 
     the excess of--
       ``(A) the sum of--
       ``(i) the fully taxed earnings amount for the preceding 
     calendar year, and
       ``(ii) the aggregate amount of dividends received by the 
     corporation during such preceding year which are excluded 
     from gross income under section 116(a), over
       ``(B) the amount of applicable income tax taken into 
     account under subparagraph (A)(i).
       ``(2) Carryover of excess of excludable dividend amount 
     over dividends paid.--The excludable dividend amount of a 
     corporation for any calendar year shall be increased by the 
     excess of--
       ``(A) the excludable dividend amount of such corporation 
     for the preceding calendar year, over
       ``(B) the aggregate amount paid by the corporation as 
     dividends during such preceding calendar year.
       ``(c) Fully Taxed Earnings Amount.--
       ``(1) In general.--The fully taxed earnings amount for any 
     calendar year is the amount of the applicable income tax 
     shown on applicable returns for such year divided by the 
     highest rate of tax specified in section 11.
       ``(2) Increase for prior year assessments.--The fully taxed 
     earnings amount for any calendar year shall be increased by 
     the amount of any applicable income tax (not previously taken 
     into account under paragraph (1)) which is assessed during 
     such year divided by the highest rate of tax specified in 
     section 11.
       ``(3) Limitation to amount paid.--If an amount described in 
     paragraph (1) or (2) is paid after the close of the calendar 
     year in which such amount would (but for this paragraph) be 
     taken into account, such amount shall be taken into account 
     for the calendar year in which paid.
       ``(4) Highest rate of tax.--For purposes of this 
     subsection, the highest rate of tax specified in section 11 
     with respect to any applicable income tax shall be such 
     highest rate for the taxable year for which (or by reference 
     to which) such tax is determined.
       ``(d) Definitions.--For purposes of this part--
       ``(1) Applicable income tax.--
       ``(A) In general.--The term `applicable income tax' means 
     the excess (if any) of--
       ``(i) the sum of the taxes imposed by sections 11, 55, 511, 
     801, 831, 882, 1201, 1291 (without regard to section 
     1291(c)(1)(B)), and 1374, over
       ``(ii) the sum of the credits under part IV of subchapter A 
     (other than subpart C and section 27(a)).
       ``(B) Transitional rules.--
       ``(i) In general.--Such term shall not include any tax 
     imposed for any taxable year ending before April 1, 2001.
       ``(ii) Treatment of minimum tax credit.--The applicable 
     income tax shall not be reduced by the credit under section 
     53 attributable (determined as if such credit were used on a 
     first-in first-out basis) to taxable years ending before 
     April 1, 2001.
       ``(iii) Section 1374.--The reference to section 1374 in 
     subparagraph (A)(i) shall not apply to taxable years 
     beginning before January 1, 2003.
       ``(iv) Other taxes included.--The taxes imposed by sections 
     531 and 541 (as in effect before their repeal) shall be taken 
     into account under subparagraph (A)(i) for taxable years 
     ending after March 31, 2001, and beginning before January 1, 
     2004.
       ``(2) Applicable return.--
       ``(A) In general.--The term `applicable return' means, with 
     respect to a calendar year, any return of applicable income 
     tax for a taxable year if the 15th day of the 9th month 
     following the close of such taxable year occurs during such 
     calendar year.
       ``(B) Filing requirement.--If a return is filed after the 
     close of the calendar year with respect to which such return 
     would (but for this subparagraph) be treated as an applicable 
     return under subparagraph (A), such return shall be treated 
     as an applicable return for the calendar year in which filed.

     ``SEC. 282. SPECIAL RULES FOR CREDITS AND REFUNDS.

       ``(a) In General.--No overpayment of an applicable income 
     tax by a corporation may be allowed as a credit or refund to 
     the extent that the overpayment exceeds the sum of--
       ``(1) the aggregate applicable income taxes otherwise taken 
     into account under section 281 for determining the excludable 
     dividend amount for the calendar year succeeding the calendar 
     year in which the credit or refund would otherwise be allowed 
     or made, and
       ``(2) an amount equal to the lesser of--
       ``(A) the product of the corporation's excludable dividend 
     amount for such calendar year and the fraction the numerator 
     of which is the highest rate of tax specified in section 11 
     (within the meaning of section 281(c)(4)) and the denominator 
     of which is 1 minus such highest rate, or
       ``(B) the amount specified by the corporation for purposes 
     of this paragraph.
       ``(b) Adjustments to Excludable Dividend Amounts Resulting 
     From Credits and Refunds.--If subsection (a) applies to any 
     credit or refund which is allowed or made in a calendar 
     year--
       ``(1) the applicable income taxes described in subsection 
     (a)(1) otherwise taken into account under section 281 for 
     determining the excludable dividend amount for the succeeding 
     calendar year shall be reduced (but not below zero) by the 
     amount of the credit or refund, and
       ``(2) the excludable dividend amount for the calendar year 
     shall be reduced by the excess of--
       ``(A) the amount determined under subsection (a)(2) divided 
     by the highest rate of tax specified in section 11, over
       ``(B) the amount determined under subsection (a)(2).
       ``(c) Disallowed Overpayment Not Lost.--Nothing in 
     subsection (a) shall be construed to reduce the amount of any 
     overpayment for which credit or refund is not allowed by 
     reason of subsection (a), and such overpayment shall continue 
     to be taken into account in applying subsection (a) for 
     succeeding calendar years until a credit or refund is allowed 
     or made.
       ``(d) Exception for Foreign Tax Credit.--This section shall 
     not apply to any overpayment to the extent that such 
     overpayment is attributable to the credit allowed under 
     section 27(a).
       ``(e) Denial of Interest.--No interest shall be allowed on 
     any overpayment during the period that credit or refund of 
     such overpayment is not allowed by reason of this section.

     ``SEC. 283. SPECIAL RULES FOR FOREIGN CORPORATIONS AND 
                   SHAREHOLDERS.

       ``(a) Computation of Excludable Dividend Amounts of Foreign 
     Corporations.--
       ``(1) Reduction in excludable dividend amount for certain 
     taxes.--The reduction under section 281(b)(1)(B) (without 
     regard to this subparagraph) shall be increased by the sum 
     of--
       ``(A) the taxes imposed by section 884 (relating to branch 
     profits tax), and
       ``(B) so much of the taxes imposed by section 881 as are 
     attributable to dividends which would (but for subsection 
     (b)) be excludable under section 116.
       ``(2) Treatment of disallowed exclusions.--Notwithstanding 
     subsection (b), the excludable dividend amount of a foreign 
     corporation for a calendar year shall be increased by the 
     dividends received by the corporation which (but for 
     subsection (b)) would be excludable under section 116(a).
       ``(b) Taxation of Foreign Shareholders.--In the case of a 
     shareholder who is a nonresident alien individual or a 
     foreign corporation, no dividends shall be excludable under 
     section 116(a).
       ``(c) Rules Relating to Foreign Tax Credit.--
       ``(1) In general.--No credit shall be allowed under section 
     901 for any taxes paid or accrued (or deemed paid under 
     section 902 or 960) with respect to any dividend excludable 
     under section 116.
       ``(2) Excludable dividend amount.--The excludable dividend 
     amount of a corporation for any calendar year shall be 
     determined without regard to a reduction in the credit 
     allowed by section 27(a) on an applicable return for a prior 
     calendar year.

     ``SEC. 284. OTHER SPECIAL RULES.

       ``(a) Redemptions.--If a corporation makes a distribution 
     to a shareholder during any calendar year with respect to its 
     stock and section 301 does not apply to such distribution, 
     the excludable dividend amount as of the beginning of the 
     calendar year shall be reduced by the ratable share of such 
     amounts attributable to the stock so redeemed.
       ``(b) Coordination With Section 246(c).--
       ``(1) Holding period requirements.--If a shareholder 
     disposes of any share of stock before the holding period 
     requirements of section 246(c) are met, the basis of such 
     share shall be reduced by the amount of dividends received 
     with respect to such share which are excludable under section 
     116(a).
       ``(2) Related payments.--No deduction shall be allowed 
     under this chapter for any related payments described in 
     section 246(c)(1)(B) with respect to any dividend excludable 
     under section 116(a) with respect to any share of stock to 
     the extent that such payments do not exceed the amount of 
     such dividend or basis increase.
       ``(3) Treatment of disallowed exclusions and adjustments.--
     The excludable dividend amount of any corporation for a 
     calendar year, and its earnings and profits, shall not be 
     increased by the dividends received by the corporation which 
     are excludable under section 116(a) and which resulted in a 
     basis reduction under paragraph (1).
       ``(c) Treatment of Regulated Investment Companies and Real 
     Estate Investment Trusts.--
       ``(1) In general.--Except as provided in regulations, the 
     excludable dividend amount of a regulated investment company 
     or real estate investment trust shall be zero.
       ``(2) Cross reference.--


[[Page S6558]]


  ``For special rules relating to application of this part to regulated 
investment companies and real estate investment trusts, see section 
852(g).

       ``(d) Exclusion Reduced Where Portfolio Stock Held by 
     Corporation is Debt-Financed.--
       ``(1) Treatment of excludable dividend.--In the case of any 
     debt-financed portfolio stock (within the meaning of section 
     246A) held by a corporation, the amount excluded under 
     section 116(a) with respect to any dividend received with 
     respect to such stock shall be an amount equal to the product 
     of--
       ``(A) the amount which would be excluded under section 
     116(a) without regard to this paragraph, and
       ``(B) 100 percent minus the average indebtedness percentage 
     (within the meaning of section 246A(d)).
       ``(2) Limitation.--The aggregate amount of reductions under 
     paragraph (1) with respect to any debt-financed portfolio 
     stock shall not exceed the amount of interest deduction 
     (including any deductible short sale expense) allocable to 
     such stock.
       ``(3) Exception.--This subsection shall not apply to any 
     dividend described in paragraph (1) or (2) of section 
     246A(b).
       ``(e) Treatment of Variable Annuity Contracts.--
       ``(1) In general.--A life insurance company may allocate 
     (at such time and manner as the Secretary shall prescribe) to 
     a qualified variable annuity contract based on a segregated 
     asset account dividends received which would (but for section 
     803(c)) be excludable under section 116(a) with respect to 
     stock held in such account.
       ``(2) Treatment of amounts allocated.--
       ``(A) Amounts allocated on or before annuity starting 
     date.--Any amount allocated under paragraph (1) to a contract 
     on or before the annuity starting date shall be treated for 
     purposes of section 72 as an additional investment in the 
     contract.
       ``(B) Amounts allocated after annuity starting date.--If 
     any amount is allocated under paragraph (1) to a contract 
     after the annuity starting date, the amounts otherwise 
     includible in gross income with respect to amounts received 
     as an annuity under such contract after the date of such 
     allocation shall be reduced by the amount so allocated.
       ``(3) Qualified variable annuity contract.--For purposes of 
     this subsection, the term `qualified variable annuity 
     contract' means any annuity contract described in section 
     817(d)(3)(A). Such term shall not include a pension plan 
     contract (within the meaning of section 818).
       ``(4) Information reporting.--The Secretary may require 
     such reporting as may be appropriate for purposes of this 
     paragraph.
       ``(f) Cooperatives.--In the case of a cooperative to which 
     subchapter T applies--
       ``(1) the excludable dividend amount of such cooperative 
     shall be allocated for purposes of section 116 and this part 
     between shares of such cooperative held by patrons and shares 
     held by other persons in such manner as the Secretary shall 
     prescribe by regulations, and
       ``(2) no deduction shall be allowed to the cooperative 
     under this chapter for any dividend paid to a patron which is 
     excludable under section 116(a).
       ``(g) ESOP Stock.--Any dividend allowed as a deduction 
     under section 404(k) shall not be treated as a dividend for 
     purposes of section 116 and this part.

     ``SEC. 285. REGULATIONS.

       ``The Secretary shall prescribe such regulations as may be 
     appropriate to carry out section 116 and this part, including 
     regulations--
       ``(1) providing for the treatment of options and 
     convertible debt as stock, including modification of the 
     attribution rules under section 318(a)(4),
       ``(2) providing for the allocation of the excludable 
     dividend amount in the case of transactions described in 
     section 312(h),
       ``(3) waiving the application of section 246(c)(4) for 
     purposes of sections 284(b) and 1059(g),
       ``(4) modifying the consolidated return regulations to the 
     extent necessary or appropriate to apply the provisions of 
     this part, including regulations that accelerate the 
     inclusion in the excludable dividend amount of a higher-tier 
     member with respect to--
       ``(A) activities of lower-tier members of the group, and
       ``(B) dividends excludable under section 116(a) received 
     from such lower-tier members,
       ``(5) providing for the application of section 116 and this 
     part in the case of pass-thru entities, including appropriate 
     adjustments to basis, and
       ``(6) as are necessary to further the purposes of section 
     116 and this part and to prevent the circumvention of such 
     purposes.

