[Congressional Record Volume 149, Number 128 (Wednesday, September 17, 2003)]
[House]
[Pages H8301-H8356]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
CHARITABLE GIVING ACT OF 2003
Mr. LINDER. Mr. Speaker, by direction of the Committee on Rules, I
call up House Resolution 370 and ask for its immediate consideration.
The Clerk read the resolution, as follows:
H. Res. 370
Resolved, That upon the adoption of this resolution it
shall be in order without intervention of any point of order
to consider in the House the bill (H.R. 7) to amend the
Internal Revenue Code of 1986 to provide incentives for
charitable contributions by individuals and businesses, and
for other purposes. The bill shall be considered as read for
amendment. The amendment in the nature of a substitute
recommended by the Committee on Ways and Means now printed in
the bill, modified by the amendment printed in part A of the
report of the Committee on Rules accompanying this
resolution, shall be considered as adopted. The previous
question shall be considered as ordered on the bill, as
amended, and on any further amendment thereto to final
passage without intervening motion except: (1) one hour of
debate on the bill, as amended, equally divided and
controlled by the chairman and ranking minority member of the
Committee on Ways and Means; (2) the amendment printed in
part B of the report of the Committee on Rules, if offered by
Representative Cardin of Maryland or his designee, which
shall be in order without intervention of any point of order,
shall be considered as read, and shall be separately
debatable for one hour equally divided and controlled by the
proponent and an opponent; and (3) one motion to recommit
with or without instructions.
The SPEAKER pro tempore. The gentleman from Georgia (Mr. Linder) is
recognized for 1 hour.
Mr. LINDER. Mr. Speaker, for the purpose of debate only, I yield the
customary 30 minutes to the gentlewoman from New York (Ms. Slaughter),
pending which I yield myself such time as I may consume. During
consideration of this resolution, all time yielded is for the purpose
of debate only.
Mr. Speaker, H. Res. 370 is a modified, closed rule that provides one
hour of debate in the House, equally divided and controlled by the
chairman and ranking minority member of the Committee on Ways and
Means. H. Res. 370 waives all points of order against consideration of
the bill. It provides that the amendment in the nature of a substitute
recommended by the Committee on Ways and Means, as modified by the
amendment printed in Part A of the Committee on Rules report
accompanying the resolution, shall be considered as adopted.
The rule also provides for the consideration of the amendment in the
nature of a substitute printed in Part B of the Committee on Rules
report, if offered by the gentleman from Maryland (Mr. Cardin) or his
designee, which shall be considered as read, shall be debatable for one
hour equally divided and controlled by the proponent and an opponent.
The rule waives all points of order against the amendment printed in
Part B of the report.
Finally, H. Res. 370 provides one motion to recommit, with or without
instructions.
Mr. Speaker, I urge my colleagues to join me in approving this fair
and balanced rule, so that the full House can proceed to consider the
underlying bipartisan charitable giving legislation.
The basic thrust of H.R. 7 is to make a number of changes to the Tax
Code in order to provide incentives for individuals and businesses to
make charitable contributions. I suspect that we would all agree that
the Tax Code should not discourage taxpayers or businesses from seeking
to help others. H.R. 7 is designed to ensure that charitable
contributions of many different kinds can flourish by providing a
variety of tax incentives for people and employers to help those in
need. I applaud the hard work and leadership of my friend and
colleague, the majority whip, the gentleman from Missouri (Mr. Blunt),
and his principal Democrat cosponsor, the gentleman from Tennessee (Mr.
Ford), in bringing this legislation to the House floor today.
I urge my colleagues on both sides of the aisle to join me in voting
for this rule so that we can move on to consideration of the underlying
legislation.
Mr. Speaker, I reserve the balance of my time.
[[Page H8302]]
Ms. SLAUGHTER. Mr. Speaker, I thank the gentleman from Georgia (Mr.
Linder) for yielding me the customary 30 minutes, and I yield myself
such time as I may consume.
(Ms. SLAUGHTER asked and was given permission to revise and extend
her remarks.)
Ms. SLAUGHTER. Mr. Speaker, I am pleased the body is considering
legislation to increase tax incentives for charitable donations.
Charitable organizations across the country are responsible for
improving the lives of individuals and entire communities. These
dedicated, hard-working groups provide shelter to those without homes,
provide food and clothing to families in need, and care for the sick
and the dying. They work with our children, providing opportunities for
them to develop through art and music programs, teaching them to read,
and so much more.
In east Buffalo, the tenacity and leadership of Sister Mary Johnice
and others created the Response to Love Center. This community outreach
center is a family center. The thrift shop clothes the needy. The
kitchen feeds the hungry. The food pantry stretches families' thin
budgets. The food stamp worker helps those in need to fill out the
applications. The visiting nurse takes blood pressures and addresses
health care issues with a client. It is right and good that this body
seeks to support these great works by increasing the donations of
individuals and community-minded companies.
I am also gratified that the bill before us today is without
provisions allowing religious organizations that receive Federal funds
to discriminate. Discrimination is not charitable. Discrimination
should neither be allowed nor encouraged, particularly by the Federal
Government. The invidious evil of discrimination erodes groups'
charitable mission.
During these bad economic times, when millions of jobs have been lost
and millions of people suffer unemployment, the demand for the
charitable work rises.
It is my hope that this legislation will provide additional
assistance to meet the additional demand. The women and men who lost
jobs at local manufacturing plants are not the only ones suffering. The
Federal Government's fiscal house is in complete disorder. The enormous
tax giveaways to millionaires and the mounting costs of rebuilding Iraq
are draining the Federal coffers, and the ailing economy has yet to
generate enough revenue. In fact, the budget deficit for this fiscal
year is going to be over $400 billion, and the deficit for next year
should be around $500 billion, one-half trillion. The predicted $5.6
billion surplus has become an anticipated $2.3 trillion deficit.
So how are we going to pay for the $12.7 billion cost of this bill?
H.R. 7 does not address this issue, but the Democrat substitute does,
fortunately. The substitute amendment would add revenue offsets by
closing tax loopholes and curtailing abusive tax shelters. It would
even increase funding for community programs that, among other things,
prevent child abuse and provide child care to low-income families. This
is a fiscally responsible approach for encouraging charitable giving
and providing assistance to vulnerable families during these
particularly difficult times.
Mr. Speaker, I want to express my personal displeasure and sorrow
that the Committee on Rules did not make in order the amendment by my
colleague, the gentlewoman from New York (Mrs. Maloney) that would have
forgiven the one-time tax on the CDBG grants for the businesses in
Lower Manhattan who suffered so much on 9/11.
Mr. Speaker, I reserve the balance of my time.
Mr. LINDER. Mr. Speaker, I reserve the balance of my time.
Ms. SLAUGHTER. Mr. Speaker, I yield 6 minutes to the gentlewoman from
New York (Mrs. Maloney).
Mrs. MALONEY. Mr. Speaker, I thank the gentlewoman for yielding me
this time and for her leadership on so many important issues before
this body.
I rise in strong support of the underlying bill, but in opposition to
this closed rule, a rule that does not allow a straight up-or-down vote
on an amendment that the New York delegation supported that would not
have taxed grants to individuals and businesses that suffered because
of 9/11. It is really beyond me to understand why the majority
continues to block efforts to correct what is an injustice and why they
continue to unfairly tax the victims of 9/11. We have heard many
discussions before this body on taxes, taxes that they want to
eliminate and make permanent, on estate taxes, on this, that, and the
other. Well, now the majority has found a tax that they do like, and
that is taxing the people who took a hit for the country, the victims
of 9/11.
I want to share with my colleagues that this is the latest in a
series of actions by the New York delegation. The New York delegation
has written the IRS and the Secretary of the Treasury. We have written
the President. We have written to the Speaker of the House, the
gentleman from Illinois (Mr. Hastert), and the leadership of the other
body. We have introduced bipartisan legislation. The Committee on Ways
and Means is aware of the challenge, and the Congressional Research
Service has issued a memo on this unfair tax.
We went in front of the Committee on Rules before and tried to add it
as an amendment to H.R. 1308, the increased child tax credit bill. And
just last week, the gentleman from New York (Mr. Nadler) and myself
tried to add this amendment to the Transportation-Treasury bill, and it
was ruled not germane. But in the Committee on Rules last night, when
they discussed it, the Parliamentarian had made a statement that it was
entirely germane and could have been taken up by this body.
{time} 1145
So the end results continue to remain that the victims of 9/11 are
still being taxed, and it is just unfair for these cash-strapped
individuals and businesses to take another financial hit from this
disaster, a financial hit that the Joint Committee on Taxation
estimated to be over $268 million.
The IRS is taking back $268 million in Federal aid that the President
pledged to New York City and Congress appropriated. We should be
sending aid to victims, not taking it away.
The IRS decision has also had a ripple effect on other Federal
benefits that survivors of 9/11 may receive. Since many agencies rely
on the IRS's definition of gross income, some recipients' eligibility
for programs like Medicare, Medicaid and Social Security, these
programs likewise may be in jeopardy and taxed.
I would like to bring it down to what it means to an individual life
with my constituents. I would like to take the example of Olga Diaz.
She was the owner of a hair salon in the World Trade Center. She
estimates that she lost $300,000 in the attacks and received a Federal
grant of $37,000, a fraction of her loss. She now owes over $10,000.
She owes a third of her grant of $37,000 back to the Federal
Government. And she states that she learned about the taxation of the
grant ``after I invested it in rebuilding my business and I am now
struggling to find ways to pay.''
Mr. STARK. Mr. Speaker, will the gentlewoman yield?
Mrs. MALONEY. I yield to the gentleman from California.
Mr. STARK. Mr. Speaker, I would ask, how much was the New York
delegation asking, does the gentlewoman recall, for the help of the 9/
11 victims?
Mrs. MALONEY. We, as a body, as the gentleman knows, appropriated and
approved with the President $21.4 billion.
My office issued a report along with the Speaker of the City Council
last week that 7 billion of those dollars have come to New York City,
and that allocated or planned is roughly $19 billion. So we are short
from the $21 billion.
Mr. STARK. So that was over 10?
Mrs. MALONEY. Yes.
Mr. STARK. So that would be about 200 million a year that you are
short. I wondered if the gentlewoman was aware that in this bill there
is $61 million for the State of Washington and the Weyerhaeuser Timber
Corporation to do a kind of experiment in how to save trees by cutting
them down, and none of the other States were allowed to participate in
this, including New York State where they have major timber and pulp.
So all through this bill
[[Page H8303]]
there are special little interests gifts. Think of the Weyerhaeuser
Timber Corporation and how badly they need an extra $61 million as
compared to the people of 9/11.
Mrs. MALONEY. Reclaiming my time, I am outraged by this information.
I thank the gentleman for letting me know about it. Certainly investing
in human lives and trying to make them whole again after they have lost
so much, in my opinion, is far more important than a timber subsidy.
I repeat, $268 million is being taken from the individuals and the
businesses, most of which are small businesses, back into the Federal
government. And to make matters worse, the IRS did not tell these
people until the eve of the tax date so that they spent the money, as
Mrs. Olga Diaz did, investing in trying to get her business going
again. Now they are coming in and taking a third of her grant, which is
just a fraction of the grant that was owed to her in her $300,000 loss.
So this is very unfair, and I do not believe that it is the intent of
this body to tax these grants. I hope that in a subsequent bill or
amendment it will be made in order or the bill from the delegation may
come to the floor to correct this.
Mr. LINDER. Mr. Speaker, I yield such time as he may consume to the
gentleman from California (Mr. Dreier), the chairman of the Committee
on Rules.
(Mr. DREIER asked and was given permission to revise and extend his
remarks.)
Mr. DREIER. Mr. Speaker, I thank my friend for yielding me time and I
rise in strong support of this rule.
As we all know, this rule does in fact make in order the Democratic
substitute, which was offered by the gentleman from Maryland (Mr.
Cardin), and I believe that the rule itself should enjoy broad
bipartisan support as I hope at the end of the day the legislation
will.
This is bipartisan legislation authored by our good friend, the
gentleman from Missouri (Mr. Blunt), the distinguished majority whip,
and the gentleman from Tennessee (Mr. Ford), who have worked forming a
bipartisan compromise on this. I will say that the goal is a very
simple one, and that is to encourage greater philanthropy in
contribution.
My friend, the gentleman from Georgia (Mr. Linder), regularly points
to the fact that people in this country were contributing large amounts
before the Internal Revenue Code was put into place in 1913, and we do
have many people who do step up and voluntarily provide large
contributions. We have a lot of foundations that, frankly, do not take
the tax ramifications of their contributions into consideration. But
there are also incentives that do exist and we need to recognize that
and the idea of saying to people who do not itemize, meaning those who
are lower, middle income taxpayers, that they should have an
opportunity to qualify for a deduction for their charitable
contribution is the right thing to do.
This measure also goes a long way towards encouraging corporate
philanthropy by increasing from 10 to 20 percent the cap on corporate
contributions, so we want to see even greater support from the business
community.
Also, the legislation does go a long way towards addressing private
foundations, and I think that is an important thing and it deals with
the 5 percent minimum for contributions and distributions from those
private foundations.
Mr. Speaker, I think that we have here a piece of legislation which
will allow us to do something that is very important. We have so many
people looking to the Federal Government to provide assistance in a
wide range of areas and we, according to Article I, Section 7 of the
Constitution, have the responsibility to appropriate dollars. It seems
to me that rather than constantly focusing on appropriating the hard
earned tax dollars of the American people, what we should do is we
should provide an incentive for every American to participate
philanthropically by making contributions to meet societal needs that
are out there, and I believe that H.R. 7 will go a long way in our
quest to do just that.
I urge my colleagues to support the rule and to support the
underlying legislation at the end of the day so that we once again can
get even more and more people involved in the very, very important
decision making process of meeting the needs in their communities and
in our Nation.
Ms. SLAUGHTER. Mr. Speaker, I yield 1 minute to the gentleman from
North Carolina (Mr. Watt).
Mr. WATT. Mr. Speaker, I thank the gentlewoman for yielding me time.
Mr. Speaker, I will say that I am not a member of the Committee on
Ways and Means so I thought I would take this opportunity to say what I
have to say on the rule itself.
There are some things in this bill that cause me some heartburn and
there are some things in this bill that I think are very valuable. And
I am not sure exactly which one is taking precedence for me on the bill
itself, but I did want to thank the Committee on Ways and Means for
addressing a concern that had been raised about the administrative
expense part of this bill by the Morehead Foundation, which is a major
scholarship giving foundation in North Carolina. The Committee on Ways
and Means addressed their concern, and I wanted to acknowledge that and
thank them for doing that.
Mr. LINDER. Mr. Speaker, I yield 2 minutes to the gentleman from New
York (Mr. Houghton), our colleague on the Committee on Ways and Means.
Mr. HOUGHTON. Mr. Speaker, I thank the gentleman for yielding me
time.
Mr. Speaker, I want to encourage my fellow Members to support H.R. 7.
There are lots of provisions in the bill which I think are good and I
appreciate the comments by the former speaker in terms of what the
Committee on Ways and Means has done; but there is a particular
provision that would help many Americans who are literally struggling
to stay alive.
This provision would expand the current deductions to all businesses,
not just C corporations, and I believe this expansion would
substantially increase the donation of food to food banks and other
organizations. It is that simple.
What these groups do is to provide the obviously daily nourishment to
homeless and others that are down on their luck and just cannot provide
for all their needs themselves.
The bill also includes the provisions of H.R. 807. This is something
that I introduced with the gentleman from Georgia (Mr. Lewis) and
previous to last year Tony Hall. As many know, Tony Hall is now in Rome
doing a wonderful job for the United Nations agencies for food and
agriculture.
But this bill would open up the deduction for all businesses, as I
mentioned earlier, not just the larger corporations, and allow those
businesses a deduction for the fair-market value of the food at the
time they donate it.
This is a good provision. I urge everybody to support the bill.
Ms. SLAUGHTER. Mr. Speaker, I yield 2 minutes to the gentlewoman from
Texas (Ms. Jackson-Lee).
Ms. JACKSON-LEE of Texas. Mr. Speaker, I thank the distinguished
gentlewoman for yielding me time. I thank the members of the Committee
of Ways and Means for bringing this debate of H.R. 7 to the floor of
the House.
Let me first of all add my support to the Cardin substitute. It is an
equalizing substitute in terms of adding to this legislation a
provision to restore the Social Services block grant funding level to
$2.8 billion from $1.7 billion. It helps to support the State, local
government and community based organization programs intended for the
same population as the foundations benefiting from the tax provision
that we are now providing or discussing on the floor of the House;
additionally, as the entire cost is offset with a set of corporate
loophole closures similar to those included in other House Democratic
substitutes.
Let me also say that I would hope that in the weeks to come that we
could discuss on the floor of the House the repeal of the President's
very, if you will, misdirected tax cut in the light of the need for
funding for our soldiers in Iraq and as well in light of the very huge
budget crisis that we have.
We are bringing this bill to the floor because we are trying to help
people. We are trying to create an opportunity for smaller businesses
and others to be able to give monies to these social agencies in order
to provide for a better quality of life.
Well, Mr. Speaker, I think we can start right here in the United
States
[[Page H8304]]
Congress to create an opportunity for a better quality of life by
immediately repealing the President's tax cut so that we can in fact
fund the necessary resources that are needed for our troops, and, as
well, that we can provide the social services that our appropriators
are now struggling to provide because they are in a crisis as to the
amount of dollars that we will have.
Mr. Speaker, I think that the Cardin substitute is a great
enhancement of H.R. 7. I rise to support that substitute and certainly
will consider its impact on H.R. 7 as I consider my vote on this
legislation dealing with the Charitable Giving Act of 2003.
Mr. LINDER. Mr. Speaker, does the gentlewoman from New York (Ms.
Slaughter) have any further speakers?
Ms. SLAUGHTER. Mr. Speaker, I did have speakers requesting time but
they are not on the floor.
Mr. LINDER. Is the gentlewoman prepared to yield back?
Ms. SLAUGHTER. Mr. Speaker, I yield back the balance of my time.
Mr. LINDER. Mr. Speaker, I yield back the balance of my time, and I
move the previous question on the resolution.
The previous question was ordered.
The resolution was agreed to.
A motion to reconsider was laid on the table.
{time} 1200
Mr. THOMAS. Mr. Speaker, pursuant to House Resolution 370, I call up
the bill (H.R. 7) to amend the Internal Revenue Code of 1986 to provide
incentives for charitable contributions by individuals and businesses,
and for other purposes, and ask for its immediate consideration.
The Clerk read the title of the bill.
The SPEAKER pro tempore (Mr. Thornberry). Pursuant to House
Resolution 370, the bill is considered read for amendment.
The text of H.R. 7 is, as follows:
H.R. 7
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; ETC.
(a) Short Title.--This Act may be cited as the ``Charitable
Giving Act of 2003''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is
expressed in terms of an amendment to, or repeal of, a
section or other provision, the reference shall be considered
to be made to a section or other provision of the Internal
Revenue Code of 1986.
(c) Table of Contents.--
Sec. 1. Short title; etc.
TITLE I--CHARITABLE GIVING INCENTIVES
Sec. 101. Deduction for portion of charitable contributions to be
allowed to individuals who do not itemize deductions.
Sec. 102. Tax-free distributions from individual retirement plans for
charitable purposes.
Sec. 103. Increase in cap on corporate charitable contributions.
Sec. 104. Charitable deduction for contributions of food inventory.
Sec. 105. Reform of certain excise taxes related to private
foundations.
Sec. 106. Excise tax on unrelated business taxable income of charitable
remainder trusts.
Sec. 107. Expansion of charitable contribution allowed for scientific
property used for research and for computer technology
and equipment used for educational purposes.
Sec. 108. Adjustment to basis of S corporation stock for certain
charitable contributions.
TITLE II--TAX REFORM AND IMPROVEMENTS RELATING TO CHARITABLE
ORGANIZATIONS AND PROGRAMS
Sec. 201. Suspension of tax-exempt status of terrorist organizations.
Sec. 202. Clarification of definition of church tax inquiry.
Sec. 203. Expansion of declaratory judgment remedy to tax-exempt
organizations.
Sec. 204. Landowner incentives programs.
Sec. 205. Modifications to section 512(b)(13).
Sec. 206. Simplification of lobbying expenditure limitation.
Sec. 207. Permitted holdings of private foundation where corporation is
publicly traded and publicly controlled.
TITLE III--OTHER PROVISIONS
Sec. 301. Compassion capital fund.
Sec. 302. Reauthorization of assets for independence demonstration.
Sec. 303. Sense of the Congress regarding corporate contributions to
faith-based organizations, etc.
Sec. 304. Maternity group homes.
TITLE I--CHARITABLE GIVING INCENTIVES
SEC. 101. DEDUCTION FOR PORTION OF CHARITABLE CONTRIBUTIONS
TO BE ALLOWED TO INDIVIDUALS WHO DO NOT ITEMIZE
DEDUCTIONS.
(a) In General.--Section 170 (relating to charitable, etc.,
contributions and gifts) is amended by redesignating
subsection (m) as subsection (n) and by inserting after
subsection (l) the following new subsection:
``(m) Deduction for Individuals Not Itemizing Deductions.--
``(1) In general.--In the case of an individual who does
not itemize deductions for any taxable year, there shall be
taken into account as a direct charitable deduction under
section 63 an amount equal to the amount allowable under
subsection (a) for the taxable year for cash contributions
(determined without regard to any carryover), to the extent
that such contributions exceed $250 ($500 in the case of a
joint return) but do not exceed $500 ($1,000 in the case of a
joint return).
``(2) Termination.--This subsection shall not apply to any
taxable year beginning after December 31, 2005.''.
(b) Direct Charitable Deduction.--
(1) In general.--Subsection (b) of section 63 (defining
taxable income) is amended by striking ``and'' at the end of
paragraph (1), by striking the period at the end of paragraph
(2) and inserting ``, and'', and by adding at the end the
following new paragraph:
``(3) the direct charitable deduction.''.
(2) Definition.--Section 63 is amended by redesignating
subsection (g) as subsection (h) and by inserting after
subsection (f) the following new subsection:
``(g) Direct Charitable Deduction.--For purposes of this
section, the term `direct charitable deduction' means that
portion of the amount allowable under section 170(a) which is
taken as a direct charitable deduction for the taxable year
under section 170(m).''.
(3) Conforming amendment.--Subsection (d) of section 63 is
amended by striking ``and'' at the end of paragraph (1), by
striking the period at the end of paragraph (2) and inserting
``, and'', and by adding at the end the following new
paragraph:
``(3) the direct charitable deduction.''.
(c) Study.--
(1) In general.--The Secretary of the Treasury shall study
the effect of the amendments made by this section on
increased charitable giving and taxpayer compliance,
including a comparison of taxpayer compliance between
taxpayers who itemize their charitable contributions and
taxpayers who claim a direct charitable deduction.
(2) Report.--By not later than December 31, 2005, the
Secretary of the Treasury shall report on the study required
under paragraph (1) to the Committee on Finance of the Senate
and the Committee on Ways and Means of the House of
Representatives.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2003.
SEC. 102. TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT
PLANS FOR CHARITABLE PURPOSES.
(a) In General.--Subsection (d) of section 408 (relating to
individual retirement accounts) is amended by adding at the
end the following new paragraph:
``(8) Distributions for charitable purposes.--
``(A) In general.--No amount shall be includible in gross
income by reason of a qualified charitable distribution.
``(B) Qualified charitable distribution.--For purposes of
this paragraph, the term `qualified charitable distribution'
means any distribution from an individual retirement plan--
``(i) which is made on or after the date that the
individual for whose benefit the plan is maintained has
attained age 70 \1/2\, and
``(ii) which is made directly by the trustee--
``(I) to an organization described in section 170(c), or
``(II) to a split-interest entity.
A distribution shall be treated as a qualified charitable
distribution only to the extent that the distribution would
be includible in gross income without regard to subparagraph
(A) and, in the case of a distribution to a split-interest
entity, only if no person holds an income interest in the
amounts in the split-interest entity attributable to such
distribution other than one or more of the following: the
individual for whose benefit such plan is maintained, the
spouse of such individual, or any organization described in
section 170(c).
``(C) Contributions must be otherwise deductible.--For
purposes of this paragraph--
``(i) Direct contributions.--A distribution to an
organization described in section 170(c) shall be treated as
a qualified charitable distribution only if a deduction for
the entire distribution would be allowable under section 170
(determined without regard to subsection (b) thereof and this
paragraph).
``(ii) Split-interest gifts.--A distribution to a split-
interest entity shall be treated as a qualified charitable
distribution only if a deduction for the entire value of the
interest in the distribution for the use of an organization
described in section 170(c) would be allowable under section
170 (determined without regard to subsection (b) thereof and
this paragraph).
``(D) Application of section 72.--Notwithstanding section
72, in determining the extent to which a distribution is a
qualified charitable distribution, the entire amount of the
distribution shall be treated as includible in gross income
without regard to subparagraph (A) to the extent that such
[[Page H8305]]
amount does not exceed the aggregate amount which would have
been so includible if all amounts were distributed from all
individual retirement plans treated as 1 contract under
paragraph (2)(A) for purposes of determining the inclusion on
such distribution under section 72. Proper adjustments shall
be made in applying section 72 to other distributions in such
taxable year and subsequent taxable years.
``(E) Special rules for split-interest entities.--
``(i) Charitable remainder trusts.--Notwithstanding section
664(b), distributions made from a trust described in
subparagraph (G)(i) shall be treated as ordinary income in
the hands of the beneficiary to whom is paid the annuity
described in section 664(d)(1)(A) or the payment described in
section 664(d)(2)(A).
``(ii) Pooled income funds.--No amount shall be includible
in the gross income of a pooled income fund (as defined in
subparagraph (G)(ii)) by reason of a qualified charitable
distribution to such fund, and all distributions from the
fund which are attributable to qualified charitable
distributions shall be treated as ordinary income to the
beneficiary.
``(iii) Charitable gift annuities.--Qualified charitable
distributions made for a charitable gift annuity shall not be
treated as an investment in the contract.
``(F) Denial of deduction.--Qualified charitable
distributions shall not be taken into account in determining
the deduction under section 170.
``(G) Split-interest entity defined.--For purposes of this
paragraph, the term `split-interest entity' means--
``(i) a charitable remainder annuity trust or a charitable
remainder unitrust (as such terms are defined in section
664(d)) which must be funded exclusively by qualified
charitable distributions,
``(ii) a pooled income fund (as defined in section
642(c)(5)), but only if the fund accounts separately for
amounts attributable to qualified charitable distributions,
and
``(iii) a charitable gift annuity (as defined in section
501(m)(5)).''.
(b) Modifications Relating to Information Returns by
Certain Trusts.--
(1) Returns.--Section 6034 (relating to returns by trusts
described in section 4947(a)(2) or claiming charitable
deductions under section 642(c)) is amended to read as
follows:
``SEC. 6034. RETURNS BY TRUSTS DESCRIBED IN SECTION
4947(A)(2) OR CLAIMING CHARITABLE DEDUCTIONS
UNDER SECTION 642(C).
``(a) Trusts Described in Section 4947(a)(2).--Every trust
described in section 4947(a)(2) shall furnish such
information with respect to the taxable year as the Secretary
may by forms or regulations require.
``(b) Trusts Claiming a Charitable Deduction Under Section
642(c).--
``(1) In general.--Every trust not required to file a
return under subsection (a) but claiming a deduction under
section 642(c) for the taxable year shall furnish such
information with respect to such taxable year as the
Secretary may by forms or regulations prescribe, including--
``(A) the amount of the deduction taken under section
642(c) within such year,
``(B) the amount paid out within such year which represents
amounts for which deductions under section 642(c) have been
taken in prior years,
``(C) the amount for which such deductions have been taken
in prior years but which has not been paid out at the
beginning of such year,
``(D) the amount paid out of principal in the current and
prior years for the purposes described in section 642(c),
``(E) the total income of the trust within such year and
the expenses attributable thereto, and
``(F) a balance sheet showing the assets, liabilities, and
net worth of the trust as of the beginning of such year.
``(2) Exceptions.--Paragraph (1) shall not apply to a trust
for any taxable year if--
``(A) all the net income for such year, determined under
the applicable principles of the law of trusts, is required
to be distributed currently to the beneficiaries, or
``(B) the trust is described in section 4947(a)(1).''.
(2) Increase in penalty relating to filing of information
return by split-interest trusts.--Paragraph (2) of section
6652(c) (relating to returns by exempt organizations and by
certain trusts) is amended by adding at the end the following
new subparagraph:
``(C) Split-interest trusts.--In the case of a trust which
is required to file a return under section 6034(a),
subparagraphs (A) and (B) of this paragraph shall not apply
and paragraph (1) shall apply in the same manner as if such
return were required under section 6033, except that--
``(i) the 5 percent limitation in the second sentence of
paragraph (1)(A) shall not apply,
``(ii) in the case of any trust with gross income in excess
of $250,000, the first sentence of paragraph (1)(A) shall be
applied by substituting `$100' for `$20', and the second
sentence thereof shall be applied by substituting `$50,000'
for `$10,000', and
``(iii) the third sentence of paragraph (1)(A) shall be
disregarded.
In addition to any penalty imposed on the trust pursuant to
this subparagraph, if the person required to file such return
knowingly fails to file the return, such penalty shall also
be imposed on such person who shall be personally liable for
such penalty.''.
(3) Confidentiality of noncharitable beneficiaries.--
Subsection (b) of section 6104 (relating to inspection of
annual information returns) is amended by adding at the end
the following new sentence: ``In the case of a trust which is
required to file a return under section 6034(a), this
subsection shall not apply to information regarding
beneficiaries which are not organizations described in
section 170(c).''.
(c) Effective Dates.--
(1) Subsection (a).--The amendment made by subsection (a)
shall apply to distributions made after December 31, 2003.
(2) Subsection (b).--The amendments made by subsection (b)
shall apply to returns for taxable years beginning after
December 31, 2003.
SEC. 103. INCREASE IN CAP ON CORPORATE CHARITABLE
CONTRIBUTIONS.
(a) In General.--Paragraph (2) of section 170(b) (relating
to corporations) is amended by striking ``10 percent'' and
inserting ``the applicable percentage''.
(b) Applicable Percentage.--Subsection (b) of section 170
is amended by adding at the end the following new paragraph:
``(3) Applicable percentage defined.--For purposes of
paragraph (2), the applicable percentage shall be determined
in accordance with the following table:
``For taxable years beginning in calendarThe applicable percentage is--
2004..........................................................11
2005..........................................................12
2006..........................................................13
2007..........................................................14
2008 through 2011.............................................15
2012 and thereafter........................................20.''.
(c) Conforming Amendments.--
(1) Sections 512(b)(10) and 805(b)(2)(A) are each amended
by striking ``10 percent'' each place it occurs and inserting
``the applicable percentage (determined under section
170(b)(3))''.
(2) Sections 545(b)(2) and 556(b)(2) are each amended by
striking ``10-percent limitation'' and inserting ``applicable
percentage limitation''.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2003.
SEC. 104. CHARITABLE DEDUCTION FOR CONTRIBUTIONS OF FOOD
INVENTORY.
(a) In General.--Paragraph (3) of section 170(e) (relating
to special rule for certain contributions of inventory and
other property) is amended by redesignating subparagraph (C)
as subparagraph (D) and by inserting after subparagraph (B)
the following new subparagraph:
``(C) Special rule for contributions of food inventory.--
``(i) General rule.--In the case of a charitable
contribution of food, this paragraph shall be applied--
``(I) without regard to whether the contribution is made by
a C corporation, and
``(II) only for food that is apparently wholesome food.
``(ii) Limitation.--In the case of taxpayer other than a C
corporation, clause (i) shall not apply to any contribution
of apparently wholesome food from a trade or business of the
taxpayer to the extent that such contribution exceeds the
applicable percentage (within the meaning of subsection
(b)(3)) of the amount of net income of the taxpayer from the
trade or business with respect to which such food is
inventory. For purposes of the preceding sentence, the amount
of net income of the taxpayer from a trade or business is the
excess of--
``(I) the aggregate amount of gross income from such trade
or business received or accrued by the taxpayer during the
taxable year, over
``(II) the aggregate amount of any deductions allocable to
such trade or business allowed to the taxpayer under this
chapter for the taxable year.
``(iii) Determination of fair market value.--In the case of
a qualified contribution of apparently wholesome food to
which this paragraph applies and which, solely by reason of
internal standards of the taxpayer or lack of market, cannot
or will not be sold, the fair market value of such food shall
be determined by taking into account the price at which the
same or substantially the same food items (as to both type
and quality) are sold by the taxpayer at the time of the
contribution (or, if not so sold at such time, in the recent
past).
``(iv) Apparently wholesome food.--For purposes of this
subparagraph, the term `apparently wholesome food' shall have
the meaning given to such term by section 22(b)(2) of the
Bill Emerson Good Samaritan Food Donation Act (42 U.S.C.
1791(b)(2)), as in effect on the date of the enactment of
this subparagraph.''.
(b) Effective Date.--The amendment made by section shall
apply to taxable years beginning after December 31, 2003.
SEC. 105. REFORM OF CERTAIN EXCISE TAXES RELATED TO PRIVATE
FOUNDATIONS.
(a) Reduction of Tax on Net Investment Income.--Subsection
(a) of section 4940 (relating to excise tax based on
investment income) is amended by striking ``2 percent'' and
inserting ``1 percent''.
(b) Repeal of Reduction In Tax Where Private Foundation
Meets Certain Distribution Requirements.--Section 4940 is
amended by striking subsection (e).
(c) Modification of Excise Tax on Failure to Distribute
Income.--
[[Page H8306]]
(1) Administrative expenses not treated as distributions.--
Subparagraph (A) of section 4942(g)(1) is amended by striking
``including that portion of reasonable and necessary
administrative expenses'' and inserting ``excluding
administrative expenses''.
(2) Exclusion not to apply to certain private
foundations.--Paragraph (3) of section 4942(j) is amended--
(A) by striking ``(within the meaning of paragraph (1) or
(2) of subsection (g))'' each place it appears, and
(B) by inserting at the end the following: ``For purposes
of this paragraph, the term `qualifying distributions' means
qualifying distributions within the meaning of paragraph (1)
or (2) of subsection (g), except that `including that portion
of reasonable and necessary administrative expenses' shall be
substituted for `excluding administrative expenses' in
subsection (g)(1)(A).''.
(3) Conforming amendment.--Subsection (g) of section 4942
is amended by striking paragraph (4).
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2003.
SEC. 106. EXCISE TAX ON UNRELATED BUSINESS TAXABLE INCOME OF
CHARITABLE REMAINDER TRUSTS.
(a) In General.--Subsection (c) of section 664 (relating to
exemption from income taxes) is amended to read as follows:
``(c) Taxation of Trusts.--
``(1) Income tax.--A charitable remainder annuity trust and
a charitable remainder unitrust shall, for any taxable year,
not be subject to any tax imposed by this subtitle.
``(2) Excise tax.--
``(A) In general.--In the case of a charitable remainder
annuity trust or a charitable remainder unitrust that has
unrelated business taxable income (within the meaning of
section 512, determined as if part III of subchapter F
applied to such trust) for a taxable year, there is hereby
imposed on such trust or unitrust an excise tax equal to the
amount of such unrelated business taxable income.
``(B) Certain rules to apply.--The tax imposed by
subparagraph (A) shall be treated as imposed by chapter 42
for purposes of this title other than subchapter E of chapter
42.
``(C) Character of distributions and coordination with
distribution requirements.--The amounts taken into account in
determining unrelated business taxable income (as defined in
subparagraph (A)) shall not be taken into account for
purposes of--
``(i) subsection (b),
``(ii) determining the value of trust assets under
subsection (d)(2), and
``(iii) determining income under subsection (d)(3).
``(D) Tax court proceedings.--For purposes of this
paragraph, the references in section 6212(c)(1) to section
4940 shall be deemed to include references to this
paragraph.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2003.
SEC. 107. EXPANSION OF CHARITABLE CONTRIBUTION ALLOWED FOR
SCIENTIFIC PROPERTY USED FOR RESEARCH AND FOR
COMPUTER TECHNOLOGY AND EQUIPMENT USED FOR
EDUCATIONAL PURPOSES.
(a) Scientific Property Used for Research.--
(1) In general.--Clause (ii) of section 170(e)(4)(B)
(defining qualified research contributions) is amended by
inserting ``or assembled'' after ``constructed''.
(2) Conforming amendment.--Clause (iii) of section
170(e)(4)(B) is amended by inserting ``or assembling'' after
``construction''.
(b) Computer Technology and Equipment for Educational
Purposes.--
(1) In general.--Clause (ii) of section 170(e)(6)(B) is
amended by inserting ``or assembled'' after ``constructed''
and ``or assembling'' after ``construction''.
(2) Special rule extended.--Section 170(e)(6)(G) is amended
by striking ``2003'' and inserting ``2005''.
(3) Conforming amendments.--Subparagraph (D) of section
170(e)(6) is amended by inserting ``or assembled'' after
``constructed'' and ``or assembling'' after ``construction''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2003.
SEC. 108. ADJUSTMENT TO BASIS OF S CORPORATION STOCK FOR
CERTAIN CHARITABLE CONTRIBUTIONS.
(a) In General.--Paragraph (2) of section 1367(a) (relating
to adjustments to basis of stock of shareholders, etc.) is
amended by adding at the end the following new flush
sentence:
``The decrease under subparagraph (B) by reason of a
charitable contribution (as defined in section 170(c)) of
property shall be the amount equal to the shareholder's pro
rata share of the adjusted basis of such property.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2003.
TITLE II--TAX REFORM AND IMPROVEMENTS RELATING TO CHARITABLE
ORGANIZATIONS AND PROGRAMS
SEC. 201. SUSPENSION OF TAX-EXEMPT STATUS OF TERRORIST
ORGANIZATIONS.
(a) In General.--Section 501 (relating to exemption from
tax on corporations, certain trusts, etc.) is amended by
redesignating subsection (p) as subsection (q) and by
inserting after subsection (o) the following new subsection:
``(p) Suspension of Tax-Exempt Status of Terrorist
Organizations.--
``(1) In general.--The exemption from tax under subsection
(a) with respect to any organization described in paragraph
(2), and the eligibility of any organization described in
paragraph (2) to apply for recognition of exemption under
subsection (a), shall be suspended during the period
described in paragraph (3).
``(2) Terrorist organizations.--An organization is
described in this paragraph if such organization is
designated or otherwise individually identified--
``(A) under section 212(a)(3)(B)(vi)(II) or 219 of the
Immigration and Nationality Act as a terrorist organization
or foreign terrorist organization,
``(B) in or pursuant to an Executive order which is related
to terrorism and issued under the authority of the
International Emergency Economic Powers Act or section 5 of
the United Nations Participation Act of 1945 for the purpose
of imposing on such organization an economic or other
sanction, or
``(C) in or pursuant to an Executive order issued under the
authority of any Federal law if--
``(i) the organization is designated or otherwise
individually identified in or pursuant to such Executive
order as supporting or engaging in terrorist activity (as
defined in section 212(a)(3)(B) of the Immigration and
Nationality Act) or supporting terrorism (as defined in
section 140(d)(2) of the Foreign Relations Authorization Act,
Fiscal Years 1988 and 1989); and
``(ii) such Executive order refers to this subsection.
``(3) Period of suspension.--With respect to any
organization described in paragraph (2), the period of
suspension--
``(A) begins on the later of--
``(i) the date of the first publication of a designation or
identification described in paragraph (2) with respect to
such organization, or
``(ii) the date of the enactment of this subsection, and
``(B) ends on the first date that all designations and
identifications described in paragraph (2) with respect to
such organization are rescinded pursuant to the law or
Executive order under which such designation or
identification was made.
``(4) Denial of deduction.--No deduction shall be allowed
under section 170, 545(b)(2), 556(b)(2), 642(c), 2055,
2106(a)(2), or 2522 for any contribution to an organization
described in paragraph (2) during the period described in
paragraph (3).
``(5) Denial of administrative or judicial challenge of
suspension or denial of deduction.--Notwithstanding section
7428 or any other provision of law, no organization or other
person may challenge a suspension under paragraph (1), a
designation or identification described in paragraph (2), the
period of suspension described in paragraph (3), or a denial
of a deduction under paragraph (4) in any administrative or
judicial proceeding relating to the Federal tax liability of
such organization or other person.
``(6) Erroneous designation.--
``(A) In general.--If--
``(i) the tax exemption of any organization described in
paragraph (2) is suspended under paragraph (1),
``(ii) each designation and identification described in
paragraph (2) which has been made with respect to such
organization is determined to be erroneous pursuant to the
law or Executive order under which such designation or
identification was made, and
``(iii) the erroneous designations and identifications
result in an overpayment of income tax for any taxable year
by such organization,
credit or refund (with interest) with respect to such
overpayment shall be made.
``(B) Waiver of limitations.--If the credit or refund of
any overpayment of tax described in subparagraph (A)(iii) is
prevented at any time by the operation of any law or rule of
law (including res judicata), such credit or refund may
nevertheless be allowed or made if the claim therefor is
filed before the close of the 1-year period beginning on the
date of the last determination described in subparagraph
(A)(ii).
``(7) Notice of suspensions.--If the tax exemption of any
organization is suspended under this subsection, the Internal
Revenue Service shall update the listings of tax-exempt
organizations and shall publish appropriate notice to
taxpayers of such suspension and of the fact that
contributions to such organization are not deductible during
the period of such suspension.''.
(b) Effective Date.--The amendments made by this section
shall apply to designations made before, on, or after the
date of the enactment of this Act.
SEC. 202. CLARIFICATION OF DEFINITION OF CHURCH TAX INQUIRY.
Subsection (i) of section 7611 (relating to section not to
apply to criminal investigations, etc.) is amended by
striking ``or'' at the end of paragraph (4), by striking the
period at the end of paragraph (5) and inserting ``, or'',
and by inserting after paragraph (5) the following:
``(6) information provided by the Secretary related to the
standards for exemption from tax under this title and the
requirements under this title relating to unrelated business
taxable income.''.
SEC. 203. EXPANSION OF DECLARATORY JUDGMENT REMEDY TO TAX-
EXEMPT ORGANIZATIONS.
(a) In General.--Paragraph (1) of section 7428(a) (relating
to creation of remedy) is amended--
[[Page H8307]]
(1) in subparagraph (B) by inserting after ``509(a))'' the
following: ``or as a private operating foundation (as defined
in section 4942(j)(3))''; and
(2) by amending subparagraph (C) to read as follows:
``(C) with respect to the initial qualification or
continuing qualification of an organization as an
organization described in subsection (c) (other than
paragraph (3)) or (d) of section 501 which is exempt from tax
under section 501(a), or''.
(b) Court Jurisdiction.--Subsection (a) of section 7428 is
amended in the material following paragraph (2) by striking
``United States Tax Court, the United States Claims Court, or
the district court of the United States for the District of
Columbia'' and inserting the following: ``United States Tax
Court (in the case of any such determination or failure) or
the United States Claims Court or the district court of the
United States for the District of Columbia (in the case of a
determination or failure with respect to an issue referred to
in subparagraph (A) or (B) of paragraph (1)),''.
(c) Effective Date.--The amendments made by this section
shall apply to pleadings filed with respect to determinations
(or requests for determinations) made after the date of the
enactment of this Act.
SEC. 204. LANDOWNER INCENTIVES PROGRAMS.
(a) In General.--Subsection (a) of section 126 is amended
by redesignating paragraph (10) as paragraph (11) and by
inserting after paragraph (9) the following new paragraph:
``(10) Landowner initiatives programs to conserve
threatened, endangered, or imperiled species, or protect or
restore habitat carried out under--
``(A) the Fish and Wildlife Coordination Act (16 U.S.C. 661
et seq.),
``(B) the Fish and Wildlife Act of 1956 (16 U.S.C. 742f),
or
``(C) section 6 of the Endangered Species Act (16 U.S.C.
11531 et seq.).''.
(b) Excludable Portion.--Subparagraph (A) of section
126(b)(1) is amended by inserting after ``Secretary of
Agriculture'' the following: ``(the Secretary of the
Interior, in the case of the landowner incentives programs
described in subsection (a)(10) and the programs described in
subsection (a)(11) that are implemented by the Department of
the Interior)''.
(c) Effective Date.--The amendments made by this section
shall apply to amounts received after the date of the
enactment of this Act, in taxable years ending after such
date.
SEC. 205. MODIFICATIONS TO SECTION 512(B)(13).
(a) In General.--Paragraph (13) of section 512(b) (relating
to special rules for certain amounts received from controlled
entities) is amended by redesignating subparagraph (E) as
subparagraph (F) and by inserting after subparagraph (D) the
following new subparagraph:
``(E) Paragraph to apply only to excess payments.--
``(i) In general.--Subparagraph (A) shall apply only to the
portion of a specified payment received or accrued by the
controlling organization that exceeds the amount which would
have been paid or accrued if such payment met the
requirements prescribed under section 482.
``(ii) Addition to tax for valuation misstatements.--The
tax imposed by this chapter on the controlling organization
shall be increased by an amount equal to 20 percent of the
larger of--
``(I) such excess determined without regard to any
amendment or supplement to a return of tax, or
``(II) such excess determined with regard to all such
amendments and supplements.''.
(b) Effective Date.--
(1) In general.--The amendment made by this section shall
apply to payments received or accrued after December 31,
2003.
(2) Payments subject to binding contract transition rule.--
If the amendments made by section 1041 of the Taxpayer Relief
Act of 1997 did not apply to any amount received or accrued
in the first 2 taxable years beginning on or after the date
of the enactment of the Taxpayer Relief Act of 1997 under any
contract described in subsection (b)(2) of such section, such
amendments also shall not apply to amounts received or
accrued under such contract before January 1, 2001.
SEC. 206. SIMPLIFICATION OF LOBBYING EXPENDITURE LIMITATION.
(a) Repeal of Grassroots Expenditure Limit.--Paragraph (1)
of section 501(h) (relating to expenditures by public
charities to influence legislation) is amended to read as
follows:
``(1) General rule.--In the case of an organization to
which this subsection applies, exemption from taxation under
subsection (a) shall be denied because a substantial part of
the activities of such organization consists of carrying on
propaganda, or otherwise attempting, to influence
legislation, but only if such organization normally makes
lobbying expenditures in excess of the lobbying ceiling
amount for such organization for each taxable year.''.
(b) Excess Lobbying Expenditures.--Section 4911(b) is
amended to read as follows:
``(b) Excess Lobbying Expenditures.--For purposes of this
section, the term `excess lobbying expenditures' means, for a
taxable year, the amount by which the lobbying expenditures
made by the organization during the taxable year exceed the
lobbying nontaxable amount for such organization for such
taxable year.''.
(c) Conforming Amendments.--
(1) Section 501(h)(2) is amended by striking subparagraphs
(C) and (D).
(2) Section 4911(c) is amended by striking paragraphs (3)
and (4).
(3) Paragraph (1)(A) of section 4911(f) is amended by
striking ``limits of section 501(h)(1) have'' and inserting
``limit of section 501(h)(1) has''.
(4) Paragraph (1)(C) of section 4911(f) is amended by
striking ``limits of section 501(h)(1) are'' and inserting
``limit of section 501(h)(1) is''.
(5) Paragraphs (4)(A) and (4)(B) of section 4911(f) are
each amended by striking ``limits of section 501(h)(1)'' and
inserting ``limit of section 501(h)(1)''.
(6) Paragraph (8) of section 6033(b) (relating to certain
organizations described in section 501(c)(3)) is amended by
inserting ``and'' at the end of subparagraph (A) and by
striking subparagraphs (C) and (D).
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2003.
SEC. 207. PERMITTED HOLDINGS OF PRIVATE FOUNDATION WHERE
CORPORATION IS PUBLICLY TRADED AND PUBLICLY
CONTROLLED.
(a) In General.--Paragraph (2) of section 4943(c) (relating
to the permitted holdings in a corporation) is amended by
adding at the end the following new subparagraphs:
``(D) Permitted holdings where corporation is publicly-
traded and publicly controlled.--A private foundation shall
not be treated as having excess business holdings in any
corporation in any calendar year in which it (together with
all other private foundations which are described in section
4946(a)(1)(H)) owns not more than 5 percent of the voting
stock and not more than 5 percent in value of all outstanding
shares of all classes of stock if--
``(i) the common stock of the corporation, and any other
class of stock of which shares are held by the private
foundation, are regularly traded on an established securities
market (within the meaning of section 897(c)(3)),
``(ii) more than 50 percent of--
``(I) the total combined voting power of all classes of
stock of such corporation entitled to vote, and
``(II) the total value of the stock of such corporation,
is owned directly or indirectly by persons other than the
private foundation and persons who are disqualified persons
with respect to the private foundation,
``(iii) the Board of Directors of such corporation consists
of a majority of persons who are not disqualified persons
with respect to the private foundation, and
``(iv) any undistributed income (within the meaning of
section 4942(c)) of the private foundation for such year
(determined after substituting `6 percent' for `5 percent' in
section 4942(e)(1)) shall have been distributed within the
required period under section 4942(a) so as to avoid
application of the initial tax on such undistributed income.
``(E) Exception to permitted holdings where corporation is
publicly-traded and publicly controlled.--No stock of a
corporation held by the private foundation shall be
considered permitted holdings pursuant to subparagraph (D) to
the extent such stock was acquired by the private foundation
by purchase in a taxable transaction or was acquired from a
disqualified person who acquired such stock by purchase in a
taxable transaction within the 5 years immediately preceding
the transfer of such stock to the private foundation. Solely
for purposes of applying the preceding sentence--
``(i) any such stock acquired by purchase in a taxable
transaction by such disqualified person within such 5 year
period shall be treated as included in such transfer to the
extent of such transfer,
``(ii) all stock acquired by such disqualified person by
purchase in a taxable transaction during the 24 month period
beginning on the date of the transfer to the private
foundation shall be treated as held by such disqualified
person on the date of such transfer and included in such
transfer, and
``(iii) the private foundation may specifically designate
any shares of stock not considered permitted holdings for
purposes of allowing such private foundation to dispose of
such stock.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2003.
TITLE III--OTHER PROVISIONS
SEC. 301. COMPASSION CAPITAL FUND.
Title IV of the Social Security Act (42 U.S.C. 601-679b) is
amended by adding at the end the following:
``PART F--COMPASSION CAPITAL FUND
``SEC. 481. SECRETARY'S FUND TO SUPPORT AND REPLICATE
PROMISING SOCIAL SERVICE PROGRAMS.
``(a) Grant Authority.--
``(1) In general.--The Secretary may make grants to support
any private entity that operates a promising social services
program.
``(2) Applications.--An entity desiring to receive a grant
under paragraph (1) shall submit to the Secretary an
application for the grant, which shall contain such
information as the Secretary may require.
``(b) Contract Authority, Etc.--The Secretary may enter
into a grant, contract, or cooperative agreement with any
entity under which the entity would provide technical
assistance to another entity to operate a social service
program that assists persons and families in need, including
by--
``(1) providing the other entity with--
[[Page H8308]]
``(A) technical assistance and information, including legal
assistance and other business assistance;
``(B) information on capacity-building;
``(C) information and assistance in identifying and using
best practices for serving persons and families in need; or
``(D) assistance in replicating programs with demonstrated
effectiveness in assisting persons and families in need; or
``(2) supporting research on the best practices of social
service organizations.
``(c) Guidance and Technical Assistance.--The Secretary may
use not more than 25 percent of the amount appropriated under
this section for a fiscal year to provide guidance and
technical assistance to States and political subdivisions of
States with respect to the implementation of any social
service program.
``(d) Social Services Program Defined.--In this section,
the term `social services program' means a program that
provides benefits or services of any kind to persons and
families in need.
``(e) Limitations on Authorization of Appropriations.--To
carry out this section, there are authorized to be
appropriated to the Secretary $150,000,000 for fiscal year
2003, and such sums as may be necessary for fiscal years 2004
through 2007.''.
SEC. 302. REAUTHORIZATION OF ASSETS FOR INDEPENDENCE
DEMONSTRATION.
Section 416 of the Assets for Independence Act (title IV of
Public Law 105-285; 42 U.S.C. 604 note) is amended by
striking ``and 2003'' and inserting ``2003, 2004, 2005, 2006,
2007, and 2008''.
SEC. 303. SENSE OF THE CONGRESS REGARDING CORPORATE
CONTRIBUTIONS TO FAITH-BASED ORGANIZATIONS,
ETC.
(a) Findings.--The Congress finds as follows:
(1) America's community of faith has long played a leading
role in dealing with difficult societal problems that might
otherwise have gone unaddressed.
(2) President Bush has called upon Americans ``to revive
the spirit of citizenship . . . to marshal the compassion of
our people to meet the continuing needs of our Nation''.
(3) Although the work of faith-based organizations should
not be used by government as an excuse for backing away from
its historic and rightful commitment to help those who are
disadvantaged and in need, such organizations can and should
be seen as a valuable partner with government in meeting
societal challenges.
(4) Every day faith-based organizations in the United
States help people recover from drug and alcohol addiction,
provide food and shelter for the homeless, rehabilitate
prison inmates so that they can break free from the cycle of
recidivism, and teach people job skills that will allow them
to move from poverty to productivity.
(5) Faith-based organizations are often more successful in
dealing with difficult societal problems than government and
non-sectarian organizations.
(6) As President Bush has stated, ``It is not sufficient to
praise charities and community groups; we must support them.
And this is both a public obligation and a personal
responsibility.''.
(7) Corporate foundations contribute billions of dollars
each year to a variety of philanthropic causes.
(8) According to a study produced by the Capital Research
Center, the 10 largest corporate foundations in the United
States contributed $1,900,000,000 to such causes.
(9) According to the same study, faith-based organizations
only receive a small fraction of the contributions made by
corporations in the United States, and 6 of the 10
corporations that give the most to philanthropic causes
explicitly ban or restrict contributions to faith-based
organizations.
(b) Corporations Encouraged To Contribute to Faith-Based
Organizations.--The Congress calls on corporations in the
United States, in the words of the President, ``to give more
and to give better'' by making greater contributions to
faith-based organizations that are on the front lines
battling some of the great societal challenges of our day.
(c) Sense of the Congress.--It is the sense of Congress
that--
(1) corporations in the United States are important
partners with government in efforts to overcome difficult
societal problems; and
(2) no corporation in the United States should adopt
policies that prohibit the corporation from contributing to
an organization that is successfully advancing a
philanthropic cause merely because such organization is faith
based.
SEC. 304. MATERNITY GROUP HOMES.
(a) Permissible Use of Funds.--Section 322 of the Runaway
and Homeless Youth Act (42 U.S.C. 5714-2) is amended--
(1) in subsection (a)(1), by inserting ``(including
maternity group homes)'' after ``group homes''; and
(2) by adding at the end the following:
``(c) Maternity Group Home.--In this part, the term
`maternity group home' means a community-based, adult-
supervised group home that provides--
``(1) young mothers and their children with a supportive
and supervised living arrangement in which such mothers are
required to learn parenting skills, including child
development, family budgeting, health and nutrition, and
other skills to promote their long-term economic independence
and the well-being of their children; and
``(2) pregnant women with--
``(A) information regarding the option of placing children
for adoption through licensed adoption service providers;
``(B) assistance with prenatal care and child birthing; and
``(C) pre- and post-placement adoption counseling.''.
(b) Contract for Evaluation.--Part B of the Runaway and
Homeless Youth Act (42 U.S.C. 5701 et seq.) is amended by
adding at the end the following:
``SEC. 323. CONTRACT FOR EVALUATION.
``(a) In General.--The Secretary shall enter into a
contract with a public or private entity for an evaluation of
the maternity group homes that are supported by grant funds
under this Act.
``(b) Information.--The evaluation described in subsection
(a) shall include the collection of information about the
relevant characteristics of individuals who benefit from
maternity group homes such as those that are supported by
grant funds under this Act and what services provided by
those maternity group homes are most beneficial to such
individuals.
``(c) Report.--Not later than 2 years after the date on
which the Secretary enters into a contract for an evaluation
under subsection (a), and biennially thereafter, the entity
conducting the evaluation under this section shall submit to
Congress a report on the status, activities, and
accomplishments of maternity group homes that are supported
by grant funds under this Act.''.
(c) Authorization of Appropriations.--Section 388 of the
Runaway and Homeless Youth Act (42 U.S.C. 5751) is amended--
(1) in subsection (a)(1)--
(A) by striking ``There'' and inserting the following:
``(A) In general.--There'';
(B) in subparagraph (A), as redesignated, by inserting
``and the purpose described in subparagraph (B)'' after
``other than part E''; and
(C) by adding at the end the following:
``(B) Maternity group homes.--There is authorized to be
appropriated, for maternity group homes eligible for
assistance under section 322(a)(1)--
``(i) $33,000,000 for fiscal year 2003; and
``(ii) such sums as may be necessary for fiscal year
2004.''; and
(2) in subsection (a)(2)(A), by striking ``paragraph (1)''
and inserting ``paragraph (1)(A)''.
The SPEAKER pro tempore. The amendment printed in the bill, modified
by the amendment printed in part A of House Report 108-273, is adopted.
The committee amendment in the nature of a substitute, as modified,
is as follows:
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; ETC.
(a) Short Title.--This Act may be cited as the ``Charitable
Giving Act of 2003''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is
expressed in terms of an amendment to, or repeal of, a
section or other provision, the reference shall be considered
to be made to a section or other provision of the Internal
Revenue Code of 1986.
(c) Table of Contents.--
Sec. 1. Short title; etc.
TITLE I--CHARITABLE GIVING INCENTIVES
Sec. 101. Deduction for portion of charitable contributions to be
allowed to individuals who do not itemize deductions.
Sec. 102. Tax-free distributions from individual retirement plans for
charitable purposes.
Sec. 103. Increase in cap on corporate charitable contributions.
Sec. 104. Charitable deduction for contributions of food inventory.
Sec. 105. Reform of certain excise taxes related to private
foundations.
Sec. 106. Excise tax on unrelated business taxable income of charitable
remainder trusts.
Sec. 107. Expansion of charitable contribution allowed for scientific
property used for research and for computer technology
and equipment used for educational purposes.
Sec. 108. Adjustment to basis of S corporation stock for certain
charitable contributions.
Sec. 109. Charitable organizations permitted to make collegiate housing
and infrastructure grants.
Sec. 110. Conduct of certain games of chance not treated as unrelated
trade or business.
Sec. 111. Excise taxes exemption for blood collector organizations.
Sec. 112. Nonrecognition of gain on the sale of property used in
performance of an exempt function.
Sec. 113. Exemption of qualified 501(c)(3) bonds for nursing homes from
Federal guarantee prohibitions.
TITLE II--TAX REFORM AND IMPROVEMENTS RELATING TO CHARITABLE
ORGANIZATIONS AND PROGRAMS
Sec. 201. Suspension of tax-exempt status of terrorist organizations.
Sec. 202. Clarification of definition of church tax inquiry.
Sec. 203. Extension of declaratory judgment remedy to tax-exempt
organizations.
Sec. 204. Landowner incentives programs.
[[Page H8309]]
Sec. 205. Modifications to section 512(b)(13).
Sec. 206. Simplification of lobbying expenditure limitation.
Sec. 207. Pilot project for forest conservation activities.
TITLE III--OTHER PROVISIONS
Sec. 301. Compassion capital fund.
Sec. 302. Reauthorization of assets for independence demonstration.
Sec. 303. Sense of the Congress regarding corporate contributions to
faith-based organizations, etc.
Sec. 304. Maternity group homes.
Sec. 305. Authority of States to use 10 percent of their TANF funds to
carry out social services block grant programs.
TITLE I--CHARITABLE GIVING INCENTIVES
SEC. 101. DEDUCTION FOR PORTION OF CHARITABLE CONTRIBUTIONS
TO BE ALLOWED TO INDIVIDUALS WHO DO NOT ITEMIZE
DEDUCTIONS.
(a) In General.--Section 170 (relating to charitable, etc.,
contributions and gifts) is amended by redesignating
subsection (m) as subsection (n) and by inserting after
subsection (l) the following new subsection:
``(m) Deduction for Individuals Not Itemizing Deductions.--
``(1) In general.--In the case of an individual who does
not itemize deductions for a taxable year, there shall be
taken into account as a direct charitable deduction under
section 63 an amount equal to the amount allowable under
subsection (a) for the taxable year for cash contributions
(determined without regard to any carryover), to the extent
that such contributions exceed $250 ($500 in the case of a
joint return) but do not exceed $500 ($1,000 in the case of a
joint return).
``(2) Termination.--Paragraph (1) shall not apply to any
taxable year beginning after December 31, 2005.''.
(b) Direct Charitable Deduction.--
(1) In general.--Subsection (b) of section 63 (defining
taxable income) is amended by striking ``and'' at the end of
paragraph (1), by striking the period at the end of paragraph
(2) and inserting ``, and'', and by adding at the end the
following new paragraph:
``(3) the direct charitable deduction.''.
(2) Definition.--Section 63 is amended by redesignating
subsection (g) as subsection (h) and by inserting after
subsection (f) the following new subsection:
``(g) Direct Charitable Deduction.--For purposes of this
section, the term `direct charitable deduction' means that
portion of the amount allowable under section 170(a) which is
taken as a direct charitable deduction for the taxable year
under section 170(m).''.
(3) Conforming amendment.--Subsection (d) of section 63 is
amended by striking ``and'' at the end of paragraph (1), by
striking the period at the end of paragraph (2) and inserting
``, and'', and by adding at the end the following new
paragraph:
``(3) the direct charitable deduction.''.
(c) Study.--
(1) In general.--The Secretary of the Treasury shall study
the effect of the amendments made by this section on
increased charitable giving and taxpayer compliance,
including a comparison of taxpayer compliance between
taxpayers who itemize their charitable contributions and
taxpayers who claim a direct charitable deduction.
(2) Report.--Not later than December 31, 2006, the
Secretary of the Treasury shall report on the study required
under paragraph (1) to the Committee on Finance of the Senate
and the Committee on Ways and Means of the House of
Representatives.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2003.
SEC. 102. TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT
PLANS FOR CHARITABLE PURPOSES.
(a) In General.--Subsection (d) of section 408 (relating to
individual retirement accounts) is amended by adding at the
end the following new paragraph:
``(8) Distributions for charitable purposes.--
``(A) In general.--No amount shall be includible in gross
income by reason of a qualified charitable distribution.
``(B) Qualified charitable distribution.--For purposes of
this paragraph, the term `qualified charitable distribution'
means any distribution from an individual retirement plan
other than a plan described in subsection (k) or (p) of
section 408--
``(i) which is made on or after the date that the
individual for whose benefit the plan is maintained has
attained age 70\1/2\, and
``(ii) which is made directly by the trustee--
``(I) to an organization described in section 170(c), or
``(II) to a split-interest entity.
A distribution shall be treated as a qualified charitable
distribution only to the extent that the distribution would
be includible in gross income without regard to subparagraph
(A) and, in the case of a distribution to a split-interest
entity, only if no person holds an income interest in the
amounts in the split-interest entity attributable to such
distribution other than one or more of the following: the
individual for whose benefit such plan is maintained, the
spouse of such individual, or any organization described in
section 170(c).
``(C) Contributions must be otherwise deductible.--For
purposes of this paragraph--
``(i) Direct contributions.--A distribution to an
organization described in section 170(c) shall be treated as
a qualified charitable distribution only if a deduction for
the entire distribution would be allowable under section
170 (determined without regard to subsection (b) thereof
and this paragraph).
``(ii) Split-interest gifts.--A distribution to a split-
interest entity shall be treated as a qualified charitable
distribution only if a deduction for the entire value of the
interest in the distribution for the use of an organization
described in section 170(c) would be allowable under section
170 (determined without regard to subsection (b) thereof and
this paragraph).
``(D) Application of section 72.--Notwithstanding section
72, in determining the extent to which a distribution is a
qualified charitable distribution, the entire amount of the
distribution shall be treated as includible in gross income
without regard to subparagraph (A) to the extent that such
amount does not exceed the aggregate amount which would have
been so includible if all amounts distributed from all
individual retirement plans were treated as 1 contract under
paragraph (2)(A) for purposes of determining the inclusion of
such distribution under section 72. Proper adjustments shall
be made in applying section 72 to other distributions in such
taxable year and subsequent taxable years.
``(E) Special rules for split-interest entities.--
``(i) Charitable remainder trusts.--Notwithstanding section
664(b), distributions made from a trust described in
subparagraph (G)(i) shall be treated as ordinary income in
the hands of the beneficiary to whom is paid the annuity
described in section 664(d)(1)(A) or the payment described in
section 664(d)(2)(A).
``(ii) Pooled income funds.--No amount shall be includible
in the gross income of a pooled income fund (as defined in
subparagraph (G)(ii)) by reason of a qualified charitable
distribution to such fund, and all distributions from the
fund which are attributable to qualified charitable
distributions shall be treated as ordinary income to the
beneficiary.
``(iii) Charitable gift annuities.--Qualified charitable
distributions made for a charitable gift annuity shall not be
treated as an investment in the contract.
``(F) Denial of deduction.--Qualified charitable
distributions shall not be taken into account in determining
the deduction under section 170.
``(G) Split-interest entity defined.--For purposes of this
paragraph, the term `split-interest entity' means--
``(i) a charitable remainder annuity trust or a charitable
remainder unitrust (as such terms are defined in section
664(d)) which must be funded exclusively by qualified
charitable distributions,
``(ii) a pooled income fund (as defined in section
642(c)(5)), but only if the fund accounts separately for
amounts attributable to qualified charitable distributions,
and
``(iii) a charitable gift annuity (as defined in section
501(m)(5)).''.
(b) Modifications Relating to Information Returns by
Certain Trusts.--
(1) Returns.--Section 6034 (relating to returns by trusts
described in section 4947(a)(2) or claiming charitable
deductions under section 642(c)) is amended to read as
follows:
``SEC. 6034. RETURNS BY TRUSTS DESCRIBED IN SECTION
4947(A)(2) OR CLAIMING CHARITABLE DEDUCTIONS
UNDER SECTION 642(C).
``(a) Trusts Described in Section 4947(a)(2).--Every trust
described in section 4947(a)(2) shall furnish such
information with respect to the taxable year as the Secretary
may by forms or regulations require.
``(b) Trusts Claiming a Charitable Deduction Under Section
642(c).--
``(1) In general.--Every trust not required to file a
return under subsection (a) but claiming a deduction under
section 642(c) for the taxable year shall furnish such
information with respect to such taxable year as the
Secretary may by forms or regulations prescribe, including--
``(A) the amount of the deduction taken under section
642(c) within such year,
``(B) the amount paid out within such year which represents
amounts for which deductions under section 642(c) have been
taken in prior years,
``(C) the amount for which such deductions have been taken
in prior years but which has not been paid out at the
beginning of such year,
``(D) the amount paid out of principal in the current and
prior years for the purposes described in section 642(c),
``(E) the total income of the trust within such year and
the expenses attributable thereto, and
``(F) a balance sheet showing the assets, liabilities, and
net worth of the trust as of the beginning of such year.
``(2) Exceptions.--Paragraph (1) shall not apply to a trust
for any taxable year if--
``(A) all the net income for such year, determined under
the applicable principles of the law of trusts, is required
to be distributed currently to the beneficiaries, or
``(B) the trust is described in section 4947(a)(1).''.
(2) Increase in penalty relating to filing of information
return by split-interest trusts.--Paragraph (2) of section
6652(c) (relating to returns by exempt organizations and by
certain trusts) is amended by adding at the end the following
new subparagraph:
``(C) Split-interest trusts.--In the case of a trust which
is required to file a return under section 6034(a),
subparagraphs (A) and (B) of this paragraph shall not apply
and paragraph (1) shall apply in the same manner as if such
return were required under section 6033, except that--
``(i) the 5 percent limitation in the second sentence of
paragraph (1)(A) shall not apply,
``(ii) in the case of any trust with gross income in excess
of $250,000, the first sentence of paragraph (1)(A) shall be
applied by substituting `$100' for `$20', and the second
sentence thereof shall be applied by substituting `$50,000'
for `$10,000', and
[[Page H8310]]
``(iii) the third sentence of paragraph (1)(A) shall be
disregarded.
In addition to any penalty imposed on the trust pursuant to
this subparagraph, if the person required to file such return
knowingly fails to file the return, such penalty shall also
be imposed on such person who shall be personally liable for
such penalty.''.
(3) Confidentiality of noncharitable beneficiaries.--
Subsection (b) of section 6104 (relating to inspection of
annual information returns) is amended by adding at the end
the following new sentence: ``In the case of a trust which is
required to file a return under section 6034(a), this
subsection shall not apply to information regarding
beneficiaries which are not organizations described in
section 170(c).''.
(c) Effective Dates.--
(1) Subsection (a).--The amendment made by subsection (a)
shall apply to distributions made after December 31, 2003.
(2) Subsection (b).--The amendments made by subsection (b)
shall apply to returns for taxable years beginning after
December 31, 2003.
SEC. 103. INCREASE IN CAP ON CORPORATE CHARITABLE
CONTRIBUTIONS.
(a) In General.--Paragraph (2) of section 170(b) (relating
to corporations) is amended by striking ``10 percent'' and
inserting ``the applicable percentage''.
(b) Applicable Percentage.--Subsection (b) of section 170
is amended by adding at the end the following new paragraph:
``(3) Applicable percentage defined.--For purposes of
paragraph (2), the applicable percentage shall be determined
in accordance with the following table:
``For taxable years beginning in calendarThe applicable percentage is--
2004..........................................................11
2005..........................................................12
2006..........................................................13
2007..........................................................14
2008 through 2011.............................................15
2012 and thereafter........................................20.''.
(c) Conforming Amendments.--
(1) Sections 512(b)(10) and 805(b)(2)(A) are each amended
by striking ``10 percent'' each place it occurs and inserting
``the applicable percentage (determined under section
170(b)(3))''.
(2) Sections 545(b)(2) and 556(b)(2) are each amended by
striking ``10-percent limitation'' and inserting ``applicable
percentage limitation''.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2003.
SEC. 104. CHARITABLE DEDUCTION FOR CONTRIBUTIONS OF FOOD
INVENTORY.
(a) In General.--Paragraph (3) of section 170(e) (relating
to special rule for certain contributions of inventory and
other property) is amended by redesignating subparagraph (C)
as subparagraph (D) and by inserting after subparagraph (B)
the following new subparagraph:
``(C) Special rule for contributions of food inventory.--
``(i) General rule.--In the case of a charitable
contribution of food from any trade or business (or interest
therein) of the taxpayer, this paragraph shall be applied--
``(I) without regard to whether the contribution is made by
a C corporation, and
``(II) only to food that is apparently wholesome food.
``(ii) Limitation.--In the case of a taxpayer other than a
C corporation, the aggregate amount of such contributions for
any taxable year which may be taken into account under this
section shall not exceed the applicable percentage (within
the meaning of subsection (b)(3)) of the taxpayer's aggregate
net income for such taxable year from all trades or
businesses from which such contributions were made for such
year, computed without regard to this section.
``(iii) Determination of fair market value.--In the case of
a qualified contribution of apparently wholesome food to
which this paragraph applies and which, solely by reason of
internal standards of the taxpayer or lack of market, cannot
or will not be sold, the fair market value of such food shall
be determined by taking into account the price at which the
same or substantially the same food items (as to both type
and quality) are sold by the taxpayer at the time of the
contribution (or, if not so sold at such time, in the recent
past).
``(iv) Apparently wholesome food.--For purposes of this
subparagraph, the term `apparently wholesome food' has the
meaning given to such term by section 22(b)(2) of the Bill
Emerson Good Samaritan Food Donation Act (42 U.S.C.
1791(b)(2)), as in effect on the date of the enactment of
this subparagraph.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2003.
SEC. 105. REFORM OF CERTAIN EXCISE TAXES RELATED TO PRIVATE
FOUNDATIONS.
(a) Reduction of Tax on Net Investment Income.--Section
4940(a) (relating to tax-exempt foundations) is amended by
striking ``2 percent'' and inserting ``1 percent''.
(b) Repeal of Reduction in Tax Where Private Foundation
Meets Certain Distribution Requirements.--Section 4940
(relating to excise tax based on investment income) is
amended by striking subsection (e).
(c) Modification of Excise Tax on Self-Dealing.--The second
sentence of section 4941(a)(1) (relating to initial excise
tax imposed on self-dealer) is amended by striking ``5
percent'' and inserting ``25 percent''.
(d) Modification of Excise Tax on Failure To Distribute
Income.--
(1) Certain administrative expenses not treated as
distributions.--Section 4942(g) is amended by striking
paragraph (4) and inserting the following new paragraphs:
``(4) Limitation on administrative expenses treated as
distributions.--
``(A) In general.--For purposes of paragraph (1)(A), the
following administrative expenses shall not be treated as
qualifying distributions:
``(i) Any administrative expense which is not directly
attributable to direct charitable activities, grant selection
activities, grant monitoring and administration activities,
compliance with applicable Federal, State, or local law, or
furthering public accountability of the private foundation.
``(ii) Any compensation paid to a disqualified person to
the extent that such compensation exceeds an annual rate of
$100,000.
``(iii) Any expense incurred for transportation by air
unless such transportation is regularly-scheduled commercial
air transportation.
``(iv) Any expense incurred for regularly-scheduled
commercial air transportation to the extent that such expense
exceeds the cost of such transportation in coach-class
accommodations.
``(B) Adjustment for inflation.--In the case of a taxable
year beginning after December 31, 2004, the $100,000 amount
in subparagraph (A)(ii) shall be increased by an amount equal
to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, determined by substituting `calendar year 2003'
for `calendar year 1992' in subparagraph (B) thereof.
If any amount as increased under the preceding sentence is
not a multiple of $50, such amount shall be rounded to the
next lowest multiple of $50.
``(5) Regulations.--The Secretary shall prescribe such
regulations as may be necessary to carry out the purposes of
paragraph (4). Such regulations shall provide that
administrative expenses which are excluded from qualifying
distributions solely by reason of the limitations in
paragraph (4) shall not for such reason subject a private
foundation to any other excise taxes imposed by this
subchapter.''.
(2) Disallowance not to apply to certain private
foundations.--
(A) In general.--Section 4942(j)(3) (defining operating
foundation) is amended--
(i) by striking ``(within the meaning of paragraph (1) or
(2) of subsection (g))'' each place it appears, and
(ii) by adding at the end the following new sentence: ``For
purposes of this paragraph, the term `qualifying
distributions' means qualifying distributions within the
meaning of paragraph (1) or (2) of subsection (g) (determined
without regard to subsection (g)(4)).''.
(B) Conforming amendment.--Section 4942(f)(2)(C)(i) is
amended by inserting ``(determined without regard to
subsection (g)(4))'' after ``within the meaning of subsection
(g)(1)(A)''.
(e) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2003.
SEC. 106. EXCISE TAX ON UNRELATED BUSINESS TAXABLE INCOME OF
CHARITABLE REMAINDER TRUSTS.
(a) In General.--Subsection (c) of section 664 (relating to
exemption from income taxes) is amended to read as follows:
``(c) Taxation of Trusts.--
``(1) Income tax.--A charitable remainder annuity trust and
a charitable remainder unitrust shall, for any taxable year,
not be subject to any tax imposed by this subtitle.
``(2) Excise tax.--
``(A) In general.--In the case of a charitable remainder
annuity trust or a charitable remainder unitrust that has
unrelated business taxable income (within the meaning of
section 512, determined as if part III of subchapter F
applied to such trust) for a taxable year, there is hereby
imposed on such trust or unitrust an excise tax equal to the
amount of such unrelated business taxable income.
``(B) Certain rules to apply.--The tax imposed by
subparagraph (A) shall be treated as imposed by chapter 42
for purposes of this title other than subchapter E of chapter
42.
``(C) Character of distributions and coordination with
distribution requirements.--The amounts taken into account in
determining unrelated business taxable income (as defined in
subparagraph (A)) shall not be taken into account for
purposes of--
``(i) subsection (b),
``(ii) determining the value of trust assets under
subsection (d)(2), and
``(iii) determining income under subsection (d)(3).
``(D) Tax court proceedings.--For purposes of this
paragraph, the references in section 6212(c)(1) to section
4940 shall be deemed to include references to this
paragraph.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2003.
SEC. 107. EXPANSION OF CHARITABLE CONTRIBUTION ALLOWED FOR
SCIENTIFIC PROPERTY USED FOR RESEARCH AND FOR
COMPUTER TECHNOLOGY AND EQUIPMENT USED FOR
EDUCATIONAL PURPOSES.
(a) Scientific Property Used for Research.--
(1) In general.--Clause (ii) of section 170(e)(4)(B)
(defining qualified research contributions) is amended by
inserting ``or assembled'' after ``constructed''.
(2) Conforming amendment.--Clause (iii) of section
170(e)(4)(B) is amended by inserting ``or assembling'' after
``construction''.
(b) Computer Technology and Equipment for Educational
Purposes.--
(1) In general.--Clause (ii) of section 170(e)(6)(B) is
amended by inserting ``or assembled'' after ``constructed''
and ``or assembling'' after ``construction''.
[[Page H8311]]
(2) Special rule made permanent.--Section 170(e)(6) is
amended by striking subparagraph (G).
(3) Conforming amendments.--Subparagraph (D) of section
170(e)(6) is amended by inserting ``or assembled'' after
``constructed'' and ``or assembling'' after ``construction''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2003.
SEC. 108. ADJUSTMENT TO BASIS OF S CORPORATION STOCK FOR
CERTAIN CHARITABLE CONTRIBUTIONS.
(a) In General.--Paragraph (2) of section 1367(a) (relating
to adjustments to basis of stock of shareholders, etc.) is
amended by adding at the end the following new flush
sentence:
``The decrease under subparagraph (B) by reason of a
charitable contribution (as defined in section 170(c)) of
property shall be the amount equal to the shareholder's pro
rata share of the adjusted basis of such property.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2003.