     Any regulations under paragraph (4) may be effective as of 
     the effective date of this part.

     ``SEC. 286. PHASEIN AND TERMINATION.

       ``(a) Phasein of Excludable Dividend Amount.--In computing 
     the excludable dividend amount for any calendar year, only 50 
     percent of the applicable income taxes for a taxable year 
     beginning before April 1, 2002, shall be taken into account.
       ``(b) Termination.--
       ``(1) In general.--Except as provided in this subsection, 
     section 116 and this part shall not apply to any calendar 
     year after calendar year 2006, and the excludable dividend 
     amount for any such year shall be zero.
       ``(2) Credits and refunds.--Section 282 shall apply to any 
     credit or refund after December 31, 2006, of an applicable 
     income tax taken into account in determining the excludable 
     dividend account for calendar year 2003, 2004, 2005, or 
     2006.''.
       (b) Reporting of Excludable Dividends.--
       (1) In general.--Section 6042(a) (relating to returns 
     regarding payments of dividends and corporate earnings and 
     profits) is amended to read as follows:
       ``(a) Requirement of Reporting.--
       ``(1) In general.--Every person--
       ``(A) who makes payments of dividends aggregating $10 or 
     more to any other person during any calendar year, or
       ``(B) who receives such payments of dividends as a nominee 
     and who makes payments aggregating $10 or more during any 
     calendar year to any other person with respect to the 
     dividends received,

     shall make a return at the time and in the manner prescribed 
     by the Secretary, setting forth the information described in 
     paragraph (3).
       ``(2) Returns required by secretary.--Every person who 
     makes payments of dividends to which paragraph (1) does not 
     apply shall, when required by the Secretary, make a return 
     setting forth the information described in paragraph (3).
       ``(3) Information reported.--Information described in this 
     paragraph includes--
       ``(A) the aggregate amount of dividends, including the 
     portion of such amount excludable from gross income under 
     section 116(a), and
       ``(B) such other information as the Secretary may require.

     In the case of a nominee described in paragraph (1)(B), this 
     paragraph shall apply with respect to the payments and 
     allocations made by the nominee.''
       (2) Application to foreign persons.--Section 6042 is 
     amended by adding at the end the following new subsection:
       ``(e) Application to Foreign Persons.--The Secretary may 
     provide for the application of this section to payments, 
     allocations, and distributions made by or to a foreign person 
     to the extent necessary to carry out the provisions of 
     section 116 and part X of subchapter B of chapter 1.''
       (3) Conforming amendment.--Section 6042(c)(2) is amended to 
     read as follows:
       ``(2) the information described in subsection (a)(3) 
     required to be shown on the return.''
       (c) Amendments to Other Sections.--
       (1) Minimum tax.--Clause (i) of section 56(g)(4)(B) is 
     amended by striking ``or under section 114'' and inserting 
     ``, section 114, or section 116''.
       (2) Coordination with dividend received deductions.--
       (A) Section 246 is amended by adding at the end the 
     following new subsection:
       ``(f) Coordination With Dividend Exclusion.--No deduction 
     shall be allowed under section 243, 244, or 245 with respect 
     to the amount of any dividend excluded from gross income 
     under section 116 or would be so excluded but for sections 
     283(b) and 284(d).''
       (B) Section 243 is amended by adding at the end the 
     following new subsection:
       ``(f) Termination.--Paragraph (1) of subsection (a) shall 
     not apply to any dividend received by a corporation after 
     December 31, 2005.''
       (3) Carryovers in certain corporation acquisitions.--
     Section 381(c) is amended by adding at the end the following 
     new paragraph:
       ``(27) Excludable dividend amount.--The acquiring 
     corporation shall take into account (to the extent proper to 
     carry out the purposes of this section, section 116, and part 
     X of subchapter B, and under such regulation as may be 
     prescribed by the Secretary) the excludable dividend amount 
     in respect of the distributor or transferor.''
       (4) Trusts and estates.--Subsection (a) of section 643 is 
     amended--
       (A) by redesignating paragraph (7) as paragraph (8) and by 
     inserting after paragraph (6) the following new paragraph:
       ``(7) Dividends, etc.--There shall be included the amount 
     of any dividends excluded from gross income under section 
     116.'', and
       (B) by striking ``and (6)'' in the last sentence and 
     inserting ``, (6), and (7)''.
       (5) Partnerships.--Paragraph (5) of section 702(a) is 
     amended to read as follows:
       ``(5) dividends with respect to which there is an exclusion 
     under section 116 or a deduction under part VIII of 
     subchapter B,''.
       (6) Extraordinary dividends.--
       (A) In general.--Section 1059 is amended by redesignating 
     subsection (g) as subsection (h) and by inserting after 
     subsection (f) the following new subsection:
       ``(g) Treatment of Excludable Dividends as Extraordinary 
     Dividends.--
       ``(1) In general.--For purposes of this section, any 
     dividend excludable under section 116(a) shall be treated as 
     an extraordinary dividend, except that this section shall be 
     applied by substituting `1 year (or such other period as the 
     Secretary may prescribe)' for `2 years' each place it 
     appears.
       ``(2) Treatment of deemed extraordinary dividends.--The 
     excludable dividend amount of any corporation for a calendar 
     year, and its earnings and profits, shall not be increased by 
     the dividends received by the corporation which are treated 
     as extraordinary dividends by reason of paragraph (1).
       ``(3) Coordination with section 284(b).--This section shall 
     not apply to any dividend excludable under section 116(a) 
     with respect to which section 284(b) applies.

[[Page S6559]]

       ``(4) Regulations.--The Secretary may by regulation provide 
     for exceptions to the application of paragraph (1).''
       (B) Paragraph (3) of section 1059(d) is amended by 
     inserting ``section 1223(11) shall not apply and'' after 
     ``subsection (a),''.
       (C)(i) Section 1059 is amended by striking ``corporation'' 
     each place it appears in subsection (a) and inserting 
     ``taxpayer''.
       (ii) The section heading for section 1059 is amended by 
     striking ``CORPORATE'' and by inserting ``AND EXCLUDABLE'' 
     before ``DIVIDENDS''.
       (iii) The item relating to section 1059 in the table of 
     sections for part IV of subchapter O of chapter 1 is 
     amended--
       (I) by striking ``Corporate'' and inserting 
     ``Shareholder's'', and
       (II) by inserting ``and excludable'' before ``dividends''.
       (7) Private foundations.--Section 4940(c) is amended by 
     adding at the end the following new paragraph:
       ``(6) Coordination with dividend exclusion.--For purposes 
     of this section, gross investment income shall not include a 
     dividend to the extent excluded from gross income under 
     section 116(a).''
       (d) Conforming Amendments.--
       (1)(A) Part X of subchapter B of chapter 1, as in effect on 
     the day before the date of the enactment of this Act, is 
     hereby moved after part XI of such subchapter B and 
     redesignated as part XII.
       (B) Section 281, as so in effect, is redesignated as 
     section 296.
       (C) The table of sections for such part XII, as so 
     designated, is amended by striking ``Sec. 281'' and inserting 
     ``Sec. 296.''
       (D) The table of parts for subchapter B of chapter 1 is 
     amended by striking the items relating to parts X and XI and 
     inserting the following new items:

``Part X. Rules for application of dividend exclusion.
``Part XI. Special rules relating to corporate preference items.
``Part XII. Terminal railroad corporations and their shareholders.''

       (2) Subsection (f) of section 301 is amended by adding at 
     the end the following new paragraph:
       ``(4) For exclusion from gross income of certain dividends, 
     see section 116.''

     SEC. 203. TREATMENT OF REGULATED INVESTMENT COMPANIES AND 
                   REAL ESTATE INVESTMENT TRUSTS.

       (a) In General.--Section 852 is amended by adding at the 
     end the following new subsection:
       ``(g) Special Rules Relating to Section 116 and Part X of 
     Subchapter B.--
       ``(1) Excludable portion.--
       ``(A) In general.--For purposes of section 116(a), the 
     excludable portion of any dividend paid by any qualified 
     investment entity shall be the amount so designated by such 
     entity in a written notice mailed to its shareholders not 
     later than 60 days after the close of its taxable year in 
     which such dividend is paid.
       ``(B) Limitation.--If the aggregate amount so designated 
     with respect to a taxable year (including dividends paid 
     after the close of the taxable year as described in section 
     855) exceeds the aggregate amount of dividends received by 
     such entity during such year which are excludable from gross 
     income under section 116(a), then the amount of a dividend 
     otherwise excludable by reason of a designation under 
     subparagraph (A) shall be reduced by an amount which bears 
     the same ratio to the amount otherwise excludable as such 
     excess bears to the total amount designated under 
     subparagraph (A).
       ``(C) Treatment of capital gain and exempt-interest 
     dividends.--Any amount designated under subparagraph (A) as 
     excludable under section 116 may not be treated as a capital 
     gain dividend or an exempt-interest dividend.
       ``(D) Coordination with section 853.--The election under 
     section 853 shall not apply to dividends excludable under 
     section 116 received by a qualified investment entity.
       ``(2) Definitions.--For purposes of this subsection--
       ``(A) Qualified investment entity.--The term `qualified 
     investment entity' means--
       ``(i) a regulated investment company, and
       ``(ii) a real estate investment trust.
       ``(B) Exempt-interest dividend.--The term `exempt-interest 
     dividend' has the meaning given to such term by subsection 
     (b)(5).''
       (b) Other Rules Relating to Regulated Investment 
     Companies.--
       (1) Distribution requirements.--Clause (i) of section 
     852(a)(1)(B) is amended by inserting ``and its dividend 
     income excludable under section 116(a),'' before ``over''.
       (2) Taxation of entity and shareholders.--
       (A) The material following paragraph (3) of section 851(b) 
     is amended by inserting ``and dividends excludable from gross 
     income under section 116(a)'' after ``103(a)'' in the third 
     sentence.
       (B) Section 852(b)(2)(D) is amended by striking ``and 
     exempt-interest dividends'' and inserting ``, exempt-interest 
     dividends, and any dividends excludable under section 
     116(a)''.
       (C) Subparagraph (B) of section 852(b)(4) is amended to 
     read as follows:
       ``(B) Loss attributable to exempt dividends.--If--
       ``(i) a shareholder of a regulated investment company 
     receives an exempt-interest dividend or a dividend excludable 
     under section 116(a) with respect to any share, and
       ``(ii) such share is held by the taxpayer for 6 months or 
     less,

     then any loss on the sale or exchange of such share shall, to 
     the extent of the sum of the amounts of such dividends be 
     disallowed.''
       (D) Paragraph (3) of section 4982(c) is amended by striking 
     ``and'' at the end of subparagraph (A), by striking the 
     period at the end of subparagraph (B) and inserting ``, 
     and'', and by adding at the end the following new 
     subparagraph:
       ``(C) any dividend excludable from gross income under 
     section 116(a).''
       (c) Other Rules Relating to Real Estate Investment 
     Trusts.--
       (1) Distribution requirements.--Subparagraph (A) of section 
     857(a)(1) is amended by striking ``and'' at the end of clause 
     (i), by striking ``minus'' at the end of clause (ii), and by 
     inserting at the end the following new clause:
       ``(iii) 90 percent of its dividend income excludable under 
     section 116(a); minus''
       (2) Taxation of entity and shareholders.--
       (A)(i) Section 856(c)(2) is amended--
       (I) by inserting ``(including dividends excludable from 
     gross income under section 116(a))'' after ``dividends'' in 
     subparagraph (A), and
       (II) by inserting ``(including tax-exempt interest)'' after 
     ``interest'' in subparagraph (B).
       (ii) Section 856(c) is amended by adding at the end the 
     following new paragraph:
       ``(8) Gross income tests.--For purposes of paragraphs (2) 
     and (3), gross income shall be treated as including tax-
     exempt interest and dividends excludable from gross income 
     under section 116(a).''
       (B) Section 857(b)(2)(B) is amended by inserting `` or any 
     dividends paid which are excludable under section 116(a)'' 
     after ``subparagraph (D)''.
       (C) Section 857(b) is amended by adding at the end the 
     following new paragraph:
       ``(10) Loss attributable to exempt dividends.--If--
       ``(A) a taxpayer receives a dividend excludable under 
     section 116(a) with respect to any share of stock of, or a 
     certificate of beneficial interest in, a real estate 
     investment trust, and
       ``(B) such share or certificate is held by the taxpayer for 
     6 months or less,

     then any loss on the sale or exchange of such share or 
     certificate shall, to the extent of the sum of the amounts of 
     such dividends, be disallowed.''
       (D) Paragraph (1) of section 4981(c) is amended by striking 
     ``and'' at the end of subparagraph (A), by striking the 
     period at the end of subparagraph (B) and inserting ``, 
     and'', and by adding at the end the following new 
     subparagraph:
       ``(C) any dividend excludable from gross income under 
     section 116(a).''

     SEC. 204. TREATMENT OF INSURANCE COMPANIES.

       (a) Life Insurance Companies.--
       (1) Section 803 is amended by adding at the end the 
     following new subsection:
       ``(c) Special Rules for Excludable Dividends.--
       ``(1) In general.--The exclusion under section 116(a) with 
     respect to any dividend received by a life insurance company 
     shall only apply to such company's share (as determined under 
     section 812) of such dividend.
       ``(2) Rules for segregated asset accounts.--In the case of 
     stock held in a segregated asset account (within the meaning 
     of section 817), this subsection shall be applied as if the 
     policyholders' share of the excludable portion of any 
     dividend with respect to such stock were 100 percent.
       ``(3) Computation of excludable dividend amount.--In the 
     case of a life insurance company, the increase under clause 
     (ii) of section 281(b)(1)(A) in the company's excludable 
     dividend amount shall be limited to the company's share (as 
     determined under section 812) of the dividends described in 
     such clause.''
       (2) Section 812(d)(1)(A) is amended by inserting 
     ``(including dividends excludable under section 116(a))'' 
     after ``dividends''.
       (3) Section 815(c)(2)(A)(iii) is amended by adding ``and 
     the amount of dividends excludable under section 116(a) (as 
     modified by section 803(c)(1)),'' after ``section 103''.
       (b) Other Insurance Companies.--
       (1) Section 832(b)(5)(B) is amended by striking ``and'' at 
     the end of clause (ii), by striking the period at the end of 
     clause (iii) and inserting ``, and'', and by adding after 
     clause (iii) the following new clause:
       ``(iv) any dividend excludable under section 116(a) which 
     is received during such taxable year.''
       (2) Section 832(c) is amended by striking ``and'' at the 
     end of paragraph (12), by striking the period at the end of 
     paragraph (13) and inserting ``; and'', and by adding at the 
     end the following new paragraph:
       ``(14) the amount of dividends received during the taxable 
     year which are excluded from gross income under section 
     116(a).''
       (3) Section 833(b)(3)(E) is amended--
       (A) by striking ``and'' at the end of clause (i), by 
     striking the period at the end of clause (ii) and inserting 
     ``, and'', and by inserting after clause (ii) the following 
     new clause:
       ``(iii) the aggregate amount excluded for the taxable year 
     under section 116(a).'', and
       (B) by adding at the end the following: ``The amount 
     determined under clause (iii) shall be reduced by the amount 
     of any decrease in such deductions for the taxable year by 
     reason of section 832(b)(5)(B) to the

[[Page S6560]]

     extent such decrease is attributable to the exclusion under 
     section 116(a).''
       (4) Section 834(c) is amended by adding at the end the 
     following new paragraph:
       ``(10) Excludable dividends.--The amount of dividends 
     received during the taxable year which are excluded from 
     gross income under section 116(a).''

     SEC. 205. TREATMENT OF S CORPORATIONS.

       (a) Application of Section 116 and Part X of Subchapter B 
     to S Corporations.--Section 1368 is amended by adding at the 
     end the following new subsection:
       ``(f) Coordination With Dividend Exclusion.--
       ``(1) Determination of excluded dividends amount.--
       ``(A) In general.--Clause (ii) of section 281(b)(1)(A) 
     shall not apply to amounts received or allocated in a taxable 
     year for which the corporation is an S corporation.
       ``(B) Cross reference.--

  ``For treatment of taxes imposed by section 1374, see section 
281(d)(1).

       ``(2) Distributions.--Subject to regulations prescribed by 
     the Secretary, the preceding provisions of this section shall 
     not apply to any dividend excludable from gross income under 
     section 116(a).''
       (c) Modification to Treatment of Section 1374 Tax.--
       (1) Paragraph (2) of section 1366(f) is amended to read as 
     follows:
       ``(2) Treatment of built-in gains.--The amount of the items 
     of the net recognized built-in gain taken into account under 
     section 1374(b)(1) (reduced by any deduction allowed under 
     section 1374(b)(2)) shall not be taken into account under 
     this section.''
       (2)(A) Subsection (c) of section 1371 is amended by adding 
     at the end the following new paragraph:
       ``(4) Treatment of built-in gain.--The accumulated earnings 
     and profits of the corporation shall be increased at the 
     beginning of the taxable year by the amount not taken into 
     account under section 1366 by reason of section 1366(f)(2) 
     (determined without regard any reduction of such amount under 
     section 1374(b)(2)) reduced by the tax imposed by section 
     1374 (net of credits allowed).''
       (B) Paragraph (1) of section 1371(c) is amended by striking 
     ``and (3)'' and inserting ``, (3), and (4)''.
       (d) Repeal of Tax and Termination Where Excess Passive 
     Investment Income.--
       (1) Repeal of tax.--
       (A) In general.--Section 1375 is repealed.
       (B) Conforming amendments.--Sections 26(b)(2)(J) and 
     1366(f)(3) are repealed.
       (2) Repeal of termination.--Section 1362(d) is amended by 
     striking paragraph (3).
       (e) Treatment of Accumulated Adjustments Account.--
     Subsection (e) of section 1368 is amended by adding at the 
     end the following new paragraph:
       ``(4) Treatment of certain distributions.--The accumulated 
     adjustments account for any taxable year shall be increased 
     by the sum of the dividends excludable under section 116(a) 
     received by the corporation during such taxable year.''

     SEC. 206. REPEAL OF ACCUMULATED EARNINGS TAX AND PERSONAL 
                   HOLDING COMPANY TAX.

       (a) In General.--Parts I and II of subchapter G of chapter 
     1 (relating to corporations improperly accumulating surplus 
     and to personal holding companies) are hereby repealed.
       (b) Conforming Amendments.--
       (1) Section 12 is amended by striking paragraph (2) and by 
     redesignating paragraphs (3), (4), (5), (6), and (7) as 
     paragraphs (2), (3), (4), (5), and (6), respectively.
       (2) Section 26(b)(2) is amended by striking subparagraphs 
     (F) and (G).
       (3) Section 30A(c) is amended by inserting ``or'' at the 
     end of paragraph (1), by striking paragraphs (2) and (3), and 
     by redesignating paragraph (4) as paragraph (2).
       (4) Section 41(e)(7)(E) is amended by adding ``and'' at the 
     end of clause (i), by striking clause (ii), and by 
     redesignating clause (iii) as clause (ii).
       (5) Section 56(b)(2) is amended by striking subparagraph 
     (C) and by redesignating subparagraph (D) as subparagraph 
     (C).
       (6) Section 111 is amended by striking subsection (d).
       (7) Section 170(e)(4)(D) is amended by adding ``and'' at 
     the end of clause (i), by striking clause (ii), and by 
     redesignating clause (iii) as clause (ii).
       (8) Sections 170(f)(10)(A), 508(d), 4947, and 4948(c)(4) 
     are each amended by striking ``545(b)(2),'' each place it 
     appears.
       (9)(A) Section 316(b) is amended by striking paragraph (2) 
     and by redesignating paragraph (3) as paragraph (2).
       (B) Section 331(b) is amended by striking ``(other than a 
     distribution referred to in paragraph (2)(B) of section 
     316(b))''.
       (10) Section 341(d) is amended--
       (A) by striking ``section 544(a) (relating to personal 
     holding companies)'' and inserting ``section 465(f) (relating 
     to constructive ownership rules)'', and
       (B) by inserting before the period at the end of the next 
     to the last sentence ``and such paragraph (2) shall be 
     applied by inserting `or by or for his partner' after `his 
     family' ''.
       (11) Section 381(c) is amended by striking paragraphs (14) 
     and (17).
       (12) Section 443(e) is amended by striking paragraphs (1) 
     and (2) and by redesignating paragraphs (3), (4), and (5) as 
     paragraphs (1), (2), and (3), respectively.
       (13) Section 447(g)(4)(A) is amended by striking ``other 
     than--'' and all that follows and inserting ``other than an S 
     corporation.''
       (14)(A) Section 465(a)(1)(B) is amended to read as follows:
       ``(B) a C corporation which is closely held,''.
       (B) Section 465(a)(3) is amended to read as follows:
       ``(3) Closely held determination.--For purposes of 
     paragraph (1), a corporation is closely held if, at any time 
     during the last half of the taxable year, more than 50 
     percent in value of its outstanding stock is owned, directly 
     or indirectly, by or for not more than 5 individuals. For 
     purposes of this paragraph, an organization described in 
     section 401(a), 501(c)(17), or 509(a) or a portion of a trust 
     permanently set aside or to be used exclusively for the 
     purposes described in section 642(c) shall be considered an 
     individual.''
       (C) Section 465(c)(7)(B) is amended by striking clause (i) 
     and by redesignating clauses (ii) and (iii) as clauses (i) 
     and (ii), respectively.
       (D) Section 465(c)(7)(G) is amended to read as follows:
       ``(G) Loss of 1 member of affiliated group may not offset 
     income of personal service corporation.--Nothing in this 
     paragraph shall permit any loss of a member of an affiliated 
     group to be used as an offset against the income of any other 
     member of such group which is a personal service corporation 
     (as defined in section 269A(b) but determined by substituting 
     `5 percent' for `10 percent' in section 269A(b)(2)).''
       (E) Section 465 is amended by adding at the end the 
     following new subsection:
       ``(f) Constructive Ownership Rules.--For purposes of 
     subsection (a)(3)--
       ``(1) Stock not owned by individual.--Stock owned, directly 
     or indirectly, by or for a corporation, partnership, estate, 
     or trust shall be considered as being owned proportionately 
     by its shareholders, partners, or beneficiaries.
       ``(2) Family ownership.--An individual shall be considered 
     as owning the stock owned, directly or indirectly, by or for 
     his family. For purposes of this paragraph, the family of an 
     individual includes only his brothers and sisters (whether by 
     the whole or half blood), spouse, ancestors, and lineal 
     descendants.
       ``(3) Options.--If any person has an option to acquire 
     stock, such stock shall be considered as owned by such 
     person. For purposes of this paragraph, an option to acquire 
     such an option, and each one of a series of such options, 
     shall be considered as an option to acquire such stock.
       ``(4) Application of family and option rules.--Paragraphs 
     (2) and (3) shall be applied if, but only if, the effect is 
     to make the corporation closely held under subsection (a)(3).
       ``(5) Constructive ownership as actual ownership.--Stock 
     constructively owned by a person by reason of the application 
     of paragraph (1) or (3), shall, for purposes of applying 
     paragraph (1) or (2), be treated as actually owned by such 
     person; but stock constructively owned by an individual by 
     reason of the application of paragraph (2) shall not be 
     treated as owned by him for purposes of again applying such 
     paragraph in order to make another the constructive owner of 
     such stock.
       ``(6) Option rule in lieu of family rule.--If stock may be 
     considered as owned by an individual under either paragraph 
     (2) or (3) it shall be considered as owned by him under 
     paragraph (3).
       ``(7) Convertible securities.--Outstanding securities 
     convertible into stock (whether or not convertible during the 
     taxable year) shall be considered as outstanding stock if the 
     effect of the inclusion of all such securities is to make the 
     corporation closely held under subsection (a)(3). The 
     requirement under the preceding sentence that all convertible 
     securities must be included if any are to be included shall 
     be subject to the exception that, where some of the 
     outstanding securities are convertible only after a later 
     date than in the case of others, the class having the earlier 
     conversion date may be included although the others are not 
     included, but no convertible securities shall be included 
     unless all outstanding securities having a prior conversion 
     date are also included.''
       (15)(A) Section 553(a)(1) is amended by striking ``section 
     543(d)'' and inserting ``subsection (c)''.
       (B) Section 553 is amended by adding at the end the 
     following new subsection:
       ``(c) Active Business Computer Software Royalties.--
       ``(1) In general.--For purposes of subsection (a), the term 
     `active business computer software royalties' means any 
     royalties--
       ``(A) received by any corporation during the taxable year 
     in connection with the licensing of computer software, and
       ``(B) with respect to which the requirements of paragraphs 
     (2), (3), and (4) are met.
       ``(2) Royalties must be received by corporation actively 
     engaged in computer software business.--The requirements of 
     this paragraph are met if the royalties described in 
     paragraph (1)--
       ``(A) are received by a corporation engaged in the active 
     conduct of the trade or business of developing, 
     manufacturing, or producing computer software, and
       ``(B) are attributable to computer software which--