SEC. 109. CHARITABLE ORGANIZATIONS PERMITTED TO MAKE
COLLEGIATE HOUSING AND INFRASTRUCTURE GRANTS.
(a) In General.--Section 501 (relating to exemption from
tax on corporations, certain trusts, etc.), as amended by
section 201, is further amended by redesignating subsection
(q) as subsection (r) and by inserting after subsection (p)
the following new subsection:
``(q) Treatment of Organizations Making Collegiate Housing
and Infrastructure Improvement Grants.--
``(1) In general.--For purposes of subsection (c)(3) and
sections 170(c)(2)(B), 2055(a), and 2522(a)(2), an
organization shall not fail to be treated as organized and
operated exclusively for charitable or educational purposes
solely because such organization makes collegiate housing and
infrastructure grants to an organization described in
subsection (c)(7), so long as, at the time of the grant,
substantially all of the active members of the recipient
organization are full-time students at the college or
university with which such recipient organization is
associated.
``(2) Housing and infrastructure grants.--For purposes of
paragraph (1), collegiate housing and infrastructure grants
are grants to provide, improve, operate, or maintain
collegiate housing that may involve more than incidental
social, recreational, or private purposes, so long as such
grants are for purposes that would be permissible for a
dormitory of the college or university referred to in
paragraph (1). A grant shall not be treated as a collegiate
housing and infrastructure grant for purposes of paragraph
(1) to the extent that such grant is used to provide physical
fitness equipment.
``(3) Grants to certain organizations holding title to
property, etc.--For purposes of this subsection, a collegiate
housing and infrastructure grant to an organization described
in subsection (c)(2) or (c)(7) holding title to property
exclusively for the benefit of an organization described in
subsection (c)(7) shall be considered a grant to the
organization described in subsection (c)(7) for whose benefit
such property is held.''.
(b) Effective Date.--The amendment made by this section
shall apply to grants made after December 31, 2003.
SEC. 110. CONDUCT OF CERTAIN GAMES OF CHANCE NOT TREATED AS
UNRELATED TRADE OR BUSINESS.
(a) In General.--Paragraph (1) of section 513(f) (relating
to certain bingo games) is amended to read as follows:
``(1) In general.--The term `unrelated trade or business'
does not include--
``(A) any trade or business which consists of conducting
bingo games, and
``(B) any trade or business which consists of conducting
qualified games of chance if the net proceeds from such trade
or business are paid or set aside for payment for purposes
described in section 170(c)(2)(B), for the promotion of
social welfare (within the meaning of section 501(c)(4)),
or for a purpose for which State law specifically
authorizes the expenditure of such proceeds.''.
(b) Qualified Games of Chance.--Subsection (f) of section
513 is amended by adding at the end the following new
paragraph:
``(3) Qualified games of chance.--For purposes of paragraph
(1), the term `qualified game of chance' means any game of
chance (other than bingo) conducted by an organization if--
``(A) such organization is licensed pursuant to State law
to conduct such game,
``(B) only organizations which are organized as nonprofit
corporations or are exempt from tax under section 501(a) may
be so licensed to conduct such game within the State, and
``(C) the conduct of such game does not violate State or
local law.''
(c) Clerical Amendment.--The subsection heading of section
513(f) is amended by striking ``Bingo Games'' and inserting
``Games of Chance''.
(d) Effective Date.-- The amendments made by this section
shall apply to games conducted after December 31, 2003.
SEC. 111. EXCISE TAXES EXEMPTION FOR BLOOD COLLECTOR
ORGANIZATIONS.
(a) Exemption From Imposition of Special Fuels Tax.--
Section 4041(g) (relating to other exemptions) is amended by
striking ``and'' at the end of paragraph (3), by striking the
period in paragraph (4) and inserting ``; and'', and by
inserting after paragraph (4) the following new paragraph:
``(5) with respect to the sale of any liquid to a qualified
blood collector organization (as defined in section
7701(a)(48)) for such organization's exclusive use, or with
respect to the use by a qualified blood collector
organization of any liquid as a fuel.''.
(b) Exemption From Manufacturers Excise Tax.--
(1) In general.--Section 4221(a) (relating to certain tax-
free sales) is amended by striking ``or'' at the end of
paragraph (4), by adding ``or'' at the end of paragraph (5),
and by inserting after paragraph (5) the following new
paragraph:
``(6) to a qualified blood collector organization (as
defined in section 7701(a)(48)) for such organization's
exclusive use,''.
(2) Conforming amendments.--
(A) The second sentence of section 4221(a) is amended by
striking ``Paragraphs (4) and (5)'' and inserting
``Paragraphs (4), (5), and (6)''.
(B) Section 6421(c) is amended by striking ``or (5)'' and
inserting ``(5), or (6)''.
(c) Exemption From Communication Excise Tax.--
(1) In general.--Section 4253 (relating to exemptions) is
amended by redesignating subsection (k) as subsection (l) and
inserting after subsection (j) the following new subsection:
``(k) Exemption for Qualified Blood Collector
Organizations.--Under regulations provided by the Secretary,
no tax shall be imposed under section 4251 on any amount paid
by a qualified blood collector organization (as defined in
section 7701(a)(48)) for services or facilities furnished to
such organization.''.
(2) Conforming amendment.--Section 4253(l), as redesignated
by paragraph (1), is amended by striking ``or (j)'' and
inserting ``(j), or (k)''.
(d) Credit for Refund for Certain Taxes on Sales and
Services.--
(1) Deemed overpayment.--
(A) In general.--Section 6416(b)(2) is amended by
redesignating subparagraphs (E) and (F) as subparagraphs (F)
and (G), respectively, and by inserting after subparagraph
(D) the following new subparagraph:
``(E) sold to a qualified blood collector organization (as
defined in section 7701(a)(48)) for such organization's
exclusive use;''.
(B) Conforming amendments.--Section 6416(b)(2) is amended--
(i) by striking ``Subparagraphs (C) and (D)'' and inserting
``Subparagraphs (C), (D), and (E)'', and
(ii) by striking ``(C), and (D)'' and inserting ``(C), (D),
and (E)''.
(2) Sales of tires.--Clause (ii) of section 6416(b)(4)(B)
is amended by inserting ``sold to a qualified blood collector
organization (as defined in section 7701(a)(48)) for its
exclusive use,'' after ``for its exclusive use,''.
(e) Definition of Qualified Blood Collector Organization.--
Section 7701(a) is amended by inserting at the end the
following new paragraph:
``(48) Qualified blood collector organization.--The term
`qualified blood collector organization' means an
organization which is--
``(A) described in section 501(c)(3) and exempt from tax
under section 501(a),
``(B) registered by the Food and Drug Administration to
collect blood, and
``(C) primarily engaged in the activity of the collection
of blood.''.
(f) Effective Date.--The amendments made by this section
shall take effect on January 1, 2004.
SEC. 112. NONRECOGNITION OF GAIN ON THE SALE OF PROPERTY USED
IN PERFORMANCE OF AN EXEMPT FUNCTION.
(a) In General.--Subparagraph (D) of section 512(a)(3) is
amended to read as follows:
``(D) Nonrecognition of gain.--
``(i) In general.--If property used directly in the
performance of the exempt function of an organization
described in paragraph (7), (9), (17), or (20) of section
501(c) is sold by such organization, and within a period
beginning 1 year before the date of such sale, and ending
3 years (10 years, in the case of an organization
described in section 501(c)(7)) after such date, other
property is purchased and used by such organization
directly in the performance of its exempt function, gain
(if any) from such sale shall be recognized only to the
extent that such organization's sales price of the old
property exceeds the organization's cost of purchasing the
other property.
``(ii) Statute of limitations.--If an organization
described in section 501(c)(7) sells property on which gain
is not recognized, in whole or in part, by reason of clause
(i), then the statutory period for the assessment of any
deficiency attributable to such gain shall not expire until
the end of the 3-year period beginning on the date that the
Secretary is notified by such organization (in such manner as
the Secretary may prescribe) that--
``(I) the organization has met the requirements of clause
(i) with respect to gain which was not recognized,
``(II) the organization does not intend to meet such
requirements, or
``(III) the organization failed to meet such requirements
within the prescribed period.
For the purposes of this clause, any 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.
``(iii) Destruction and loss.--For purposes of this
subparagraph, the destruction in whole or in part, theft,
seizure, requisition, or condemnation of property, shall be
treated as the sale of such property, and rules similar to
the rules provided by subsections (b), (c), (e), and (j) of
section 1034 (as in effect on the day before the date of the
enactment of the Taxpayer Relief Act of 1997) shall apply.''.
(b) Effective Date.--The amendment made by this section
shall apply with respect to the sale of any property for
which the 3-year period for offsetting gain by purchasing
other property under subparagraph (D) of section 512(a)(3) of
the Internal Revenue Code (as in effect on the day before the
date of the enactment of this Act) had not expired as of
January 1, 2001.
[[Page H8312]]
SEC. 113. EXEMPTION OF QUALIFIED 501(C)(3) BONDS FOR NURSING
HOMES FROM FEDERAL GUARANTEE PROHIBITIONS.
(a) In General.--For purposes of section 149(b)(1) of the
Internal Revenue Code of 1986, any qualified 501(c)(3) bond
(as defined in section 145 of such Code) shall not be treated
as federally guaranteed solely because such bond is part of
an issue supported by a letter of credit, if such bond--
(1) is issued after December 31, 2003, and before the date
which is 1 year after the date of the enactment of this Act,
and
(2) is part of an issue 95 percent or more of the net
proceeds of which are to be used to finance 1 or more of the
following facilities primarily for the benefit of the
elderly:
(A) Licensed nursing home facility.
(B) Licensed or certified assisted living facility.
(C) Licensed personal care facility.
(D) Continuing care retirement community.
(b) Limitation on Issuer.--Subsection (a) shall not apply
to any bond described in such subsection if the aggregate
authorized face amount of the issue of which such bond is a
part, when increased by the outstanding amount of such bonds
issued by the issuer during the period described in
subsection (a)(1) exceeds $15,000,000.
(c) Limitation on Beneficiary.--Rules similar to the rules
of section 144(a)(10) of the Internal Revenue Code of 1986
shall apply for purposes of this section, except that--
(1) ``$15,000,000'' shall be substituted for
``$40,000,000'' in subparagraph (A) thereof, and
(2) such rules shall be applied--
(A) only with respect to bonds described in this section,
and
(B) with respect to the aggregate authorized face amount of
all issues of such bonds which are allocable to the
beneficiary.
(d) Continuing Care Retirement Community.--For purposes of
this section, the term ``continuing care retirement
community'' means a community which provides, on the same
campus, a consortium of residential living options and
support services to persons at least 60 years of age under a
written agreement. For purposes of the preceding sentence,
the residential living options shall include independent
living units, nursing home beds, and either assisted living
units or personal care beds.
TITLE II--TAX REFORM AND IMPROVEMENTS RELATING TO CHARITABLE
ORGANIZATIONS AND PROGRAMS
SEC. 201. SUSPENSION OF TAX-EXEMPT STATUS OF TERRORIST
ORGANIZATIONS.
(a) In General.--Section 501 (relating to exemption from
tax on corporations, certain trusts, etc.) is amended by
redesignating subsection (p) as subsection (q) and by
inserting after subsection (o) the following new subsection:
``(p) Suspension of Tax-Exempt Status of Terrorist
Organizations.--
``(1) In general.--The exemption from tax under subsection
(a) with respect to any organization described in paragraph
(2), and the eligibility of any organization described in
paragraph (2) to apply for recognition of exemption under
subsection (a), shall be suspended during the period
described in paragraph (3).
``(2) Terrorist organizations.--An organization is
described in this paragraph if such organization is
designated or otherwise individually identified--
``(A) under section 212(a)(3)(B)(vi)(II) or 219 of the
Immigration and Nationality Act as a terrorist organization
or foreign terrorist organization,
``(B) in or pursuant to an Executive order which is related
to terrorism and issued under the authority of the
International Emergency Economic Powers Act or section 5 of
the United Nations Participation Act of 1945 for the purpose
of imposing on such organization an economic or other
sanction, or
``(C) in or pursuant to an Executive order issued under the
authority of any Federal law if--
``(i) the organization is designated or otherwise
individually identified in or pursuant to such Executive
order as supporting or engaging in terrorist activity (as
defined in section 212(a)(3)(B) of the Immigration and
Nationality Act) or supporting terrorism (as defined in
section 140(d)(2) of the Foreign Relations Authorization Act,
Fiscal Years 1988 and 1989); and
``(ii) such Executive order refers to this subsection.
``(3) Period of suspension.--With respect to any
organization described in paragraph (2), the period of
suspension--
``(A) begins on the later of--
``(i) the date of the first publication of a designation or
identification described in paragraph (2) with respect to
such organization, or
``(ii) the date of the enactment of this subsection, and
``(B) ends on the first date that all designations and
identifications described in paragraph (2) with respect to
such organization are rescinded pursuant to the law or
Executive order under which such designation or
identification was made.
``(4) Denial of deduction.--No deduction shall be allowed
under section 170, 545(b)(2), 556(b)(2), 642(c), 2055,
2106(a)(2), or 2522 for any contribution to an organization
described in paragraph (2) during the period described in
paragraph (3).
``(5) Denial of administrative or judicial challenge of
suspension or denial of deduction.--Notwithstanding section
7428 or any other provision of law, no organization or other
person may challenge a suspension under paragraph (1), a
designation or identification described in paragraph (2), the
period of suspension described in paragraph (3), or a denial
of a deduction under paragraph (4) in any administrative or
judicial proceeding relating to the Federal tax liability of
such organization or other person.
``(6) Erroneous designation.--
``(A) In general.--If--
``(i) the tax exemption of any organization described in
paragraph (2) is suspended under paragraph (1),
``(ii) each designation and identification described in
paragraph (2) which has been made with respect to such
organization is determined to be erroneous pursuant to the
law or Executive order under which such designation or
identification was made, and
``(iii) the erroneous designations and identifications
result in an overpayment of income tax for any taxable year
by such organization,
credit or refund (with interest) with respect to such
overpayment shall be made.
``(B) Waiver of limitations.--If the credit or refund of
any overpayment of tax described in subparagraph (A)(iii) is
prevented at any time by the operation of any law or rule of
law (including res judicata), such credit or refund may
nevertheless be allowed or made if the claim therefor is
filed before the close of the 1-year period beginning on the
date of the last determination described in subparagraph
(A)(ii).
``(7) Notice of suspensions.--If the tax exemption of any
organization is suspended under this subsection, the Internal
Revenue Service shall update the listings of tax-exempt
organizations and shall publish appropriate notice to
taxpayers of such suspension and of the fact that
contributions to such organization are not deductible during
the period of such suspension.''.
(b) Effective Date.--The amendments made by this section
shall apply to designations made before, on, or after the
date of the enactment of this Act.
SEC. 202. CLARIFICATION OF DEFINITION OF CHURCH TAX INQUIRY.
Subsection (i) of section 7611 (relating to section not to
apply to criminal investigations, etc.) is amended by
striking ``or'' at the end of paragraph (4), by striking the
period at the end of paragraph (5) and inserting ``, or'',
and by inserting after paragraph (5) the following:
``(6) information provided by the Secretary related to the
standards for exemption from tax under this title and the
requirements under this title relating to unrelated business
taxable income.''.
SEC. 203. EXTENSION OF DECLARATORY JUDGMENT REMEDY TO TAX-
EXEMPT ORGANIZATIONS.
(a) In General.--Paragraph (1) of section 7428(a) (relating
to creation of remedy) is amended--
(1) in subparagraph (B) by inserting after ``509(a))'' the
following: ``or as a private operating foundation (as defined
in section 4942(j)(3))''; and
(2) by amending subparagraph (C) to read as follows:
``(C) with respect to the initial qualification or
continuing qualification of an organization as an
organization described in subsection (c) (other than
paragraph (3)) or (d) of section 501 which is exempt from
tax under section 501(a), or''.
(b) Court Jurisdiction.--Subsection (a) of section 7428 is
amended in the material following paragraph (2) by striking
``United States Tax Court, the United States Claims Court, or
the district court of the United States for the District of
Columbia'' and inserting the following: ``United States Tax
Court (in the case of any such determination or failure) or
the United States Claims Court or the district court of the
United States for the District of Columbia (in the case of a
determination or failure with respect to an issue referred to
in subparagraph (A) or (B) of paragraph (1)),''.
(c) Effective Date.--The amendments made by this section
shall apply to pleadings filed with respect to determinations
(or requests for determinations) made after the date of the
enactment of this Act.
SEC. 204. LANDOWNER INCENTIVES PROGRAMS.
(a) In General.--Subsection (a) of section 126 is amended
by redesignating paragraph (10) as paragraph (11) and by
inserting after paragraph (9) the following new paragraph:
``(10) Landowner initiatives programs to conserve
threatened, endangered, or imperiled species, or protect or
restore habitat carried out under--
``(A) the Fish and Wildlife Coordination Act (16 U.S.C. 661
et seq.),
``(B) the Fish and Wildlife Act of 1956 (16 U.S.C. 742f),
or
``(C) section 6 of the Endangered Species Act (16 U.S.C.
11531 et seq.).''.
(b) Excludable Portion.--Subparagraph (A) of section
126(b)(1) is amended by inserting after ``Secretary of
Agriculture'' the following: ``(the Secretary of the
Interior, in the case of the landowner incentives programs
described in subsection (a)(10) and the programs described in
subsection (a)(11) that are implemented by the Department of
the Interior)''.
(c) Effective Date.--The amendments made by this section
shall apply to amounts received after December 31, 2003, in
taxable years ending after such date.
SEC. 205. MODIFICATIONS TO SECTION 512(B)(13).
(a) In General.--Paragraph (13) of section 512(b) (relating
to special rules for certain amounts received from controlled
entities) is amended by redesignating subparagraph (E) as
subparagraph (F) and by inserting after subparagraph (D) the
following new subparagraph:
``(E) Paragraph to apply only to excess payments.--
``(i) In general.--Subparagraph (A) shall apply only to the
portion of a specified payment received or accrued by the
controlling organization that exceeds the amount which would
have been paid or accrued if such payment met the
requirements prescribed under section 482.
[[Page H8313]]
``(ii) Addition to tax for valuation misstatements.--The
tax imposed by this chapter on the controlling organization
shall be increased by an amount equal to 20 percent of the
larger of--
``(I) such excess determined without regard to any
amendment or supplement to a return of tax, or
``(II) such excess determined with regard to all such
amendments and supplements.''.
(b) Effective Date.--
(1) In general.--The amendment made by this section shall
apply to payments received or accrued after December 31,
2003.
(2) Payments subject to binding contract transition rule.--
If the amendments made by section 1041 of the Taxpayer Relief
Act of 1997 did not apply to any amount received or accrued
in the first 2 taxable years beginning on or after the date
of the enactment of the Taxpayer Relief Act of 1997 under any
contract described in subsection (b)(2) of such section, such
amendments also shall not apply to amounts received or
accrued under such contract before January 1, 2001.
SEC. 206. SIMPLIFICATION OF LOBBYING EXPENDITURE LIMITATION.
(a) Repeal of Grassroots Expenditure Limit.--Paragraph (1)
of section 501(h) (relating to expenditures by public
charities to influence legislation) is amended to read as
follows:
``(1) General rule.--In the case of an organization to
which this subsection applies, exemption from taxation under
subsection (a) shall be denied because a substantial part of
the activities of such organization consists of carrying on
propaganda, or otherwise attempting, to influence
legislation, but only if such organization normally makes
lobbying expenditures in excess of the lobbying ceiling
amount for such organization for each taxable year.''.
(b) Excess Lobbying Expenditures.--Section 4911(b) is
amended to read as follows:
``(b) Excess Lobbying Expenditures.--For purposes of this
section, the term `excess lobbying expenditures' means, for a
taxable year, the amount by which the lobbying expenditures
made by the organization during the taxable year exceed the
lobbying nontaxable amount for such organization for such
taxable year.''.
(c) Conforming Amendments.--
(1) Section 501(h)(2) is amended by striking subparagraphs
(C) and (D).
(2) Section 4911(c) is amended by striking paragraphs (3)
and (4).
(3) Paragraph (1)(A) of section 4911(f) is amended by
striking ``limits of section 501(h)(1) have'' and inserting
``limit of section 501(h)(1) has''.
(4) Paragraph (1)(C) of section 4911(f) is amended by
striking ``limits of section 501(h)(1) are'' and inserting
``limit of section 501(h)(1) is''.
(5) Paragraphs (4)(A) and (4)(B) of section 4911(f) are
each amended by striking ``limits of section 501(h)(1)'' and
inserting ``limit of section 501(h)(1)''.
(6) Paragraph (8) of section 6033(b) (relating to certain
organizations described in section 501(c)(3)) is amended by
inserting ``and'' at the end of subparagraph (A) and by
striking subparagraphs (C) and (D).
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2003.
SEC. 207. PILOT PROJECT FOR FOREST CONSERVATION ACTIVITIES.
(a) Tax-Exempt Bond Financing.--
(1) In general.--For purposes of the Internal Revenue Code
of 1986, any qualified forest conservation bond shall be
treated as an exempt facility bond under section 142 of such
Code.
(2) Qualified forest conservation bond.--For purposes of
this section, the term ``qualified forest conservation bond''
means any bond issued as part of an issue if--
(A) 95 percent or more of the net proceeds (as defined in
section 150(a)(3) of such Code) of such issue are to be used
for qualified project costs,
(B) such bond is an obligation of the State of Washington
or any political subdivision thereof, and
(C) such bond is issued for a qualified organization before
December 31, 2006.
(3) Limitation on aggregate amount issued.--The maximum
aggregate face amount of bonds which may be issued under this
subsection shall not exceed $250,000,000.
(4) Qualified project costs.--For purposes of this
subsection, the term ``qualified project costs'' means the
sum of--
(A) the cost of acquisition by the qualified organization
from an unrelated person of forests and forest land located
in the State of Washington which at the time of acquisition
or immediately thereafter are subject to a conservation
restriction described in subsection (c)(2),
(B) interest on the qualified forest conservation bonds for
the 3-year period beginning on the date of issuance of such
bonds, and
(C) credit enhancement fees which constitute qualified
guarantee fees (within the meaning of section 148 of such
Code).
(5) Special rules.--In applying the Internal Revenue Code
of 1986 to any qualified forest conservation bond, the
following modifications shall apply:
(A) Section 146 of such Code (relating to volume cap) shall
not apply.
(B) For purposes of section 147(b) of such Code (relating
to maturity may not exceed 120 percent of economic life), the
land and standing timber acquired with proceeds of qualified
forest conservation bonds shall have an economic life of 35
years.
(C) Subsections (c) and (d) of section 147 of such Code
(relating to limitations on acquisition of land and existing
property) shall not apply.
(D) Section 57(a)(5) of such Code (relating to tax-exempt
interest) shall not apply to interest on qualified forest
conservation bonds.
(6) Treatment of current refunding bonds.--Paragraphs
(2)(C) and (3) shall not apply to any bond (or series of
bonds) issued to refund a qualified forest conservation bond
issued before December 31, 2006, if--
(A) the average maturity date of the issue of which the
refunding bond is a part is not later than the average
maturity date of the bonds to be refunded by such issue,
(B) the amount of the refunding bond does not exceed the
outstanding amount of the refunded bond, and
(C) the net proceeds of the refunding bond are used to
redeem the refunded bond not later than 90 days after the
date of the issuance of the refunding bond.
For purposes of subparagraph (A), average maturity shall be
determined in accordance with section 147(b)(2)(A) of such
Code.
(7) Effective date.--This subsection shall apply to
obligations issued on or after the date of enactment of this
Act.
(b) Items From Qualified Harvesting Activities Not Subject
to Tax or Taken Into Account.--
(1) In general.--Income, gains, deductions, losses, or
credits from a qualified harvesting activity conducted by a
qualified organization shall not be subject to tax or taken
into account under subtitle A of the Internal Revenue Code of
1986.
(2) Limitation.--The amount of income excluded from gross
income under paragraph (1) for any taxable year shall not
exceed the amount used by the qualified organization to make
debt service payments during such taxable year for qualified
forest conservation bonds.
(3) Qualified harvesting activity.--For purposes of
paragraph (1)--
(A) In general.--The term ``qualified harvesting activity''
means the sale, lease, or harvesting, of standing timber--
(i) on land owned by a qualified organization which was
acquired with proceeds of qualified forest conservation
bonds, and
(ii) pursuant to a qualified conservation plan adopted by
the qualified organization.
(B) Exceptions.--
(i) Cessation as qualified organization.--The term
``qualified harvesting activity'' shall not include any sale,
lease, or harvesting for any period during which the
organization ceases to qualify as a qualified organization.
(ii) Exceeding limits on harvesting.--The term ``qualified
harvesting activity'' shall not include any sale, lease, or
harvesting of standing timber on land acquired with proceeds
of qualified forest conservation bonds to the extent
that--
(I) the average annual area of timber harvested from such
land exceeds 2.5 percent of the total area of such land, or
(II) the quantity of timber removed from such land exceeds
the quantity which can be removed from such land annually in
perpetuity on a sustained-yield basis with respect to such
land.
The limitations under subclauses (I) and (II) shall not apply
to post-fire restoration and rehabilitation or sanitation
harvesting of timber stands which are substantially damaged
by fire, windthrow, or other catastrophes, or which are in
imminent danger from insect or disease attack.
(4) Termination.--This subsection shall not apply to any
qualified harvesting activity occurring after the date on
which there is no outstanding qualified forest conservation
bond or any such bond ceases to be a tax-exempt bond.
(5) Partial recapture of benefits if harvesting limit
exceeded.--If, as of the date that this subsection ceases to
apply under paragraph (4), the average annual area of timber
harvested from the land exceeds the requirement of paragraph
(3)(B)(ii)(I), the tax imposed by chapter 1 of such Code
shall be increased, under rules prescribed by the Secretary
of the Treasury, by the sum of the tax benefits attributable
to such excess and interest at the underpayment rate under
section 6621 of such Code for the period of the underpayment.
(c) Definitions.--For purposes of this section--
(1) Qualified conservation plan.--The term ``qualified
conservation plan'' means a multiple land use program or plan
which--
(A) is designed and administered primarily for the purposes
of protecting and enhancing wildlife and fish, timber, scenic
attributes, recreation, and soil and water quality of the
forest and forest land,
(B) mandates that conservation of forest and forest land is
the single-most significant use of the forest and forest
land, and
(C) requires that timber harvesting be consistent with--
(i) restoring and maintaining reference conditions for the
region's ecotype,
(ii) restoring and maintaining a representative sample of
young, mid, and late successional forest age classes,
(iii) maintaining or restoring the resources' ecological
health for purposes of preventing damage from fire, insect,
or disease,
(iv) maintaining or enhancing wildlife or fish habitat, or
(v) enhancing research opportunities in sustainable
renewable resource uses.
(2) Conservation restriction.--The conservation restriction
described in this paragraph is a restriction which--
(A) is granted in perpetuity to an unrelated person which
is described in section 170(h)(3) of such Code and which, in
the case of a nongovernmental unit, is organized and operated
for conservation purposes,
(B) meets the requirements of clause (ii) or (iii)(II) of
section 170(h)(4)(A) of such Code,
(C) obligates the qualified organization to pay the costs
incurred by the holder of the conservation restriction in
monitoring compliance with such restriction, and
(D) requires an increasing level of conservation benefits
to be provided whenever circumstances allow it.
[[Page H8314]]
(3) Qualified organization.--The term ``qualified
organization'' means an organization--
(A) which is a nonprofit organization substantially all the
activities of which are charitable, scientific, or
educational, including acquiring, protecting, restoring,
managing, and developing forest lands and other renewable
resources for the long-term charitable, educational,
scientific and public benefit,
(B) more than half of the value of the property of which
consists of forests and forest land acquired with the
proceeds from qualified forest conservation bonds,
(C) which periodically conducts educational programs
designed to inform the public of environmentally sensitive
forestry management and conservation techniques,
(D) which has at all times a board of directors--
(i) at least 20 percent of the members of which represent
the holders of the conservation restriction described in
paragraph (2),
(ii) at least 20 percent of the members of which are public
officials, and
(iii) not more than one-third of the members of which are
individuals who are or were at any time within 5 years before
the beginning of a term of membership on the board, an
employee of, independent contractor with respect to, officer
of, director of, or held a material financial interest in, a
commercial forest products enterprise with which the
qualified organization has a contractual or other financial
arrangement,
(E) the bylaws of which require at least two-thirds of the
members of the board of directors to vote affirmatively to
approve the qualified conservation plan and any change
thereto, and
(F) upon dissolution, is required to dedicate its assets
to--
(i) an organization described in section 501(c)(3) of such
Code which is organized and operated for conservation
purposes, or
(ii) a governmental unit described in section 170(c)(1) of
such Code.
(4) Unrelated person.--The term ``unrelated person'' means
a person who is not a related person.
(5) Related person.--A person shall be treated as related
to another person if--
(A) such person bears a relationship to such other person
described in section 267(b) (determined without regard to
paragraph (9) thereof), or 707(b)(1), of such Code,
determined by substituting ``25 percent'' for ``50 percent''
each place it appears therein, and
(B) in the case such other person is a nonprofit
organization, if such person controls directly or indirectly
more than 25 percent of the governing body of such
organization.
(d) Report.--
(1) In general.--The Comptroller General of the United
States shall conduct a study on the pilot project for forest
conservation activities under this section. Such study shall
examine the extent to which forests and forest lands were
managed during the 5-year period beginning on the date of the
enactment of this Act to achieve the goals of such project.
(2) Submission of report to congress.--Not later than six
years after the date of the enactment of this Act, the
Comptroller General shall submit a report of such study to
the Committee on Ways and Means and the Committee on
Resources of the House of Representatives and the Committee
on Finance and the Committee on Energy and Natural Resources
of the Senate.
TITLE III--OTHER PROVISIONS
SEC. 301. COMPASSION CAPITAL FUND.
Title IV of the Social Security Act (42 U.S.C. 601-679b) is
amended by adding at the end the following:
``PART F--COMPASSION CAPITAL FUND
``SEC. 481. SECRETARY'S FUND TO SUPPORT AND REPLICATE
PROMISING SOCIAL SERVICE PROGRAMS.
``(a) Grant Authority.--
``(1) In general.--The Secretary may make grants to support
any private entity that operates a promising social services
program.
``(2) Applications.--An entity desiring to receive a grant
under paragraph (1) shall submit to the Secretary an
application for the grant, which shall contain such
information as the Secretary may require.
``(b) Contract Authority, etc.--The Secretary may enter
into a grant, contract, or cooperative agreement with any
entity under which the entity would provide technical
assistance to another entity to operate a social service
program that assists persons and families in need, including
by--
``(1) providing the other entity with--
``(A) technical assistance and information, including legal
assistance and other business assistance;
``(B) information on capacity-building;
``(C) information and assistance in identifying and using
best practices for serving persons and families in need; or
``(D) assistance in replicating programs with demonstrated
effectiveness in assisting persons and families in need; or
``(2) supporting research on the best practices of social
service organizations.
``(c) Guidance and Technical Assistance.--The Secretary may
use not more than 25 percent of the amount appropriated under
this section for a fiscal year to provide guidance and
technical assistance to States and political subdivisions of
States with respect to the implementation of any social
service program.
``(d) Social Services Program Defined.--In this section,
the term `social services program' means a program that
provides benefits or services of any kind to persons and
families in need.
``(e) Limitations on Authorization of Appropriations.--To
carry out this section, there are authorized to be
appropriated to the Secretary $150,000,000 for fiscal year
2004, and such sums as may be necessary for fiscal years 2005
through 2008.''.
SEC. 302. REAUTHORIZATION OF ASSETS FOR INDEPENDENCE
DEMONSTRATION.
(a) In General.--Section 416 of the Assets for Independence
Act (title IV of Public Law 105-285; 42 U.S.C. 604 note) is
amended by striking ``and 2003'' and inserting ``2003, 2004,
2005, 2006, 2007, and 2008''.
(b) Removal of Economic Literacy Activities From Limitation
on Use of Amounts in the Reserve Fund.--Section 407(c)(3) of
such Act (title IV of Public Law 105-285; 42 U.S.C. 604 note)
is amended by adding at the end the following: ``The
preceding sentences of this paragraph shall not apply to
amounts used by an entity for any activity described in
paragraph (1)(A).''.
(c) Eligibility Expanded To Include Individuals in
Households With Income Not Exceeding 50 Percent of Area
Median Income.--Section 408(a)(1) of such Act (title IV of
Public Law 105-285; 42 U.S.C. 604 note) is amended to read as
follows:
``(1) Income test.--The adjusted gross income of the
household--
``(A) does not exceed 200 percent of the poverty line (as
determined by the Office of Management and Budget) or the
earned income amount described in section 32 of the Internal
Revenue Code of 1986 (taking into account the size of the
household); or
``(B) does not exceed 50 percent of the area median income
(as determined by the Secretary of Housing and Urban
Development) for the area in which the household is
located.''.
(d) Extension of Time for Account Holders To Access Federal
Funds.--Section 407(d) of such Act (title IV of Public Law
105-285; 42 U.S.C. 604 note) is amended--
(1) in the subsection heading, by striking ``When Project
Terminates''; and
(2) by striking ``upon'' and inserting ``on the date that
is 6 months after''.
(e) Verification of Postsecondary Education Expenses.--
Section 404(8)(A) of such Act (title IV of Public Law 105-
285; 42 U.S.C. 604 note) is amended in the 1st sentence by
inserting ``or a vendor, but only to the extent that the
expenses are described in a document which explains the
educational items to be purchased, and the document and
the expenses are approved by the qualified entity'' before
the period.
(f) Authority To Use Excess Interest To Fund Other
Individual Development Accounts.--Section 410 of such Act
(title IV of Public Law 105-285; 42 U.S.C. 604 note) is
amended--
(1) in subsection (a)(3)--
(A) by striking ``any interest that has accrued'' and
inserting ``interest that has accrued during that period'';
and
(B) by striking the period and inserting ``, but only to
the extent that the amount of the interest does not exceed
the amount of interest that has accrued during that period on
amounts deposited in the account by that individual.''; and
(2) by adding at the end the following:
``(f) Use of Excess Interest To Fund Other Individual
Development Accounts.--To the extent that a qualified entity
has an amount that, but for the limitation in subsection
(a)(3), would be required by that subsection to be deposited
into the individual development account of an individual or
into a parallel account maintained by the qualified entity,
the qualified entity may deposit the amount into the
individual development account of any individual or into any
such parallel account maintained by the qualified entity.''.
SEC. 303. SENSE OF THE CONGRESS REGARDING CORPORATE
CONTRIBUTIONS TO FAITH-BASED ORGANIZATIONS,
ETC.
(a) Findings.--The Congress finds as follows:
(1) America's community of faith has long played a leading
role in dealing with difficult societal problems that might
otherwise have gone unaddressed.
(2) President Bush has called upon Americans ``to revive
the spirit of citizenship . . . to marshal the compassion of
our people to meet the continuing needs of our Nation''.
(3) Although the work of faith-based organizations should
not be used by government as an excuse for backing away from
its historic and rightful commitment to help those who are
disadvantaged and in need, such organizations can and should
be seen as a valuable partner with government in meeting
societal challenges.
(4) Every day faith-based organizations in the United
States help people recover from drug and alcohol addiction,
provide food and shelter for the homeless, rehabilitate
prison inmates so that they can break free from the cycle of
recidivism, and teach people job skills that will allow them
to move from poverty to productivity.
(5) Faith-based organizations are often more successful in
dealing with difficult societal problems than government and
non-sectarian organizations.
(6) As President Bush has stated, ``It is not sufficient to
praise charities and community groups; we must support them.
And this is both a public obligation and a personal
responsibility.''.
(7) Corporate foundations contribute billions of dollars
each year to a variety of philanthropic causes.
(8) According to a study produced by the Capital Research
Center, the 10 largest corporate foundations in the United
States contributed $1,900,000,000 to such causes.
(9) According to the same study, faith-based organizations
only receive a small fraction of the contributions made by
corporations in the United States, and 6 of the 10
corporations that give the most to philanthropic causes
explicitly ban or restrict contributions to faith-based
organizations.
(b) Corporations Encouraged To Contribute to Faith-Based
Organizations.--The Congress calls on corporations in the
United States, in the words of the President, ``to give
[[Page H8315]]
more and to give better'' by making greater contributions to
faith-based organizations that are on the front lines
battling some of the great societal challenges of our day.
(c) Sense of the Congress.--It is the sense of Congress
that--
(1) corporations in the United States are important
partners with government in efforts to overcome difficult
societal problems; and
(2) no corporation in the United States should adopt
policies that prohibit the corporation from contributing to
an organization that is successfully advancing a
philanthropic cause merely because such organization is faith
based.
SEC. 304. MATERNITY GROUP HOMES.
Section 322 of the Runaway and Homeless Youth Act (42
U.S.C. 5714-2) is amended--
(1) in subsection (a)(1), by inserting ``(including
maternity group homes)'' after ``group homes''; and
(2) by adding at the end the following:
``(c) Maternity Group Home.--In this part, the term
`maternity group home' means a community-based, adult-
supervised group home that provides--
``(1) young mothers and their children with a supportive
and supervised living arrangement in which such mothers are
required to learn parenting skills, including child
development, family budgeting, health and nutrition, and
other skills to promote their long-term economic independence
and the well-being of their children; and
``(2) pregnant women with--
``(A) information regarding the option of placing children
for adoption through licensed adoption service providers;
``(B) assistance with prenatal care and child birthing; and
``(C) pre- and post-placement adoption counseling.''.
SEC. 305. AUTHORITY OF STATES TO USE 10 PERCENT OF THEIR TANF
FUNDS TO CARRY OUT SOCIAL SERVICES BLOCK GRANT
PROGRAMS.
Section 404(d)(2) of the Social Security Act (42 U.S.C.
604(d)(2)) is amended to read as follows:
``(2) Limitation on amount transferable to title xx
programs.--A State may use not more than 10 percent of the
amount of any grant made to the State under section 403(a)
for a fiscal year to carry out State programs pursuant to
title XX.''.
The SPEAKER pro tempore. After one hour of debate on the bill, as
amended, it shall be in order to consider the further amendment printed
in part B of the report, if offered by the gentleman from Maryland (Mr.
Cardin), or his designee, which shall be considered read, and shall be
debatable for one hour, equally divided and controlled by the proponent
and an opponent.
The gentleman from California (Mr. Thomas) and the gentleman from
California (Mr. Stark) each will control 30 minutes of debate on the
bill.
The Chair recognizes the gentleman from California (Mr. Thomas).
Mr. THOMAS. Mr. Speaker, I yield myself such time as I may consume.
First of all, I want to compliment the cosponsors of the bill, the
gentleman from Missouri (Mr. Blunt) and the gentleman from Tennessee
(Mr. Ford). The fact that they decided on a bipartisan approach, I
think set the tone for the changes that result in the bill we have
before us.