[[Page S6561]]

       ``(i) is developed, manufactured, or produced by such 
     corporation (or its predecessor) in connection with the trade 
     or business described in subparagraph (A), or
       ``(ii) is directly related to such trade or business.
       ``(3) Royalties must constitute at least 50 percent of 
     income.--The requirements of this paragraph are met if the 
     royalties described in paragraph (1) constitute at least 50 
     percent of the ordinary gross income of the corporation for 
     the taxable year.
       ``(4) Deductions under sections 162 and 174 relating to 
     royalties must equal or exceed 25 percent of ordinary gross 
     income.--
       ``(A) In general.--The requirements of this paragraph are 
     met if--
       ``(i) the sum of the deductions allowable to the 
     corporation under sections 162, 174, and 195 for the taxable 
     year which are properly allocable to the trade or business 
     described in paragraph (2) equals or exceeds 25 percent of 
     the ordinary gross income of such corporation for such 
     taxable year, or
       ``(ii) the average of such deductions for the 5-taxable 
     year period ending with such taxable year equals or exceeds 
     25 percent of the average ordinary gross income of such 
     corporation for such period.
     If a corporation has not been in existence during the 5-
     taxable year period described in clause (ii), then the period 
     of existence of such corporation shall be substituted for 
     such 5-taxable year period.
       ``(B) Deductions allowable under section 162.--For purposes 
     of subparagraph (A), a deduction shall not be treated as 
     allowable under section 162 if it is specifically allowable 
     under another section.
       ``(C) Limitation on allowable deductions.--For purposes of 
     subparagraph (A), no deduction shall be taken into account 
     with respect to compensation for personal services rendered 
     by the 5 individual shareholders holding the largest 
     percentage (by value) of the outstanding stock of the 
     corporation. For purposes of the preceding sentence 
     individuals holding less than 5 percent (by value) of the 
     stock of such corporation shall not be taken into account.''
       (16) Section 556(b)(1) is amended by striking ``, but not 
     including'' and all that follows and inserting a period.
       (17) Section 561(a) is amended by striking paragraph (3), 
     by inserting ``and'' at the end of paragraph (1), and by 
     striking ``, and'' at the end of paragraph (2) and inserting 
     a period.
       (18) Section 562(b) is amended to read as follows:
       ``(b) Distributions in Liquidation.--Except in the case of 
     a foreign personal holding company described in section 552--
       ``(1) in the case of amounts distributed in liquidation, 
     the part of such distribution which is properly chargeable to 
     earnings and profits accumulated after February 28, 1913, 
     shall be treated as a dividend for purposes of computing the 
     dividends paid deduction, and
       ``(2) in the case of a complete liquidation occurring 
     within 24 months after the adoption of a plan of liquidation, 
     any distribution within such period pursuant to such plan 
     shall, to the extent of the earnings and profits (computed 
     without regard to capital losses) of the corporation for the 
     taxable year in which such distribution is made, be treated 
     as a dividend for purposes of computing the dividends paid 
     deduction.

     For purposes of paragraph (1), a liquidation includes a 
     redemption of stock to which section 302 applies. Except to 
     the extent provided in regulations, the preceding sentence 
     shall not apply in the case of any mere holding or investment 
     company which is not a regulated investment company.''
       (19) Section 563 is amended by striking subsections (a) and 
     (b), by redesignating subsections (c) and (d) as subsections 
     (a) and (b), and by striking ``, (b), or (c)'' in subsection 
     (b) (as so redesignated).
       (20) Section 564 is hereby repealed.
       (21) Section 631(c) is amended by striking the next to the 
     last sentence and inserting the following: ``This subsection 
     shall have no application for purposes of applying subchapter 
     G (relating to corporations used to avoid income tax on 
     shareholders).''.
       (22) Section 852(b)(1) is amended by striking ``which is a 
     personal holding company (as defined in section 542) or''.
       (23)(A) Section 856(h)(1) is amended to read as follows:
       ``(1) In general.--For purposes of subsection (a)(6), a 
     corporation, trust, or association is closely held if the 
     stock ownership requirement of section 465(a)(3) is met.''.
       (B) Section 856(h)(3)(A)(i) is amended by striking 
     ``section 542(a)(2)'' and inserting ``section 465(a)(3)''.
       (C) Paragraph (3) of section 856(h) is amended by striking 
     subparagraph (B) and by redesignating subparagraphs (C) and 
     (D) as subparagraphs (B) and (C), respectively.
       (D) Subparagraph (C) of section 856(h)(3), as redesignated 
     by the preceding subparagraph, is amended by striking 
     ``subparagraph (C)'' and inserting ``subparagraph (B)''.
       (24) The last sentence of section 882(c)(2) is amended to 
     read as follows:

     ``The preceding sentence shall not be construed to deny the 
     credit provided by section 33 for tax withheld at source or 
     the credit provided by section 34 for certain uses of 
     gasoline.''.
       (25) Section 936(a)(3) is amended by striking subparagraphs 
     (B) and (C), by inserting ``or'' at the end of subparagraph 
     (A), and by redesignating subparagraph (D) as subparagraph 
     (B).
       (26) Section 936 is amended by striking subsection (g).
       (27) Section 992(d) is amended by striking paragraph (2) 
     and by redesignating paragraphs (3), (4), (5), (6), and (7) 
     as paragraphs (2), (3), (4), (5), and (6), respectively.
       (28) Section 992 is amended by striking subsection (e).
       (29) Section 1202(e)(8) is amended by striking ``section 
     543(d)(1)'' and inserting ``section 553(c)(1)''.
       (30) Section 1298(b) is amended by striking paragraph (8) 
     and redesignating paragraph (9) as paragraph (8).
       (31) Section 1504(c)(2)(B) is amended by adding ``and'' at 
     the end of clause (i), by striking clause (ii), and by 
     redesignating clause (iii) as clause (ii).
       (32)(A) Section 1551(a) is amended by striking ``or the 
     accumulated earnings credit'' and all that follows and 
     inserting ``unless such transferee corporation shall 
     establish by the clear preponderance of the evidence that the 
     securing of such benefits was not a major purpose of such 
     transfer.''.
       (B) The section heading for section 1551 is amended by 
     striking ``AND ACCUMULATED EARNINGS CREDIT''.
       (C) The item relating to section 1551 in the table of 
     sections for part I of subchapter B of chapter 6 is amended 
     by striking ``and accumulated earnings credit''.
       (33)(A) Section 1561(a) is amended--
       (i) by striking paragraph (2),
       (ii) by redesignating paragraphs (3) and (4) as paragraphs 
     (2) and (3),
       (iii) by striking ``paragraph (3)'' each place it appears 
     and inserting ``paragraph (2)'',
       (iv) by striking ``paragraph (4)'' and inserting 
     ``paragraph (3)'', and
       (v) by striking the third sentence.
       (B) Section 1561(b) is amended to read as follows:
       ``(b) Certain Short Taxable Years.--If a corporation has a 
     short taxable year which does not include a December 31 and 
     is a component member of a controlled group of corporations 
     with respect to such taxable year, then for purposes of this 
     subtitle, the amount in each taxable income bracket in the 
     tax table in section 11(b) for such corporation for such 
     taxable year shall be the amount specified in subsection 
     (a)(1), divided by the number of corporations which are 
     component members of such group on the last day of such 
     taxable year. For purposes of the preceding sentence, section 
     1563(b) shall be applied as if such last day were substituted 
     for December 31.''.
       (34) Section 2057(e)(2)(C) is amended by adding at the end 
     the following new sentence: ``References to sections 542 and 
     543 in the preceding sentence shall be treated as references 
     to such sections as in effect on the day before their 
     repeal.''
       (35) Sections 6422 is amended by striking paragraph (3) and 
     by redesignating paragraphs (4) through (12) and paragraphs 
     (3) through (11), respectively.
       (36) Section 6501 is amended by striking subsection (f).
       (37) Section 6503(k) of such Code is amended by striking 
     paragraph (1) and by redesignating paragraphs (2) through (5) 
     as paragraphs (1) through (4), respectively.
       (38) Section 6515 is amended by striking paragraph (1) and 
     by redesignating paragraphs (2) through (6) as paragraphs (1) 
     through (5), respectively.
       (39) Section 6601(b) is amended by striking paragraph (4) 
     and redesignating paragraph (5) as paragraph (4).
       (40) Subsections (d)(1)(B) and (e)(2) of section 6662 of 
     such Code are each amended by striking ``or a personal 
     holding company (as defined in section 542)''.
       (41) Section 6683 is hereby repealed.
       (42) Section 7518(c)(1) is amended by inserting ``and'' at 
     the end of subparagraph (C), by striking ``, and'' at the end 
     of subparagraph (D) and inserting a period, and by striking 
     subparagraph (E).
       (c) Clerical Amendments.--
       (1) The table of parts for subchapter G of chapter 1 of 
     such Code is amended by striking the items relating to parts 
     I and II.
       (2) The table of sections for part IV of such subchapter G 
     is amended by striking the item relating to section 564.
       (3) The table of sections for part I of subchapter B of 
     chapter 68 of such Code is amended by striking the item 
     relating to section 6683.

     SEC. 207. EFFECTIVE DATES.

       (a) In General.--Except as otherwise provided in this 
     title, the amendments made by this title shall apply to 
     distributions received after December 31, 2002, and before 
     January 1, 2007.
       (b) Special Rules.--
       (1) Section 1374 tax.--In applying the amendments made by 
     this section, any tax imposed by section 1374 of the Internal 
     Revenue Code of 1986 for any taxable year beginning before 
     January 1, 2003, shall not be taken into account.
       (2) Section 205 (c) and (d) and section 206.--The 
     amendments made by subsections (c) and (d) of section 205 and 
     by section 206 shall apply to taxable years beginning after 
     December 31, 2003, and before January 1, 2007; except that--
       (A) section 547 of such Code (as in effect before its 
     repeal) shall continue to apply to deficiency dividends (as 
     defined in section 547(d) of such Code) relating to taxable 
     years beginning before January 1, 2004, and
       (B) subsections (a) and (b) of section 563 of such Code (as 
     so in effect) shall continue to apply to dividends relating 
     to taxable years beginning before January 1, 2004.


[[Page S6562]]


     Notwithstanding subparagraphs (A) and (B), such dividends 
     shall not be taken into account in applying section 116 of 
     such Code or part X of subchapter B of chapter 1 of such 
     Code.
       (3) Section 282.--Section 282 of such Code (as added by 
     this title) shall apply to taxable years ending after the 
     date of the enactment of this Act.
                                 ______
                                 
  SA 671. Mr. LAUTENBERG (for himself, Mr. Corzine, Mr. Leahy, Mrs. 
Murray, and Mr. Reid) submitted an amendment intended to be proposed by 
him to the bill H.R. 1298, to provide assistance to foreign countries 
to combat HIV/AIDS, tuberculosis, and malaria, and for other purposes; 
which was ordered to lie on the table; as follows:

       At the appropriate place, insert the following:

     SEC. ____. RULE OF CONSTRUCTION RELATING TO METHOD OF 
                   PREVENTION.

       Nothing in this Act (or an amendment made by this Act) 
     shall be construed to require that an organization utilize or 
     endorse any particular approach to HIV/AIDS prevention, 
     except that any information provided by the organization 
     about any particular preventive approach shall be complete 
     and medically accurate including both the public health 
     benefits and failure rates of the approach involved.
                                 ______
                                 
  SA 672. Mr. REED (for himself, Mr. Corzine, Ms. Mikulski, Mr. Kerry, 
Mr. Rockefeller, Ms. Landrieu, and Mr. Sarbanes) proposed an amendment 
to the bill S. 1054, to provide for reconciliation pursuant to section 
201 of the concurrent resolution on the budget for fiscal year 2004; as 
follows:

       At the end of subtitle C of title V add the following:

     SEC. ____. LOW-INCOME HOUSING TAX CREDIT.