The President had indicated that one of his top priorities, as he
said, to rally the armies of compassion, to help the underprivileged in
the United States is, in fact, to a certain extent a uniquely American
structure dealing with the creation of foundations, charitable trusts
and other structures to assist those in need in a private plan from
those who have wealth.
These plans, approaches and foundations are governed, especially in
terms of a privileged position, under the tax code as those who, when
they conduct these activities, are exempt from various taxable
consequences. Periodically, we really do need to review the structure,
the relationships and the way in which these foundations and other
structures relate to the tax code.
In addition to that, there is nothing wrong with this society,
through the tax code, influencing in a positive way a people's
willingness to carry on contributions and charitable acts. That really
is the core of H.R. 7, and I am pleased to say, notwithstanding the
fact that the minority will offer a substitute for the bill, those
portions that I have just discussed are identical between H.R. 7 and
the substitute that will be offered.
The difference is about other actions, other money, other funding
arguments. Those will be examined in terms of the substitute versus the
underlying bill, but I want to underscore, this bill came out of the
Committee on Ways and Means by a voice vote. What that means is that,
basically, it was supported by all of the Members. The compromise that
was achieved that produced this result is an excellent example of
people who are going to be governed working with those people who are
empowered to do the governing and resolving differences.
I do believe the core portion of H.R. 7 is not controversial and
should be passed.
Mr. Speaker, last week H.R. 7, the Charitable Giving Act of 2003
passed the Committee on Ways and Means, as amended, by voice vote.
The Charitable Giving Act is one of President Bush's top priorities,
and will--as he has said--``rally the armies of compassion'' to help
the underprivileged in the United States. The bill encourages
charitable contributions by individuals, businesses and foundations,
while improving the effectiveness and efficacy of the government's
delivery program for these important donations. The tax incentives in
H.R. 7 will encourage and promote philanthropic donations by removing
barriers that restrict giving.
H.R. 7 allows those taxpayers who do not itemize, which accounts for
roughly two-thirds of returns, the opportunity to deduct a portion of
their charitable contributions.
The bill provides an exclusion from gross income for otherwise
taxable withdrawals from traditional or Roth IRAs that are made for
charitable purposes. IRAs represent a major untapped source of
charitable contributions, and it is estimated that Americans have used
these plans to save roughly $2.3 trillion. By allowing taxpayers who
have reached age 70\1/2\ to make tax-free transfers of IRA assets for
charitable purposes, this provision represents a key source of
increased charitable giving while also providing safeguards to ensure
that IRA owners have ample assets for retirement.
H.R. 7 increases incentives that encourage benevolent contributions
by corporations and other business. The bill increases the cap on
corporate charitable contributions from 10 to 20 percent of modified
taxable income and allows all businesses, rather than just C
corporations, to take advantage of an extension of enhanced deductions
for donations of food inventory. In addition, H.R. 7 better allows
corporations to donate scientific property, computer technology and
equipment to enhance research, and allows a shareholder in an S
corporation to receive the benefit of a full charitable deduction for
charitable contributions made by the S corporation.
In addition, this bill includes legislation to authorize a new
compassion capital fund to support propitious social programs while
extending and strengthening current efforts that urge low-income
families to save in hopes to pay for school, start a business, or
purchase a home. Furthermore, the enhanced State flexibility outlined
in H.R. 7 allows States to transfer 10 percent of annual Federal cash
welfare funds to the Social Services Block Grant in order to better
help low-income families.
Mr. Speaker, this legislation is very important for two reasons: (1)
it will help Americans help those who need it the most--whether it is
through initiatives to end substance abuse and gang related violence,
or to improve the health of the neediest; and (2) it will ensure
uniformity exists in how charitable foundations operate. I urge my
colleagues to vote in support of H.R. 7.
Mr. Speaker, I yield the balance of my time to the gentleman from
Missouri (Mr. Blunt) and ask unanimous consent that he control the
balance of the time.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from California?
There was no objection.
Mr. STARK. Mr. Speaker, I yield myself such time as I may consume to
address not just this bill but all the things that the bill either
ignores or demeans by suggesting that these charitable acts will solve
some of the major problems in our country.
The bill suggests that it is going to spend $13 billion, when any
reasonable assessment would suggest that it is a $23-billion bill
because it sunsets the tax deduction in the second year, and we know
that as night follows day, the next request will be to make it
permanent, and I think it is rather deceptive to suggest to the public
that it is, in fact, 13 when it is arguably substantially more, if one
believes that the bill does the right thing to begin with.
The bill ought to be noted for what it does not do. What it does not
do is deal with 12 million children whose parents will not receive a
tax credit, which the President supports, the other body supports, and
for some reason, my Republican colleagues in this House feel that
because their parents pay little or no income tax, while they may pay
substantial payroll taxes, they ought not to receive this money.
So many of the parents who are such low income, including the parents
of 250,000 or more children who are children of our brave troops who
will not
[[Page H8316]]
receive this money, many of those same families will be importuned and
given $6 a month in tax deduction for contributing to various causes.
One imagines the United Crusade or whatever.
Many of us suspect that that will not generate very much charitable
giving, and it would seem to me to be much more direct to deal with tax
credits for families under $25,000 a year who have children to raise
wherein health care is limited, wherein there is no help for housing or
clothing or school subsidies which we have talked about on this floor.
So, again, this bill is notable for what it does not do.
Then it has a certain amount of arrogance in what it does do. For
example, it is almost cute, there is a college housing project, as it
is called, in this bill, and what that basically does is help Delta
Kappa Epsilon and Phi Beta Kappa and Kappa Kappa Alpha. It is a gift to
fraternity and sorority houses on college campuses.
{time} 1215
Now, I have no quarrel with fraternities and sororities; but they
are, indeed, private social clubs; and it seems to me that we are
taking the first step in giving taxpayer dollars to private clubs that
have every right to restrict their membership by race, by religion, by
ethnicity, or any other reason. And there is no quarrel, but we have
never before in the history of our Tax Code of our country given
taxpayer dollars to golf clubs or tennis clubs or any other types of
clubs.
And then we are going to go and have an experiment, and this is an
experiment for a very limited group of Americans. We are going to give
$61 million to create experiments to show that by cutting down trees we
are going to save trees. Now that may work, but if it works, it is only
going to work in the State of Washington because the $61 million in
experiments cannot be used in any one of the other 49 States.
I noticed that the two distinguished sponsors of this bill are from
Tennessee. To my knowledge, there is a timber industry in Tennessee.
What is so shabby about the timber industry in Tennessee that we cannot
help them do an experiment in ecological management of our forests?
There happens to be a timber industry in California where the chairman
of the Committee on Ways and Means resides. Why would we not like to
help preserve the redwoods in California with some of this money, or
the State of Oregon or the State of Maine? Why is it that only one
State gets to participate in this experiment? And I might add it adds
up to one timber company, the Weyerhaeuser timber company, which is
owned by a very rich family, so we maybe could say it is only one
family that participates. That is not right. It is not the proper thing
to do.
If these programs are good, in every other experiment, we let people
apply and we try and award these not as pork and a reward to some
individual politician, but we try to reward them to the program which
shows they have the most potential for benefiting the most Americans.
That is the way a democracy ought to work; and in this new
administration which tends to interpret democracy any way that the
Attorney General chooses on that particular day, we seem to be
redefining in this bill how we should apply charity and what are
charitable organizations, how we should apply the largess of the
Federal Government with rifle-shot approaches to individual
corporations.
Mr. Speaker, this is a bill that is fraught with help for individual
companies and individual interests; and it is most notable, as I would
like to repeat once again, for what it does not do. It does not help
those 12 million children in low-income families who most need
assistance and which this House has repeatedly turned its back on due
to the Republican leadership's refusal to bring up the child tax credit
extension.
So it is with heavy heart, Mr. Speaker, that I say that charitable
giving here has been politicized to the extent that under the guise of
helping low-income people with $6 a month, we are giving humongous
rewards to fraternities and sororities, to the Weyerhaeuser timber
company in the State of Washington, and to people who arguably do not
need that charity today.
Mr. Speaker, I reserve the balance of my time.
Mr. BLUNT. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I am glad to be here to talk about this bill. This is a
tax bill. It is a tax bill that really is an important step toward what
we do for charities in this country. It is an important step in the
President's faith-based agenda; but certainly as a tax bill that
encourages charitable giving, all that giving is not necessarily done
to faith-based institutions. This has broad bipartisan support. I am
pleased with the way the Committee on Ways and Means dealt with this
bill and brought this bill to the floor without any dissenting votes on
Tuesday of last week.
The gentleman from Tennessee (Mr. Ford), a cosponsor of the bill,
worked hard on this bill; and we have over 80 bipartisan House
cosponsors working with us on this bill.
The truth is our charities need some encouragement. They have faced
some difficult times. 2001 was the first year that charitable giving in
this country was lower than the year before. Giving in 2002 seems to
continue to reflect that trend. Corporate giving fell by almost 15
percent between 2000 and 2001.
As we look towards what this does for charities generally, we can
also look at what it does for faith-based charities which are so
important in providing services in the country. Seventy-five percent of
the food pantries in America are run by religious organizations, 71
percent of the food kitchens are faith based, 43 percent of the
shelters are run by the faith-based community.
This act really allows those who give to charity more ways to give
and encourages them to give in new ways. This is a change in the Tax
Code that has impact. In fact, the Congressional Budget Office estimate
of the impact of this bill would indicate that $45 to $50 billion more
will be given to charities over the next 10 years if this bill becomes
law than would be given to charities if this bill does not become law.
There are many things, particularly as charities reach out to
individuals in need, food kitchens, shelters, food pantries, where the
charity has proved to be such a compassionate way to deal with this
problem with the most impact. Clearly the family unit intact is the
best way to provide services to people. After that I think we could
have a debate that my side would win advocating that when charities
step in, they are almost always more compassionate, quicker, more cost
effective, and get out more of the money available to them, and get
help sooner and quicker and more effectively than any other way to do
this. Of course, where both the family has failed, where individuals
through the church and community have not been able to do the job,
there is a place for government programs. But there is a clear place
for charities.
Let me talk about two or three things in this bill that make a
difference in terms of how millions of Americans are affected. Eighty-
six million Americans do not itemize their taxes, but of those 86
million Americans, many give money every week, every month, every year
to a church or charity. The bill of the gentleman from Tennessee (Mr.
Ford) and my bill changes the Tax Code in a way that lets those people
who give to church and charity have credit for some of the giving that
they do to church and charity. Just like people who itemize their
taxes, they have to demonstrate that they did make that gift, but this
treats them differently from the people who do not itemize their taxes
and do not give. This really does reward giving for individuals and
couples.
The second big area of impact of the bill, I believe, will be the
changes we make in those resources and how we deal with those resources
that people have in IRAs. There are $2.5 trillion in the country today
in IRAs. Many people, as they begin to utilize their IRAs, suddenly
realize they do not have enough money in their IRAs to do all of the
things that they would like to do; but many people realize through some
good fortune in investing, an extraordinary commitment to funding their
IRA, through that and the other things they have done providing for
their retirement, their IRA is a big resource of money that they do not
need or are not likely to need all of.
Today, the tax consequences of gifting IRAs are such that almost none
of that money is given to charity or
[[Page H8317]]
faith-based charities. The change in this bill removes the tax obstacle
from giving that money. After people reach the age of 70\1/2\ and begin
to evaluate their resources and the need for those resources, suddenly
that $2.5 trillion out there in IRAs is available for gifting
potential.
If we talk to our friends who raise money for their local college or
university, for the Red Cross, for the blood center, for whatever it
would be, they would say that this portion of the bill is the portion
that they look to which has the greatest opportunity to change giving
in the future.
We raise the cap on corporate charitable contributions over the next
10 years from 10 percent that could be gifted of profits to 20 percent
of profits. We extend current incentives for food donations to apply to
even more farmers, more restaurants, more retailers, more wholesalers.
We allow value added to those products to have a greater value in
gifting than it has today.
This bill reauthorizes a program which allows low-income working
Americans the opportunity to build assets through matching savings
accounts, known as IDAs, which can be used to purchase a home, expand
educational opportunity, or to start a small business.
This bill provides $150 million a year for a compassion capital fund
to assist small community and faith-based organizations who want to
start a charitable outreach to do that, to set up their organization or
to expand their capacity to serve. This encourages conservation by
private landowners by requiring certain Federal grant money for
conservation be treated as tax free.
Mr. Speaker, I yield 1\1/3\ minutes to the gentleman from Wisconsin
(Mr. Ryan) to respond to one statement made by the gentleman from
California (Mr. Stark).
Mr. RYAN of Wisconsin. Mr. Speaker, I thank the gentleman for his
tireless work on a bipartisan basis to bring this bill to the floor.
I want to quickly address some of the inaccuracies dealing with the
collegiate housing issue. The claim is the collegiate housing issue
only helps sororities and fraternities. Let me tell Members exactly
what this does and does not do. Number one, for many of us who
represent colleges and universities in our districts, we realize that
there is an undersupply of off-campus housing and an overcrowding on
campus in our Nation's colleges and universities.
What this simply does is it allows off-campus housing be built by
nonprofit organizations to address this need, to bring up to code, to
fire code, off-campus housing because right now if you are going to
invest tax-deductible dollars into a nonprofit, you can deduct those
and invest them on campus for university housing; but you cannot take
tax-deductible dollars to invest in building collegiate housing off
campus even though they are nonprofit, not-for-profit foundations.
So this goes well beyond sororities and fraternities. It goes to
religious organizations, Hillel; it goes to nonprofits and fraternities
and sororities, and only to university students who have academic
careers, not to country clubs or anything else. It is tightly defined,
and it puts the need where it is required and that is to address this
critical shortage of bringing buildings up to code and addressing this
housing shortage need.
Mr. STARK. Mr. Speaker, I yield 5\1/2\ minutes to the gentleman from
Maryland (Mr. Cardin), the author of our proposed Democratic
substitute, who can speak to the issue of how we might pay for this
bill.
{time} 1230
Mr. CARDIN. Mr. Speaker, first let me compliment the gentleman from
Missouri (Mr. Blunt), the sponsor of this legislation, and the
gentleman from Tennessee (Mr. Ford) for reaching, I think, a fair
compromise on some very controversial issues so that we really do have
a chance to enact a bill this year that can help our faith-based
institutions, our nonprofit institutions in carrying out their very
important responsibility. Major compromises were reached along with
Senator Lieberman and Senator Santorum in the Senate that would provide
our sponsors in the House to eliminate from the bill a very
controversial provision dealing with employment discrimination. I know
that many of our Members have been concerned about that. Those
provisions are not included in this legislation, and I want to
compliment all involved who were responsible for the removal of that
provision.
I also want to compliment the architects of this legislation for
working out a fair compromise as it relates to a foundation's
administrative costs. We have a fair compromise on that issue that puts
some Federal controls on administrative costs but also allows the
foundations to be able to do their business in the most cost-effective
way.
In my view, this legislation is a positive help to faith-based
institutions, nonprofit institutions and is consistent with the
tradition of our country to maintain the church-state separation. There
is help here for those who want to privately give, whether they be
individuals or corporations, to our nonprofit community through the use
of direct contributions or their IRAs.
Mr. Speaker, let me also agree with the gentleman from Wisconsin (Mr.
Ryan) in regards to the provisions relating to housing.
I think this bill is a positive bill. I agree with the distinguished
Republican whip that this bill has moved in a bipartisan way through
this body and through the other body and we therefore have a good bill
before us. I would urge my good friend to continue that process and let
Members vote their convictions on the amendment that I will be offering
a little bit later.
It includes two more provisions. It builds on the underlying bill but
adds two more provisions that has strong bipartisan support not only in
this body but also the other body. It provides an extra $1.1 billion
for the social services block grant program. In 1996, we were financing
the social services block grant program at $2.8 billion a year. We cut
it in the welfare bill to $2.38 billion a year but we made a commitment
in that legislation that we would restore that cut in 2003. That is
exactly what the Cardin amendment will do. And it has strong bipartisan
support. Many Members on the Republican side of the Committee on Ways
and Means support that change. I hope they will vote that way today. It
is vitally important to our faith-based institutions.
Let me just give my colleagues one example. Catholic Charities relies
upon public programs for 62 percent of their support. The social
services block grant program is a very important part of that. It
provides day care for low-income families, offers counseling services
to at-risk youth, provides nutritional assistance to the elderly and
provides community-based care to the disabled. This is their number one
priority as far as help in order to be able to carry out their very
important mission.
The second change is that the bill is fully paid for by closing
corporate loopholes through tax shelters. I know that a document was
sent out that says this is extremely controversial. If it is extremely
controversial, why did 95 members of the other body vote in favor of
it? It passed 95 to 3 or 4 in the Senate. It is not controversial. It
is controversial to add $13 billion more to the national debt and not
pay for it. So this amendment pays for the cost of the bill through a
provision that is good tax policy.
Our deficit this year is projected to grow by over $500 billion. That
does not even include the $87 billion that the President has asked us
to pass by a supplemental appropriation to prosecute the war in Iraq
and Afghanistan. What my amendment will do is close tax shelters by
codifying the practice of the courts that will bring in moneys from
activities that have no economic value. It is what the other body did
to pay for it.
There is one more thing I might add. We are in the closing days of
this first session of this Congress. Major differences between the
House and Senate will have difficult times being reconciled in
conference. The adoption of my amendment gives us a much better chance
to get this bill to the President this year. I urge my colleagues not
only to support the underlying bill, support the Cardin amendment so
that we can get a bill to the President and that we can also accomplish
two more important factors that I think are supported on a bipartisan
basis. I urge support for the amendment that will be offered later and
I hope that we can continue to work in a bipartisan way to get this
bill to the President's desk.
[[Page H8318]]
Mr. BLUNT. Mr. Speaker, I appreciate the gentleman from Maryland's
work on getting this bill out of committee unanimously and the fact
that it is totally included in his substitute.
Mr. Speaker, I yield 2 minutes to the gentlewoman from Washington
(Ms. Dunn).
Ms. DUNN. Mr. Speaker, I rise in support of H.R. 7 and I call for its
swift adoption by the House. I think this is a piece of legislation
that shows that all of us care and we are delighted to have it before
the body today.
I do want to respond to a mistaken and outdated characterization that
came up in previous comments about one of the provisions on forestry
bonds in this piece of legislation. This is a provision that was passed
by this House last March. Forestry bonds as included in H.R. 7 are a
new and collaborative approach to preserving sensitive lands that are
close to major population areas. Instead of wasting millions of dollars
on lawsuits, which has been the case often in the past between members
of the conservation community and timber owners, this proposal enables
a board of trustees made up of timber executives, of conservationists
and people representing the Contract Logging Association to purchase
property through tax-free bonds from a willing seller. Twenty percent
of the property is immediately put into conservation easements,
probably the most sensitive portion of the property, around lakes and
rivers and streams, for example. There is a continuation, however, of
timber harvests, because the purpose of the harvests must be to pay off
the bonds that are granted by an organization within the involved
State. It is a broadly supported provision, broadly supported by the
conservation community and also the timber community. I think it is an
ideal way to provide a collaborative approach, one that will be an
experiment and I think will yield great returns certainly out of this
experiment, perhaps eventually something that could be used by folks
all over the United States to preserve these important properties.
Mr. STARK. Mr. Speaker, I am pleased to yield 5 minutes to the
gentleman from Wisconsin (Mr. Kleczka).
Mr. KLECZKA. Mr. Speaker, I always thought that charitable giving
came from the heart and not through tax breaks in the Federal Tax Code.
I come to the floor today to oppose this bill and I feel somewhat like
the skunk at the picnic, but I think it is time that this Congress act
more responsibly.
Let me give my colleagues a little background as to where we are as
far as the Federal deficit. This administration took over and inherited
a $236 billion surplus. In 4 short years, they have turned it into a
deficit, and the Congressional Budget Office indicates that deficit
will be $580 billion. Yes, there has been a downturn in the economy,
but more importantly over the last few years, this Congress has given
almost $3 trillion in tax cuts. If these cuts were affordable, one
would say fine. But they are not, my friends. For every tax cut we give
today, it goes on the deficit and your kids and your grandkids are
going to pay for it. Not us, your kids and grandkids will.
So here we have a bill that costs $13 billion and it is geared to
enhance charitable giving. What a noble purpose. If the economy was
different, if the fiscal picture for the country was different, I
probably would be supporting the bill, also. But, my friends, the
plain, simple fact is, it is nice but we cannot afford it. My
constituents would like to go and buy a new car and a new refrigerator,
and those things are nice, but they cannot afford it, so they do not do
it. But this Congress just cannot stop giving away money.
Let us look at the bill itself. In the bill, we double the corporate
charitable giving deduction. Currently corporations can give away and
take a tax credit for 10 percent of their gross income. This bill
doubles it. Are the corporations so overtaxed? A lot of them are
running offshore to escape all taxation. In 1996, corporate taxes made
up 12 percent of all the revenue the Federal Government takes in. In
2002, that shrunk to 8 percent. So do not tell me corporations are in
need of another tax break. Their liability is drastically being
reduced. And to tell me that if we do not double their charitable
giving to 20 percent, instead of 10, they are not going to give the
excess food to the food pantry, they are going to throw it in the
dumpster, that is nonsense.
Another provision in the bill tells nonitemizers, those people who do
the short form, that they can, after giving individually $500, take a
$250 above-the-line credit. That seems well and good. However, the
standard deduction that filer gets already includes a portion for
charitable giving. So if we want to increase it, let us increase the
standard deduction. But know full well 80 to 90 percent of those filers
are going to claim the $250 credit and that is why we do not trust them
because that provision is only good for 2 years. They are going to have
a little study. But we do not have enough auditors to audit that and I
suspect that almost all the filers will take that credit.
Mr. Speaker, it is a great bill, but the fact of the matter is the
taxpayers cannot afford this bill. And as I look at the various
portions of it, even including the lumber company giveaway, those might
be nice in better times. Another portion of the bill decreases the
taxes for charitable foundations in half. That costs some $2.8 billion.
Today charitable corporations pay 2 percent Federal tax on their
income. That is not a heck of a lot. Boy, I wish my constituents only
paid 2 percent. But we feel so generous today, we are going to cut that
in half to 1 percent. And that $2.8 billion goes smack on to the
deficit.
One other item I think we should mention, I indicated that the
Federal deficit is slated by the Congressional Budget Office to be $580
billion. That is without the $87 billion the President has asked for
the war in Iraq. That goes right on it. That means the deficit is going
to be over $650 billion.
Mr. BLUNT. Mr. Speaker, I yield 2 minutes to the gentleman from
Florida (Mr. Feeney), the former Speaker of the House of Florida.
Mr. FEENEY. Mr. Speaker, I rise in support of this great bill. I want
to thank and congratulate the gentleman from Missouri (Mr. Blunt) and
the gentleman from Tennessee (Mr. Ford) for this bipartisan effort.
America is the most charitable country in the history of planet
Earth. We ought to rejoice in the American great tradition of charity.
The problem is that unfortunately, taxpayers, businesses and
individuals, are punished through the Tax Code even when they use
after-tax dollars to contribute to the well-being of their fellow
citizens. For all of the reasons that the critics dislike this bill,
one critic suggested he is opposed to this bill because it does not do
everything that we should be doing to help America. The last speaker
just suggested that what we have is a problem in that the Federal
Government is losing money. Well, the whole presumption is that somehow
this is the Federal Government's money in the first place. I would
suggest that people in Oviedo, where I live, think it is their money
and that they are best able to determine how to help the well-being of
their neighbors and charities.
This is a wonderful bill because it allows the two-thirds of us that
do not itemize our deductions to participate in a tax deduction when we
help our fellow citizens. I think that is a great idea. It levels the
playing field. You do not have to be a wealthy, complicated tax filer
in order to enjoy the deduction. This bill levels the playing field.
All of us will get the deduction. It allows people that have built up
assets in their IRA that maybe will not be necessary for their
retirement to take advantage of a provision so that they will be able
to contribute to important charities in their neighborhoods and
communities. Finally, it adds additional help to businesses that want
to provide food or shelter or well-being for the needy.
I will end with the fact that there are two approaches to how we can
help our fellow man. Some people, well-meaning, think we ought to
confiscate as much tax dollars as we can from individuals and
businesses in order to have a one-size-fits-all government program to
help the needy. My experience is that the best way to help people is
through local charitable giving where you can help people not become
dependent on government but you can help them reform their lives, get
back on their feet and help themselves. That is what this bill does.
{time} 1245
Mr. STARK. Mr. Speaker, I yield 3 minutes to the gentleman from
Washington State (Mr. McDermott).
[[Page H8319]]
(Mr. McDERMOTT asked and was given permission to revise and extend
his remarks.)
Mr. McDERMOTT. Mr. Speaker, I came rushing over here to make a public
service announcement. There is a hurricane coming. But the name is not
Isabel. The name is George.
Ever since President Bush got elected, this Congress has rubber-
stamped every single tax cut he came up with. In fact, I got over here
in such a hurry, I forgot my rubber stamp. But the fact is that, at
some point, the President has to be brought to reality. I saw the
gentleman from Maryland (Mr. Cardin) out here all exercised over this.
This is only $12 billion he is giving away this time. This is chump
change. I do not know. I think he has lost his nerve maybe. Because he
comes in here one day and asks for $87 billion, and then he says, by
the way, let us give away another $12 billion to people. I hope
Americans, if they just remember that I gave them all that money and
put them $44 trillion in debt in the future, they will reelect me.
You say where do I get that number? Well, the Financial Times, and
this is no liberal newspaper I want the Members to understand, they
revealed that the Bush administration shelved a report commissioned by
the Treasury Department that shows that the U.S. economy faces a future
of chronic budget deficits totaling $44 trillion, the study's most
comprehensive assessment of how the U.S. Government is at risk at being
overwhelmed by the baby boom generation's future health and retirement
costs.
This President does not care about anything except if he can trick
the people with a tax cut, he thinks he can get elected. They will
forget about the mess he has created in Iraq. They will forget about
the mess in Afghanistan. I have got $12 billion more for you, folks,
that is our President's plan, and they are going to keep trying to give
money away. They act like the $480 billion is nothing. They put on
another $100 billion this week, 87 for Iraq and $13 billion in this
bill. Is there any end? One would say this was somebody who was
addicted if one was talking in any other terms. I mean they cannot get
off the needle of tax cuts. And if the Congress does not stand up, when
are the people going to be taken care of? Is this bill saving our
country? Is it going to make more jobs? I think not. There is no plan
to spend any money on making jobs, no. This is just give $12 billion
more away so that companies will give more to charity because the
Government is not doing its job.
Mr. BLUNT. Mr. Speaker, I yield myself 45 seconds.
I would just remind the Members in the debate that this is about not
$12 billion; it is really about $50 billion, $50 billion that the
American people decide they want to give to charities to help their
fellow citizens, and certainly that makes a difference in the character
of the country. Anytime we individually reach out, frankly, that is
more character developing than seeing the Government reach out. It does
not mean there is not a place for the Government to reach out, but to
suggest that it is a bad thing in any way to encourage people to reach
out or to suggest that people who give money to church and charity
every month will lie about whether they gave that money is
inappropriate.
I want to say how much I have appreciated the opportunity to work
with the gentleman from Tennessee (Mr. Ford), my good friend. We came
to Congress at the same time. We developed a bill here that has broad
bipartisan support. That was voted unanimously out of the Committee on
Ways and Means.
Mr. Speaker, I yield 3\1/2\ minutes to the gentleman from Tennessee
(Mr. Ford).
The SPEAKER pro tempore (Mr. Thornberry). The Chair first announces
to Members the gentleman from Missouri (Mr. Blunt) has 14 minutes
remaining, and the gentleman from California (Mr. Stark) has 8\1/2\
minutes remaining.
Mr. FORD. Mr. Speaker, I thank the gentleman from Missouri (Mr.
Blunt) for yielding me this time. And I thank the leadership on my
side, the gentleman from California (Mr. Stark) and the gentleman from
Washington (Mr. McDermott) and, of course, the gentleman from New York
(Mr. Rangel).
I rise today in support of H.R. 7. It has been a pleasure to work
with the gentleman from Missouri (Mr. Blunt) and the leadership on his
side. I thank him for the new friendship, or the strengthened
friendship, we now have, and I appreciate the bill we have been able to
put together.
The intent of the Charitable Giving Act, which has already been
stated, is pretty simple. We want to help churches and charities and
places of faith and nonprofit groups across the country who are
committed to making a difference, and I dare say, making our
communities better. With this slow economy, with some 3 million jobs
lost and the end of a bull market now, it seems more important than
ever to find new ways to encourage giving, charitable giving.
As generous as our Nation is, we all know we face challenges, for
many of my colleagues on my side of the aisle have highlighted how some
of the decisions we have made here in this Congress have impacted our
ability to grow. But as the Speaker knows, millions of Americans give a
portion of their paychecks or their savings to help those less
fortunate than them. In my community of Memphis and communities across
America, nonprofit groups, volunteer organizations work every day to
fill those vital needs. Often these efforts can do more to help than
what we do here in Government. And at a time of mounting budget
deficits in Washington and in almost all 50 State capitals, charities
are carrying a heavier burden. States are cutting back money to
hospitals, health clinics, schools, drug and alcohol rehab programs,
preschool and afterschool programs. Because of the deep wells of
compassion that exist in our communities, we cannot let any people fall
through the cracks.
But money is tight for millions of families. They want to give, but
they also want to have money to pay the bills. This bill is one way we
can empower people to give more to charity for it empowers those whose
compassion runs deep, especially those who do not have deep pockets. As
the Members know, many in Congress and in this country raised
constitutional concerns about many aspects of the President's faith-
based agenda. We share the President's goal of rallying the armies of
compassion, but we were concerned about the faith-based component. Our
bill will encourage giving and help charities without regard to
religious affiliation.
What this bill does is remove obstacles to charitable giving in a tax
code. First, the bill allows some 86 million Americans who do not
itemize the opportunity to deduct a portion of their charitable
contribution, between $250 and $500, $250 for individuals and $500 for
married couples. It raises the cap on corporate charitable
contributions from 10 percent to 20 percent over 10 years. It also
provides for tax-free contributions from IRAs for charitable purposes,
which will help a wide range of charities, especially education
institutions. It provides $150 million a year for a Compassion Capital
Fund to assist small community and faith-based organizations with
technical assistance and to expand their capacity to serve.
In closing, Mr. Speaker, I want to commend the gentleman from New
York (Mr. Rangel) and the gentleman from Maryland (Mr. Cardin) for the
substitute to H.R. 7, which I intend to support. The substitute
includes the entire original bill, and it makes it better by increasing
the authorization levels for the Social Services Block Grant by $1.1
billion. The Senate companion of this bill includes funding for SSBG as
well.
I also commend the gentleman from Texas (Mr. Doggett) for working to
make this bill revenue neutral. The revenue effect of H.R. 7 is tiny
compared to the positive benefits, as the gentleman from Missouri (Mr.
Blunt) has already stated, that will come out of it, and certainly
compared to other bills that we have considered in this Chamber in
recent years.
In closing, I urge all of my colleagues, particularly my Democratic
colleagues, to support this bill on final passage. I look forward to
working with many here and others in the Chamber to reconcile whatever
differences there may be and realize that when we support this bill,
despite its minor cost, as the gentleman from Missouri (Mr. Blunt) and
others have stated, it will help so many of our Nation's
[[Page H8320]]
charities, places of faith, and educational institutions.
Mr. BLUNT. Mr. Speaker, I yield 2 minutes to the gentleman from
Wisconsin (Mr. Green).
Mr. GREEN of Wisconsin. Mr. Speaker, I thank the gentleman for
yielding me this time and I congratulate him and the gentleman from
Tennessee (Mr. Ford) for this piece of legislation.
The previous speaker asked rhetorically what does this bill do? By
spurring investment in America's charities, this bill will help lift
lives and heal neighborhoods. It sounds like a pretty good deal to me.
I would like to talk about a very specific provision in this bill
because this bill also rightly points to a problem that we have in
charitable giving, one that Congress cannot by itself solve. As section
303 of this bill points out, many of our Nation's largest foundations
have a bias against giving to the community of faith. As so many people
have noted, every day all across America, faith-based organizations
help people, help them recover from drug and alcohol addiction, provide
food and shelter to the homeless, teach people skills that they need to
move from poverty to productivity, and so much more. And yet
foundations, especially corporate foundations, will not give help to
these groups. Corporate foundations give roughly $2 billion a year to
charities, but a mere fraction of that goes to the community of faith.
Of the ten largest corporations in America, six have restrictions
either banning or greatly limiting contributions to faith-based
organizations and not one of them gives more than 5 percent of its
donations to these groups. The leading 1,000 foundations in America
have targeted just 2.3 percent of their grants to faith-based
organizations. The leading 100 have given just 1.5 percent. Shame on
them. They are missing a chance to do so much good.
Let us hope that the public, let us hope that shareholders demand a
change. This legislation shines a spotlight on this problem and
encourages them to rethink their restrictions. It is time for us to
reach out. It is time for corporate America to reach out to the
community of faith. There are so many needs and so many opportunities.
There is so much good that we can do if corporate America, if
foundations, if we all reach out and partner with those who are on the
frontlines each and every day.
I am proud to support this legislation. I think this is going to make
a historic difference, and once again, I congratulate the authors.
Mr. STARK. Mr. Speaker, I yield 4 minutes to the gentleman from Texas
(Mr. Doggett).
Mr. DOGGETT. Mr. Speaker, on January 29, 2002, President Bush stood
at this podium, and he told this Congress and the Nation ``our budget
will run a deficit that will be small and short term.'' He had hardly
gotten out of the room before the deficit began soaring, soaring so
much that this year, we have the largest deficit in the history of the
United States. Soaring so much that over the course of this year and
next year, we will probably exceed $1 trillion in additional national
debt. Any honest projection shows that these deficits will continue
rising throughout this decade. We have the largest fiscal reversal in
the history of the United States, if not the history of the world,
moving from the surplus the Bush Administration inherited to the
unending debt with which we are now being burdened.
We begin to understand why they call this a ``faith-based''
initiative because despite this devastating fiscal record, they ask us
to have faith that somehow their speeches will balance the budget even
while they continue depleting the national treasury with one good cause
and some not so good causes after another, taking out $10 billion here,
$20 billion there, $50 billion some other place.
If you have faith in the bill that you are advancing today, have the
good faith to deal straight with the American people instead of just
giving them another IOU. And I commend the gentleman from Tennessee
(Mr. Ford) for having the courage to support the substitute paying for
this chartible giving initiative to which I know he is so committed.
The Republican sponsor in the last Congress of this measure (Mr. Watts)
was willing to do the same until he found out paying for it requires
more than a speech.
We can pay for this initiative today, and then some, by correcting a
considerable inequity in our tax system. The Founding Fathers believed
that there should be no ``taxation without representation,'' and
certainly we all agree. But some taxpayers, as a result of the inaction
of the House Committee on Ways and Means and the leadership of this
House, are today turning that on its head. They believe that we should
have no ``taxation through misrepresentation.'' Too many corporations
have misrepresented to their shareholders, their investors, to the tax
collector the true nature of their income. They give new meaning to
Leona Helmsley's claim that ``only the little people pay taxes.'' And
today my colleagues talk about charity. Charity is when Congress
ignores $10 billion a year, according to some estimates, in losses due
to sham corporate tax shelters--shelters that are abuses of our current
legal system. Charity is when the Republican leadership persists
turning a blind eye to that abuse.
Since 1999, we have had a way to solve this problem. We have been
asking for approval of a tax shelter measure that has had broad support
in this body and is so ``controversial'' that almost every Republican
Member of the United States Senate has voted for it. It passed 95 to 5
as a part not of some other bill, but of this very chartible giving
bill. So what happens when it gets to the House Committee on Ways and
Means? The same people that have been protecting these corporate tax
abusers all this time have again offered them a little ``charity'' by
removing all of the tax shelter language.
{time} 1300
They stripped out the ``pay-for'' in this bill, a ``pay-for'' that
brings equity to our tax system, that ensures that these corporate tax
abusers get a little fair treatment. When such tax evaders dodge their
taxes, guess who has to pay for national security and homeland
security? All of the small businesses and large businesses and
taxpayers large and small, who are already doing their fair share,
already paying their fair portion of taxes.
Mr. Speaker, we have an opportunity today through the Democratic
alternative to end this abuse of corporate tax shelters and at the same
time pay for this charitable bill giving instead of incurring more
public debt.
Mr. BLUNT. Mr. Speaker, I yield 1 minute to the gentleman from
Indiana (Mr. Souder).
(Mr. SOUDER asked and was given permission to revise and extend his
remarks.)
Mr. SOUDER. Mr. Speaker, first I want to thank the gentleman from
Missouri (Mr. Blunt) and the gentleman from Tennessee (Mr. Ford) for
their leadership on this bill. It is something that I have long waited
to see, an actual change in our Tax Code to give more incentive to
charitable giving.
It is unfortunate that partisan politics has been, again, injected
into this. Because as we have been holding a series of faith-based
hearings around the country, one thing that we recently heard in Texas
in San Antonio from the most effective faith-based drug addict rescue
group in the State of Texas, and, really, in America, said, where do
you think the financial support of our ministry comes from? The people
who have come through the front door of that home.
This bill will give those people a chance to get a tax break, many
who have very little funds who have been ignored because of the way our
Tax Code is structured in charitable giving. This is one small step,
and I hope we can expand it in the future, but an important step and
the most important step.
We have been on the floor arguing over charitable choice. I said from
the beginning that the Tax Code was the most important and the second
most was the Compassion Capital Fund, which is also in this bill to
help these little usually urban or rural organizations get an ability
to do a 501(c)(3) corporation. And this bill also covers that. I am
thrilled with this bill.
Mr. STARK. Mr. Speaker, I yield 3 minutes to the gentleman from
Virginia (Mr. Scott).
Mr. SCOTT of Virginia. Mr. Speaker, I think it is important to speak
about what is not in this bill as well as what is in it. This bill is
in stark contrast to
[[Page H8321]]
the bill which passed 2 years ago in that it does not include the
provision that would allow employment discrimination with Federal
dollars. In fact, the bill preserves current civil rights protections.
Faith-based organizations willing to comply with civil rights laws
will be able to get funding under this bill just as they can today. And
organizations which refuse to comply with the 60-year tradition of no
discrimination with Federal funds will not be able to get funding under
this bill.
When we talk about discrimination, let us remember that there was a
time in America when people of certain religions were routinely denied
jobs solely because of their religious beliefs, but we passed laws to
end that invidious discrimination.
All of us can be supportive of the work of faith-based organizations
and recognize that many can successfully sponsor federally funded
programs, but we do not have to sabotage anti-discrimination laws to do
that. And it is insulting to suggest that we can get investments in
needy areas only if we turn back the clock on civil rights.
This bill allows us to support the work of faith-based organizations
without sacrificing our hard-won civil rights protections. The language
in the original bill that will allow faith-based organizations to
proselytize to beneficiaries in public services and use Federal money
to convert people to their own religion has likewise been dropped from
this bill as well.