       (a) Findings.--The Senate finds the following:
       (1) The low-income housing tax credit is the Nation's 
     primary program for producing affordable rental housing.
       (2) Each year, the low-income housing tax credit produces 
     over 115,000 affordable apartments.
       (3) Since Congress created the low-income housing tax 
     credit in 1986, the credit has created 1,500,000 units of 
     affordable housing for about 3,500,000 Americans.
       (4) Analyses have found that certain approaches to reducing 
     or eliminating the taxation of dividends have the potential 
     to reduce the value of the low-income housing tax credit and 
     so reduce the amount of affordable housing available.
       (5) As of 2001, over 7,000,000 American renter families (1 
     in 5) suffer severe housing affordability problems, meaning 
     that the family spends more than half of its income on rent 
     or lives in substandard housing.
       (6) More than 150,000 apartments in the low-cost rental 
     housing inventory are lost each year due to rent increases, 
     abandonment, and deterioration.
       (b) Sense of the Senate.--It is the sense of the Senate 
     that any reduction or elimination of the taxation on 
     dividends should include provisions to preserve the success 
     of the low-income housing tax credit.
                                 ______
                                 
  SA 673. Mr. DeWine submitted an amendment intended to be proposed by 
him to the bill S. 1054, to provide for reconciliation pursuant to 
section 201 of the concurrent resolution on the budget for fiscal year 
2004; as follows:

       At the appropriate place insert the following:

     SECTION 1. TREATMENT OF CERTAIN IMPORTED RECYCLED HALONS.

       (a) In General.--Section 1803(c) of the Small Business Job 
     Protection Act of 1986 (Public Law 104-188) is amended by 
     striking ``1997'' and ``1998'' and inserting ``1994''.
       (b) Waiver of Limitations.--If refund or credit of any 
     overpayment of tax resulting from the amendment made by this 
     section is prevented at any time before the close of the 1-
     year period beginning on the date of the enactment of this 
     Act by the operation of any law or rule of law (including res 
     judicata), such refund or credit may nevertheless be made or 
     allowed if claim therefor is filed before the close of such 
     period.
                                 ______
                                 
  SA 674. Mr. FEINGOLD submitted an amendment intended to be proposed 
by him to the bill H.R. 1298, to provide assistance to foreign 
countries to combat HIV AIDS, tuberculosis, and malaria, and for other 
purposes; which was ordered to lie on the table; as follows:

       On page 31, between lines 5 and 6, insert the following:

       ``(V) Ensuring that United States efforts to combat HIV/
     AIDS take maximum advantage of the potential for positive 
     spill-over effects in other health priorities, such as 
     improving pre-natal care and combating tuberculosis through 
     referral at voluntary counseling and testing centers.

                                 ______
                                 
  SA 675. Mr. KENNEDY (for himself, Mr. McCain, Mr. Feingold, Mrs. 
Feinstein, Mr. Levin, Mr. Schumer, Mr. Pryor, Mr. Johnson, and Mr. 
Leahy) submitted an amendment intended to be proposed by him to the 
bill H.R. 1298, to provide assistance to foreign countries to combat 
HIV AIDS, tuberculosis, and malaria, and for other purposes; which was 
ordered to lie on the table; as follows:

       On page 54, strike lines 7 through 24, and insert the 
     following: ``medicines to treat opportunistic infections, at 
     the lowest possible price for products of assured quality (as 
     provided for in subparagraph (D)). Such procurement shall be 
     made anywhere in the world notwithstanding any provision of 
     law restricting procurement of goods to domestic sources.
       ``(B) Mechanisms for quality control and sustainable 
     supply.--Mechanisms to ensure that such HIV/AIDS 
     pharmaceuticals, antiviral therapies, and other appropriate 
     medicines are quality-controlled and sustainably supplied.
       ``(C) Distribution.--The distribution of such HIV/AIDS 
     pharmaceuticals, antiviral therapies, and other appropriate 
     medicines (including medicines to treat opportunistic 
     infections) to qualified national, regional, or local 
     organizations for the treatment of individuals with HIV/AIDS 
     in accordance with appropriate HIV/AIDS testing and 
     monitoring requirements and treatment protocols and for the 
     prevention of mother-to-child transmission of the HIV 
     infection.
       ``(D) Lowest possible price and assured quality.--
       ``(i) Lowest possible price.--With respect to an HIV/AIDS 
     pharmaceutical, an antiviral therapy, or any other 
     appropriate medicine, including a medicine to treat 
     opportunistic infections, the lowest possible price means the 
     lowest delivered duty unpaid price at which such medicine 
     (which includes all products of assured quality with the same 
     active ingredients) may be obtained in sufficient quantity in 
     either the United States or elsewhere on the world market.
       ``(ii) Assured quality.--An HIV/AIDS pharmaceutical, an 
     antiviral therapy, or any other appropriate medicine, 
     including a medicine to treat opportunistic infections, shall 
     be considered a product of assured quality if it is--

       ``(I)(aa) approved by the Food and Drug Administration;
       ``(bb) authorized for marketing by the European Commission;
       ``(cc) on the most recent edition of the list of HIV-
     related medicines prequalified for procurement by the World 
     Health Organization's Pilot Procurement Quality and Sourcing 
     Project; or
       ``(dd) during the period that begins on the date of 
     enactment of this section and ending on December 31, 2004, 
     authorized for use by the national regulatory authority of 
     the country where the product will be used; and
       ``(II) in compliance with--

       ``(aa) the intellectual property laws of the country where 
     the product is manufactured;
       ``(bb) the intellectual property laws of the country where 
     the product will be used; and
       ``(cc) applicable international obligations in the field of 
     intellectual property, to the extent consistent with the 
     flexibilities provided in the Agreement on Trade-Related 
     Aspects of Intellectual Property Rights (TRIPS), as 
     interpreted in the Declaration on the TRIPS Agreement and 
     Public Health, adopted by the World Trade Organization at the 
     Fourth Ministerial Conference at Doha, Qatar on November 14, 
     2001.
       ``(iii) Prices publicly available.--Prices paid for 
     purchases of HIV/AIDS pharmaceuticals, antiviral therapies, 
     and other appropriate medicines, including medicines to treat 
     opportunistic infections, of assured quality shall be made 
     publicly available.
       ``(iv) Application to appropriated funds.--Funds 
     appropriated under title IV of the United States Leadership 
     Against HIV/AIDS, Tuberculosis, and Malaria Act of 2003 that 
     are used for the procurement of HIV/AIDS pharmaceuticals, 
     antiviral therapies, and other appropriate medicines, 
     including medicines to treat opportunistic infections, shall 
     be used to procure products of assured quality at the lowest 
     possible price, as determined under this subparagraph.
       (E) Rule of construction.--Nothing in this paragraph shall 
     be construed to affect a decision regarding which medicine is 
     most medically appropriate for a specific disease or 
     condition.
                                 ______
                                 
  SA 676. Mr. DURBIN proposed an amendment intended to the bill H.R. 
1298, to provide assistance to foreign countries to combat HIV AIDS, 
tuberculosis, and malaria, and for other purposes; as follows:

       Beginning on page 35, strike line 22, and all that follows 
     through page 45, line 25, and insert the following section:

     SEC. 202. PARTICIPATION IN THE GLOBAL FUND TO FIGHT AIDS, 
                   TUBERCULOSIS AND MALARIA.

       (a) Authority for United States Participation.--
       (1) United states participation.--The United States is 
     authorized to participate in the Global Fund.
       (2) Privileges and immunities.--The Global Fund shall be 
     considered a public international organization for purposes 
     of section 1 of the International Organizations Immunities 
     Act (22 U.S.C. 288).
       (b) Public Dissemination.--Not later than 180 days after 
     the date of the enactment of this Act, and regularly 
     thereafter for the duration of the Global Fund, the 
     Coordinator of the United States Government Activities to

[[Page S6563]]

     Combat HIV/AIDS Globally shall make available to the public, 
     through electronic media and other publication mechanisms, 
     the following documents:
       (1) Any proposal approved for funding by the Global Fund.
       (2) A list of all organizations that comprise each country 
     coordinating mechanism, as such mechanism is recognized by 
     the Global Fund.
       (3) A list of all organizations that received funds from 
     the Global Fund, including the amount of such funds received 
     by each organization.
       (c) Annual Report.--Not later than one year after the date 
     of the enactment of this Act, and annually thereafter, the 
     Coordinator of the United States Government Activities to 
     Combat HIV/AIDS Globally shall submit to the appropriate 
     congressional committees a report on the Global Fund. The 
     report shall include, for the reporting period, the following 
     elements:
       (1) Contributions pledged to or received by the Global Fund 
     (including donations from the private sector).
       (2) Efforts made by the Global Fund to increase 
     contributions from all sources other than the United States.
       (3) Programs funded by the Global Fund.
       (4) An evaluation of the effectiveness of such programs.
       (5) Recommendations regarding the adequacy of such 
     programs.
       (d) United States Financial Participation.--
       (1) Authorization of appropriations.--Of the amounts 
     authorized to be appropriated under section 401, there are 
     authorized to be appropriated for United States contributions 
     to the Global Fund, in addition to any other amounts 
     authorized to be appropriated under any other provision of 
     law for such purpose, $1,000,000,000 for fiscal year 2004, 
     $1,200,000,000 for fiscal year 2005, and such sums as may be 
     necessary for fiscal years 2006 through 2008.
       (2) Availability of funds.--
       (A) Certain fiscal year 2004 funds.--Of the amount 
     authorized to be appropriated by paragraph (1) for fiscal 
     year 2004, the amount in excess of $500,000,000 shall be 
     available only if the Global Fund receives, during the period 
     beginning on April 1, 2003, and ending on March 31, 2004, 
     pledges from all donors other than the United States for 
     funding new grant proposals in an amount not less than 
     $2,000,000,000.
       (B) Certain fiscal year 2005 funds.--Of the amount 
     authorized to be appropriated by paragraph (1) for fiscal 
     year 2005, the amount in excess of $600,000,000 shall be 
     available only if the Global Fund receives, during the period 
     beginning on April 1, 2004, and ending on March 31, 2005, 
     pledges from all donors other than the United States for 
     funding new grant proposals in an amount not less than 
     $2,400,000,000.
       (C) Receipt of pledges before period end.--If the Global 
     Fund receives in a period described in subparagraph (A) or 
     (B) the pledges described in such subparagraph in the amount 
     required by such subparagraph as of a date before the end of 
     such period, the United States contribution specified in such 
     subparagraph shall be available as of such date.
       (D) Availability of amounts.--Amounts authorized to be 
     appropriated by paragraph (1), and available under that 
     paragraph or this paragraph, shall remain available until 
     expended.
       (3) Prior fiscal year funds.--Any unobligated balances of 
     funds made available for fiscal years 2001 and 2002 under 
     section 141 of the Global AIDS and Tuberculosis Relief Act of 
     2000 (22 U.S.C. 6841)--
       (A) are authorized to remain available until expended; and
       (B) shall be merged with, and made available for the same 
     purposes as, the funds authorized to be appropriated by 
     paragraph (1).
                                 ______
                                 
  SA 677. Mr. LEAHY (for himself and Mrs. Clinton) submitted an 
amendment intended to be proposed by him to the bill H.R. 1298, to 
provide assistance to foreign countries to combat HIV AIDS, 
tuberculosis, and malaria, and for other purposes; which was ordered to 
lie on the table; as follows:

       At the appropriate place insert:

     SEC.   . POLICY TO INCREASE FUNDING TO COMBAT HIV/AIDS AND 
                   FOR OTHER INTERNATIONAL HEALTH PROGRAMS.