An individual in a homeless shelter should not be required to have to
consider changing his religion in order to get a meal if that meal is
paid for with Federal funds. The Constitution does not permit this and
neither should we.
I hope this bill can be a positive step in the right direction, but
all of us should be cognizant that although the old H.R. 7 is gone,
there are currently several bills, individual bills, that would allow
faith-based organizations to discriminate in employment based on
religion with Federal funds.
We have already seen these provisions in the reauthorization of the
Head Start bill that passed the House and the Workforce Investment Act,
and I am sure that there will be others.
Mr. Speaker, this bill shows that we can do better than that. We can
support good community organizations that do good work without
sacrificing either civil rights protections or the Constitution.
We can accomplish this by providing them more money to do that work
and providing guidance and navigating the Federal bureaucracy, and we
do not have to undermine constitutional and anti-discrimination laws to
do that.
Mr. BLUNT. Mr. Speaker, I yield 2 minutes to the gentleman from Ohio
(Mr. Portman).
Mr. PORTMAN. Mr. Speaker, I thank the gentleman for yielding me time
and want to congratulate him and the gentleman from Tennessee (Mr.
Ford) for their good bipartisan work on this legislation.
The legislation does have a cost, as it is analyzed by the Joint Tax
Committee, and I believe that is $12.6 billion. Guess what? Over that
same period of time, the estimates are there will be about $50 billion
more in contributions to our charities. These are faith-based
charities, community organizations, those who are out there doing the
good work to help those most in need.
I love the provision on the nonitemizers, because it helps people who
are nonitemizers now not only give more money to charity and gives them
a break for it, but gets them more engaged as volunteers in their
communities in helping out, having an investment in these charities.
I like the provision on the IRA rollover. We ought to do the same
with some other retirement accounts. With the IRAs, we are able to say
if you are 70\1/2\, you can then roll over into a charity without
having the tax consequences. That will help not only this year, but
going forward, as baby boomers begin to get these big lump sums in
their IRAs, to be able to give those to charities. There are a lot of
assets there, and it is a great policy.
The gentleman from Texas raises a substitute; and I just have to say,
codifying this very complicated issue of economic substance doctrine is
a very difficult thing to do. The Treasury Department is dead set
against it. They instead believe what we ought to be doing is providing
more disclosure and tightening the rules. That is going to be in a bill
coming to the floor, we hope soon, out of the FSC-ETI bill. That is a
better way to approach it.
Finally, the codification of economic substance, to my understanding,
is retroactive, so you are actually changing the rules of the game
after the fact. So those who have entered into transactions and
arrangements are now being told after the fact, guess what, the rules
all change; now we have this new rule to be applied.
I am afraid what will happen is you will see tax shelters going
underground. You will not see what we ought to be seeing, which is more
disclosure and tightening of the rules.
So I think this is a great bill. I would urge my colleagues to
support it, because it does the right thing on policy grounds; and I
would be very skeptical about this substitute. I think it is bad tax
policy; and it will result, perhaps inadvertently, in more problems in
our Tax Code.
Mr. BLUNT. Mr. Speaker, I am pleased that the gentleman from Ohio
(Mr. Portman) and the gentleman from Michigan (Mr. Camp), the next
speaker, have done such a good job to get this bill to the floor.
Mr. Speaker, I yield 1 minute to the gentleman from Michigan (Mr.
Camp).
Mr. CAMP. Mr. Speaker, I thank the majority whip for his hard work on
this bill; and I lend my strong support to H.R. 7, which passed the
committee by voice vote. I think all members on the committee agreed
that this policy was an appropriate way to increase philanthropy among
individuals, corporations, and foundations. I think it contains the
right mix of tax incentives to spur individual giving, business and
foundation giving, for example, the nonitemizer provision for low- and
middle-income taxpayers. In my view, the Tax Code should provide a tax
incentive to all taxpayers to give to charity, not just those who
itemize; and this bill does that.
Another important feature is those who have reached 70\1/2\ can make
tax-free contributions from their IRAs.
Last, I want to thank the majority whip and the committee for their
hard work in making sure that we also do what we can to increase giving
from charitable organizations and foundations. I think we have the
right mix in this bill to do that.
I lend my strong support to this legislation.
Mr. BLUNT. Mr. Speaker, I yield 1 minute to the gentleman from
Florida (Mr. Crenshaw).
Mr. CRENSHAW. Mr. Speaker, I just want to rise in strong support of
this legislation. I want to highlight a charitable organization in my
community, Jacksonville, Florida, called the Jessie Ball duPont Fund.
Last year they gave away about $13.5 million. They gave it to over 300
different organizations, everything from the Boys Clubs to the Girls
Clubs to the United Way.
What this legislation does is encourages foundations like the duPont
Fund and other charitable organizations, it gives them technical
advice, it gives them guidance, and, more than anything, maybe holds
them to public accountability.
The bottom line, Mr. Speaker, is this kind of legislation encourages
people to be good stewards in their own community. America is great
because America is about people helping people; and any time that
people want to give money, in terms of charity, we ought to do
everything we can to pave the way. So I urge support of this
legislation.
Mr. BLUNT. Mr. Speaker, I yield 1 minute to the gentleman from
Indiana (Mr. Pence).
(Mr. PENCE asked and was given permission to revise and extend his
remarks.)
Mr. PENCE. Mr. Speaker, I rise with a deep sense of gratitude to our
majority whip, the gentleman from Missouri (Mr. Blunt), and to his
colleague, the gentleman from Tennessee (Mr. Ford), for their yeoman's
work in crafting the Blunt-Ford Charitable Giving Act. It is an
extraordinary piece of legislation that will encourage the investment
by everyday Americans into the organizations that make our communities
great.
While this bill is targeted to all charities, its impact will be
profound, especially in the faith-based community. It
[[Page H8322]]
is worthy of noting that 75 percent of food pantries are religious-
based, 71 percent of food kitchens are faith-based, and 43 percent of
shelters in this country are faith-based providers. Today's Blunt-Ford
Charitable Giving Act is part of President Bush's vision of a faith-
based initiative encouraging everyday Americans to come along side
those who each and every day do for the least of these.
I strongly support this legislation and strongly urge its passage
today.
Mr. STARK. Mr. Speaker, I yield the balance of my time to the
gentleman from Texas (Mr. Doggett).
Mr. DOGGETT. Mr. Speaker, without a doubt there are many good
features of this proposal. That is why so many people support it.
Perhaps the benefits are a bit exaggerated in the suggestion there will
be $40 billion or $50 billion in additional money motivated by tax
considerations instead of the heart. That probably overstates the case.
But the important argument in favor of the Democratic substitute is
that this proposal is presented as just another free lunch, like so
many other allegedly pain free measures that keep rolling through this
House.
As proposed, this bill will add to the burden of our children and our
grandchildren billions of dollars that could and should be paid for
now. That is why one of the cosponsors, the gentleman from Tennessee
(Mr. Ford), has said he supports the substitute. He is ready to pay for
his bill, he has that much confidence in it. The only argument against
paying for it was the unusual suggestion of the gentleman from Ohio
(Mr. Portman) that it would be ``difficult.''
I agree, it has proven very difficult for the Committee on Ways and
Means to do anything about corporate tax cheats. They have known about
this problem since at least 1999, and they have chosen to sit on their
hands.
Most people have heard about something called Enron, a Texas
corporation. The Committee on Ways and Means was afraid though to look
under the rock for all the Enron dirty tax secrets, about how much it
avoided paying of its fair share of taxes, for fear of what Republicans
might find, and they have still not, until this very day, found it
possible to overcome what they call the ``difficulties'' of dealing
with the Enron tax transgressions, nor those of any other corporation.
Pay for this bill. The Democratic substitute does.
Mr. BLUNT. Mr. Speaker, I yield 1 minute to the gentlewoman from
Connecticut (Mrs. Johnson).
Mrs. JOHNSON of Connecticut. Mr. Speaker, I thank the gentleman for
yielding me time.
I want to commend the chairman for crafting a bill that will reward
average taxpayers for their generosity and eliminate unnecessary
barriers to giving. This is a bipartisan bill that will expand our
communities' ability to help each other. However, there are some
additional provisions that I hope we will be able to work on with the
Senate.
First of all, the social services block grant enables communities to
address special needs in a very flexible and very local manner, and I
am thrilled that this bill reinstates the 10 percent right of
transferring money from the TANF block grant to the social services
block grant. But more needs to be done, and the Senate bill does offer
us that opportunity in the conference.
Secondly, I hope that it will look at some of the charitable
incentives for conservation in the Senate bill, a higher deduction for
donating land to qualified land trusts, for example, that will enable
small landowners to be part of conservation and preservation in their
communities.
{time} 1315
Mr. BLUNT. Mr. Speaker, I yield 1 minute to the gentleman from
Illinois (Mr. Crane).
Mr. CRANE. Mr. Speaker, charitable organizations are vital to the
health and well-being of American citizens. Charity benefits both the
giver and the receiver in like proportions. The act of giving elevates
the heart of the giver; the act of receiving elevates the condition of
the recipient. Charity is a blessed act that should suffer no
discouragement from something so punitive as the Tax Code.
Mr. Speaker, I am very pleased that two major components of H.R. 7
are based upon legislation I have introduced for almost 20 years, the
Charitable Giving Tax Relief Act and the IRA Charitable Rollover
Incentive Act. The Charitable Giving Tax Relief Act allow nonitemizers
to deduct 100 percent of any charitable contributions up to the amount
of standard deduction.
Secondly, under H.R. 7, individuals age 70\1/2\ or older will be able
to contribute amounts currently held in IRA accounts directly to
qualified charities without having to first recognize the income for
tax purposes and then take a charitable deduction.
We now have an excellent opportunity to advance sound tax policy and
sound social policy by returning to our Nation's historical emphasis on
private activities and personal involvement in the well-being of our
communities.
I congratulate all, and I urge everyone to vote for the bill.
Mr. BLUNT. Mr. Speaker, I would just like to say as I yield myself
the remainder of my time that I appreciate the character of the debate,
I appreciate the opportunity to work with the gentleman from Tennessee
(Mr. Ford) and the members of the Committee on Ways and Means in
bringing this bill to the floor. We look forward to passage today and a
quick effort to work with our friends in the other body and see this
bill on the President's desk become law and make a difference in the
way people are encouraged to do things for others in their community
and in our country and around the world.
Ms. JACKSON-LEE of Texas. Mr. Speaker, I rise in support of H.R. 7,
the Charitable Giving Act of 2003 along with the Democrats' Substitute
Amendment Agreement. The Democrats' Substitute Amendment has three
parts. First, the Substitute would include all the provisions of the
underlying bill, H.R. 7, as reported by the Committee on Ways and
Means. Second, the Substitute would add a provision increasing the
funding for the Social Services Block Grant, SSBG, by $1.1 billion next
year. Third, the Substitute would add revenue offset provisions to
curtail abusive tax shelter schemes. The Substitute is a fiscally
responsible approach for encouraging charitable giving and providing
assistance to vulnerable families during these particularly difficult
times.
Considering that the federal deficit is projected to exceed $500
billion next year and the President's request for an additional $87
billion for Iraq, I urge all House Members vote for the Democratic
Substitute Amendment.
The Substitute increases funding for the Social Services Block Grant,
SSBG, by $1.1 billion next year. This increase is included in S. 476,
the Senate-passed CARE Act of 2003. The SSBG funds community programs
to protect abused children, provide day care to low-income families,
offer counseling services to at-risk youth, provide nutritional
assistance to the elderly, and provide community-based care to the
disabled.
The Substitute provides immediate resources to States to address
program cuts in these important areas. Rep. Cardin offered such a
provision as an amendment during Committee markup of H.R. 7.
The Substitute includes provisions to curtail abusive tax shelter
schemes. These provisions would prevent tax shelter transactions that
have no economic substance, without affecting legitimate business
transactions, and would tighten penalties for egregious behavior. The
provisions would offset the costs of the Substitute (including both the
underlying bill and increased funding for the SSBG).
Congressman Doggett offered such an offset during Committee markup of
H.R. 7. Corporations increasingly are engaged in aggressive tax
avoidance transactions. Those transactions often are very complicated
transactions that lack little, if any, business purpose or profit
motive. The transactions are very similar in their structure with the
accounting gimmicks used by Enron. They both pretend to technically
comply with complicated rules, but create results that cannot be
justified.
Not surprisingly, large accounting firms, the same people who
assisted Enron, sell corporate tax shelters. The Joint Committee on
Taxation recommended many of anti-tax shelter provisions in the
Substitute.
The major provision of the Substitute would codify and slightly
strengthen the ``economic substance doctrine.'' The economic substance
doctrine is a court-made rule of law that disallows claimed tax
benefits if the benefits arise out of a transaction for which there is
no business purpose or profit motive.
The other major provision of the Substitute would not permit legal
opinions to be used in order to avoid penalties when courts disallow
tax benefits using economic substance analysis. (Under current law,
legal opinions provide protection against penalties even when the legal
opinions are fairly poor.) All of Enron's tax shelter transactions had
legal opinions supporting them.
[[Page H8323]]
Mr. Speaker, for the above reasons, I support this bill with the
Substitute Amendment.
Mr. TURNER. Mr. Speaker, I rise today in strong support of H.R. 7,
the Charitable Giving Act, and to urge my colleagues to do the same.
Let me begin by saying that I value the role of charitable
organizations in the delivery and provision of social services. Our
country has been made stronger through the good works of people who
dedicate their time, efforts, and skills to helping those in need.
These organizations have long fed the hungry, clothed the poor, given
shelter to the homeless, and helped heal the sick. Their contributions
have been absolutely essential for millions of Americans throughout the
history of our great nation.
It is time now that we help these charitable organizations continue
to help those in need. The bill before us today contains many important
provisions that work toward a single goal of encouraging charitable
giving in the United States. The bill does this by making it easier for
individuals to deduct their charitable contributions from their income
taxes, by allowing tax-free distributions from IRAs for charities and
by encouraging donations of important items such as food and computers.
I know firsthand about the important role that charitable
organizations play in every community. In my own district the Matile
Family Foundation, the Dayton Foundation, and the Iddings Foundation
have a long and distinguished record of giving and serving the Dayton
community. Similarly our community is home to numerous faith-based
organizations that also provide important services to those in need,
including the Gospel Mission, Revival Center Ministries and St. Mary's
Neighborhood Development Corporation.
In May I convened a community and faith-based forum where over 80
individuals from charitable organizations met to discuss partnering
with the Federal government on the delivery of social services. I
believe the bill before us will help these and many other organizations
throughout my congressional district.
As a cosponsor of this important legislation, I am proud to join my
colleagues in expressing support for H.R. 7 and urge all Members to
vote in favor of it. This critical measure will help ensure that
charitable organizations can continue to attract the resources
necessary to help our most vulnerable populations by improving the
incentives for individuals and corporations to donate to charitable
entities.
Mr. EMANUEL. Mr. Speaker, I rise proudly as an original cosponsor of
the Charitable Giving Act and also in strong support of Cardin-Doggett
substitute.
I signed on as an original cosponsor of H.R. 7 because our Nation's
charities are struggling in this weak economy to meet increasing
demands with diminishing resources. In response, this bill delivers tax
fairness and strong incentives for America's donors to give generously,
even those with modest means.
I am pleased that the substitute makes this bill even stronger by
taking this opportunity to shut down tax avoidance schemes built into
the Tax Code that encourage dishonest corporate transactions and
bookkeeping practices. Another improvement is that the substitute pays
for the bill. This is critical since the President has asked Congress
for another $87 billion for rebuilding Iraq, twice the amount
originally anticipated.
I am as pleased as the next person when corporations earn profits.
But there is something wrong when tax breaks for working families are
outnumbered by corporate subsidies for oil drilling, insurance, nuclear
power, commercial real estate, equipment purchases, drug manufacturing,
ethanol production, and more.
President Reagan criticized corporate tax subsidies as wasteful and
in direct conflict with free market principles and economic growth. In
1986, he issued executive orders to cut back many of these subsidies.
Republicans and Democrats should continue working together to follow
his lead.
In recent years, however, subsidies have made a comeback. At the same
time, corporate income taxes are virtually the lowest among the world's
developed countries. The Bermuda scheme is the tip of the offshore
iceberg now costing U.S. taxpayers $50 billion or more a year.
Taxpayers subsidize overall corporate subsidies worth $125 billion.
This amount is equivalent to the income taxes paid by 60 million
individuals and families.
Many of these subsidies fail to serve any worthwhile economic or
social objective. But since 2001, more loopholes and breaks for special
and corporate interests have been added to the code. It is replete with
sunsets, phase-ins, phase outs, and gimmicks that encouraged Enron,
Tyco, and WorldCom to circumvent tax law. But nothing has been done to
make it easier for working families to navigate the Code. There is
something wrong when more than 60 percent of Americans found it
necessary to pay an accountant or tax preparer to file their taxes in
2002.
Ending offshore havens, gimmicks and tax shelters should go hand in
hand with simplification in any tax reform initiative. The Cardin
substitute is a first step toward reforming a tax code that's proven
more user-friendly to corporations and the wealthy than America's
working families. Another important step would be for Congress to
consider my proposal to create a Simplified Family Credit that merges
the EITC, the child tax credit and the dependent exemption into one
easy-to-claim credit. I will continue supporting legislation that
simplifies the Code for reward working families as much as corporate
interests.
Mr. Speaker, to that end, I am please to vote for the Cardin-Doggett
substitute, and in support of the Charitable Giving Act of 2003. This
important legislation, in addition to closing unfair tax loopholes,
will recreate new incentives for Americans to make charitable donations
for an array of worth and important social services in our Nation.
Mr. TERRY. Mr. Speaker, I rise today in support of H.R. 7, the
Charitable Giving Act of 2003. I commend Whip Blunt and Chairman Thomas
for their diligent efforts on this important legislation.
As a cosponsor, I have supported this bill for several reasons.
The American people are the most generous people in the world. It is
estimated Americans gave more than 183 billion dollars last year to
charitable organizations. Foundations, bequests, and corporations
brought charitable giving up to 241 billion dollars.
These donations advanced noble causes in religion, health, science,
the environment. To alleviate pain and suffering. To promote culture
and world understanding.
For example, in my own district, The Durham Research Center at the
University of Nebraska Medical Center, a $77 million, 10-level
facility, was completed without tax dollars. It will enable UNMC to
enhance its research in a number of areas including cancer,
cardiovascular diseases, neurosciences, transplantation biology,
genetics and eye research.
Charities and institutions often serve purposes that exceed
government efforts to promote the health, safety, and well-being of its
citizens, and often with lower costs.
The purpose behind this act is simple. We must ensure the best
policies to encourage people to donate to charities. Whether the goal
is collecting food for the hungry, shelter for the indigent, or
treatment for the addicted, this bill strengthens the existing tax code
to encourage charitable donations.
For example, this bill:
Provides 86 million Americans who do not itemize the opportunity to
deduct a portion of their charitable contributions--representing more
than two-thirds of tax returns filed.
Provides incentives for individuals to give tax-free contributions
from their Individual Retirement Accounts (IRAs) for charitable
purposes, which will help a wide range of charities.
Raises the cap on corporate charitable contributions from 10% to 20%
over 10 years.
Extends current incentives for food donations to apply to even more
farmers, restaurants, and corporations to help those in need.
Anne Frank once wrote: ``No one has ever become poor by giving.'' We
recognize this sentiment with H.R. 7 and I urge my colleagues to join
me in supporting the Charitable Giving Act.
Mr. WOLF. Mr. Speaker, I rise today in support of H.R. 7, the
Charitable Giving Act. This legislation takes an important step to help
further the efforts begun nearly 40 years when President Johnson
declared war on poverty and hunger. Sadly, according to the U.S.
Department of Agriculture reports that 13 million kids live in
households that do not have an adequate supply of food.
In 2001, the USDA says there were 33.6 million Americans--20 million
adults and 13 million children--who were hungry or at risk of hunger.
In Matthew 25, Jesus talks about the obligation to feed the hungry. In
a world, and especially a nation, as plentiful as ours, it is tragic
that even one child is hungry.
Barriers need to be eliminated to allow businesses to do the morally
conscionable thing and donate their surplus food. It's outrageous that
it is more ``cost effective'' for a business to throw out or destroy
surplus food rather than donate it to a local soup kitchen. The
Charitable Giving Act takes important steps to ensure that more of
America's abundant food supply ends up in the mouths of America's
hungry families, not in landfills. The USDA estimates that 96 billion
pounds of food are thrown away each year.
I would like to submit for the Record a recent article from the
Chicago Tribune titled ``Hunger has a new face.'' This article points
out that many of these hungry children live in households in with
working parents. As the cost of living in many urban areas continues to
increase, the number of working poor is expanding rapidly, hitting
single moms particularly hard. As the face of hunger in America
changes, we must make sure that our policies continue to meet the
needs.
The Charitable Giving Act provides incentives to farmers and small
businesses, whose
[[Page H8324]]
resources are also constrained in these economic times. I applaud the
authors of this bill for their dedication to building a greater
America. But our work is not yet done. I want to encourage my
colleagues appointed to conference this important legislation to
consider the food donation provision contained in the Senate bill--the
same food donation provision, I might add, that was introduced earlier
this year by my colleague Mr. Baker from Louisiana.
America's Second Harvest estimates that the Senate version would
produce over 878 million new meals by 2013--that's over three times the
number of new meals than the House bill will provide. Make no mistake,
the bill we have in front of us today is a very good start and is a
victory for all those who have hope for a better America. Let us now
move forward, and show America that fighting hunger isn't about what
side of the aisle you stand on, but rather what kind of humanity we
seek to be.
[From the Chicago Tribune, Sept. 1, 2003]
Hunger Has a New Face
(By V. Dion Haynes)
Bend, Ore.--Despite working full time as a waitress at an
International House of Pancakes restaurant, Crystal Carter
regularly must turn to charities and generous friends to feed
herself and her three small children.
Likewise, Leslie Ramaekers finds it difficult to stretch
the wages from her full-time auto-detailing job to buy enough
food. She often skips breakfast and lunch to ensure that her
four children can eat.
Randy Malone has it even worse. Laid off 1\1/2\ years ago,
he has to use his sparse resources to feed his two nieces and
nephew, who live with him. Forced to skip meals, Malone has
lost 25 pounds.
``I don't normally eat breakfast or lunch. Sometimes for
dinner I might get a peanut butter sandwich or a piece of
bread,'' said Malone, 42, who was picking up a bag of free
groceries from a food pantry in northeast Portland one day
this summer.
``I'd rather them eat it than me,'' he added, referred to
the children, age 7 to 12.
In a survey, 25 U.S. cities reported on average a 19
percent increase in demand for emergency food assistance from
2001 to 2002. Some city officials say Carter, Ramaekers and
Malone represent the new face of hunger in America.
single moms affected
The ranks of the hungry more and more include single
mothers stuck in low-wage jobs, married couples who can't
keep up with soaring housing costs and able-bodied people who
can't find jobs.
Their predicament forces them every month to grapple with
vexing trade-offs: Pay the rent or child care? Buy that
prescription for a sick child or pay that overdue electric
bill? Put gas in the car or food on the table?
``We're seeing Depression-era food lines in 21st Century
America. . . . This is the most food productive nation on the
planet, and we should not have hunger,'' said Doug O'Brien,
vice president for policy and research at Chicago-based
America's Second Harvest, the umbrella organization for the
nation's food banks and the largest hunger relief
organization in the U.S.
The previous profile of a hungry person, O'Brien said, was
``a homeless, chronically unemployed, mentally ill substance
abuser.''
But by 2001, ``we were as likely to see a single mother
who's employed as we would a homeless man,'' he added.
``Nationwide, 40 percent of the people we serve come from
households where at least one person is working.''
Agriculture Department experts peg the number of hungry or
``food insecure'' people at about 34 million, up from about
30 million in 1995. Hunger and food insecurity are defined
broadly--when people are forced to skip a meal or cut back on
what they eat because they lack money, when people don't
know where their next meal is coming from or when people
must visit a soup kitchen or food pantry for emergency
assistance.
Demand for emergency food rose dramatically from 2001 to
2002 in about 25 cities polled late last year by the U.S.
Conference of Mayors. Requests for food jumped 52 percent in
Kansas City, 49 percent in Miami, 28 percent in Chicago, 25
percent in Los Angeles, 14 percent in Cleveland and 10
percent in New Orleans.
States step up outreach
The issue has been receiving attention in recent months.
Oregon, Wisconsin, Virginia and West Virginia have stepped up
their outreach to hungry people who might qualify for
assistance from food stamp programs. And two bills have been
introduced in Congress to expand the number of children
eligible for free school meal programs.
A study released in July by the Center on Hunger and
Poverty at Brandeis University suggested that hunger is
released to the epidemic of obesity. The study said that low-
income families ``may consume low-cost foods with relatively
higher levels of calories per dollar to stave off hunger''
rather than more nutritious food when their resources run
short.
No state better exemplifies the crisis than Oregon, which
has been ranked by the U.S. Department of Agriculture as No.
1 in hunger and food insecurity.
Oregon, which prospered in the 1990s from the dot-com boom
and has an image as a recreation-friendly and environmentally
conscious state, hardly seems a candidate for hunger capital
of the nation.
But the state, which also ranks at or near the top in
unemployment, has been grappling with an economic meltdown.
If has made drastic spending cuts for schools, health care,
social programs and courts to relieve a nearly $3 billion
deficit.
As serious as the budget problems are, according to
experts, the current crisis is the product of a systemic
shift as low-paying, low-skill jobs in the service industry
replaced high-paying, low-skill jobs in the timber and
fishing industries.
Bend, Ore., reflects that wage gap and economic
metamorphosis.
For generations, this region was timber country, with an
abundance of family-run mills. But from 1989 to 1997, jobs in
the forest industry declined by 47 percent in central Oregon.
Now only one family-run mill is left in the region.
During the same time, dozens of golf courses, spas,
mountain lake and ski lodges and new housing developments
sprang up, transforming central Oregon into a resort and an
upscale retirement area.
``A lot of people say it's going to be another Aspen,
Colo.,'' said Carter; the IHOP waitress, who often visits an
area food pantry to feed her two daughters and son.
``There's no middle class here,'' added Carter. ``Either
you have money or you don't.''
Instead of making $17 an hour in a mill, the most people
can get around here [in serviced industry jobs] is around
minimum wage,'' said Sweet Pea Cole, a coordinator for the
Central Oregon Community Action Agency, where Carter gets her
free food.
Advocates for the poor say Oregon officials largely were in
denial about the state's hunger problem--until this year:
When Gov. Ted Kulongoski took office in January, he made
fighting hunger a priority. Kulongoski, a Democrat, is
appearing in TV public service announcements to raise
awareness.
The governor also is calling for more affordable housing.
And he recently signed legislation to refurbish crumbling
bridges and highways, which would create 5,000 jobs annually
for 10 years.
But some people struggling to put food on the table say the
efforts will do little to help them.
``There has to be some way of training people, people who
are stuck and struggling and want to do something with their
lives,'' said Ramaekers, 28, of Tualatin, Ore., the auto-
detail worker and mother of four who skips meals and
frequents food banks.
``You're working harder but always staying in the same
place.''
Mr. SOUDER. Mr. Speaker, for several years now we have been having
the discussion on how best to help faith-based organizations. Very few
clear answers have emerged. Today we are here to discuss H.R. 7, the
Charitable Giving Act, which addresses the two areas where I believe
the government can best assist faith-based and community organizations
in their work.
A few months ago I initiated a series of field hearings to talk
directly to the faith-based providers of social services. We've put the
cart before the horse in this debate, and what we're trying to do with
these hearings is to take a step back, and ask the providers what
qualities they possess that makes them unique. Time and time again,
they are telling me that it is their faith that drives them to do the
work that they do, often in undesirable conditions for little or no
recognitnition. Our second hearing was held in San Antonio, where
Freddie Garcia has built a very successful drug treatment program that
is not only faith-base, but faith-saturated. Jack Willome is a San
Antonio businessman who volunteers his time to help Victory Fellowship
with financial planning. During his testimony at our hearing he
recounted a conversation he had had with a friend prior to his
involvement with Victory Fellowship. His friend counseled him, ``Jack,
when you're giving money away, your first objective should be to try to
do no harm.''
When we as the Congress are debating how we can best support the
scores of faith-based organizations working in our neighborhoods, we
need to heed that same advice. Do no harm. We know that organizations
like Victory Fellowship, Lutheran Social Services, Prison Fellowship,
Chicago's Emmaus Ministries and T.E.A.M. III in my hometown of Fort
Wayne, Indiana, are helping people every day, and they do not apologize
for the role faith plays in their programs. As we start attaching
restrictions and qualifications to the money government is wiling to
give faith-based organizations, we put ourselves in the position of
asking those charities to drain their programs of the very qualities
that make them effective providers of social services.
So how can we best help these organizations without asking them to
dilute or eliminate their religious character? The Charitable Giving
Act, is a good step in the right direction. Research shows that
individuals who receive a tax deduction for charitable giving
contribute more than individuals who do not receive such tax benefits.
By allowing the 86 million Americans who currently do not itemize on
their tax returns an opportunity to deduct a portion of their
charitable contributions, we are recognizing that the best way to help
the private
[[Page H8325]]
sector is to encourage more charitable giving by individuals. We know
that there are limits on how much money the government is able to spend
on social services. Unfortunately, the demand for social services far
exceeds the money government is able to spend. It doesn't matter who is
in office, the dollars just aren't there.
So, we need to turn to the neighborhood organizations that are
providing services, with or without government aid. Americans know
which organizations in their communities are making a difference. By
encouraging individuals to increase their charitable giving, we improve
the likelihood that the dollars are going to go to the organizations
that will produce the best results. Jack Willome also testified about
the fundraising and fiscal accountability of Victory Fellowship. He
said that that 90 percent of Victory Fellowship's budget comes from the
giving of people who have benefited from the ministry. As he testified,
It's the only project I have ever been involved in as a
donor where I have total confidence that the organization has
the ability to sustain the operations in the new facility,
and I don't have to worry about that because of their track
record. The financial support of the ministry, guess where it
comes from? The people who have come through the front door
of that home after--as their characters are being transformed
and they become involved in Victory Temple Church and they
give financially to the work of the church.''
It makes no difference if the government is involved with a faith-based
organization or not. Those charities will be accountable, first and
foremost, to their clients and to their donors. The support of the
community is perhaps our best indicator of how successful an
organization is at improving the lives of their clients.
I believe that the best way we can help the faith-based community is
to encourage private sector philanthropy for all individuals who
contribute to charitable organizations, not just those who itemize.
Approximately two-thirds of tax returns filed do not claim itemized
deductions; therefore those taxpayers are not eligible to deduct their
charitable contributions. The majority of non-itemizers are low- and
middle-income taxpayers--the very taxpayers who would benefit from this
piece of legislation.
Here are a few examples of who would benefit from this bill. A non-
itemizing, single taxpayer with a taxable income of $45,000 owes about
$8,060 in federal income taxes. This legislation would reduce the
individual's taxes owed by $62.50 if he or she donated $500 to a
charity of his or her choice. Likewise, a family of four with a taxable
income of $65,000 would save $125 in taxes for a donation of $1,000 to
a local charity. While the savings may seem small, it is certainly
better than the current tax policy of providing no benefit to non-
itemizers. It is my hope that Congress will revisit this issue in the
future to further expand tax relief for individuals and families who
contribute financially to the valuable work of faith-based
organizations.
The second thing we can do to help the countless faith-based and
community organizations serve their communities is to provide these
organizations with the training and technical assistance they need in
order to serve their clients more effectively. Mark Terrell, CEO of
Lifeline Youth and Family Services in Fort Wayne, a program that
provides prevention, intervention, and aftercare service for families
and children in the Fort Wayne community testified at our Chicago field
hearing that
there needs to be a system put in place that will help both
small and large agencies meet the financial reporting
requirements that are necessary when using public funds. The
desire and ability of these organizations to do great work
within a community that desperately needs their help can be
undermined or undone when they don't have the skills or
resources necessary to meet high-maintenance reporting
requirements.
The authorization of a Compassion Capital Fund recognizes the unique
contributions of faith-based and community organizations to the
provision of social services by providing the resources necessary for
these smaller organizations to improve and expand their services. Last
year, the Department of Health and Human Services created a Compassion
Capital Fund funded with $30 million appropriated by Congress. HHS then
took $24.8 million of that appropriation and awarded it in grants to 21
intermediary organizations whose purpose was to help smaller
organizations operate and manage their programs more effectively, train
staff, and expand the types and scope of the social services they
provide to their communities.
Two years ago I stood in this Chamber and told you about Pastor Jesse
Beasley. Pastor Beasley was trying to start a youth program for kids to
protect them from the drug problem and high murder rate affecting Fort
Wayne. Now, two years later, that desire to help improve the lives of
his neighbors has led Pastor Jesse Beasley along with several other
Fort Wayne clergy to begin a program called T.E.A.M. III, which is an
acronym for Touching and Equipping All Mankind. T.E.A.M. III now
provides mentoring, a summer feeding program, a workforce development
program and other social services. As T.E.A.M. III is working to
provide services, they would benefit from the training that a
Compassion Capital Fund would provide. They know where the need is,
they have the faith to tackle any problem that comes their way, but
they may need additional assistance if they desire to apply for a
federal grant. There are a lot of small faith-based and community
organizations in this country that have the heart for service but lack
the finances to hire a CPA or attorney on their staff.
I commend the Ways and Means Committee for including a $150 million
Compassion Capital grant fund in this bill. This authorization level
will enable the Health and Human Services Department to expand their
technical assistance services to greater numbers of faith-based
organizations.
The Charitable Giving Act of 2003 is the culmination of several years
of hard work, and I am proud to be a cosponsor of this important bill.
It contains, in large part, what I believe are the most effective ways
the federal government can lend its support to faith-based
organizations. As Jack Willome said, it does no harm. It encourages
individuals and businesses to make private contributions to
organizations that are truly transforming people's lives--not just
through assisting people with their physical needs, but also their
spiritual needs.
While government can be helpful in alleviating some of the problems
our society faces today, it will never have the answers for some of our
country's neediest people--people who need more than their physical
needs met. They need help spiritually; they need God to fill the void
in their lives. Community and faith-based organizations are critical to
the stability and health of our country, and they rely on the support
of private donations, not government aid. I encourage my colleagues to
vote for this legislation. The return on the dollar from private
donations resulting from this legislation will be immeasurable. Not
only will individual lives be changed, but our entire society will
change as crime rates do down, unwed pregnancies decrease, drug rates
and suicides diminish and, in time, those same people begin to give
back to their communities as others once helped them.
Mr. CRANE. Mr. Speaker, from spiritual counseling to rape crisis
centers, charitable organizations are vital to the health and well-
being of American citizens. Charity benefits both the giver and
receiver in like proportions. The act of giving elevates the heart of
the giver; the act of receiving elevates the condition of the
recipient.
Charity is a blessed act that should suffer no discouragement from
something so punitive as the tax code, which contains absurd, yet very
real, disincentives to individuals willing and able to exercise the
gift of charity. Such disincentives have terrible consequences in
reducing the resources available to private organizations. If our tax
code were not so laden with peculiarities and oddities, this
legislation would not be needed. Unfortunately, in many cases under
current law, a contribution results in a loss of some portion of the
charitable deduction.
Mr. Speaker, I am very pleased that two major components of H.R. 7
are based upon legislation I have introduced for many years, the
Charitable Giving Tax Relief Act and the IRA Charitable Rollover
Incentive Act. The Charitable Giving Tax Relief Act allows non-
itemizers to deduct 100 percent of any charitable contributions up to
the amount of the standard deduction. Under current law, while non-
itemizers receive the standard deduction, only itemizers can take a
deduction for their charitable contributions. Approximately two-thirds
of tax returns filed do not claim itemized deductions; therefore those
taxpayers are not eligible to deduct their charitable contributions.
the majority of non-itemizers are low- and middle-income taxpayers. The
tax code should provide a tax benefit to all taxpayers, not just those
who itemize.
Secondly, I am pleased that H.R. 7 includes language based upon the
IRA Charitable Rollover Incentive Act. Under H.R. 7, individuals age
70\1/2\ or older will be able to contribute amounts currently held in
Individual Retirement Accounts (IRAs) directly to qualified charities
without having to first recognize the income for tax purposes and then
take a charitable deduction.
The IRA was intended to encourage individuals to save for retirement,
but due to the general increase in asset values over the years, many
individuals have more than sufficient funds to retire comfortably. Thus
it is a common practice for retirees to transfer some of their wealth
to charities and, in some cases, that wealth is held in an IRA.
Unfortunately, in many cases under current law such a simple
arrangement results in a loss of some portion of the charitable
deduction. This legislation will give individuals more freedom to
allocate their resources as they see fit while providing badly
[[Page H8326]]
needed resources to churches, colleges and universities, and other
social organizations.
We now have an excellent opportunity to advance sound tax policy and
sound social policy by returning to our Nation's historical emphasis on
private activities and personal involvement in the well-being of our
communities. I commend the authors of this legislation and urge all of
my colleagues to support this vitally important bill.
Mr. BLUNT. Mr. Speaker, I yield back the balance of my time.
Amendment in the Nature of a Substitute Offered by Mr. Cardin
Mr. CARDIN. Mr. Speaker, I offer an amendment in the nature of a
substitute.
The SPEAKER pro tempore. The Clerk will designate the amendment in
the nature of a substitute.
The text of the amendment in the nature of a substitute is as
follows:
Amendment in the nature of a substitute offered by Mr. Cardin:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE; ETC.
(a) Short Title.--This Act may be cited as the ``Charitable
Giving Act of 2003''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is
expressed in terms of an amendment to, or repeal of, a
section or other provision, the reference shall be considered
to be made to a section or other provision of the Internal
Revenue Code of 1986.
(c) Table of Contents.--
Sec. 1. Short title; etc.
TITLE I--CHARITABLE GIVING INCENTIVES
Sec. 101. Deduction for portion of charitable contributions to be
allowed to individuals who do not itemize deductions.
Sec. 102. Tax-free distributions from individual retirement plans for
charitable purposes.
Sec. 103. Increase in cap on corporate charitable contributions.
Sec. 104. Charitable deduction for contributions of food inventory.
Sec. 105. Reform of certain excise taxes related to private
foundations.
Sec. 106. Excise tax on unrelated business taxable income of charitable
remainder trusts.
Sec. 107. Expansion of charitable contribution allowed for scientific
property used for research and for computer technology
and equipment used for educational purposes.
Sec. 108. Adjustment to basis of s corporation stock for certain
charitable contributions.
Sec. 109. Charitable organizations permitted to make collegiate housing
and infrastructure grants.
Sec. 110. Conduct of certain games of chance not treated as unrelated
trade or business.
Sec. 111. Excise taxes exemption for blood collector organizations.
Sec. 112. Nonrecognition of gain on the sale of property used in
performance of an exempt function.