       (a) Findings.--(1) The National Security Strategy of the 
     United States, dated September 17, 2002, states that ``[t]he 
     scale of the public health crisis in poor countries is 
     enormous. In countries afflicted by epidemics and pandemics . 
     . . growth and development will be threatened until these 
     scourges can be contained.''
       (2) The United States Agency for International Development 
     concluded that ``Global health issues have global 
     consequences that not only affect the people of developing 
     nations but also directly affect the interests of American 
     citizens.''
       (3) The Centers for Disease Control and Prevention 
     concluded that ``[i]n today's global environment, new 
     diseases have the potential to spread across the world in a 
     matter of days, or even hours, making early detection and 
     action more important than ever.''
       (4) The President's Fiscal Year 2004 budget request for the 
     Child Survival and Health Programs Fund, which is the 
     principle source of funds for building public health capacity 
     in developing countries, would cut the Fund by $124,313,000 
     (not including programs to combat HIV/AIDS which are cut by 
     an additional $86,030,000) below the Fiscal Year 2003 enacted 
     level.
       (5) Within the Child Survival and Health Programs Fund, the 
     President's Fiscal Year 2004 budget request would cut funding 
     to protect vulnerable children by 63%; to combat infectious 
     diseases (other than HIV/AIDS) by 32%; to improve child 
     nutrition and maternal health by 12%; and to support family 
     planning and reproductive health by 5%.
       (6) These programs save the lives of millions of women and 
     children each year, help prevent dangerous infectious 
     diseases from spreading to the United States, build goodwill 
     towards the United States, and alleviate conditions that can 
     contribute to international terrorism.
       (7) Building public health capacity in developing countries 
     by improving children's health, material and reproductive 
     health, and combating other infectious diseases is an 
     essential component of an effective global strategy to 
     control the spread of HIV/AIDS.
       (b) Policy.--For each of the Fiscal Years 2004 through 
     2008, the President should request and the Congress should 
     appropriate $3,000,000,000 to carry out this Act and an 
     amount that exceeds the amount appropriated in the previous 
     fiscal year for the Child Survival and Health Programs Fund, 
     including for programs to protect vulnerable children, to 
     combat other infectious diseases, to improve disease 
     surveillance and combat drug resistance, to improve child 
     nutrition and maternal health, and to support family planning 
     and reproductive health.
                                 ______
                                 
  SA 678. Mr. DORGAN (for himself, Mr. Leahy, Mr. Daschle, Mr. Nelson 
of Florida, and Mr. Harkin) proposed an amendment to the bill H.R. 
1298, to provide assistance to foreign countries to combat HIV AIDS, 
tuberculosis, and malaria, and for other purposes; as follows:

       At the appropriate place insert the following:

     SEC. ____. EMERGENCY FOOD AID FOR HIV/AIDS VICTIMS.

       (a) Findings.--The Senate finds the following:
       (1) Whereas the Centers for Disease Control and Prevention 
     found that ``For persons living with HIV/AIDS, practicing 
     sound nutrition can play a key role in preventing 
     malnutrition and wasting syndrome, which can weaken an 
     already compromised immune system.''.
       (2) Whereas there are immediate needs for additional food 
     aid in sub-Saharan Africa where the World Food Program has 
     estimated that more than 40,000,000 people are at risk of 
     starvation.
       (3) Whereas prices of certain staple commodities have 
     increased by 30 percent over the past year, which was not 
     anticipated by the President's fiscal year 2004 budget 
     request.
       (4) The Commodity Credit Corporation has the legal 
     authority to finance up to $30,000,000,000 for ongoing 
     agriculture programs and $250,000,000 represents a use of 
     less than 1 percent of such authority to combat the worst 
     public health crisis in 500 years.
       (b) Commodity Credit Corporation.--
       (1) In general.--The Secretary of Agriculture shall 
     immediately use the funds, facilities, and authorities of the 
     Commodity Credit Corporation to provide an additional 
     $250,000,000 in fiscal year 2003 to carry out programs 
     authorized under title II of the Agricultural Trade 
     Development and Assistance Act of 1954 (7 U.S.C. 1691 et 
     seq.) to assist in mitigating the effects of HIV/AIDS on 
     affected populations in sub-Saharan Africa and other 
     developing nations, and by September 30, 2003, the 
     Administrator of the United States Agency for International 
     Development shall enter into agreements with private 
     voluntary organizations, non-governmental organizations, and 
     other appropriate organizations for the provision of such 
     agricultural commodities through programs that--
       (A) provide nutritional assistance to individuals with HIV/
     AIDS and to children, households, and communities affected by 
     HIV/AIDS; and
       (B) generate funds from the sale of such commodities for 
     activities related to the prevention and treatment of HIV/
     AIDS, support services and care for HIV/AIDS infected 
     individuals and affected households, and the creation of 
     sustainable livelihoods among individuals in HIV/AIDS 
     affected communities, including income-generating and 
     business activities.
       (2) Requirement.--The food aid provided under this 
     subsection shall be in addition to any other food aid 
     acquired and provided by the Commodity Credit Corporation 
     prior to the date of enactment of this Act. Agricultural 
     commodities made available under this subsection may, 
     notwithstanding any other provision of law, be shipped in 
     fiscal years 2003 and 2004.
                                 ______
                                 
  SA 679. Mr. LAUTENBERG (for himself, Mr. Reid, Mr. Corzine, Mr. 
Leahy, Mrs. Murray, and Mrs. Boxer) submitted an amendment intended to 
be proposed by him to the bill H.R. 1298, to provide assistance to 
foreign countries to combat HIV AIDS, tuberculosis, and malaria, and 
for other purposes; which was ordered to lie on the table; as follows:


[[Page S6564]]


       At the appropriate place, insert the following:

     SEC. ____. RULE OF CONSTRUCTION RELATING TO METHOD OF 
                   PREVENTION.

       Nothing in this Act (or an amendment made by this Act) 
     shall be construed to require that an organization utilize or 
     endorse any particular approach to HIV/AIDS prevention, 
     except that any information provided by the organization 
     about any particular preventive approach shall be complete 
     and medically accurate including both the public health 
     benefits and failure rates of the approach involved.
                                 ______
                                 
  SA 680. Mr. GRASSLEY proposed an amendment to the bill S. 1054, to 
provide for reconciliation pursuant to section 201 of the concurrent 
resolution on the budget for fiscal year 2004; as follows:

       On page 8, beginning with line 13, strike all through the 
     matter following line 2 on page 9, and insert:
       ``(A) Joint return and surviving spouse.--In the case of a 
     joint return or a surviving spouse, the amount under the 
     following table:

``In the case of taxable years beginning:                 The exemption
                                                             amount is:
  Before 2001..................................................$45,000 
  In 2001 and 2002.............................................$49,000 
  In 2003......................................................$60,500 
  In 2004......................................................$60,500 
  In 2005......................................................$60,500 
  After 2005...................................................$45,000.
       ``(B) Individual not married and not a surviving spouse.--
     In the case of an individual who is not a married individual 
     and is not a surviving spouse, the amount under the following 
     table:

``In the case of taxable years beginning:                 The exemption
                                                             amount is:
  Before 2001..................................................$33,750 
  In 2001 and 2002.............................................$35,750 
  In 2003......................................................$41,500 
  In 2004......................................................$41,500 
  In 2005......................................................$41,500 
  After 2005................................................$33,750.''.

       Beginning on page 82, line 25, strike all through page 83, 
     line 13, and insert:
       (2) Exception for existing fasits.--The amendments made by 
     this section shall not apply to any FASIT in existence on the 
     date of the enactment of this Act to the extent that regular 
     interests issued by the FASIT before such date continue to 
     remain outstanding in accordance with the original terms of 
     issuance of such interests.
       On page 165, beginning with line 21, strike all through 
     page 166, line 8, and insert:
       (a) General Rule.--If--
       (1) a taxpayer eligible to participate in--
       (A) the Department of the Treasury's Offshore Voluntary 
     Compliance Initiative, or
       (B) the Department of the Treasury's voluntary disclosure 
     initiative which applies to the taxpayer by reason of the 
     taxpayer's underreporting of United States income tax 
     liability through financial arrangements which rely on the 
     use of offshore arrangements which were the subject of the 
     initiative described in subparagraph (A), and
       (2) any interest or applicable penalty is imposed with 
     respect to any arrangement to which any initiative described 
     in paragraph (1) applied or to any underpayment of Federal 
     income tax attributable to items arising in connection with 
     any arrangement described in paragraph (1),

     then, notwithstanding any other provision of law, the amount 
     of such interest or penalty shall be equal to twice that 
     determined without regard to this section.
       On page 206, between lines 19 and 20, insert:

     SEC. ____. INCREASE IN AGE OF MINOR CHILDREN WHOSE UNEARNED 
                   INCOME IS TAXED AS IF PARENT'S INCOME.

       (a) In General.--Section 1(g)(2)(A) (relating to child to 
     whom subsection applies) is amended by striking ``age 14'' 
     and inserting ``age 18''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. ____. CONSISTENT AMORTIZATION OF PERIODS FOR 
                   INTANGIBLES.

       (a) Start-Up Expenditures.--
       (1) Allowance of deduction.--Paragraph (1) of section 
     195(b) (relating to start-up expenditures) is amended to read 
     as follows:
       ``(1) Allowance of deduction.--If a taxpayer elects the 
     application of this subsection with respect to any start-up 
     expenditures--
       ``(A) the taxpayer shall be allowed a deduction for the 
     taxable year in which the active trade or business begins in 
     an amount equal to the lesser of--
       ``(i) the amount of start-up expenditures with respect to 
     the active trade or business, or
       ``(ii) $5,000, reduced (but not below zero) by the amount 
     by which such start-up expenditures exceed $50,000, and
       ``(B) the remainder of such start-up expenditures shall be 
     allowed as a deduction ratably over the 180-month period 
     beginning with the month in which the active trade or 
     business begins.''.
       (2) Conforming amendment.--Subsection (b) of section 195 is 
     amended by striking ``Amortize'' and inserting ``Deduct'' in 
     the heading.
       (b) Organizational Expenditures.--Subsection (a) of section 
     248 (relating to organizational expenditures) is amended to 
     read as follows:
       ``(a) Election to Deduct.--If a corporation elects the 
     application of this subsection (in accordance with 
     regulations prescribed by the Secretary) with respect to any 
     organizational expenditures--
       ``(1) the corporation shall be allowed a deduction for the 
     taxable year in which the corporation begins business in an 
     amount equal to the lesser of--
       ``(A) the amount of organizational expenditures with 
     respect to the taxpayer, or
       ``(B) $5,000, reduced (but not below zero) by the amount by 
     which such organizational expenditures exceed $50,000, and
       ``(2) the remainder of such organizational expenditures 
     shall be allowed as a deduction ratably over the 180-month 
     period beginning with the month in which the corporation 
     begins business.''.
       (c) Treatment of Organizational and Syndication Fees or 
     Partnerships.--
       (1) In general.--Section 709(b) (relating to amortization 
     of organization fees) is amended by redesignating paragraph 
     (2) as paragraph (3) and by amending paragraph (1) to read as 
     follows:
       ``(1) Allowance of deduction.--If a taxpayer elects the 
     application of this subsection (in accordance with 
     regulations prescribed by the Secretary) with respect to any 
     organizational expenses--
       ``(A) the taxpayer shall be allowed a deduction for the 
     taxable year in which the partnership begins business in an 
     amount equal to the lesser of--
       ``(i) the amount of organizational expenses with respect to 
     the partnership, or
       ``(ii) $5,000, reduced (but not below zero) by the amount 
     by which such organizational expenses exceed $50,000, and
       ``(B) the remainder of such organizational expenses shall 
     be allowed as a deduction ratably over the 180-month period 
     beginning with the month in which the partnership begins 
     business.
       ``(2) Dispositions before close of amortization period.--In 
     any case in which a partnership is liquidated before the end 
     of the period to which paragraph (1)(B) applies, any deferred 
     expenses attributable to the partnership which were not 
     allowed as a deduction by reason of this section may be 
     deducted to the extent allowable under section 165.''.
       (2) Conforming amendment.--Subsection (b) of section 709 is 
     amended by striking ``Amortization'' and inserting 
     ``Deduction'' in the heading.
       (d) Effective Date.--The amendments made by this section 
     shall apply to amounts paid or incurred after the date of the 
     enactment of this Act.

     SEC. ____. CLARIFICATION OF DEFINITION OF NONQUALIFIED 
                   PREFERRED STOCK.

       (a) In General.--Section 351(g)(3)(A) is amended by adding 
     at the end the following: ``Stock shall not be treated as 
     participating in corporate growth to any significant extent 
     unless there is a real and meaningful likelihood of the 
     shareholder actually participating in the earnings and growth 
     of the corporation.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to transactions after May 14, 2003.

     SEC. ____. CLASS LIVES FOR UTILITY GRADING COSTS.

       (a) Gas Utility Property.--Section 168(e)(3)(E) (defining 
     15-year property) is amended by striking ``and'' at the end 
     of clause (ii), by striking the period at the end of clause 
     (iii) and inserting ``, and'', and by adding at the end the 
     following new clause:
       ``(iv) initial clearing and grading land improvements with 
     respect to gas utility property.''
       (b) Electric Utility Property.--Section 168(e)(3) is 
     amended by adding at the end the following new subparagraph:
       ``(F) 20-year property.--The term `20-year property' means 
     initial clearing and grading land improvements with respect 
     to any electric utility transmission and distribution 
     plant.''
       (c) Conforming Amendments.--The table contained in section 
     168(g)(3)(B) is amended--
       (1) by inserting ``or (E)(iv)'' after ``(E)(iii)'', and
       (2) by adding at the end the following new item:

  ``(F).......................................................25''.....