Sec. 113. Exemption of qualified 501(c)(3) bonds for nursing homes from
Federal guarantee prohibitions.
TITLE II--TAX REFORM AND IMPROVEMENTS RELATING TO CHARITABLE
ORGANIZATIONS AND PROGRAMS
Sec. 201. Suspension of tax-exempt status of terrorist organizations.
Sec. 202. Clarification of definition of church tax inquiry.
Sec. 203. Extension of declaratory judgment remedy to tax-exempt
organizations.
Sec. 204. Landowner incentives programs.
Sec. 205. Modifications to section 512(b)(13).
Sec. 206. Simplification of lobbying expenditure limitation.
Sec. 207. Pilot project for forest conservation activities.
TITLE III--OTHER PROVISIONS
Sec. 301. Compassion capital fund.
Sec. 302. Reauthorization of assets for independence demonstration.
Sec. 303. Sense of the Congress regarding corporate contributions to
faith-based organizations, etc.
TITLE IV--SOCIAL SERVICES BLOCK GRANT
Sec. 401. Restoration of funds for the social services block grant.
Sec. 402. Restoration of authority to transfer up to 10 percent of TANF
funds to the social services block grant.
Sec. 403. Requirement to submit annual report on State activities.
TITLE V--ABUSIVE TAX SHELTERS
Sec. 501. Short title.
Sec. 502. Findings and purpose.
Subtitle A--Provisions Designed to Curtail Tax Shelters
Sec. 511. Clarification of economic substance doctrine.
Sec. 512. Penalty for failing to disclose reportable transaction.
Sec. 513. Accuracy-related penalty for listed transactions and other
reportable transactions having a significant tax
avoidance purpose.
Sec. 514. Penalty for understatements attributable to transactions
lacking economic substance, etc.
Sec. 515. Modifications of substantial understatement penalty for
nonreportable transactions.
Sec. 516. Tax shelter exception to confidentiality privileges relating
to taxpayer communications.
Sec. 517. Disclosure of reportable transactions.
Sec. 518. Modifications to penalty for failure to register tax
shelters.
Sec. 519. Modification of penalty for failure to maintain lists of
investors.
Sec. 520. Modification of actions to enjoin certain conduct related to
tax shelters and reportable transactions.
Sec. 521. Understatement of taxpayer's liability by income tax return
preparer.
Sec. 522. Penalty on failure to report interests in foreign financial
accounts.
Sec. 523. Frivolous tax submissions.
Sec. 524. Regulation of individuals practicing before the Department of
Treasury.
Sec. 525. Penalty on promoters of tax shelters.
Sec. 526. Statute of limitations for taxable years for which listed
transactions not reported.
Sec. 527. Denial of deduction for interest on underpayments
attributable to nondisclosed reportable and noneconomic
substance transactions.
Subtitle B--Affirmation of Consolidated Return Regulation Authority
Sec. 531. Affirmation of consolidated return regulation authority.
TITLE I--CHARITABLE GIVING INCENTIVES
SEC. 101. DEDUCTION FOR PORTION OF CHARITABLE CONTRIBUTIONS
TO BE ALLOWED TO INDIVIDUALS WHO DO NOT ITEMIZE
DEDUCTIONS.
(a) In General.--Section 170 (relating to charitable, etc.,
contributions and gifts) is amended by redesignating
subsection (m) as subsection (n) and by inserting after
subsection (l) the following new subsection:
``(m) Deduction for Individuals Not Itemizing Deductions.--
``(1) In general.--In the case of an individual who does
not itemize deductions for a taxable year, there shall be
taken into account as a direct charitable deduction under
section 63 an amount equal to the amount allowable under
subsection (a) for the taxable year for cash contributions
(determined without regard to any carryover), to the extent
that such contributions exceed $250 ($500 in the case of a
joint return) but do not exceed $500 ($1,000 in the case of a
joint return).
``(2) Termination.--Paragraph (1) shall not apply to any
taxable year beginning after December 31, 2005.''.
(b) Direct Charitable Deduction.--
(1) In general.--Subsection (b) of section 63 (defining
taxable income) is amended by striking ``and'' at the end of
paragraph (1), by striking the period at the end of paragraph
(2) and inserting ``, and'', and by adding at the end the
following new paragraph:
``(3) the direct charitable deduction.''.
(2) Definition.--Section 63 is amended by redesignating
subsection (g) as subsection (h) and by inserting after
subsection (f) the following new subsection:
``(g) Direct Charitable Deduction.--For purposes of this
section, the term `direct charitable deduction' means that
portion of the amount allowable under section 170(a) which is
taken as a direct charitable deduction for the taxable year
under section 170(m).''.
(3) Conforming amendment.--Subsection (d) of section 63 is
amended by striking ``and'' at the end of paragraph (1), by
striking the period at the end of paragraph (2) and inserting
``, and'', and by adding at the end the following new
paragraph:
``(3) the direct charitable deduction.''.
(c) Study.--
(1) In general.--The Secretary of the Treasury shall study
the effect of the amendments made by this section on
increased charitable giving and taxpayer compliance,
including a comparison of taxpayer compliance between
taxpayers who itemize their charitable contributions and
taxpayers who claim a direct charitable deduction.
(2) Report.--Not later than December 31, 2006, the
Secretary of the Treasury shall report on the study required
under paragraph (1) to the Committee on Finance of the Senate
and the Committee on Ways and Means of the House of
Representatives.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2003.
SEC. 102. TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT
PLANS FOR CHARITABLE PURPOSES.
(a) In General.--Subsection (d) of section 408 (relating to
individual retirement accounts) is amended by adding at the
end the following new paragraph:
``(8) Distributions for charitable purposes.--
``(A) In general.--No amount shall be includible in gross
income by reason of a qualified charitable distribution.
``(B) Qualified charitable distribution.--For purposes of
this paragraph, the term `qualified charitable distribution'
means any distribution from an individual retirement plan
other than a plan described in subsection (k) or (p) of
section 408--
[[Page H8327]]
``(i) which is made on or after the date that the
individual for whose benefit the plan is maintained has
attained age 70 \1/2\, and
``(ii) which is made directly by the trustee--
``(I) to an organization described in section 170(c), or
``(II) to a split-interest entity.
A distribution shall be treated as a qualified charitable
distribution only to the extent that the distribution would
be includible in gross income without regard to subparagraph
(A) and, in the case of a distribution to a split-interest
entity, only if no person holds an income interest in the
amounts in the split-interest entity attributable to such
distribution other than one or more of the following: the
individual for whose benefit such plan is maintained, the
spouse of such individual, or any organization described in
section 170(c).
``(C) Contributions must be otherwise deductible.--For
purposes of this paragraph--
``(i) Direct contributions.--A distribution to an
organization described in section 170(c) shall be treated as
a qualified charitable distribution only if a deduction for
the entire distribution would be allowable under section 170
(determined without regard to subsection (b) thereof and this
paragraph).
``(ii) Split-interest gifts.--A distribution to a split-
interest entity shall be treated as a qualified charitable
distribution only if a deduction for the entire value of the
interest in the distribution for the use of an organization
described in section 170(c) would be allowable under section
170 (determined without regard to subsection (b) thereof and
this paragraph).
``(D) Application of section 72.--Notwithstanding section
72, in determining the extent to which a distribution is a
qualified charitable distribution, the entire amount of the
distribution shall be treated as includible in gross income
without regard to subparagraph (A) to the extent that such
amount does not exceed the aggregate amount which would have
been so includible if all amounts distributed from all
individual retirement plans were treated as 1 contract under
paragraph (2)(A) for purposes of determining the inclusion of
such distribution under section 72. Proper adjustments shall
be made in applying section 72 to other distributions in such
taxable year and subsequent taxable years.
``(E) Special rules for split-interest entities.--
``(i) Charitable remainder trusts.--Notwithstanding section
664(b), distributions made from a trust described in
subparagraph (G)(i) shall be treated as ordinary income in
the hands of the beneficiary to whom is paid the annuity
described in section 664(d)(1)(A) or the payment described in
section 664(d)(2)(A).
``(ii) Pooled income funds.--No amount shall be includible
in the gross income of a pooled income fund (as defined in
subparagraph (G)(ii)) by reason of a qualified charitable
distribution to such fund, and all distributions from the
fund which are attributable to qualified charitable
distributions shall be treated as ordinary income to the
beneficiary.
``(iii) Charitable gift annuities.--Qualified charitable
distributions made for a charitable gift annuity shall not be
treated as an investment in the contract.
``(F) Denial of deduction.--Qualified charitable
distributions shall not be taken into account in determining
the deduction under section 170.
``(G) Split-interest entity defined.--For purposes of this
paragraph, the term `split-interest entity' means--
``(i) a charitable remainder annuity trust or a charitable
remainder unitrust (as such terms are defined in section
664(d)) which must be funded exclusively by qualified
charitable distributions,
``(ii) a pooled income fund (as defined in section
642(c)(5)), but only if the fund accounts separately for
amounts attributable to qualified charitable distributions,
and
``(iii) a charitable gift annuity (as defined in section
501(m)(5)).''.
(b) Modifications Relating to Information Returns by
Certain Trusts.--
(1) Returns.--Section 6034 (relating to returns by trusts
described in section 4947(a)(2) or claiming charitable
deductions under section 642(c)) is amended to read as
follows:
``SEC. 6034. RETURNS BY TRUSTS DESCRIBED IN SECTION
4947(A)(2) OR CLAIMING CHARITABLE DEDUCTIONS
UNDER SECTION 642(C).
``(a) Trusts Described in Section 4947(a)(2).--Every trust
described in section 4947(a)(2) shall furnish such
information with respect to the taxable year as the Secretary
may by forms or regulations require.
``(b) Trusts Claiming a Charitable Deduction Under Section
642(c).--
``(1) In general.--Every trust not required to file a
return under subsection (a) but claiming a deduction under
section 642(c) for the taxable year shall furnish such
information with respect to such taxable year as the
Secretary may by forms or regulations prescribe, including--
``(A) the amount of the deduction taken under section
642(c) within such year,
``(B) the amount paid out within such year which represents
amounts for which deductions under section 642(c) have been
taken in prior years,
``(C) the amount for which such deductions have been taken
in prior years but which has not been paid out at the
beginning of such year,
``(D) the amount paid out of principal in the current and
prior years for the purposes described in section 642(c),
``(E) the total income of the trust within such year and
the expenses attributable thereto, and
``(F) a balance sheet showing the assets, liabilities, and
net worth of the trust as of the beginning of such year.
``(2) Exceptions.--Paragraph (1) shall not apply to a trust
for any taxable year if--
``(A) all the net income for such year, determined under
the applicable principles of the law of trusts, is required
to be distributed currently to the beneficiaries, or
``(B) the trust is described in section 4947(a)(1).''.
(2) Increase in penalty relating to filing of information
return by split-interest trusts.--Paragraph (2) of section
6652(c) (relating to returns by exempt organizations and by
certain trusts) is amended by adding at the end the following
new subparagraph:
``(C) Split-interest trusts.--In the case of a trust which
is required to file a return under section 6034(a),
subparagraphs (A) and (B) of this paragraph shall not apply
and paragraph (1) shall apply in the same manner as if such
return were required under section 6033, except that--
``(i) the 5 percent limitation in the second sentence of
paragraph (1)(A) shall not apply,
``(ii) in the case of any trust with gross income in excess
of $250,000, the first sentence of paragraph (1)(A) shall be
applied by substituting `$100' for `$20', and the second
sentence thereof shall be applied by substituting `$50,000'
for `$10,000', and
``(iii) the third sentence of paragraph (1)(A) shall be
disregarded.
In addition to any penalty imposed on the trust pursuant to
this subparagraph, if the person required to file such return
knowingly fails to file the return, such penalty shall also
be imposed on such person who shall be personally liable for
such penalty.''.
(3) Confidentiality of noncharitable beneficiaries.--
Subsection (b) of section 6104 (relating to inspection of
annual information returns) is amended by adding at the end
the following new sentence: ``In the case of a trust which is
required to file a return under section 6034(a), this
subsection shall not apply to information regarding
beneficiaries which are not organizations described in
section 170(c).''.
(c) Effective Dates.--
(1) Subsection (a).--The amendment made by subsection (a)
shall apply to distributions made after December 31, 2003.
(2) Subsection (b).--The amendments made by subsection (b)
shall apply to returns for taxable years beginning after
December 31, 2003.
SEC. 103. INCREASE IN CAP ON CORPORATE CHARITABLE
CONTRIBUTIONS.
(a) In General.--Paragraph (2) of section 170(b) (relating
to corporations) is amended by striking ``10 percent'' and
inserting ``the applicable percentage''.
(b) Applicable Percentage.--Subsection (b) of section 170
is amended by adding at the end the following new paragraph:
``(3) Applicable percentage defined.--For purposes of
paragraph (2), the applicable percentage shall be determined
in accordance with the following table:
``For taxable years beginning in calendarThe applicable percentage is--
2004..........................................................11
2005..........................................................12
2006..........................................................13
2007..........................................................14
2008 through 2011.............................................15
2012 and thereafter........................................20.''.
(c) Conforming Amendments.--
(1) Sections 512(b)(10) and 805(b)(2)(A) are each amended
by striking ``10 percent'' each place it occurs and inserting
``the applicable percentage (determined under section
170(b)(3))''.
(2) Sections 545(b)(2) and 556(b)(2) are each amended by
striking ``10-percent limitation'' and inserting ``applicable
percentage limitation''.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2003.
SEC. 104. CHARITABLE DEDUCTION FOR CONTRIBUTIONS OF FOOD
INVENTORY.
(a) In General.--Paragraph (3) of section 170(e) (relating
to special rule for certain contributions of inventory and
other property) is amended by redesignating subparagraph (C)
as subparagraph (D) and by inserting after subparagraph (B)
the following new subparagraph:
``(C) Special rule for contributions of food inventory.--
``(i) General rule.--In the case of a charitable
contribution of food from any trade or business (or interest
therein) of the taxpayer, this paragraph shall be applied--
``(I) without regard to whether the contribution is made by
a C corporation, and
``(II) only to food that is apparently wholesome food.
``(ii) Limitation.--In the case of a taxpayer other than a
C corporation, the aggregate amount of such contributions for
any taxable year which may be taken into account under this
section shall not exceed the applicable percentage (within
the meaning of subsection (b)(3)) of the taxpayer's aggregate
net income for such taxable year from all trades or
businesses from which such contributions were made for such
year, computed without regard to this section.
``(iii) Determination of fair market value.--In the case of
a qualified contribution of apparently wholesome food to
which
[[Page H8328]]
this paragraph applies and which, solely by reason of
internal standards of the taxpayer or lack of market, cannot
or will not be sold, the fair market value of such food shall
be determined by taking into account the price at which the
same or substantially the same food items (as to both type
and quality) are sold by the taxpayer at the time of the
contribution (or, if not so sold at such time, in the recent
past).
``(iv) Apparently wholesome food.--For purposes of this
subparagraph, the term `apparently wholesome food' has the
meaning given to such term by section 22(b)(2) of the Bill
Emerson Good Samaritan Food Donation Act (42 U.S.C.
1791(b)(2)), as in effect on the date of the enactment of
this subparagraph.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2003.
SEC. 105. REFORM OF CERTAIN EXCISE TAXES RELATED TO PRIVATE
FOUNDATIONS.
(a) Reduction of Tax on Net Investment Income.--Section
4940(a) (relating to tax-exempt foundations) is amended by
striking ``2 percent'' and inserting ``1 percent''.
(b) Repeal of Reduction in Tax Where Private Foundation
Meets Certain Distribution Requirements.--Section 4940
(relating to excise tax based on investment income) is
amended by striking subsection (e).
(c) Modification of Excise Tax on Self-Dealing.--The second
sentence of section 4941(a)(1) (relating to initial excise
tax imposed on self-dealer) is amended by striking ``5
percent'' and inserting ``25 percent''.
(d) Modification of Excise Tax on Failure To Distribute
Income.--
(1) Certain administrative expenses not treated as
distributions.--Section 4942(g) is amended by striking
paragraph (4) and inserting the following new paragraphs:
``(4) Limitation on administrative expenses treated as
distributions.--
``(A) In general.--For purposes of paragraph (1)(A), the
following administrative expenses shall not be treated as
qualifying distributions:
``(i) Any administrative expense which is not directly
attributable to direct charitable activities, grant selection
activities, grant monitoring and administration activities,
compliance with applicable Federal, State, or local law, or
furthering public accountability of the private foundation.
``(ii) Any compensation paid to a disqualified person to
the extent that such compensation exceeds an annual rate of
$100,000.
``(iii) Any expense incurred for transportation by air
unless such transportation is regularly-scheduled commercial
air transportation.
``(iv) Any expense incurred for regularly-scheduled
commercial air transportation to the extent that such expense
exceeds the cost of such transportation in coach-class
accommodations.
``(B) Adjustment for inflation.--In the case of a taxable
year beginning after December 31, 2004, the $100,000 amount
in subparagraph (A)(ii) shall be increased by an amount equal
to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, determined by substituting `calendar year 2003'
for `calendar year 1992' in subparagraph (B) thereof.
If any amount as increased under the preceding sentence is
not a multiple of $50, such amount shall be rounded to the
next lowest multiple of $50.
``(5) Regulations.--The Secretary shall prescribe such
regulations as may be necessary to carry out the purposes of
paragraph (4). Such regulations shall provide that
administrative expenses which are excluded from qualifying
distributions solely by reason of the limitations in
paragraph (4) shall not for such reason subject a private
foundation to any other excise taxes imposed by this
subchapter.''.
(2) Disallowance not to apply to certain private
foundations.--
(A) In general.--Section 4942(j)(3) (defining operating
foundation) is amended--
(i) by striking ``(within the meaning of paragraph (1) or
(2) of subsection (g))'' each place it appears, and
(ii) by adding at the end the following new sentence: ``For
purposes of this paragraph, the term `qualifying
distributions' means qualifying distributions within the
meaning of paragraph (1) or (2) of subsection (g) (determined
without regard to subsection (g)(4)).''.
(B) Conforming amendment.--Section 4942(f)(2)(C)(i) is
amended by inserting ``(determined without regard to
subsection (g)(4))'' after ``within the meaning of subsection
(g)(1)(A)''.
(e) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2003.
SEC. 106. EXCISE TAX ON UNRELATED BUSINESS TAXABLE INCOME OF
CHARITABLE REMAINDER TRUSTS.
(a) In General.--Subsection (c) of section 664 (relating to
exemption from income taxes) is amended to read as follows:
``(c) Taxation of Trusts.--
``(1) Income tax.--A charitable remainder annuity trust and
a charitable remainder unitrust shall, for any taxable year,
not be subject to any tax imposed by this subtitle.
``(2) Excise tax.--
``(A) In general.--In the case of a charitable remainder
annuity trust or a charitable remainder unitrust that has
unrelated business taxable income (within the meaning of
section 512, determined as if part III of subchapter F
applied to such trust) for a taxable year, there is hereby
imposed on such trust or unitrust an excise tax equal to the
amount of such unrelated business taxable income.
``(B) Certain rules to apply.--The tax imposed by
subparagraph (A) shall be treated as imposed by chapter 42
for purposes of this title other than subchapter E of chapter
42.
``(C) Character of distributions and coordination with
distribution requirements.--The amounts taken into account in
determining unrelated business taxable income (as defined in
subparagraph (A)) shall not be taken into account for
purposes of--
``(i) subsection (b),
``(ii) determining the value of trust assets under
subsection (d)(2), and
``(iii) determining income under subsection (d)(3).
``(D) Tax court proceedings.--For purposes of this
paragraph, the references in section 6212(c)(1) to section
4940 shall be deemed to include references to this
paragraph.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2003.
SEC. 107. EXPANSION OF CHARITABLE CONTRIBUTION ALLOWED FOR
SCIENTIFIC PROPERTY USED FOR RESEARCH AND FOR
COMPUTER TECHNOLOGY AND EQUIPMENT USED FOR
EDUCATIONAL PURPOSES.
(a) Scientific Property Used for Research.--
(1) In general.--Clause (ii) of section 170(e)(4)(B)
(defining qualified research contributions) is amended by
inserting ``or assembled'' after ``constructed''.
(2) Conforming amendment.--Clause (iii) of section
170(e)(4)(B) is amended by inserting ``or assembling'' after
``construction''.
(b) Computer Technology and Equipment for Educational
Purposes.--
(1) In general.--Clause (ii) of section 170(e)(6)(B) is
amended by inserting ``or assembled'' after ``constructed''
and ``or assembling'' after ``construction''.
(2) Special rule made permanent.--Section 170(e)(6) is
amended by striking subparagraph (G).
(3) Conforming amendments.--Subparagraph (D) of section
170(e)(6) is amended by inserting ``or assembled'' after
``constructed'' and ``or assembling'' after ``construction''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2003.
SEC. 108. ADJUSTMENT TO BASIS OF S CORPORATION STOCK FOR
CERTAIN CHARITABLE CONTRIBUTIONS.
(a) In General.--Paragraph (2) of section 1367(a) (relating
to adjustments to basis of stock of shareholders, etc.) is
amended by adding at the end the following new flush
sentence:
``The decrease under subparagraph (B) by reason of a
charitable contribution (as defined in section 170(c)) of
property shall be the amount equal to the shareholder's pro
rata share of the adjusted basis of such property.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2003.
SEC. 109. CHARITABLE ORGANIZATIONS PERMITTED TO MAKE
COLLEGIATE HOUSING AND INFRASTRUCTURE GRANTS.
(a) In General.--Section 501 (relating to exemption from
tax on corporations, certain trusts, etc.), as amended by
section 201, is further amended by redesignating subsection
(q) as subsection (r) and by inserting after subsection (p)
the following new subsection:
``(q) Treatment of Organizations Making Collegiate Housing
and Infrastructure Improvement Grants.--
``(1) In general.--For purposes of subsection (c)(3) and
sections 170(c)(2)(B), 2055(a), and 2522(a)(2), an
organization shall not fail to be treated as organized and
operated exclusively for charitable or educational purposes
solely because such organization makes collegiate housing and
infrastructure grants to an organization described in
subsection (c)(7), so long as, at the time of the grant,
substantially all of the active members of the recipient
organization are full-time students at the college or
university with which such recipient organization is
associated.
``(2) Housing and infrastructure grants.--For purposes of
paragraph (1), collegiate housing and infrastructure grants
are grants to provide, improve, operate, or maintain
collegiate housing that may involve more than incidental
social, recreational, or private purposes, so long as such
grants are for purposes that would be permissible for a
dormitory of the college or university referred to in
paragraph (1). A grant shall not be treated as a collegiate
housing and infrastructure grant for purposes of paragraph
(1) to the extent that such grant is used to provide physical
fitness equipment.
``(3) Grants to certain organizations holding title to
property, etc.--For purposes of this subsection, a collegiate
housing and infrastructure grant to an organization described
in subsection (c)(2) or (c)(7) holding title to property
exclusively for the benefit of an organization described in
subsection (c)(7) shall be considered a grant to the
organization described in subsection (c)(7) for whose benefit
such property is held.''.
(b) Effective Date.--The amendment made by this section
shall apply to grants made after December 31, 2003.
[[Page H8329]]
SEC. 110. CONDUCT OF CERTAIN GAMES OF CHANCE NOT TREATED AS
UNRELATED TRADE OR BUSINESS.
(a) In General.--Paragraph (1) of section 513(f) (relating
to certain bingo games) is amended to read as follows:
``(1) In general.--The term `unrelated trade or business'
does not include--
``(A) any trade or business which consists of conducting
bingo games, and
``(B) any trade or business which consists of conducting
qualified games of chance if the net proceeds from such trade
or business are paid or set aside for payment for purposes
described in section 170(c)(2)(B), for the promotion of
social welfare (within the meaning of section 501(c)(4)), or
for a purpose for which State law specifically authorizes the
expenditure of such proceeds.''.
(b) Qualified Games of Chance.--Subsection (f) of section
513 is amended by adding at the end the following new
paragraph:
``(3) Qualified games of chance.--For purposes of paragraph
(1), the term `qualified game of chance' means any game of
chance (other than bingo) conducted by an organization if--
``(A) such organization is licensed pursuant to State law
to conduct such game,
``(B) only organizations which are organized as nonprofit
corporations or are exempt from tax under section 501(a) may
be so licensed to conduct such game within the State, and
``(C) the conduct of such game does not violate State or
local law.''
(c) Clerical Amendment.--The subsection heading of section
513(f) is amended by striking ``Bingo Games'' and inserting
``Games of Chance''.
(d) Effective Date.-- The amendments made by this section
shall apply to games conducted after December 31, 2003.
SEC. 111. EXCISE TAXES EXEMPTION FOR BLOOD COLLECTOR
ORGANIZATIONS.
(a) Exemption From Imposition of Special Fuels Tax.--
Section 4041(g) (relating to other exemptions) is amended by
striking ``and'' at the end of paragraph (3), by striking the
period in paragraph (4) and inserting ``; and'', and by
inserting after paragraph (4) the following new paragraph:
``(5) with respect to the sale of any liquid to a qualified
blood collector organization (as defined in section
7701(a)(48)) for such organization's exclusive use, or with
respect to the use by a qualified blood collector
organization of any liquid as a fuel.''.
(b) Exemption From Manufacturers Excise Tax.--
(1) In general.--Section 4221(a) (relating to certain tax-
free sales) is amended by striking ``or'' at the end of
paragraph (4), by adding ``or'' at the end of paragraph (5),
and by inserting after paragraph (5) the following new
paragraph:
``(6) to a qualified blood collector organization (as
defined in section 7701(a)(48)) for such organization's
exclusive use,''.
(2) Conforming amendments.--
(A) The second sentence of section 4221(a) is amended by
striking ``Paragraphs (4) and (5)'' and inserting
``Paragraphs (4), (5), and (6)''.
(B) Section 6421(c) is amended by striking ``or (5)'' and
inserting ``(5), or (6)''.
(c) Exemption From Communication Excise Tax.--
(1) In general.--Section 4253 (relating to exemptions) is
amended by redesignating subsection (k) as subsection (l) and
inserting after subsection (j) the following new subsection:
``(k) Exemption for Qualified Blood Collector
Organizations.--Under regulations provided by the Secretary,
no tax shall be imposed under section 4251 on any amount paid
by a qualified blood collector organization (as defined in
section 7701(a)(48)) for services or facilities furnished to
such organization.''.
(2) Conforming amendment.--Section 4253(l), as redesignated
by paragraph (1), is amended by striking ``or (j)'' and
inserting ``(j), or (k)''.
(d) Credit for Refund for Certain Taxes on Sales and
Services.--
(1) Deemed overpayment.--
(A) In general.--Section 6416(b)(2) is amended by
redesignating subparagraphs (E) and (F) as subparagraphs (F)
and (G), respectively, and by inserting after subparagraph
(D) the following new subparagraph:
``(E) sold to a qualified blood collector organization (as
defined in section 7701(a)(48)) for such organization's
exclusive use;''.
(B) Conforming amendments.--Section 6416(b)(2) is amended--
(i) by striking ``Subparagraphs (C) and (D)'' and inserting
``Subparagraphs (C), (D), and (E)'', and
(ii) by striking ``(C), and (D)'' and inserting ``(C), (D),
and (E)''.
(2) Sales of tires.--Clause (ii) of section 6416(b)(4)(B)
is amended by inserting ``sold to a qualified blood collector
organization (as defined in section 7701(a)(48)) for its
exclusive use,'' after ``for its exclusive use,''.
(e) Definition of Qualified Blood Collector Organization.--
Section 7701(a) is amended by inserting at the end the
following new paragraph:
``(48) Qualified blood collector organization.--The term
`qualified blood collector organization' means an
organization which is--
``(A) described in section 501(c)(3) and exempt from tax
under section 501(a),
``(B) registered by the Food and Drug Administration to
collect blood, and
``(C) primarily engaged in the activity of the collection
of blood.''.
(f) Effective Date.--The amendments made by this section
shall take effect on January 1, 2004.
SEC. 112. NONRECOGNITION OF GAIN ON THE SALE OF PROPERTY USED
IN PERFORMANCE OF AN EXEMPT FUNCTION.
(a) In General.--Subparagraph (D) of section 512(a)(3) is
amended to read as follows:
``(D) Nonrecognition of gain.--
``(i) In general.--If property used directly in the
performance of the exempt function of an organization
described in paragraph (7), (9), (17), or (20) of section
501(c) is sold by such organization, and within a period
beginning 1 year before the date of such sale, and ending 3
years (10 years, in the case of an organization described in
section 501(c)(7)) after such date, other property is
purchased and used by such organization directly in the
performance of its exempt function, gain (if any) from such
sale shall be recognized only to the extent that such
organization's sales price of the old property exceeds the
organization's cost of purchasing the other property.
``(ii) Statute of limitations.--If an organization
described in section 501(c)(7) sells property on which gain
is not recognized, in whole or in part, by reason of clause
(i), then the statutory period for the assessment of any
deficiency attributable to such gain shall not expire until
the end of the 3-year period beginning on the date that the
Secretary is notified by such organization (in such manner as
the Secretary may prescribe) that--
``(I) the organization has met the requirements of clause
(i) with respect to gain which was not recognized,
``(II) the organization does not intend to meet such
requirements, or
``(III) the organization failed to meet such requirements
within the prescribed period.
For the purposes of this clause, any 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.
``(iii) Destruction and loss.--For purposes of this
subparagraph, the destruction in whole or in part, theft,
seizure, requisition, or condemnation of property, shall be
treated as the sale of such property, and rules similar to
the rules provided by subsections (b), (c), (e), and (j) of
section 1034 (as in effect on the day before the date of the
enactment of the Taxpayer Relief Act of 1997) shall apply.''.
(b) Effective Date.--The amendment made by this section
shall apply with respect to the sale of any property for
which the 3-year period for offsetting gain by purchasing
other property under subparagraph (D) of section 512(a)(3) of
the Internal Revenue Code (as in effect on the day before the
date of the enactment of this Act) had not expired as of
January 1, 2001.
SEC. 113. EXEMPTION OF QUALIFIED 501(C)(3) BONDS FOR NURSING
HOMES FROM FEDERAL GUARANTEE PROHIBITIONS.
(a) In General.--For purposes of section 149(b)(1) of the
Internal Revenue Code of 1986, any qualified 501(c)(3) bond
(as defined in section 145 of such Code) shall not be treated
as federally guaranteed solely because such bond is part of
an issue supported by a letter of credit, if such bond--
(1) is issued after December 31, 2003, and before the date
which is 1 year after the date of the enactment of this Act,
and
(2) is part of an issue 95 percent or more of the net
proceeds of which are to be used to finance 1 or more of the
following facilities primarily for the benefit of the
elderly:
(A) Licensed nursing home facility.
(B) Licensed or certified assisted living facility.
(C) Licensed personal care facility.
(D) Continuing care retirement community.
(b) Limitation on Issuer.--Subsection (a) shall not apply
to any bond described in such subsection if the aggregate
authorized face amount of the issue of which such bond is a
part, when increased by the outstanding amount of such bonds
issued by the issuer during the period described in
subsection (a)(1) exceeds $15,000,000.
(c) Limitation on Beneficiary.--Rules similar to the rules
of section 144(a)(10) of the Internal Revenue Code of 1986
shall apply for purposes of this section, except that--
(1) ``$15,000,000'' shall be substituted for
``$40,000,000'' in subparagraph (A) thereof, and
(2) such rules shall be applied--
(A) only with respect to bonds described in this section,
and
(B) with respect to the aggregate authorized face amount of
all issues of such bonds which are allocable to the
beneficiary.
(d) Continuing Care Retirement Community.--For purposes of
this section, the term ``continuing care retirement
community'' means a community which provides, on the same
campus, a consortium of residential living options and
support services to persons at least 60 years of age under a
written agreement. For purposes of the preceding sentence,
the residential living options shall include independent
living units, nursing home beds, and either assisted living
units or personal care beds.
TITLE II--TAX REFORM AND IMPROVEMENTS RELATING TO CHARITABLE
ORGANIZATIONS AND PROGRAMS
SEC. 201. SUSPENSION OF TAX-EXEMPT STATUS OF TERRORIST
ORGANIZATIONS.
(a) In General.--Section 501 (relating to exemption from
tax on corporations, certain
[[Page H8330]]
trusts, etc.) is amended by redesignating subsection (p) as
subsection (q) and by inserting after subsection (o) the
following new subsection:
``(p) Suspension of Tax-Exempt Status of Terrorist
Organizations.--
``(1) In general.--The exemption from tax under subsection
(a) with respect to any organization described in paragraph
(2), and the eligibility of any organization described in
paragraph (2) to apply for recognition of exemption under
subsection (a), shall be suspended during the period
described in paragraph (3).
``(2) Terrorist organizations.--An organization is
described in this paragraph if such organization is
designated or otherwise individually identified--
``(A) under section 212(a)(3)(B)(vi)(II) or 219 of the
Immigration and Nationality Act as a terrorist organization
or foreign terrorist organization,
``(B) in or pursuant to an Executive order which is related
to terrorism and issued under the authority of the
International Emergency Economic Powers Act or section 5 of
the United Nations Participation Act of 1945 for the purpose
of imposing on such organization an economic or other
sanction, or
``(C) in or pursuant to an Executive order issued under the
authority of any Federal law if--
``(i) the organization is designated or otherwise
individually identified in or pursuant to such Executive
order as supporting or engaging in terrorist activity (as
defined in section 212(a)(3)(B) of the Immigration and
Nationality Act) or supporting terrorism (as defined in
section 140(d)(2) of the Foreign Relations Authorization Act,
Fiscal Years 1988 and 1989); and
``(ii) such Executive order refers to this subsection.
``(3) Period of suspension.--With respect to any
organization described in paragraph (2), the period of
suspension--
``(A) begins on the later of--
``(i) the date of the first publication of a designation or
identification described in paragraph (2) with respect to
such organization, or
``(ii) the date of the enactment of this subsection, and
``(B) ends on the first date that all designations and
identifications described in paragraph (2) with respect to
such organization are rescinded pursuant to the law or
Executive order under which such designation or
identification was made.
``(4) Denial of deduction.--No deduction shall be allowed
under section 170, 545(b)(2), 556(b)(2), 642(c), 2055,
2106(a)(2), or 2522 for any contribution to an organization
described in paragraph (2) during the period described in
paragraph (3).
``(5) Denial of administrative or judicial challenge of
suspension or denial of deduction.--Notwithstanding section
7428 or any other provision of law, no organization or other
person may challenge a suspension under paragraph (1), a
designation or identification described in paragraph (2), the
period of suspension described in paragraph (3), or a denial
of a deduction under paragraph (4) in any administrative or
judicial proceeding relating to the Federal tax liability of
such organization or other person.
``(6) Erroneous designation.--
``(A) In general.--If--
``(i) the tax exemption of any organization described in
paragraph (2) is suspended under paragraph (1),
``(ii) each designation and identification described in
paragraph (2) which has been made with respect to such
organization is determined to be erroneous pursuant to the
law or Executive order under which such designation or
identification was made, and
``(iii) the erroneous designations and identifications
result in an overpayment of income tax for any taxable year
by such organization,
credit or refund (with interest) with respect to such
overpayment shall be made.
``(B) Waiver of limitations.--If the credit or refund of
any overpayment of tax described in subparagraph (A)(iii) is
prevented at any time by the operation of any law or rule of
law (including res judicata), such credit or refund may
nevertheless be allowed or made if the claim therefor is
filed before the close of the 1-year period beginning on the
date of the last determination described in subparagraph
(A)(ii).
``(7) Notice of suspensions.--If the tax exemption of any
organization is suspended under this subsection, the Internal
Revenue Service shall update the listings of tax-exempt
organizations and shall publish appropriate notice to
taxpayers of such suspension and of the fact that
contributions to such organization are not deductible during
the period of such suspension.''.
(b) Effective Date.--The amendments made by this section
shall apply to designations made before, on, or after the
date of the enactment of this Act.
SEC. 202. CLARIFICATION OF DEFINITION OF CHURCH TAX INQUIRY.
Subsection (i) of section 7611 (relating to section not to
apply to criminal investigations, etc.) is amended by
striking ``or'' at the end of paragraph (4), by striking the
period at the end of paragraph (5) and inserting ``, or'',
and by inserting after paragraph (5) the following:
``(6) information provided by the Secretary related to the
standards for exemption from tax under this title and the
requirements under this title relating to unrelated business
taxable income.''.
SEC. 203. EXTENSION OF DECLARATORY JUDGMENT REMEDY TO TAX-
EXEMPT ORGANIZATIONS.
(a) In General.--Paragraph (1) of section 7428(a) (relating
to creation of remedy) is amended--
(1) in subparagraph (B) by inserting after ``509(a))'' the
following: ``or as a private operating foundation (as defined
in section 4942(j)(3))''; and
(2) by amending subparagraph (C) to read as follows:
``(C) with respect to the initial qualification or
continuing qualification of an organization as an
organization described in subsection (c) (other than
paragraph (3)) or (d) of section 501 which is exempt from tax
under section 501(a), or''.
(b) Court Jurisdiction.--Subsection (a) of section 7428 is
amended in the material following paragraph (2) by striking
``United States Tax Court, the United States Claims Court, or
the district court of the United States for the District of
Columbia'' and inserting the following: ``United States Tax
Court (in the case of any such determination or failure) or
the United States Claims Court or the district court of the
United States for the District of Columbia (in the case of a
determination or failure with respect to an issue referred to
in subparagraph (A) or (B) of paragraph (1)),''.
(c) Effective Date.--The amendments made by this section
shall apply to pleadings filed with respect to determinations
(or requests for determinations) made after the date of the
enactment of this Act.
SEC. 204. LANDOWNER INCENTIVES PROGRAMS.
(a) In General.--Subsection (a) of section 126 is amended
by redesignating paragraph (10) as paragraph (11) and by
inserting after paragraph (9) the following new paragraph:
``(10) Landowner initiatives programs to conserve
threatened, endangered, or imperiled species, or protect or
restore habitat carried out under--
``(A) the Fish and Wildlife Coordination Act (16 U.S.C. 661
et seq.),
``(B) the Fish and Wildlife Act of 1956 (16 U.S.C. 742f),
or
``(C) section 6 of the Endangered Species Act (16 U.S.C.
11531 et seq.).''.
(b) Excludable Portion.--Subparagraph (A) of section
126(b)(1) is amended by inserting after ``Secretary of
Agriculture'' the following: ``(the Secretary of the
Interior, in the case of the landowner incentives programs
described in subsection (a)(10) and the programs described in
subsection (a)(11) that are implemented by the Department of
the Interior)''.
(c) Effective Date.--The amendments made by this section
shall apply to amounts received after December 31, 2003, in
taxable years ending after such date.
SEC. 205. MODIFICATIONS TO SECTION 512(B)(13).
(a) In General.--Paragraph (13) of section 512(b) (relating
to special rules for certain amounts received from controlled
entities) is amended by redesignating subparagraph (E) as
subparagraph (F) and by inserting after subparagraph (D) the
following new subparagraph:
``(E) Paragraph to apply only to excess payments.--
``(i) In general.--Subparagraph (A) shall apply only to the
portion of a specified payment received or accrued by the
controlling organization that exceeds the amount which would
have been paid or accrued if such payment met the
requirements prescribed under section 482.
``(ii) Addition to tax for valuation misstatements.--The
tax imposed by this chapter on the controlling organization
shall be increased by an amount equal to 20 percent of the
larger of--
``(I) such excess determined without regard to any
amendment or supplement to a return of tax, or
``(II) such excess determined with regard to all such
amendments and supplements.''.
(b) Effective Date.--
(1) In general.--The amendment made by this section shall
apply to payments received or accrued after December 31,
2003.
(2) Payments subject to binding contract transition rule.--
If the amendments made by section 1041 of the Taxpayer Relief
Act of 1997 did not apply to any amount received or accrued
in the first 2 taxable years beginning on or after the date
of the enactment of the Taxpayer Relief Act of 1997 under any
contract described in subsection (b)(2) of such section, such
amendments also shall not apply to amounts received or
accrued under such contract before January 1, 2001.
SEC. 206. SIMPLIFICATION OF LOBBYING EXPENDITURE LIMITATION.
(a) Repeal of Grassroots Expenditure Limit.--Paragraph (1)
of section 501(h) (relating to expenditures by public
charities to influence legislation) is amended to read as
follows:
``(1) General rule.--In the case of an organization to
which this subsection applies, exemption from taxation under
subsection (a) shall be denied because a substantial part of
the activities of such organization consists of carrying on
propaganda, or otherwise attempting, to influence
legislation, but only if such organization normally makes
lobbying expenditures in excess of the lobbying ceiling
amount for such organization for each taxable year.''.
(b) Excess Lobbying Expenditures.--Section 4911(b) is
amended to read as follows:
``(b) Excess Lobbying Expenditures.--For purposes of this
section, the term `excess lobbying expenditures' means, for a
taxable year, the amount by which the lobbying expenditures
made by the organization during
[[Page H8331]]
the taxable year exceed the lobbying nontaxable amount for
such organization for such taxable year.''.
(c) Conforming Amendments.--
(1) Section 501(h)(2) is amended by striking subparagraphs
(C) and (D).
(2) Section 4911(c) is amended by striking paragraphs (3)
and (4).
(3) Paragraph (1)(A) of section 4911(f) is amended by
striking ``limits of section 501(h)(1) have'' and inserting
``limit of section 501(h)(1) has''.
(4) Paragraph (1)(C) of section 4911(f) is amended by
striking ``limits of section 501(h)(1) are'' and inserting
``limit of section 501(h)(1) is''.
(5) Paragraphs (4)(A) and (4)(B) of section 4911(f) are
each amended by striking ``limits of section 501(h)(1)'' and
inserting ``limit of section 501(h)(1)''.
(6) Paragraph (8) of section 6033(b) (relating to certain
organizations described in section 501(c)(3)) is amended by
inserting ``and'' at the end of subparagraph (A) and by
striking subparagraphs (C) and (D).
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2003.
SEC. 207. PILOT PROJECT FOR FOREST CONSERVATION ACTIVITIES.
(a) Tax-Exempt Bond Financing.--
(1) In general.--For purposes of the Internal Revenue Code
of 1986, any qualified forest conservation bond shall be
treated as an exempt facility bond under section 142 of such
Code.
(2) Qualified forest conservation bond.--For purposes of
this section, the term ``qualified forest conservation bond''
means any bond issued as part of an issue if--
(A) 95 percent or more of the net proceeds (as defined in
section 150(a)(3) of such Code) of such issue are to be used
for qualified project costs,
(B) such bond is an obligation of the State of Washington
or any political subdivision thereof, and
(C) such bond is issued for a qualified organization before
December 31, 2006.
(3) Limitation on aggregate amount issued.--The maximum
aggregate face amount of bonds which may be issued under this
subsection shall not exceed $250,000,000.
(4) Qualified project costs.--For purposes of this
subsection, the term ``qualified project costs'' means the
sum of--
(A) the cost of acquisition by the qualified organization
from an unrelated person of forests and forest land located
in the State of Washington which at the time of acquisition
or immediately thereafter are subject to a conservation
restriction described in subsection (c)(2),
(B) interest on the qualified forest conservation bonds for
the 3-year period beginning on the date of issuance of such
bonds, and
(C) credit enhancement fees which constitute qualified
guarantee fees (within the meaning of section 148 of such
Code).
(5) Special rules.--In applying the Internal Revenue Code
of 1986 to any qualified forest conservation bond, the
following modifications shall apply:
(A) Section 146 of such Code (relating to volume cap) shall
not apply.
(B) For purposes of section 147(b) of such Code (relating
to maturity may not exceed 120 percent of economic life), the
land and standing timber acquired with proceeds of qualified
forest conservation bonds shall have an economic life of 35
years.
(C) Subsections (c) and (d) of section 147 of such Code
(relating to limitations on acquisition of land and existing
property) shall not apply.
(D) Section 57(a)(5) of such Code (relating to tax-exempt
interest) shall not apply to interest on qualified forest
conservation bonds.
(6) Treatment of current refunding bonds.--Paragraphs
(2)(C) and (3) shall not apply to any bond (or series of
bonds) issued to refund a qualified forest conservation bond
issued before December 31, 2006, if--
(A) the average maturity date of the issue of which the
refunding bond is a part is not later than the average
maturity date of the bonds to be refunded by such issue,
(B) the amount of the refunding bond does not exceed the
outstanding amount of the refunded bond, and
(C) the net proceeds of the refunding bond are used to
redeem the refunded bond not later than 90 days after the
date of the issuance of the refunding bond.
For purposes of subparagraph (A), average maturity shall be
determined in accordance with section 147(b)(2)(A) of such
Code.
(7) Effective date.--This subsection shall apply to
obligations issued on or after the date of enactment of this
Act.
(b) Items From Qualified Harvesting Activities Not Subject
to Tax or Taken Into Account.--
(1) In general.--Income, gains, deductions, losses, or
credits from a qualified harvesting activity conducted by a
qualified organization shall not be subject to tax or taken
into account under subtitle A of the Internal Revenue Code of
1986.
(2) Limitation.--The amount of income excluded from gross
income under paragraph (1) for any taxable year shall not
exceed the amount used by the qualified organization to make
debt service payments during such taxable year for qualified
forest conservation bonds.
(3) Qualified harvesting activity.--For purposes of
paragraph (1)--
(A) In general.--The term ``qualified harvesting activity''
means the sale, lease, or harvesting, of standing timber--
(i) on land owned by a qualified organization which was
acquired with proceeds of qualified forest conservation
bonds, and
(ii) pursuant to a qualified conservation plan adopted by
the qualified organization.
(B) Exceptions.--
(i) Cessation as qualified organization.--The term
``qualified harvesting activity'' shall not include any sale,
lease, or harvesting for any period during which the
organization ceases to qualify as a qualified organization.
(ii) Exceeding limits on harvesting.--The term ``qualified
harvesting activity'' shall not include any sale, lease, or
harvesting of standing timber on land acquired with proceeds
of qualified forest conservation bonds to the extent that--
(I) the average annual area of timber harvested from such
land exceeds 2.5 percent of the total area of such land, or
(II) the quantity of timber removed from such land exceeds
the quantity which can be removed from such land annually in
perpetuity on a sustained-yield basis with respect to such
land.
The limitations under subclauses (I) and (II) shall not apply
to post-fire restoration and rehabilitation or sanitation
harvesting of timber stands which are substantially damaged
by fire, windthrow, or other catastrophes, or which are in
imminent danger from insect or disease attack.
(4) Termination.--This subsection shall not apply to any
qualified harvesting activity occurring after the date on
which there is no outstanding qualified forest conservation
bond or any such bond ceases to be a tax-exempt bond.
(5) Partial recapture of benefits if harvesting limit
exceeded.--If, as of the date that this subsection ceases to
apply under paragraph (4), the average annual area of timber
harvested from the land exceeds the requirement of paragraph
(3)(B)(ii)(I), the tax imposed by chapter 1 of such Code
shall be increased, under rules prescribed by the Secretary
of the Treasury, by the sum of the tax benefits attributable
to such excess and interest at the underpayment rate under
section 6621 of such Code for the period of the underpayment.
(c) Definitions.--For purposes of this section--
(1) Qualified conservation plan.--The term ``qualified
conservation plan'' means a multiple land use program or plan
which--
(A) is designed and administered primarily for the purposes
of protecting and enhancing wildlife and fish, timber, scenic
attributes, recreation, and soil and water quality of the
forest and forest land,
(B) mandates that conservation of forest and forest land is
the single-most significant use of the forest and forest
land, and
(C) requires that timber harvesting be consistent with--
(i) restoring and maintaining reference conditions for the
region's ecotype,
(ii) restoring and maintaining a representative sample of
young, mid, and late successional forest age classes,
(iii) maintaining or restoring the resources' ecological
health for purposes of preventing damage from fire, insect,
or disease,
(iv) maintaining or enhancing wildlife or fish habitat, or
(v) enhancing research opportunities in sustainable
renewable resource uses.
(2) Conservation restriction.--The conservation restriction
described in this paragraph is a restriction which--
(A) is granted in perpetuity to an unrelated person which
is described in section 170(h)(3) of such Code and which, in
the case of a nongovernmental unit, is organized and operated
for conservation purposes,
(B) meets the requirements of clause (ii) or (iii)(II) of
section 170(h)(4)(A) of such Code,
(C) obligates the qualified organization to pay the costs
incurred by the holder of the conservation restriction in
monitoring compliance with such restriction, and
(D) requires an increasing level of conservation benefits
to be provided whenever circumstances allow it.
(3) Qualified organization.--The term ``qualified
organization'' means an organization--
(A) which is a nonprofit organization substantially all the
activities of which are charitable, scientific, or
educational, including acquiring, protecting, restoring,
managing, and developing forest lands and other renewable
resources for the long-term charitable, educational,
scientific and public benefit,
(B) more than half of the value of the property of which
consists of forests and forest land acquired with the
proceeds from qualified forest conservation bonds,
(C) which periodically conducts educational programs
designed to inform the public of environmentally sensitive
forestry management and conservation techniques,
(D) which has at all times a board of directors--
(i) at least 20 percent of the members of which represent
the holders of the conservation restriction described in
paragraph (2),
(ii) at least 20 percent of the members of which are public
officials, and
(iii) not more than one-third of the members of which are
individuals who are or were at any time within 5 years before
the beginning of a term of membership on the board, an
employee of, independent contractor with respect to, officer
of, director of, or held a material financial interest in, a
commercial
[[Page H8332]]
forest products enterprise with which the qualified
organization has a contractual or other financial
arrangement,
(E) the bylaws of which require at least two-thirds of the
members of the board of directors to vote affirmatively to
approve the qualified conservation plan and any change
thereto, and
(F) upon dissolution, is required to dedicate its assets
to--
(i) an organization described in section 501(c)(3) of such
Code which is organized and operated for conservation
purposes, or
(ii) a governmental unit described in section 170(c)(1) of
such Code.
(4) Unrelated person.--The term ``unrelated person'' means
a person who is not a related person.
(5) Related person.--A person shall be treated as related
to another person if--
(A) such person bears a relationship to such other person
described in section 267(b) (determined without regard to
paragraph (9) thereof), or 707(b)(1), of such Code,
determined by substituting ``25 percent'' for ``50 percent''
each place it appears therein, and
(B) in the case such other person is a nonprofit
organization, if such person controls directly or indirectly
more than 25 percent of the governing body of such
organization.
(d) Report.--
(1) In general.--The Comptroller General of the United
States shall conduct a study on the pilot project for forest
conservation activities under this section. Such study shall
examine the extent to which forests and forest lands were
managed during the 5-year period beginning on the date of the
enactment of this Act to achieve the goals of such project.
(2) Submission of report to congress.--Not later than six
years after the date of the enactment of this Act, the
Comptroller General shall submit a report of such study to
the Committee on Ways and Means and the Committee on
Resources of the House of Representatives and the Committee
on Finance and the Committee on Energy and Natural Resources
of the Senate.
TITLE III--OTHER PROVISIONS
SEC. 301. COMPASSION CAPITAL FUND.
Title IV of the Social Security Act (42 U.S.C. 601-679b) is
amended by adding at the end the following:
``PART F--COMPASSION CAPITAL FUND
``SEC. 481. SECRETARY'S FUND TO SUPPORT AND REPLICATE
PROMISING SOCIAL SERVICE PROGRAMS.
``(a) Grant Authority.--
``(1) In general.--The Secretary may make grants to support
any private entity that operates a promising social services
program.
``(2) Applications.--An entity desiring to receive a grant
under paragraph (1) shall submit to the Secretary an
application for the grant, which shall contain such
information as the Secretary may require.
``(b) Contract Authority, Etc.--The Secretary may enter
into a grant, contract, or cooperative agreement with any
entity under which the entity would provide technical
assistance to another entity to operate a social service
program that assists persons and families in need, including
by--
``(1) providing the other entity with--
``(A) technical assistance and information, including legal
assistance and other business assistance;
``(B) information on capacity-building;
``(C) information and assistance in identifying and using
best practices for serving persons and families in need; or
``(D) assistance in replicating programs with demonstrated
effectiveness in assisting persons and families in need; or
``(2) supporting research on the best practices of social
service organizations.
``(c) Guidance and Technical Assistance.--The Secretary may
use not more than 25 percent of the amount appropriated under
this section for a fiscal year to provide guidance and
technical assistance to States and political subdivisions of
States with respect to the implementation of any social
service program.
``(d) Social Services Program Defined.--In this section,
the term `social services program' means a program that
provides benefits or services of any kind to persons and
families in need.
``(e) Limitations on Authorization of Appropriations.--To
carry out this section, there are authorized to be
appropriated to the Secretary $150,000,000 for fiscal year
2004, and such sums as may be necessary for fiscal years 2005
through 2008.''.
SEC. 302. REAUTHORIZATION OF ASSETS FOR INDEPENDENCE
DEMONSTRATION.
(a) In General.--Section 416 of the Assets for Independence
Act (title IV of Public Law 105-285; 42 U.S.C. 604 note) is
amended by striking ``and 2003'' and inserting ``2003, 2004,
2005, 2006, 2007, and 2008''.
(b) Removal of Economic Literacy Activities From Limitation
on Use of Amounts in the Reserve Fund.--Section 407(c)(3) of
such Act (title IV of Public Law 105-285; 42 U.S.C. 604 note)
is amended by adding at the end the following: ``The
preceding sentences of this paragraph shall not apply to
amounts used by an entity for any activity described in
paragraph (1)(A).''.
(c) Eligibility Expanded to Include Individuals In
Households With Income Not Exceeding 50 Percent of Area
Median Income.--Section 408(a)(1) of such Act (title IV of
Public Law 105-285; 42 U.S.C. 604 note) is amended to read as
follows:
``(1) Income test.--The adjusted gross income of the
household--
``(A) does not exceed 200 percent of the poverty line (as
determined by the Office of Management and Budget) or the
earned income amount described in section 32 of the Internal
Revenue Code of 1986 (taking into account the size of the
household); or
``(B) does not exceed 50 percent of the area median income
(as determined by the Secretary of Housing and Urban
Development) for the area in which the household is
located.''.
(d) Extension of Time for Account Holders to Access Federal
Funds.--Section 407(d) of such Act (title IV of Public Law
105-285; 42 U.S.C. 604 note) is amended--
(1) in the subsection heading, by striking ``When Project
Terminates''; and
(2) by striking ``upon'' and inserting ``on the date that
is 6 months after''.
(e) Verification of Postsecondary Education Expenses.--
Section 404(8)(A) of such Act (title IV of Public Law 105-
285; 42 U.S.C. 604 note) is amended in the 1st sentence by
inserting ``or a vendor, but only to the extent that the
expenses are described in a document which explains the
educational items to be purchased, and the document and the
expenses are approved by the qualified entity'' before the
period.
(f) Authority to Use Excess Interest to Fund Other
Individual Development Accounts.--Section 410 of such Act
(title IV of Public Law 105-285; 42 U.S.C. 604 note) is
amended--
(1) in subsection (a)(3)--
(A) by striking ``any interest that has accrued'' and
inserting ``interest that has accrued during that period'';
and
(B) by striking the period and inserting ``, but only to
the extent that the amount of the interest does not exceed
the amount of interest that has accrued during that period on
amounts deposited in the account by that individual.''; and
(2) by adding at the end the following:
``(f) Use of Excess Interest to Fund Other Individual
Development Accounts.--To the extent that a qualified entity
has an amount that, but for the limitation in subsection
(a)(3), would be required by that subsection to be deposited
into the individual development account of an individual or
into a parallel account maintained by the qualified entity,
the qualified entity may deposit the amount into the
individual development account of any individual or into any
such parallel account maintained by the qualified entity.''.
SEC. 303. SENSE OF THE CONGRESS REGARDING CORPORATE
CONTRIBUTIONS TO FAITH-BASED ORGANIZATIONS,
ETC.
(a) Findings.--The Congress finds as follows:
(1) America's community of faith has long played a leading
role in dealing with difficult societal problems that might
otherwise have gone unaddressed.
(2) President Bush has called upon Americans ``to revive
the spirit of citizenship . . . to marshal the compassion of
our people to meet the continuing needs of our Nation''.
(3) Although the work of faith-based organizations should
not be used by government as an excuse for backing away from
its historic and rightful commitment to help those who are
disadvantaged and in need, such organizations can and should
be seen as a valuable partner with government in meeting
societal challenges.
(4) Every day faith-based organizations in the United
States help people recover from drug and alcohol addiction,
provide food and shelter for the homeless, rehabilitate
prison inmates so that they can break free from the cycle of
recidivism, and teach people job skills that will allow them
to move from poverty to productivity.
(5) Faith-based organizations are often more successful in
dealing with difficult societal problems than government and
non-sectarian organizations.
(6) As President Bush has stated, ``It is not sufficient to
praise charities and community groups; we must support them.
And this is both a public obligation and a personal
responsibility.''.
(7) Corporate foundations contribute billions of dollars
each year to a variety of philanthropic causes.
(8) According to a study produced by the Capital Research
Center, the 10 largest corporate foundations in the United
States contributed $1,900,000,000 to such causes.
(9) According to the same study, faith-based organizations
only receive a small fraction of the contributions made by
corporations in the United States, and 6 of the 10
corporations that give the most to philanthropic causes
explicitly ban or restrict contributions to faith-based
organizations.
(b) Corporations Encouraged To Contribute to Faith-Based
Organizations.--The Congress calls on corporations in the
United States, in the words of the President, ``to give more
and to give better'' by making greater contributions to
faith-based organizations that are on the front lines
battling some of the great societal challenges of our day.
(c) Sense of the Congress.--It is the sense of Congress
that--
(1) corporations in the United States are important
partners with government in efforts to overcome difficult
societal problems; and
(2) no corporation in the United States should adopt
policies that prohibit the corporation from contributing to
an organization that is successfully advancing a
philanthropic cause merely because such organization is faith
based.
[[Page H8333]]
TITLE IV--SOCIAL SERVICES BLOCK GRANT
SEC. 401. RESTORATION OF FUNDS FOR THE SOCIAL SERVICES BLOCK
GRANT.
(a) Findings.--Congress makes the following findings:
(1) On August 22, 1996, the Personal Responsibility and
Work Opportunity Reconciliation Act of 1996 (Public Law 104-
193; 110 Stat. 2105) was signed into law.
(2) In enacting that law, Congress authorized
$2,800,000,000 for fiscal year 2003 and each fiscal year
thereafter to carry out the Social Services Block Grant
program established under title XX of the Social Security Act
(42 U.S.C. 1397 et seq.).
(b) Restoration of Funds.--Section 2003(c)(11) of the
Social Security Act (42 U.S.C. 1397b(c)(11)) is amended by
inserting ``, except that, with respect to fiscal year 2004,
the amount shall be $2,800,000,000'' after ``thereafter''.
SEC. 402. RESTORATION OF AUTHORITY TO TRANSFER UP TO 10
PERCENT OF TANF FUNDS TO THE SOCIAL SERVICES
BLOCK GRANT.
(a) In General.--Section 404(d)(2) of the Social Security
Act (42 U.S.C. 604(d)(2)) is amended to read as follows:
``(2) Limitation on amount transferable to title xx
programs.--A State may use not more than 10 percent of the
amount of any grant made to the State under section 403(a)
for a fiscal year to carry out State programs pursuant to
title XX.''.
(b) Effective Date.--The amendment made by subsection (a)
applies to amounts made available for fiscal year 2004 and
each fiscal year thereafter.
SEC. 403. REQUIREMENT TO SUBMIT ANNUAL REPORT ON STATE
ACTIVITIES.
(a) In General.--Section 2006(c) of the Social Security Act
(42 U.S.C. 1397e(c)) is amended by adding at the end the
following:
``The Secretary shall compile the information submitted by
the States and submit that information to Congress on an
annual basis.''.
(b) Effective Date.--The amendment made by subsection (a)
applies to information submitted by States under section 2006
of the Social Security Act (42 U.S.C. 1397e) with respect to
fiscal year 2004 and each fiscal year thereafter.
TITLE V--ABUSIVE TAX SHELTERS
SEC. 501. SHORT TITLE.
This title may be cited as the ``Abusive Tax Shelter
Shutdown and Taxpayer Accountability Act of 2003''.
SEC. 502. FINDINGS AND PURPOSE.
(a) Findings.--The Congress hereby finds that:
(1) Many corporate tax shelter transactions are complicated
ways of accomplishing nothing aside from claimed tax
benefits, and the legal opinions justifying those
transactions take an inappropriately narrow and restrictive
view of well-developed court doctrines under which--
(A) the taxation of a transaction is determined in
accordance with its substance and not merely its form,
(B) transactions which have no significant effect on the
taxpayer's economic or beneficial interests except for tax
benefits are treated as sham transactions and disregarded,
(C) transactions involving multiple steps are collapsed
when those steps have no substantial economic meaning and are
merely designed to create tax benefits,
(D) transactions with no business purpose are not given
effect, and
(E) in the absence of a specific congressional
authorization, it is presumed that Congress did not intend a
transaction to result in a negative tax where the taxpayer's
economic position or rate of return is better after tax than
before tax.
(2) Permitting aggressive and abusive tax shelters not only
results in large revenue losses but also undermines voluntary
compliance with the Internal Revenue Code of 1986.
(b) Purpose.--The purpose of this title is to eliminate
abusive tax shelters by denying tax attributes claimed to
arise from transactions that do not meet a heightened
economic substance requirement and by repealing the provision
that permits legal opinions to be used to avoid penalties on
tax underpayments resulting from transactions without
significant economic substance or business purpose.
Subtitle A--Provisions Designed to Curtail Tax Shelters
SEC. 511. CLARIFICATION OF ECONOMIC SUBSTANCE DOCTRINE.
(a) In General.--Section 7701 is amended by redesignating
subsection (m) as subsection (n) and by inserting after
subsection (l) the following new subsection:
``(m) Clarification of Economic Substance Doctrine; Etc.--
``(1) General rules.--
``(A) In general.--In applying the economic substance
doctrine, the determination of whether a transaction has
economic substance shall be made as provided in this
paragraph.
``(B) Definition of economic substance.--For purposes of
subparagraph (A)--
``(i) In general.--A transaction has economic substance
only if--
``(I) the transaction changes in a meaningful way (apart
from Federal tax effects and, if there are any Federal tax
effects, also apart from any foreign, State, or local tax
effects) the taxpayer's economic position, and
``(II) the taxpayer has a substantial nontax purpose for
entering into such transaction and the transaction is a
reasonable means of accomplishing such purpose.
``(ii) Special rule where taxpayer relies on profit
potential.--A transaction shall not be treated as having
economic substance by reason of having a potential for profit
unless--
``(I) the present value of the reasonably expected pre-tax
profit from the transaction is substantial in relation to the
present value of the expected net tax benefits that would be
allowed if the transaction were respected, and
``(II) the reasonably expected pre-tax profit from the
transaction exceeds a risk-free rate of return.
``(C) Treatment of fees and foreign taxes.--Fees and other
transaction expenses and foreign taxes shall be taken into
account as expenses in determining pre-tax profit under
subparagraph (B)(ii).
``(2) Special rules for transactions with tax-indifferent
parties.--
``(A) Special rules for financing transactions.--The form
of a transaction which is in substance the borrowing of money
or the acquisition of financial capital directly or
indirectly from a tax-indifferent party shall not be
respected if the present value of the deductions to be
claimed with respect to the transaction is substantially in
excess of the present value of the anticipated economic
returns of the person lending the money or providing the
financial capital. A public offering shall be treated as a
borrowing, or an acquisition of financial capital, from a
tax-indifferent party if it is reasonably expected that at
least 50 percent of the offering will be placed with tax-
indifferent parties.
``(B) Artificial income shifting and basis adjustments.--
The form of a transaction with a tax-indifferent party shall
not be respected if--
``(i) it results in an allocation of income or gain to the
tax-indifferent party in excess of such party's economic
income or gain, or
``(ii) it results in a basis adjustment or shifting of
basis on account of overstating the income or gain of the
tax-indifferent party.
``(3) Definitions and special rules.--For purposes of this
subsection--
``(A) Economic substance doctrine.--The term `economic
substance doctrine' means the common law doctrine under which
tax benefits under subtitle A with respect to a transaction
are not allowable if the transaction does not have economic
substance or lacks a business purpose.
``(B) Tax-indifferent party.--The term `tax-indifferent
party' means any person or entity not subject to tax imposed
by subtitle A. A person shall be treated as a tax-indifferent
party with respect to a transaction if the items taken into
account with respect to the transaction have no substantial
impact on such person's liability under subtitle A.
``(C) Substantial nontax purpose.--In applying subclause
(II) of paragraph (1)(B)(i), 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.
``(D) 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.
``(E) Treatment of lessors.--In applying subclause (I) of
paragraph (1)(B)(ii) to the lessor of tangible property
subject to a lease, the expected net tax benefits shall not
include the benefits of depreciation, or any tax credit, with
respect to the leased property and subclause (II) of
paragraph (1)(B)(ii) shall be disregarded in determining
whether any of such benefits are allowable.
``(4) Other common law doctrines not affected.--Except as
specifically provided in this subsection, the provisions of
this subsection shall not be construed as altering or
supplanting any other rule of law, and the requirements of
this subsection shall be construed as being in addition to
any such other rule of law.
``(5) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out
the purposes of this subsection. Such regulations may include
exemptions from the application of this subsection.''
(b) Effective Date.--The amendments made by this section
shall apply to transactions entered into after February 13,
2003.
SEC. 512. 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.
[[Page H8334]]
``(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 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. 513. 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 (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
[[Page H8335]]
supplement is filed after the earlier of the date the
taxpayer is first contacted by the Secretary regarding the
examination of the return or such other date as is specified
by the Secretary.
``(4) Noneconomic substance transaction understatement.--
For purposes of this subsection, the term `noneconomic
substance transaction understatement' has the meaning given
such term by section 6662B(c).
``(5) Cross reference.--
``For reporting of section 6662A(c) penalty to the Securities and
Exchange Commission, see section 6707A(e).''
(b) Determination of Other Understatements.--Subparagraph
(A) of section 6662(d)(2) is amended by adding at the end the
following flush sentence:
``The excess under the preceding sentence shall be determined
without regard to items to which section 6662A applies and
without regard to items with respect to which a penalty is
imposed by section 6662B.''
(c) Reasonable Cause Exception.--
(1) In general.--Section 6664 is amended by adding at the
end the following new subsection:
``(d) Reasonable Cause Exception for Reportable Transaction
Understatements.--
``(1) In general.--No penalty shall be imposed under
section 6662A with respect to any portion of a reportable
transaction understatement if it is shown that there was a
reasonable cause for such portion and that the taxpayer acted
in good faith with respect to such portion.
``(2) Special rules.--Paragraph (1) shall not apply to any
reportable transaction understatement unless--
``(A) the relevant facts affecting the tax treatment of the
item are adequately disclosed in accordance with the
regulations prescribed under section 6011,
``(B) there is or was substantial authority for such
treatment, and
``(C) the taxpayer reasonably believed that such treatment
was more likely than not the proper treatment.
A taxpayer failing to adequately disclose in accordance with
section 6011 shall be treated as meeting the requirements of
subparagraph (A) if the penalty for such failure was
rescinded under section 6707A(d).
``(3) Rules relating to reasonable belief.--For purposes of
paragraph (2)(C)--
``(A) In general.--A taxpayer shall be treated as having a
reasonable belief with respect to the tax treatment of an
item only if such belief--
``(i) is based on the facts and law that exist at the time
the return of tax which includes such tax treatment is filed,
and
``(ii) relates solely to the taxpayer's chances of success
on the merits of such treatment and does not take into
account the possibility that a return will not be audited,
such treatment will not be raised on audit, or such treatment
will be resolved through settlement if it is raised.
``(B) Certain opinions may not be relied upon.--
``(i) In general.--An opinion of a tax advisor may not be
relied upon to establish the reasonable belief of a taxpayer
if--
``(I) the tax advisor is described in clause (ii), or
``(II) the opinion is described in clause (iii).
``(ii) Disqualified tax advisors.--A tax advisor is
described in this clause if the tax advisor--
``(I) is a material advisor (within the meaning of section
6111(b)(1)) who participates in the organization, management,
promotion, or sale of the transaction or who is related
(within the meaning of section 267(b) or 707(b)(1)) to any
person who so participates,
``(II) is compensated directly or indirectly by a material
advisor with respect to the transaction,
``(III) has a fee arrangement with respect to the
transaction which is contingent on all or part of the
intended tax benefits from the transaction being sustained,
or
``(IV) as determined under regulations prescribed by the
Secretary, has a continuing financial interest with respect
to the transaction.
``(iii) Disqualified opinions.--For purposes of clause (i),
an opinion is disqualified if the opinion--
``(I) is based on unreasonable factual or legal assumptions
(including assumptions as to future events),
``(II) unreasonably relies on representations, statements,
findings, or agreements of the taxpayer or any other person,
``(III) does not identify and consider all relevant facts,
or
``(IV) fails to meet any other requirement as the Secretary
may prescribe.''
(2) Conforming amendment.--The heading for subsection (c)
of section 6664 is amended by inserting ``for Underpayments''
after ``Exception''.
(d) Conforming Amendments.--
(1) Subparagraph (C) of section 461(i)(3) is amended by
striking ``section 6662(d)(2)(C)(iii)'' and inserting
``section 1274(b)(3)(C)''.
(2) Paragraph (3) of section 1274(b) is amended--
(A) by striking ``(as defined in section
6662(d)(2)(C)(iii))'' in subparagraph (B)(i), and
(B) by adding at the end the following new subparagraph:
``(C) Tax shelter.--For purposes of subparagraph (B), the
term `tax shelter' means--
``(i) a partnership or other entity,
``(ii) any investment plan or arrangement, or
``(iii) any other plan or arrangement,
if a significant purpose of such partnership, entity, plan,
or arrangement is the avoidance or evasion of Federal income
tax.''
(3) Section 6662(d)(2) is amended by striking subparagraphs
(C) and (D).
(4) Section 6664(c)(1) is amended by striking ``this part''
and inserting ``section 6662 or 6663''.
(5) Subsection (b) of section 7525 is amended by striking
``section 6662(d)(2)(C)(iii)'' and inserting ``section
1274(b)(3)(C)''.
(6)(A) The heading for section 6662 is amended to read as
follows:
``SEC. 6662. IMPOSITION OF ACCURACY-RELATED PENALTY ON
UNDERPAYMENTS.''
(B) The table of sections for part II of subchapter A of
chapter 68 is amended by striking the item relating to
section 6662 and inserting the following new items:
``Sec. 6662. Imposition of accuracy-related penalty on underpayments.
``Sec. 6662A. Imposition of accuracy-related penalty on understatements
with respect to reportable transactions.''
(e) Effective Date.--The amendments made by this section
shall apply to taxable years ending after the date of the
enactment of this Act.
SEC. 514. 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(m)(1)) for the transaction giving
rise to the claimed tax benefit or the transaction was not
respected under section 7701(m)(2), or
``(B) the transaction fails to meet the requirements of any
similar rule of law.
``(d) Rules Applicable To Compromise of Penalty.--
``(1) In general.--If the 1st letter of proposed deficiency
which allows the taxpayer an opportunity for administrative
review in the Internal Revenue Service Office of Appeals has
been sent with respect to a penalty to which this section
applies, only the Commissioner of Internal Revenue may
compromise all or any portion of such penalty.
``(2) Applicable rules.--The rules of paragraphs (3), (4),
and (5) of section 6707A(d) shall apply for purposes of
paragraph (1).
``(e) Coordination With Other Penalties.--Except as
otherwise provided in this part, the penalty imposed by this
section shall be in addition to any other penalty imposed by
this title.
``(f) Cross References.--
``(1) For coordination of penalty with understatements under section
6662 and other special rules, see section 6662A(e).
``(2) For reporting of penalty imposed under this section to the
Securities and Exchange Commission, see section 6707A(e).''
(b) Clerical Amendment.--The table of sections for part II
of subchapter A of chapter 68 is amended by inserting after
the item relating to section 6662A the following new item:
``Sec. 6662B. Penalty for understatements attributable to transactions
lacking economic substance, etc.''
(c) Effective Date.--The amendments made by this section
shall apply to transactions entered into after February 13,
2003.
SEC. 515. 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--
[[Page H8336]]
``(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. 516. 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. 517. DISCLOSURE OF REPORTABLE TRANSACTIONS.
(a) In General.--Section 6111 (relating to registration of
tax shelters) is amended to read as follows:
``SEC. 6111. DISCLOSURE OF REPORTABLE TRANSACTIONS.
``(a) In General.--Each material advisor with respect to
any reportable transaction shall make a return (in such form
as the Secretary may prescribe) setting forth--
``(1) information identifying and describing the
transaction,
``(2) information describing any potential tax benefits
expected to result from the transaction, and
``(3) such other information as the Secretary may
prescribe.
Such return shall be filed not later than the date specified
by the Secretary.
``(b) Definitions.--For purposes of this section--
``(1) Material advisor.--
``(A) In general.--The term `material advisor' means any
person--
``(i) who provides any material aid, assistance, or advice
with respect to organizing, promoting, selling, implementing,
or carrying out any reportable transaction, and
``(ii) who directly or indirectly derives gross income in
excess of the threshold amount for such aid, assistance, or
advice.
``(B) Threshold amount.--For purposes of subparagraph (A),
the threshold amount is--
``(i) $50,000 in the case of a reportable transaction
substantially all of the tax benefits from which are provided
to natural persons, and
``(ii) $250,000 in any other case.
``(2) Reportable transaction.--The term `reportable
transaction' has the meaning given to such term by section
6707A(c).
``(c) Regulations.--The Secretary may prescribe regulations
which provide--
``(1) that only 1 person shall be required to meet the
requirements of subsection (a) in cases in which 2 or more
persons would otherwise be required to meet such
requirements,
``(2) exemptions from the requirements of this section, and
``(3) such rules as may be necessary or appropriate to
carry out the purposes of this section.''
(b) Conforming Amendments.--
(1) The item relating to section 6111 in the table of
sections for subchapter B of chapter 61 is amended to read as
follows:
``Sec. 6111. Disclosure of reportable transactions.''
(2)(A) So much of section 6112 as precedes subsection (c)
thereof is amended to read as follows:
``SEC. 6112. MATERIAL ADVISORS OF REPORTABLE TRANSACTIONS
MUST KEEP LISTS OF ADVISEES.
``(a) In General.--Each material advisor (as defined in
section 6111) with respect to any reportable transaction (as
defined in section 6707A(c)) shall maintain, in such manner
as the Secretary may by regulations prescribe, a list--
``(1) identifying each person with respect to whom such
advisor acted as such a material advisor with respect to such
transaction, and
``(2) containing such other information as the Secretary
may by regulations require.
This section shall apply without regard to whether a material
advisor is required to file a return under section 6111 with
respect to such transaction.''
(B) Section 6112 is amended by redesignating subsection (c)
as subsection (b).
(C) Section 6112(b), as redesignated by subparagraph (B),
is amended--
(i) by inserting ``written'' before ``request'' in
paragraph (1)(A), and
(ii) by striking ``shall prescribe'' in paragraph (2) and
inserting ``may prescribe''.
(D) The item relating to section 6112 in the table of
sections for subchapter B of chapter 61 is amended to read as
follows:
``Sec. 6112. Material advisors of reportable transactions must keep
lists of advisees.''
(3)(A) The heading for section 6708 is amended to read as
follows:
``SEC. 6708. FAILURE TO MAINTAIN LISTS OF ADVISEES WITH
RESPECT TO REPORTABLE TRANSACTIONS.''
(B) The item relating to section 6708 in the table of
sections for part I of subchapter B of chapter 68 is amended
to read as follows:
``Sec. 6708. Failure to maintain lists of advisees with respect to
reportable transactions.''
(c) Effective Date.--The amendments made by this section
shall apply to transactions with respect to which material
aid, assistance, or advice referred to in section
6111(b)(1)(A)(i) of the Internal Revenue Code of 1986 (as
added by this section) is provided after the date of the
enactment of this Act.
SEC. 518. MODIFICATIONS TO PENALTY FOR FAILURE TO REGISTER
TAX SHELTERS.
(a) In General.--Section 6707 (relating to failure to
furnish information regarding tax shelters) is amended to
read as follows:
``SEC. 6707. FAILURE TO FURNISH INFORMATION REGARDING
REPORTABLE TRANSACTIONS.
``(a) In General.--If a person who is required to file a
return under section 6111(a) with respect to any reportable
transaction--
``(1) fails to file such return on or before the date
prescribed therefor, or
``(2) files false or incomplete information with the
Secretary with respect to such transaction,
such person shall pay a penalty with respect to such return
in the amount determined under subsection (b).
``(b) Amount of Penalty.--
``(1) In general.--Except as provided in paragraph (2), the
penalty imposed under subsection (a) with respect to any
failure shall be $50,000.
``(2) Listed transactions.--The penalty imposed under
subsection (a) with respect to any listed transaction shall
be an amount equal to the greater of--
``(A) $200,000, or
``(B) 50 percent of the gross income derived by such person
with respect to aid, assistance, or advice which is provided
with respect to the reportable transaction before the date
the return including the transaction is filed under section
6111.
Subparagraph (B) shall be applied by substituting `75
percent' for `50 percent' in the case of an intentional
failure or act described in subsection (a).
``(c) Rescission Authority.--The provisions of section
6707A(d) (relating to authority of Commissioner to rescind
penalty) shall apply to any penalty imposed under this
section.
``(d) Reportable and Listed Transactions.--The terms
`reportable transaction' and `listed transaction' have the
respective meanings given to such terms by section
6707A(c).''.
(b) Clerical Amendment.--The item relating to section 6707
in the table of sections for part I of subchapter B of
chapter 68 is amended by striking ``tax shelters'' and
inserting ``reportable transactions''.