       (d) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after the date of 
     the enactment of this Act.

     SEC. ____. PROHIBITION ON NONRECOGNITION OF GAIN THROUGH 
                   COMPLETE LIQUIDATION OF HOLDING COMPANY.

       (a) In General.--Section 332 is amended by adding at the 
     end the following new subsection:
       ``(d) Recognition of Gain on Liquidation of Certain Holding 
     Companies.--
       ``(1) In general.--Subsection (a) and section 331 shall not 
     apply to any distribution in complete liquidation of an 
     applicable holding company to the extent of the earnings and 
     profits of such company.
       ``(2) Applicable holding company.--For purposes of this 
     subsection--
       ``(A) In general.--The term `applicable holding company' 
     means any corporation--
       ``(i) which is a member of a chain of includible 
     corporations with a common parent which is a foreign 
     corporation,
       ``(ii) the stock of which is directly owned by such common 
     parent or another foreign corporation,
       ``(iii) substantially all of the assets of which consist of 
     stock in other members of such chain of corporations, and

[[Page S6565]]

       ``(iv) which has not been in existence at least 5 years as 
     of the date of the liquidation.
       ``(B) Includible corporation.--The term `includible 
     corporation' has the meaning given such term under section 
     1504(b) (without regard to paragraph (3) thereof).''
       (b) Effective Date.--The amendment made by this section 
     shall apply to distributions in complete liquidation 
     occurring after the date of the enactment of this Act.

     SEC. ____. LEASE TERM TO INCLUDE CERTAIN SERVICE CONTRACTS.

       (a) In General.--Section 168(i)(3) (relating to lease term) 
     is amended by adding at the end the following new 
     subparagraph:
       ``(C) Special rule for service contracts.--In determining a 
     lease term, there shall be taken into account any optional 
     service contract or other similar arrangement.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to leases entered into after the date of the 
     enactment of this Act.

     SEC. ____. RECOGNITION OF GAIN FROM THE SALE OF A PRINCIPAL 
                   RESIDENCE ACQUIRED IN A LIKE-KIND EXCHANGE 
                   WITHIN 5 YEARS OF SALE.

       (a) In General.--Section 121(d) (relating to special rules 
     for exclusion of gain from sale of principal residence) is 
     amended by adding at the end the following new paragraph:
       ``(10) Property acquired in like-kind exchange.--If a 
     taxpayer acquired property in an exchange to which section 
     1031 applied, subsection (a) shall not apply to the sale or 
     exchange of such property if it occurs during the 5-year 
     period beginning with the exchange to which section 1031 
     applied.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to sales or exchanges after the date of the 
     enactment of this Act.

     SEC. ____. REPEAL OF CAPITAL GAINS TREATMENT FOR CERTAIN 
                   TRANSACTIONS INVOLVING OPTIONS AND COMMODITIES 
                   DEALERS.

       (a) In General.--Subsection (a) of section 1256 (relating 
     to section 1256 contracts marked to market) is amended--
       (1) by striking paragraph (3),
       (2) by redesignating paragraph (4) as paragraph (3), and
       (3) by inserting ``and'' at the end of paragraph (2).
       (b) Conforming Amendments.--
       (1) Section 988(c)(1)(E)(iv) is amended to read as follows:
       ``(iv) Treatment of certain currency contracts.--Except as 
     provided in regulations, in the case of a qualified fund, any 
     bank forward contract, any foreign currency futures contract 
     traded on a foreign exchange, or to the extent provided in 
     regulations any similar instrument, which is not otherwise a 
     section 1256 contract shall be treated as a section 1256 
     contract for purposes of section 1256.''.
       (2) Section 1092(b)(2)(A)(ii) is amended by striking ``and 
     section 1256(a)(3) will only apply to net gain or net loss 
     attributable to section 1256 contracts,''.
       (3) Section 1092(d)(5)(B) is amended by striking 
     ``1256(a)(4)'' and inserting ``1256(a)(3)''.
       (4) Section 1256(c)(1) is amended by striking ``paragraphs 
     (1), (2), and (3)'' and inserting ``paragraphs (1) and (2)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.
       Beginning on page 260, line 7, strike all through page 264, 
     line 6, and insert:

     SEC. 521. CIVIL RIGHTS TAX RELIEF.

       (a) Deduction Allowed Whether or Not Taxpayer Itemizes 
     Other Deductions.--Subsection (a) of section 62 (defining 
     adjusted gross income) is amended by inserting after 
     paragraph (18) the following new item:
       ``(19) Costs involving discrimination suits, etc.--Any 
     deduction allowable under this chapter for attorney fees and 
     court costs paid by, or on behalf of, the taxpayer in 
     connection with any action involving a claim of unlawful 
     discrimination (as defined in subsection (e)) or a claim of a 
     violation of subchapter III of chapter 37 of title 31, United 
     States Code. The preceding sentence shall not apply to any 
     deduction in excess of the amount includible in the 
     taxpayer's gross income for the taxable year on account of a 
     judgment or settlement (whether by suit or agreement and 
     whether as lump sum or periodic payments) resulting from such 
     claim.''.
       (b) Unlawful Discrimination Defined.--Section 62 is amended 
     by adding at the end the following new subsection:
       ``(e) Unlawful discrimination defined.--For purposes of 
     subsection (a)(19), the term `unlawful discrimination' means 
     an act that is unlawful under any of the following:
       ``(1) Section 302 of the Civil Rights Act of 1991 (2 U.S.C. 
     1202).
       ``(2) Section 201, 202, 203, 204, 205, 206, or 207 of the 
     Congressional Accountability Act of 1995 (2 U.S.C. 1311, 
     1312, 1313, 1314, 1315, 1316, or 1317).
       ``(3) The National Labor Relations Act (29 U.S.C. 151 et 
     seq.).
       ``(4) The Fair Labor Standards Act of 1938 (29 U.S.C. 201 
     et seq.).
       ``(5) Section 4 or 15 of the Age Discrimination in 
     Employment Act of 1967 (29 U.S.C. 623 or 633a).
       ``(6) Section 501 or 504 of the Rehabilitation Act of 1973 
     (29 U.S.C. 791 or 794).
       ``(7) Section 510 of the Employee Retirement Income 
     Security Act of 1974 (29 U.S.C. 1140).
       ``(8) Title IX of the Education Amendments of 1972 (29 
     U.S.C. 1681 et seq.).
       ``(9) The Employee Polygraph Protection Act of 1988 (29 
     U.S.C. 201 et seq.).
       ``(10) The Worker Adjustment and Retraining Notification 
     Act (29 U.S.C. 2102 et seq.).
       ``(11) Section 105 of the Family and Medical Leave Act of 
     1993 (29 U.S.C. 2615).
       ``(12) Chapter 43 of title 38, United States Code (relating 
     to employment and reemployment rights of members of the 
     uniformed services).
       ``(13) Section 1977, 1979, or 1980 of the Revised Statutes 
     (42 U.S.C. 1981, 1983, or 1985).
       ``(14) Section 703, 704, or 717 of the Civil Rights Act of 
     1964 (42 U.S.C. 2000e-2, 2000e-3, or 2000e-16).
       ``(15) Section 804, 805, 806, 808, or 818 of the Fair 
     Housing Act (42 U.S.C. 3604, 3605, 3606, 3608, or 3617).
       ``(16) Section 102, 202, 302, or 503 of the Americans with 
     Disabilities Act of 1990 (42 U.S.C. 12112, 12132, 12182, or 
     12203).
       ``(17) Any provision of Federal law (popularly known as 
     whistleblower protection provisions) prohibiting the 
     discharge of an employee, the discrimination against an 
     employee, or any other form of retaliation or reprisal 
     against an employee for asserting rights or taking other 
     actions permitted under Federal law.
       ``(18) Any provision of State or local law, or common law 
     claims permitted under Federal, State, or local law--
       ``(i) providing for the enforcement of civil rights, or
       ``(ii) regulating any aspect of the employment 
     relationship, including prohibiting the discharge of an 
     employee, the discrimination against an employee, or any 
     other form of retaliation or reprisal against an employee for 
     asserting rights or taking other actions permitted by law.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to fees and costs paid after the date of the 
     enactment of this Act with respect to any judgment or 
     settlement occurring after such date.
                                 ______
                                 
  SA 681. Mr. KENNEDY (for himself, Mr. McCain, Mr Feingold, Mrs. 
Feinstein, Mr. Levin, Mr. Schumer, Mr. Pryor, and Mr. Johnson) proposed 
an amendment to the bill H. 1298, to provide foreign assistance to 
foreign countries to combat HIV AIDS, tuberculosis, and malaria, and 
for other purposes; as follows:

       On page 54, strike lines 7 through 24, and insert the 
     following: ``medicines to treat opportunistic infections, at 
     the lowest possible price for products of assured quality (as 
     provided for in subparagraph (D)). Such procurement shall be 
     made anywhere in the world notwithstanding any provision of 
     law restricting procurement of goods to domestic sources.
       ``(B) Mechanisms for quality control and sustainable 
     supply.--Mechanisms to ensure that such HIV/AIDS 
     pharmaceuticals, antiviral therapies, and other appropriate 
     medicines are quality-controlled and sustainably supplied.
       ``(C) Distribution.--The distribution of such HIV/AIDS 
     pharmaceuticals, antiviral therapies, and other appropriate 
     medicines (including medicines to treat opportunistic 
     infections) to qualified national, regional, or local 
     organizations for the treatment of individuals with HIV/AIDS 
     in accordance with appropriate HIV/AIDS testing and 
     monitoring requirements and treatment protocols and for the 
     prevention of mother-to-child transmission of the HIV 
     infection.
       ``(D) Lowest possible price and assured quality.--
       ``(i) Lowest possible price.--With respect to an HIV/AIDS 
     pharmaceutical, an antiviral therapy, or any other 
     appropriate medicine, including a medicine to treat 
     opportunistic infections, the lowest possible price means the 
     lowest delivered duty unpaid price at which such medicine 
     (which includes all products of assured quality with the same 
     active ingredients) may be obtained in sufficient quantity in 
     either the United States or elsewhere on the world market.
       ``(ii) Assured quality.--An HIV/AIDS pharmaceutical, an 
     antiviral therapy, or any other appropriate medicine, 
     including a medicine to treat opportunistic infections, shall 
     be considered a product of assured quality if it is--

       ``(I)(aa) approved by the Food and Drug Administration;
       ``(bb) authorized for marketing by the European Commission;
       ``(cc) on the most recent edition of the list of HIV-
     related medicines prequalified for procurement by the World 
     Health Organization's Pilot Procurement Quality and Sourcing 
     Project; or
       ``(dd) during the period that begins on the date of 
     enactment of this section and ending on December 31, 2004, 
     authorized for use by the national regulatory authority of 
     the country where the product will be used; unless the 
     President determines that the product does not meet 
     appropriate quality standards and
       ``(II) in compliance with--

       ``(aa) the intellectual property laws of the country where 
     the product is manufactured;
       ``(bb) the intellectual property laws of the country where 
     the product will be used; and
       ``(cc) applicable international obligations in the field of 
     intellectual property, to the extent consistent with the 
     flexibilities provided in the Agreement on Trade-Related 
     Aspects of Intellectual Property Rights (TRIPS), as 
     interpreted in the Declaration on the TRIPS Agreement and 
     Public Health, adopted by the World Trade Organization at the 
     Fourth Ministerial Conference at Doha, Qatar on November 14, 
     2001.

[[Page S6566]]

       ``(iii) Prices publicly available.--Prices paid for 
     purchases of HIV/AIDS pharmaceuticals, antiviral therapies, 
     and other appropriate medicines, including medicines to treat 
     opportunistic infections, of assured quality shall be made 
     publicly available.
       ``(iv) Application to appropriated funds.--Funds 
     appropriated under title IV of the United States Leadership 
     Against HIV/AIDS, Tuberculosis, and Malaria Act of 2003 that 
     are used for the procurement of HIV/AIDS pharmaceuticals, 
     antiviral therapies, and other appropriate medicines, 
     including medicines to treat opportunistic infections, shall 
     be used to procure products of assured quality at the lowest 
     possible price, as determined under this subparagraph.
       ``(E) Rule of Construction.--Nothing in this paragraph 
     shall be construed to affect a decision regarding which 
     medicine is most medically appropriate for a specific disease 
     or condition.
                                 ______
                                 
  SA 682. Mrs. Feinstein (for herself, Mr. Leahy, Mr. Durbin, Mrs. 
Clinton, Mr. Jeffords, Mr. Harkin, Mr. Lautenberg, Mr. Reid, Mr. 
Schumer, Mr. Corzine, Mrs. Boxer, Mr. Feingold, and Mr. Biden) proposed 
an amendment to the bill H. 1298, to provide assistance to foreign 
countries to combat HIV AIDS, tuberculosis, and malaria, and for other 
purposes; as follows:

       Beginning on page 94, strike line 19 and all that follows 
     through line 17 on page 95, and insert the following: ``301 
     of this Act), including promoting abstinence from sexual 
     activity and encouraging monogamy and faithfulness and 
     promoting the effective use of condoms for sexually active 
     people; and
       ``(4) 10 percent of such amounts for orphans and vulnerable 
     children.

     ``SEC. 403. ALLOCATION OF FUNDS.

       ``(a) Therapeutic Medical Care.--For fiscal years 2006 
     through 2008, not less than 55 percent of the amounts 
     appropriated pursuant to the authorization of appropriations 
     under section 401 for HIV/AIDS assistance for each such 
     fiscal year shall be expended for therapeutic medical care of 
     individuals infected with HIV, of which such amount at least 
     75 percent should be expended for the purchase and 
     distribution of antiretroviral pharmaceuticals and at least 
     25 percent should be expended for related care.''.
                                 ______
                                 
  SA 683. Mr. Frist (for Mr. Dodd) proposed an amendment to the bill S. 
535, to provide Capitol-flown flags to the families of law enforcement 
officers and firefighters killed in the line of duty; as follows:

       On page 1, beginning with line 7, strike all through page 
     3, line 19, and insert the following:

     SEC. 2. CAPITOL-FLOWN FLAGS FOR FAMILIES OF DECEASED LAW 
                   ENFORCEMENT OFFICERS AND DECEASED FIREFIGHTERS.

       (a) Definitions.--In this Act:
       (1) Capitol-flown flag.--The term ``Capitol-flown flag'' 
     means a United States flag flown over the United States 
     Capitol and provided under this Act to honor the deceased law 
     enforcement officer or firefighter for whom such flag is 
     requested.
       (2) Deceased firefighter.--The term ``deceased 
     firefighter'' means a person who--
       (A) performs firefighting duties on a paid or voluntary 
     basis; and
       (B) dies in the line of duty as a firefighter.
       (3) Deceased law enforcement officer.--The term ``deceased 
     law enforcement officer'' means a person who was charged with 
     protecting public safety, who was authorized to make arrests 
     by a Federal, State, Tribal, county, or local law enforcement 
     agency, and who died while acting in the line of duty.
       (4) Member of Congress.--The term ``Member of Congress'' 
     means a Senator, a Representative in Congress, or a Delegate 
     to Congress.
       (b) Member Offices.--
       (1) In general.--The family of a deceased law enforcement 
     officer or a deceased firefighter may request that a Member 
     of Congress provide to that family a Capitol-flown flag.
       (2) Expense.--The costs associated with providing a flag 
     under this subsection may be paid from official funds.
       (c) Applicability.--This Act shall only apply to a deceased 
     law enforcement officer or a deceased firefighter who died on 
     or after the date of enactment of this Act.
                                 ______
                                 
  SA 684. Mrs. BOXER proposed an amendment to the bill H.R. 1298, to 
provide assistance to foreign countries to combat HIV/AIDS, 
tuberculosis, and malaria, and for other purposes; as follows:

       On Page 29, line 15, insert before the semicolon the 
     following: ``, including the development and implementation 
     of a specific plan to provide resources to households headed 
     by an individual who is caring for one or more AIDS 
     orphans''.
                                 ______
                                 
  SA 685. Mr. DODD proposed an amendment to the bill H.R. 1298, to 
provide assistance to foreign countries to combat HIV/AIDS, 
tuberculosis, and malaria, and for other purposes; as follows:

       On page 31, line 19, insert the following after the second 
     comma on that line:
       ``Antigua and Barbuda, the Bahamas, Barbados, Belize, 
     Dominica, Grenada, Jamaica, Montserrat, St. Kitts and Nevis, 
     St. Vincent and the Grenadines, St. Lucia, Suriname, Trinidad 
     and Tobago, Dominican Republic,''
                                 ______
                                 
  SA 686. Mr. BIDEN (for himself, Mr. Leahy) proposed an amendment to 
the bill H.R. 1298, to provide assistance to foreign countries to 
combat HIV/AIDS, tuberculosis, and malaria, and for other purposes as 
follows:

       At the end of the bill, insert the following:

             TITLE V--INTERNATIONAL FINANCIAL INSTITUTIONS

     SEC. 501. MODIFICATION OF THE ENHANCED HIPC INITIATIVE.

       Title XVI of the International Financial Institutions Act 
     (22 U.S.C. 262p--262p-7) is amended by adding at the end the 
     following new section:

     ``SEC. 1625. MODIFICATION OF THE ENHANCED HIPC INITIATIVE.

       ``(a) Authority.--
       ``(1) In general.--The Secretary of the Treasury should 
     immediately commence efforts within the Paris Club of 
     Official Creditors, the International Bank for Reconstruction 
     and Development, the International Monetary Fund, and other 
     appropriate multilateral development institutions to modify 
     the Enhanced HIPC Initiative so that the amount of debt stock 
     reduction approved for a country eligible for debt relief 
     under the Enhanced HIPC Initiative shall be sufficient to 
     reduce, for each of the first 3 years after the date of 
     enactment of this section or the Decision Point, whichever is 
     later--
       ``(A) the net present value of the outstanding public and 
     publicly guaranteed debt of the country--
       ``(i) as of the decision point if the country has already 
     reached its decision point, or
       (ii) as of the date of enactment of this Act, if the 
     country has not reached its decision point, to not more than 
     150 percent of the annual value of exports of the country for 
     the year preceding the Decision Point; and
       ``(B) the annual payments due on such public and publicly 
     guaranteed debt to not more than--
       ``(i) 10 percent or, in the case of a country suffering a 
     public health crisis (as defined in subsection (e)), not more 
     than 5 percent, of the amount of the annual current revenues 
     received by the country from internal resources; or
       ``(ii) a percentage of the gross national product of the 
     country, or another benchmark, that will yield a result 
     substantially equivalent to that which would be achieved 
     through application of subparagraph (A).
       ``(2) Limitation.--In financing the objectives of the 
     Enhanced HIPC Initiative, an international financial 
     institution shall give priority to using its own resources.
       ``(b) Relation to Poverty and the Environment.--Debt 
     cancellation under the modifications to the Enhanced HIPC 
     Initiative described in subsection (a) should not be 
     conditioned on any agreement by an impoverished country to 
     implement or comply with policies that deepen poverty or 
     degrade the environment, including any policy that--
       ``(1) implements or extends user fees on primary education 
     or primary health care, including prevention and treatment 
     efforts for HIV/AIDS, tuberculosis, malaria, and infant, 
     child, and maternal well-being;
       ``(2) provides for increased cost recovery from poor people 
     to finance basic public services such as education, health 
     care, clean water, or sanitation;
       ``(3) reduces the country's minimum wage to a level of less 
     than $2 per day or undermines workers' ability to exercise 
     effectively their internationally recognized worker rights, 
     as defined under section 526(e) of the Foreign Operations, 
     Export Financing and Related Programs Appropriations Act, 
     1995 (22 U.S.C. 262p-4p); or
       ``(4) promotes unsustainable extraction of resources or 
     results in reduced budget support for environmental programs.
       ``(c) Conditions.--A country shall not be eligible for 
     cancellation of debt under modifications to the Enhanced HIPC 
     Initiative described in subsection (a) if the government of 
     the country--
       ``(1) has an excessive level of military expenditures;
       ``(2) has repeatedly provided support for acts of 
     international terrorism, as determined by the Secretary of 
     State under section 6(j)(1) of the Export Administration Act 
     of 1979 (50 U.S.C. App. 2405(j)(1)) or section 620A(a) of the 
     Foreign Assistance Act of 1961 (22 U.S.C. 2371(a));
       ``(3) is failing to cooperate on international narcotics 
     control matters; or
       ``(4) engages in a consistent pattern of gross violations 
     of internationally recognized human rights (including its 
     military or other security forces).
       ``(d) Programs To Combat HIV/AIDS and Poverty.--A country 
     that is otherwise eligible to receive cancellation of debt 
     under the modifications to the Enhanced HIPC Initiative 
     described in subsection (a) may receive such cancellation 
     only if the country has agreed--
       ``(1) to ensure that the financial benefits of debt 
     cancellation are applied to programs to combat HIV/AIDS and 
     poverty, in particular through concrete measures to improve 
     basic services in health, education, nutrition, and other 
     development priorities, and to redress environmental 
     degradation;

[[Page S6567]]

       ``(2) to ensure that the financial benefits of debt 
     cancellation are in addition to the government's total 
     spending on poverty reduction for the previous year or the 
     average total of such expenditures for the previous 3 years, 
     whichever is greater;
       ``(3) to implement transparent and participatory 
     policymaking and budget procedures, good governance, and 
     effective anticorruption measures; and
       ``(4) to broaden public participation and popular 
     understanding of the principles and goals of poverty 
     reduction.
       ``(e) Definitions.--In this section:
       ``(1) Country suffering a public health crisis.--The term 
     `country suffering a public health crisis' means a country in 
     which the HIV/AIDS infection rate, as reported in the most 
     recent epidemiological data for that country compiled by the 
     Joint United Nations Program on HIV/AIDS, is at least 5 
     percent among women attending prenatal clinics or more than 
     20 percent among individuals in groups with high-risk 
     behavior.
       ``(2) Decision point.--The term `Decision Point' means the 
     date on which the executive boards of the International Bank 
     for Reconstruction and Development and the International 
     Monetary Fund review the debt sustainability analysis for a 
     country and determine that the country is eligible for debt 
     relief under the Enhanced HIPC Initiative.
       ``(3) Enhanced hipc initiative.--The term `Enhanced HIPC 
     Initiative' means the multilateral debt initiative for 
     heavily indebted poor countries presented in the Report of G-
     7 Finance Ministers on the Cologne Debt Initiative to the 
     Cologne Economic Summit, Cologne, June 18-20, 1999.''.

     SEC. 502. REPORT ON EXPANSION OF DEBT RELIEF TO NON-HIPC 
                   COUNTRIES.

       (a) In General.--Not later than 90 days after the date of 
     enactment of this Act, the Secretary of the Treasury shall 
     submit to Congress a report on--
       (1) the options and costs associated with the expansion of 
     debt relief provided by the Enhanced HIPC Initiative to 
     include poor countries that were not eligible for inclusion 
     in the Enhanced HIPC Initiative;
       (2) options for burden-sharing among donor countries and 
     multilateral institutions of costs associated with the 
     expansion of debt relief; and
       (3) options, in addition to debt relief, to ensure debt 
     sustainability in poor countries, particularly in cases when 
     the poor country has suffered an external economic shock or a 
     natural disaster.
       (b) Specific Options To Be Considered.--Among the options 
     for the expansion of debt relief provided by the Enhanced 
     HIPC Initiative, consideration should be given to making 
     eligible for that relief poor countries for which outstanding 
     public and publicly guaranteed debt requires annual payments 
     in excess of 10 percent or, in the case of a country 
     suffering a public health crisis (as defined in section 
     1625(e) of the Financial Institutions Act, as added by 
     section 501 of this Act), not more than 5 percent, of the 
     amount of the annual current revenues received by the country 
     from internal resources.
       (c) Enhanced HIPC Initiative Defined.--In this section, the 
     term ``Enhanced HIPC Initiative'' means the multilateral debt 
     initiative for heavily indebted poor countries presented in 
     the Report of G-7 Finance Ministers on the Cologne Debt 
     Initiative to the Cologne Economic Summit, Cologne, June 18-
     20, 1999.

     SEC. 503. AUTHORIZATION OF APPROPRIATIONS.

       (a) In General.--There are authorized to be appropriated to 
     the President such sums as may be necessary for the fiscal 
     year 2004 and each fiscal year thereafter to carry out 
     section 1625 of the International Financial Institutions Act, 
     as added by section 501 of this Act.
       (b) Availability of Funds.--Amounts appropriated pursuant 
     to subsection (a) are authorized to remain available until 
     expended.

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