(c) Effective Date.--The amendments made by this section
shall apply to returns the due date for which is after the
date of the enactment of this Act.
SEC. 519. 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. 520. 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
[[Page H8337]]
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. 521. 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. 522. PENALTY ON FAILURE TO REPORT INTERESTS IN FOREIGN
FINANCIAL ACCOUNTS.
(a) In General.--Section 5321(a)(5) of title 31, United
States Code, is amended to read as follows:
``(5) Foreign financial agency transaction violation.--
``(A) Penalty authorized.--The Secretary of the Treasury
may impose a civil money penalty on any person who violates,
or causes any violation of, any provision of section 5314.
``(B) Amount of penalty.--
``(i) In general.--Except as provided in subparagraph (C),
the amount of any civil penalty imposed under subparagraph
(A) shall not exceed $5,000.
``(ii) Reasonable cause exception.--No penalty shall be
imposed under subparagraph (A) with respect to any violation
if--
``(I) such violation was due to reasonable cause, and
``(II) the amount of the transaction or the balance in the
account at the time of the transaction was properly reported.
``(C) Willful violations.--In the case of any person
willfully violating, or willfully causing any violation of,
any provision of section 5314--
``(i) the maximum penalty under subparagraph (B)(i) shall
be increased to the greater of--
``(I) $25,000, or
``(II) the amount (not exceeding $100,000) determined under
subparagraph (D), and
``(ii) subparagraph (B)(ii) shall not apply.
``(D) Amount.--The amount determined under this
subparagraph is--
``(i) in the case of a violation involving a transaction,
the amount of the transaction, or
``(ii) in the case of a violation involving a failure to
report the existence of an account or any identifying
information required to be provided with respect to an
account, the balance in the account at the time of the
violation.''
(b) Effective Date.--The amendment made by this section
shall apply to violations occurring after the date of the
enactment of this Act.
SEC. 523. 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
[[Page H8338]]
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. 524. 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. 525. 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. 526. 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 after the date of the enactment
of this Act in taxable years ending after such date.
SEC. 527. 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 after the date of the enactment
of this Act in taxable years ending after such date.
Subtitle B--Affirmation of Consolidated Return Regulation Authority
SEC. 531. 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.
The SPEAKER pro tempore. Pursuant to House Resolution 370, the
gentleman from Maryland (Mr. Cardin) and a Member opposed each will
control 30 minutes.
The Chair recognizes the gentleman from Maryland (Mr. Cardin).
Mr. CARDIN. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, this amendment adds two important provisions to the
underlying legislation. As I mentioned during general debate, I support
the underlying bill. I think a good compromise has been reached on some
very important issues, including the elimination of the employment
discrimination provisions and a compromise in regards to foundations'
administrative costs. I think this bill will help nonprofit, faith-
based organizations consistent with our tradition of church and State.
The two additions that my amendment adds are very important to this
legislation. The Republican whip pointed out that this legislation has
been developed among Democrats and Republicans in a bipartisan way and
in cooperation with the other body, particularly Senator Lieberman and
Senator Santorum. All I ask is that the Members consider this amendment
and vote on it by their convictions. Both provisions have bipartisan
support.
The first provision adds an additional $1.1 billion to the next
fiscal year for the social services block grant, taking it from $1.7
billion to $2.8 billion. This is not a novel concept. I see the
gentlewoman from Connecticut (Mrs. Johnson) here who was very
instrumental in the social services block grant program and in the
welfare reform legislation. When we passed welfare reform in 1996, we
reduced the social services block grant from $2.8 billion to $2.38
billion, but we also included in that legislation a commitment to our
States that in 2003 we would reinstate the level at $2.8 billion. That
is exactly what this amendment would do.
Number two, this amendment is consistent with the other body. They
have already put the money in their reported bill. It puts us together
with the other body at $2.8 billion for next year.
Now, what is the social services block grant? Why is it so relevant
to the legislation that is before us? If we ask the faith-based groups
as to what is the most important funding source for them to be able to
do their work, they will tell us it is the social services block grant
program. It provides funding for day care for low-income families, for
offering counseling services to at-risk children, nutritional
assistance to the elderly, and providing community-based care to the
disabled.
I need not tell my colleagues the fiscal restraints that our States
are currently confronting, with record deficits, and they are forced to
cut these very programs that the social services block grant program
helps them to fund. For my own State of Maryland, this amendment will
mean $20 million; for the State of California, $132 million; for the
State of Texas, $81 million; New York, $73 million; Florida, $63
million. If we take a look at our major faith-based institutions such
as Catholic Charities, United Jewish Community, Lutheran Services,
Salvation Army, in each one of those cases they rely in large part on
government assistance to fund these community-based programs. For
Catholic Charities it is over 650 percent; 62 percent of their support
comes from governmental grants. The social services block grant program
is key. This amendment allows us to live
[[Page H8339]]
up to our commitment that we made in 1996 to restore the level to what
it was in 1996.
The second part of this amendment is for fiscal responsibility. I
think there is not a person in this body who has not lamented the fact
that we now have over $500 billion annual deficit that we are adding to
the national debt, and that does not include the $87 billion the
President has requested for Iraq and Afghanistan. We have a fiscal
responsibility as legislators to make sure we do not add more to that
national debt. That is why the other body reached out to find a revenue
offset to the bill that they reported.
My amendment is not original. We have taken basically the provisions
that were included in the other body to say that if you are doing a tax
shelter you should not get the benefit. The courts are already doing
that, and the revenues that it will generate will offset the revenues
that are lost under this bill so that we do not add to the deficit.
Now, I have gotten some material this morning and I have listened to
the debate as to why this would not be a good idea. I have heard that
there was a sheet put out that said this was extremely controversial. I
then listened to why it was extremely controversial, considering it
received 95 votes in the other body. The first reason that my colleague
said is that it would be administratively difficult. Well, this is
currently being done by the courts on a case-by-case basis. We have a
responsibility as the legislature to clarify this law. We should not be
doing tax policy in our courts. That is our responsibility.
I have not heard one complaint against the fact that tax shelters
should be outlawed and there should be penalties for tax shelters. This
bill deals with it in a responsible way.
The second point I have heard is that it is retroactive. Now, let me
tell my colleagues, the date in this bill is what we have done by
tradition in this body since I have been here and well before that.
When a bill is noted by a committee, they use that as the effective
date, and that is exactly what is in the bill that was reported by the
other body. We incorporate that same date. Now, if that is
retroactivity, the other side has been guilty of it many, many times.
So let us be at least straightforward in the debate. Let people vote
their convictions. We should pay for the bill and we should provide
help to the faith-based organizations in our States through the social
services block grant that many of us have supported in the past.
Mr. Speaker, I urge my colleagues to support the amendment.
Mr. Speaker, I reserve the balance of my time.
Mr. THOMAS. Mr. Speaker, I rise in opposition to the substitute, I
claim the time in opposition, and I yield myself such time as I may
consume.
Mr. Speaker, perhaps I should address the gentleman from Maryland's
last point first. This is not about the date of enactment. Pick any
date one wants. What normally happens is that if we now say something
that was legitimate is no longer legitimate, we do it on what we say is
a prospective basis. From now on, you are put on notice; you cannot do
this any more. That is not what his amendment, or his substitute, says.
What his substitute says is that it is applicable to taxable years
beginning before, on, or after the date of enactment. It is not the
date of enactment that we are concerned about; it is the fact that if
this language is adopted in the substitute it means that when it does
become effective, behavior that has already taken place, which was
legitimate at the time that it took place, is now no longer allowed.
That is called retroactive. As a matter of fact, if it were in the area
of criminal law, it would be unconstitutional. But since it is in the
area of civil law, it may be immoral, it may be unfair, it may be
wrong, but the government can do that.
I personally think in the area of tax law, we should never have a
retroactive procedure. It is one of the primary reasons I voted against
the 1986 tax bill. It had a number of retroactive provisions.
How in the world are citizens supposed to trust the actions of
government if when they conduct perhaps an irrevocable decision of a
financial nature under the Tax Code, the time at which it was carried
out was legal, several years later the Congress says it is no longer
permissible, and we can go back and deal with it retroactively? How
more fundamentally unfair can government be than that?
That is what is in here. It is not over the date; it is over what
happens when the date becomes effective. Prospectively, we can go to
the substance of what the amendment contains, which is unacceptable,
but the fact that it can reach back and deal negatively with behavior
which was acceptable at the time that it was carried out on its face
should be rejected.
In addition to that, there is much discussion about how we need to
make sure that these various lifesavers are available to the States in
carrying out very useful and needed purposes dealing with those
individuals who are in need. So if we are talking about lifesavers, the
question is this: are we talking about lifesavers or are we talking
about orange lifesavers, or perhaps cherry lifesavers, or perhaps lime
lifesavers? I think we have to really visit what we have done in this
year alone.
In the tax bill, we have already passed at the insistence of the
Senate a tax bill which contains $20 billion of gifts distributed to
the States. Half of it, $10 billion, was to go to Medicaid. The other
half, $10 billion, was totally flexible. It is available for social
services block grants or any other services that States might want to
use it for within their jurisdiction. They got $5 billion of it in
July, they are getting another $5 billion this month.
But in addition to that, earlier money that we had provided, almost
$6 billion, is still unspent in Federal TANF money that is available
for welfare, child care, other social services. And to make sure that
it would be available and could be used, we did not limit ourselves to
the modest percentage under the appropriations bill, we passed a
welfare bill that said you get the full 10 percent. The welfare bill
may hit rocky shoals in the Senate; we are providing it here again. Not
a 4 percent, not a 5 percent, but a full 10 percent transfer
capability. If, in fact, what we are now doing is not arguing that the
States need lifesavers, they want a particular flavor of lifesaver;
Members have to ask themselves is it really something that we need to
do when there is more than enough money in the system, transferability
is not a question; it is just that they want a particular flavor of
lifesaver their way. And, if, in fact, they are going to fund it under
a structure which reaches back and penalizes taxpayers when at the time
they conducted the behavior it was legal, I would say, boy, that is
overreaching, especially when the underlying bill, the key part that we
are looking at, not welfare payments or social services block grants,
but the charitable giving which is at the heart of the bill, is the
same in both bills.
{time} 1330
The stuff they are adding is really beyond the narrow focus of what
this bill is all about and that is charitable giving.
So for all those reasons, I would urge Members, notwithstanding the
appeals that are going to be made to tell you that there is more than
enough money in the system, underscoring more than $6 billion in TANF
money that still has not been spent by the States available to be
transferred for the very purposes, they argue they want to force more
money on the States.
Mr. Speaker, I reserve the balance of the time, and I ask unanimous
consent that the remainder of my time be controlled by the gentleman
from Missouri (Mr. Blunt), the cosponsor of the underlying bill.
The SPEAKER pro tempore (Mr. Whitfield). Is there objection to the
request of the gentleman from California?
There was no objection.
Mr. CARDIN. Mr. Speaker, I yield 1 minute to the gentleman from Texas
(Mr. Doggett).
Mr. DOGGETT. Mr. Speaker, I will yield to the gentleman for purposes
of a colloquy on my time.
Mr. Speaker, I am sure the gentleman intended no deceit of the House
in complaining of one of the 16 effective dates listed in the bill, the
only one of the 16 that has a date that is retroactive; isn't that
correct?
Mr. THOMAS. Mr. Chairman, will the gentleman yield?
Mr. DOGGETT. I yield to the gentleman from California.
[[Page H8340]]
Mr. THOMAS. Mr. Speaker, is the gentleman referring to the effective
date on page 76 of his substitute?
Mr. DOGGETT. There are effective dates throughout the bill. There is
one effective date that applies on February 13 of this year. They are
all specific dates on transactions this year with the exception of the
last one, which is totally retroactive. The very last one on page 121
is totally retroactive and copies, as I understand it, verbatim
language that the gentleman from California (Mr. Thomas) introduced
last year in his international tax bill. It was not, apparently,
``fundamentally unfair'' last year when you introduced it.
There is one thing that is consistent because whether it is
retroactive, prospective, past, present or future, the indifference of
the Committee on Ways and Means to corporate tax abuse is consistent.
Mr. THOMAS. Might I respond or was the gentleman simply making a
statement while the gentleman from California stood? The gentleman
indicated in his opening statement that he would yield time for
colloquy.
Mr. CARDIN. Mr. Speaker, I believe I control the time.
The SPEAKER pro tempore. The gentleman from Maryland (Mr. Cardin)
controls the time.
Mr. CARDIN. Mr. Speaker, I have no objection to the gentleman from
California (Mr. Thomas) getting time from the gentleman from Missouri
(Mr. Blunt) to respond.
Mr. THOMAS. I tell the gentleman that the gentleman from Texas (Mr.
Doggett) rose and said he would yield to me on his time. That tells you
about the way they operate.
Mr. CARDIN. Mr. Speaker, I yield myself 30 seconds.
To clarify some of the points that my chairman made, when he referred
to the States having all this TANF money that is left over, let me
point out that the States are currently spending more money every year
in TANF funds than they currently receive and that they have obligated
almost all of their money. The 10 percent transfer authority has been
approved every year. That is nothing new. So when he mentions these
issues I think we need to clarify that. And on the effective dates we
are following the tradition of this House under Republican leadership.
There is really nothing new this year.
Mr. Speaker, I yield 4 minutes to the gentleman from Michigan (Mr.
Levin).
(Mr. LEVIN asked and was given permission to revise and extend his
remarks.)
Mr. LEVIN. Mr. Speaker, I want to review the history of this block
grant. I am sorry that tempers have been lost.
I really think we need to spend a few minutes looking at the history
of this block grant because what happened was this: It was $2.8 billion
before welfare reform, and then we reduced it as part of a welfare
reform. Many of us were unhappy about that, those of us who were able
eventually to be able to improve welfare reform with child care and
also with health care. The promise then was made that this money would
be returned to the States after 5 years. Then a few years later it was
reduced to $1.7 billion.
Money was taken from this block grant to pay for transportation,
totally unrelated. So we have a commitment to the States to return the
money for this block grant, money that goes for child abuse prevention,
Meals on Wheels, home care for the disabled, child care, adoption
services and domestic violence programs. The Senate has done this. And
now apparently the leadership on the Republican side is urging
everybody within your ranks to march once again in unison in opposition
to the gentleman from Maryland's (Mr. Cardin) proposal.
That is inconsistent with what we have pledged, inconsistent with the
bill that the gentlewoman from Connecticut (Mrs. Johnson) and I and
others have introduced year after year, inconsistent with the position
taken by a majority of the Republicans on the Committee on Ways and
Means.
So why are you today again not fulfilling a promise that you
essentially made? Oh, the argument is there is money in TANF. The
gentleman from Maryland (Mr. Cardin) has already answered that. What is
happening in TANF now is that more is being spent than is being
provided. It is not a good excuse.
The excuse is given, well, we provided billions to the States
recently. They needed this money, not for the block grant but for other
purposes. So I urge support for the Cardin amendment for these
important purposes; and I close with this in terms of fiscal
responsibility. Look, we try to pay for this. You are digging a deeper
hole.
If you do not like everything that is in the Cardin proposal, come up
with your own. But you insist time after time bringing up bills that
cost billions of dollars, and you have sunset the provision for the
deductions for those who do not itemize. You know that sunset will
never be allowed to persist. We are not going to take away from
deductions from nonitemizers after 2 years. You know that. So this bill
is really going to cost $20 billion more or less, and the Democrats
have said we will step up to the plate and we will be fiscally
responsible. And you as part of the leadership are again asking the
Republicans to march in lockstep against fiscal responsibility.
You should be in support of this bill, in support of the Cardin
amendment.
Mr. BLUNT. Mr. Speaker, I yield myself 1 minute.
Mr. Speaker, I am very pleased that the underlying parts of the
Cardin substitute is of course the bill that we have on the floor
today. The bill is provided for in the budget document we voted on some
time ago. This is well within the amount that we had set aside for tax
reduction. But this tax reduction multiplies many times the good things
that are done for people with the money spent and the good things are
done for society when you encourage people to give their money to
others, to help others.
Mr. Speaker, I yield 1\1/2\ minutes to the gentleman from
Pennsylvania (Mr. Pitts).
Mr. PITTS. Mr. Speaker, I rise today in opposition to the substitute
amendment and in strong support of the underlying legislation which
will help provide necessary relief for our Nation's charities.
Our tax code should encourage, not hinder individuals from giving
generously to organizations to help people in need.
In the wake of September 11, more Americans than ever answered the
call to help a neighbor in need even while many were facing financial
hardships on their own.
Americans are a generous people. Our laws should help people to keep
more of their money so they can invest it in charitable organizations
that reflect their values. But we also need to take practical steps to
help make it easier for individuals and corporations to give, and this
legislation accomplishes this goal by helping nonitemizers to deduct
charitable contributions, by raising the cap on corporate charitable
contributions and allowing people to donate their individual retirement
accounts to charity tax free.
I am also pleased the underlying bill includes the reauthorization of
a program that allows low income working Americans the opportunity to
build assets through matched savings accounts, known as Individual
Development Accounts, to purchase a home, expand educational
opportunity, or start a small business. IDAs have been very effective
in Pennsylvania and other States in helping lower income individuals to
access the American dream.
The underlying bill is a good bill and I urge my colleague to oppose
the substitute amendment and support the bill.
Mr. CARDIN. Mr. Speaker, I yield 2 minutes to the gentleman from
Texas (Mr. Edwards).
Mr. EDWARDS. Mr. Speaker, I support this substitute. We have the
largest deficit in American history which just 2 years ago was the
largest surplus in American history, and we ought to do something about
it, and this substitute helps pay for the cost of this bill.
Let me just say that I think, Mr. Speaker, the Republican leadership
in this House has very misplaced priorities. I think the American
people would agree with me.
If you in America this year make $1 million sitting safely at home
here in the continental United States in dividend income, you will get
a $230,000 tax break. But under this bill the Republican leadership
would say to servicemen and women serving in Iraq and to
[[Page H8341]]
their families that if you are killed in Iraq this year and in service
to your country and if Congress happens to increase deaths benefits to
your family, to your widow, then we want to tax those benefits.
The bill on the other side of this Capitol did not do that. I am
puzzled and perplexed and, frankly, deeply disappointed and somewhat
angered that the Republican leadership would be willing to give a
$230,000 tax break to somebody making $1 million a year in dividend
income, but they want to have higher taxes on death benefits for
servicemen and women who might be killed in Iraq.
Secondly, those same folks who want to give that huge tax break,
$230,000 worth, to someone sitting here safely in the U.S., actually
wants to put a cap on the amount of money that can be deducted for tax
purposes for National Guardsmen and Reservists, the costs that they
incur trying to serve their country as they travel to and from places
where our Nation has asked them to travel to, they will only be able to
deduct $1,500 in taxes under this bill, according to the Republican
leadership.
Now, Mr. Speaker, we are at war today, a war on terrorism, and I
think it sends a horrible message to our servicemen and women in harm's
way today that if you are in the Guard or Reserves we will be stingy on
letting you get tax benefits to cover your cost of serving the country,
but let us help those folks making $1 million a year on dividend
income.
Mr. BLUNT. Mr. Speaker, I am sure the gentleman knows we sent that
legislation to the Senate already.
Mr. Speaker, I yield 2\1/2\ minutes to the gentlewoman from
Connecticut (Mrs. Johnson).
Mrs. JOHNSON from Connecticut. Mr. Speaker, I thank the gentleman for
yielding me time.
This is a very important bill that we are considering today. It
allows people to contribute more to their local United Way agencies,
their local YWCAs, their local church programs, that it can be very
effectively focused on serving the families and individuals, meeting
the needs of people in their own community. That is what is so
wonderful about charitable giving. So this is an important bill that we
need to move forward.
I am a very strong advocate of the social services block grant. I am
glad in this bill we do reaffirm by law that States will have the right
to transfer 10 percent of their TANF money to other purposes. Now, in
the appropriations bill earlier this year, we dropped that to 5
percent. So it is significant that we beef that back up in this law and
the States do routinely use this transfer capability to better fund
whatever programs they think are important to them. And for many States
this is the way they use all of their TANF money and for many States
they actually do not use all of their TANF money.
There are some that use all of their TANF money and this social
services block grant expansion is extremely important for that reason.
On the other hand, the Senate bill does have an expansion in it and in
conference we will be able to work on that. The problem with this bill
is that it moves forward on an issue that we need to move forward in
conference on, but it does it by adopting a pay-for that is real an
unwise pay-for.
The provisions in this bill that try to deal with tax shelters would
put forward a whole new concept as one of its tests, the concept of a
risk-free rate of return. Now, we have had trouble implementing the tax
shelter law. The States at first interpreted some of the provisions of
that law in varied ways. They are now moving toward consistent
interpretation. We are now moving toward consistency in the courts, and
so this is a particularly bad time to now change the law, putting in a
concept that has had no judicial interpretation and is not in and of
itself clear; that is, the concept of a risk-free rate of return.
{time} 1345
In addition, our own Assistant Secretary of the Treasury, Pam Olson,
has stated that codifying the economic substance doctrine could be
counterproductive and would drive tax shelters further underground.
We have a solution to this problem in the American Jobs Creation Act,
H.R. 2896, and I urge the body to solve this problem at that time and
oppose the motion to recommit.
Mr. CARDIN. Mr. Speaker, I yield myself such time as I may consume.
Let me just point out to my friend from Connecticut that the transfer
authority will have no impact on her State since her State's obligated
all of their TANF funds.
Let me point out to my friend from Missouri (Mr. Blunt), if we want
to do something for the military, the bill is sitting at the desk from
the other body. We could take it up and get it done before we leave
here this afternoon.
Mr. Speaker, I am pleased to yield 2\1/2\ minutes to the gentleman
from Massachusetts (Mr. Tierney).
Mr. TIERNEY. Mr. Speaker, I thank the gentleman for yielding me the
time.
Mr. Speaker, I rise today to add a word of caution to my colleagues
about this legislation and to support the Democratic substitute.
Everybody in this body supposedly supports charities and the important
work that they do.
At the same time, however, the Federal Government is currently
projected to run the largest deficits in history. The need for
assistance in education and health care and housing among low and
moderate income Americans is great, and unfortunately, there is little
evidence that this bill is going to do anything to address those needs.
I fear that larger deficits are going to occur and the result of this
bill is going to serve as an excuse to cut programs already
inadequately funded.
At a minimum, this bill should contain an offset. In analysis of a
similar bill that is in the Senate, the Congressional Research Service
report estimated that the charitable deduction for nonitemizers would
yield only 12 cents of additional giving for every dollar of revenue
lost to the Treasury, 12 cents. CRS concluded that the vast majority of
the cost of the deduction would go to subsidizing existing donations
rather than generating new gifts.
The charitable donations generated by this bill will support many
good causes, but that same Budget and Policy Priorities report
indicated that no more than 10 percent of all charitable giving will
directly benefit the poor. The largest recipient of the funds by far
would be religious institutions, and while religious giving is
commendable, the Center for Budget and Policy Priorities also reported
that only 6 percent of donations to religious institutions end up in
services to the poor.
My point is that this bill proposes to reduce Federal revenues by $13
billion over the next 10 years. Yet only a few cents of each dollar
will actually translate into charitable works to help the neediest
Americans. Given the projected $500 billion deficit next year and well
over $3.3 trillion debt over the next 10 years, I think colleagues need
to decide whether or not this is the best way to spend $13 billion rare
dollars.
This country has tremendous needs. America's charities can obviously
help, but it is unrealistic to think that America's charities are going
to feed the hungry, house the homeless and heal the sick left behind by
this Congress. No Child Left Behind, underfunded by $8 billion; housing
assistance that served 20,000 less families for the first time in 30
years; Head Start only serves 60 percent of the children who need it
and only 3 percent of the children who need early Head Start; and
Americans without health care number 42 million.
We are in a tough fiscal time, Mr. Speaker, as a result of the failed
economic policies of this administration. The need is great. We have to
decide if this is the best way to spend $13 billion.
Mr. BLUNT. Mr. Speaker, I yield 2\1/2\ minutes to the gentleman from
California (Mr. Herger), a member of the Committee on Ways and Means.
Mr. HERGER. Mr. Speaker, I respectfully oppose the substitute to H.R.
7 offered by the gentleman from Maryland (Mr. Cardin). I oppose the tax
increases included in the substitute. As the Subcommittee on Human
Resources chairman, I also oppose increased funding in the substitute
for the Social Services Block Grant.
First, such funding is really a welfare, not a charitable giving,
issue. In the House welfare reform bill passed in February, we
continued record welfare
[[Page H8342]]
funding despite 50 percent caseload decline since 1996. We even
proposed more than $2 billion in increased funds for child care to
support more parents in work and other activities. We already have
proposed increased funding for welfare and related benefits in our
welfare bill.
Second, Members will recall we just gave States $20 billion in May in
the jobs and growth tax relief bill. Of that, $10 billion can be spent
however States choose, including for social services.
Third, last week the General Accounting Office reported that States
have $5.6 billion in unspent welfare funds today.
Mr. Speaker, this Congress has been very generous in terms of
funding, including for the very types of services my good friend from
Maryland (Mr. Cardin) addresses as part of the welfare reform bill.
One final point, we know many are insisting on more funds in exchange
for continued welfare reforms. Providing more funds without achieving
such reforms would inadvertently undermine the potential for getting a
welfare reform deal done this year. We should resist anything that does
that.
I urge opposition to the substitute and support for the underlying
bill.
Mr. CARDIN. Mr. Speaker, I yield myself such time as I may consume.
I am curious why my friend from California points out that the Social
Services Block Grant is not part of this legislation, even though all
the faith-based nonprofit groups say it is very important to them, why
the underlying bill provides transfer authority to the Social Services
Block Grant from TANF if it is not relevant to this legislation. Maybe
the gentleman from California will try to answer that.
Mr. Speaker, I yield 2\1/2\ minutes to the gentlewoman from Oregon
(Ms. Hooley).
Ms. HOOLEY of Oregon. Mr. Speaker, I thank my good friend for
yielding time to me.
I rise today in support of the substitute to H.R. 7. This bill
permits taxpayers who do not itemize deductions on their tax returns to
deduct up to $250 in charitable donations, which is a good thing. It
permits tax-free charitable contributions from IRAs, another good thing
to do. It increases the amount corporations may contribute to charity,
a good thing to do, and it reduces the administrative expenses that
foundations may count towards a required charitable contribution, a
good thing to do. This bill also cuts in half the current excise tax on
foundations' investment, a good thing to do.
Charitable organizations provide life-enhancing programs that
Oregonians and Americans would otherwise do without: soup kitchens,
food pantries, health care clinics, domestic violence shelters. The
list is endless. These organizations make the lives of millions of
Americans a little better and a little easier. This bill helps
charities carry out their missions.
It lessens the tax burden on charitable trusts, will allow more money
to be focused on helping people. Providing tax incentives to
individuals and corporations will encourage giving to charity. These
are both great and noble goals.
However, these tax incentives come at a cost, and given the current
budget outlook, Congress should show fiscal responsibility by passing a
bill with an offset provision for the cost. This substitute does that
by simply stopping abusive tax shelter schemes. So we get two good
things out of this.
First of all, we are going to close loopholes in the current tax law,
and we are going to give charitable organizations incentives, and we
can make this a revenue-neutral bill by doing both of those. At a time
when our budget deficit is out of control, this offset provision is
imperative.
The Democratic substitute allows us to encourage charitable giving
and stop tax shelter schemes at the same time. Both good things to do.
I urge my colleagues to vote yes to help charitable organizations and
yes to stopping abusive tax shelters.
Mr. BLUNT. Mr. Speaker, I yield 1\1/2\ minutes to the gentleman from
South Carolina (Mr. Wilson), my colleague and assistant whip.
Mr. WILSON of South Carolina. Mr. Speaker, I thank the gentleman very
much for yielding me the time.
Mr. Speaker, as a long-time volunteer for charitable organizations, I
rise in opposition to this amendment and encourage all of my colleagues
to vote no.
The proper level of Social Services Block Grant funding is a welfare
reform question, not a charitable giving issue. The House-passed
welfare bill holds SSBG funding constant at $1.7 billion but allows
States to transfer up to 10 percent of annual Federal Temporary
Assistance for Needy Families, TANF, funds to the SSBG.
This same 10 percent transfer provision has been included in H.R. 7.
Adding more funds for the SSBG will make welfare reauthorization, as
indicated by the gentleman from California (Mr. Herger), even less
unlikely by providing more funds without updating work requirements.
GAO estimates States today have almost $6 billion in unspent Federal
TANF funds available for welfare, child care, and other social
services. The 1996 welfare reform law has already resulted in more SSBG
spending.
I strongly support the underlying bill, H.R. 7, and want to thank the
gentleman from Missouri (Mr. Blunt), our majority whip, for his
leadership on this critical issue. This bill gets to the heart of what
it means to be an American. We are a compassionate Nation where
neighbors look out for one another. This bill helps institutions that
have been historically successful in helping the less fortunate and
encourages all Americans to increase their charitable giving.
H.R. 7 is an important bill for America we should pass without this
amendment. I urge my colleagues to support H.R. 7 and vote no on the
amendment.
Mr. CARDIN. Mr. Speaker, may I inquire as to the time that remains?
The SPEAKER pro tempore (Mr. Whitfield). The gentleman from Maryland
(Mr. Cardin) has 10\1/2\ minutes remaining. The gentleman from Missouri
(Mr. Blunt) has 15 minutes remaining.
Mr. CARDIN. Mr. Speaker, I reserve the balance of our time.
Mr. BLUNT. Mr. Speaker, I yield 2 minutes to the gentleman from
Florida (Mr. Weldon).
Mr. WELDON of Florida. Mr. Speaker, I thank the distinguished
majority whip for recognizing me, and it is a real pleasure for me to
be able to rise and speak in support of the underlying bill and against
the substitute.
One of the things that I have learned over and over again as I
traveled around my congressional district, and indeed throughout the
State of Florida and within the United States, and that is that some of
the greatest work helping the needy and the unfortunate in our Nation,
and indeed throughout the history of our Nation, has always been
performed by a whole host of different charitable groups, the most
significant of which, of course, is religious groups, but many
nonreligious groups or groups with very loose religious affiliations.
I think one of the most important provisions in our tax law, which
has been the ability to tax deduct charitable donations, has encouraged
a lot of people. It has encouraged me to give and to give generously,
and I think it has helped strengthen our Nation, make our Nation a
better place and extending one of the provisions of this bill, and that
is one of the main things I rise and speak in support of, extending
that provision to nonitemizers I think is something actually long
overdue.
Regarding the issue that is under debate in the substitute regarding
the Social Services Block Grant, while indeed this may be a very
worthwhile issue, as I understand it we are increasing the funding in
this in the underlying appropriation and to tack on an additional
amount of this magnitude I think is, at this time, unnecessary and
inappropriate, and therefore, I would strongly encourage all of my
colleagues on both sides of the aisle to vote no on the substitute and
vote yes on the underlying bill.
Mr. CARDIN. Mr. Speaker, I yield 3 minutes to the gentleman from
Texas (Mr. Doggett).
Mr. DOGGETT. Mr. Speaker, I thank the gentleman for yielding me the
time.
I believe there are three very important issues in this debate.
First, the gentleman from Maryland (Mr. Cardin) has proposed a
bipartisan initiative to complement the good intention of the sponsors
of this measure to help children, especially abused children, in the
[[Page H8343]]
State of Texas. This proposal was good enough for every one of our
Republican colleagues across the Capitol to support as a part of this
bill. It was in the bill when it came from the Senate, and it is being
stripped out today in a way that I think is indifferent to the needs of
many children and many others who the sponsors of this bill say they
want to help.
The second issue is: is the bill good enough to be paid for? When
this bill arrived from the Senate it was paid for. It was a fiscally-
responsible bill, and that responsibility has also now been stripped
from the bill. How will our children and our grandchildren pay for the
debt to which this bill contributes, piled upon, more debt atop even
more debt? Our Nation is headed in the direction of the economic
disaster of Argentina. We are mortgaging our prosperity--leaving our
children and our grandchildren the hope of holding out a tin cup and
begging for charity themselves to pay off this National debt unless we
pay now for proposals like this.
{time} 1400
Mr. Speaker, that is why the bipartisan sponsor of this measure, the
gentleman from Tennessee (Mr. Ford), says he is ready to pay for it.
That is why Mr. J.C. Watts, the Republican sponsor of this measure in
the last Congress, told our committee he was willing to pay for it. Why
do today's Republican sponsors of this bill not put their money where
their mouth is? If they are so concerned about charity, how about
financing this bill instead of shifting more of the burden to future
generations?
And the third equally important issue: we can pay for this and at the
same time correct a gross injustice in our tax system.
In 1999 an Austin constituent drew my attention to Forbes magazine.
It prouldly bears the title proudly ``The Capitalist Tool,'' and it
published this cover story, ``Tax Shelter Hustlers, Respectable
Accountants Are Peddling Dicey Tax Loopholes.''
In 1999 after I introduced legislation and we had a hearing great
sympathy was expressed by the Republican members of the Committee on
Ways and Means, but no action. Absolutely nothing was done about a
problem that one Texas multinational told my office was receiving at
one point a cold call every day trying to con them into these abusive
corporate tax shelters. It had become an industry for major accounting
firms like Arthur Andersen to engage in promoting these corporate tax
shelters.
With the passage of several additional years and one corporate
scandal after another, still no remedial action in the House, there has
been some hope that this problem might be addressed because this year,
not in a Democratic bill, but in the tax bill that President Bush
offered, the Republican Members of the Senate added essentially the
same tax shelter language that the gentleman from Maryland (Mr. Cardin)
and I are offering today in that tax bill. The Republican Senate passed
it overwhelmingly. Yet it was stripped out by the same House Committee
on Ways and Means that has consistenly turned a blind eye to this abuse
since at least 1999.
So the Senate put it in again in this charitable giving bill to pay
for it--to be fiscally responsible. They sent legislative language over
here similar to that the gentleman from Maryland (Mr. Cardin) and I are
proposing, and today we hear Republican colleagues in the House tell us
that although it was good enough for all of the Senate Republicans it
is not good enough for us. ``We think it is difficult.'' ``We think it
is challenging.'' ``We think it is confusing.''
Well, it is not ``confusing'' to anyone other than to those who are
the so-called respectable accountants, who choose to use challenging,
confusing tax gimmicks so their well-healed clients can avoid paying
their fair share of taxes. This unfairly doged ``fair share of taxes''
is believed to run as high as $10 billion a year. When one of those
corporations does not pay its fair share, the rest of us have to pay
the difference and this is wrong. We can correct this abuse today in
the same way that the Republican Senate corrected it, and on behalf of
all honest taxpayers, I hope we will.
Mr. BLUNT. Mr. Speaker, I yield 2 minutes to the gentleman from Texas
(Mr. Sam Johnson), a member of the Committee on Ways and Means and a
leader on this issue.
(Mr. SAM JOHNSON of Texas asked and was given permission to revise
and extend his remarks.)
Mr. SAM JOHNSON of Texas. Mr. Speaker, it is disconcerting when
someone from the other side tries to tell us we are not taking care of
problems when we are. Members will find that what was just stated was
taken care of in a different bill. But I rise to support the basic
bill, H.R. 7.
It contains a provision to permit restaurant owners to deduct cost of
food donated to hunger relief charities. The United States Department
of Agriculture estimates that 96 billion pounds of edible food are
wasted and dumped in landfills each year. If even 1 percent of that
food was redirected from landfills to local charities, it will
significantly reduce the number of people who have a difficult time
getting food on their table. We are talking about wholesome and
nutritious food that is left over at grocery stores and restaurants,
and even those trays of foods that are left at the end of the night at
receptions that we all attend. It is a shame for that food to go to
waste.
With the tax incentives included in this bill, companies will have an
added incentive to make sure that this food goes to a good cause, the
hungry. I also want to talk about the provisions in the bill that help
foundations. I work with many of the Texas-based foundations to make
sure this bill does the good it is supposed to do without harming
foundations like the Meadows Foundation in Dallas, which has allocated
$25 million for grants for 2003, including a $3 million emergency loan
fund available to assist agencies that are facing crises. That is a lot
of money from one foundation. I am glad to say the money pretty much
stays in the State of Texas.
One of my favorite projects of the Meadows Foundation is the Wilson
District, which is a nonprofit community established by the foundation
in 1981 to restore and preserve some of the last Victorian structures
in Dallas. Its mission is to provide rent-free office space. We need to
pass this bill and help our foundations and our charities.
I also want to talk about the provisions in this bill that help
foundations. I worked with many of the Texas-based foundations to make
sure that this bill does the good it is supposed to do without harming
foundations like the Meadows Foundation based in Dallas.
The Meadows Foundation has allocated $25 million toward grants for
the year 2003, including a $3 million emergency loan fund available to
assist those agencies that are facing crisis situations.
This is a lot of money from one foundation and I'm glad to say that
the money pretty much stays in Texas.
One of my favorite projects of the Meadows Foundation is the Wilson
district.
It is a nonprofit community established by the foundation in 1981 to
restore and preserve some of the last Victorian structures in Dallas
but its mission is to provide rent-free office space to nonprofit
charitable organizations.
Groups like the Greater Dallas Community of Churches, the Suicide and
Crisis Center, the United Negro College Fund, the Center for Housing
Resources, and Dallas Reads are all able to have office space that lets
them focus on the good and charitable works they do without having to
worry about the rent, the light bill or other office space concerns.
It is this direct charitable work by foundations that I felt needed
to be protected in this bill.
I thank Chairman Thomas and the majority whip for working to be sure
that necessary changes were made to this bill.
Mr. BLUNT. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, let me say, as we look at this substitute again, that
this is a substitute that really encompasses the bill and that suggests
we add other things to the bill that I think can be better handled in
other pieces of legislation.
The effort to work with the Treasury Department and the
administration on tax shelters is in a bill which should be before the
committee at any time.
The social services block grant, I think, better fits another bill.
This is a bill about charitable giving. It is a tax bill. We
specifically eliminated the things about program delivery from a
similar bill that the House passed last year because we wanted to focus
on charitable giving. We did not want to focus on other programs. We
[[Page H8344]]
wanted our focus to be on those things that changed the character of
our communities because they encouraged people to assist others in
their community.
The House passed bills that really give the States $20 billion
already, $10 billion is for Medicare costs, and $10 billion is totally
flexible to the States. There is another $9 billion that is available
to the States because of unspent TANF funds and welfare reform funds.
That is $19 billion States could spend for these purposes.
This bill is well within the amount of money we set aside this year
in the budget, which I think all of the proponents of the substitute
probably also oppose the budget; but the budget did pass, and it set
aside money for tax relief. This is tax relief that does not just cost
the Federal Government money, but it truly does encourage people to
invest their money in the things they care about, in the charities they
care about, in the communities they care about, in the individuals and
families they care about that are assisted there. That is what this
bill is about.
This bill is not about trying to codify some very technical tax
policy retroactive or not that, as I understand it, not being a member
of the Committee on Ways and Means, as I understand the tax policy,
would suggest that it is interpreted differently in almost every
circuit of the country, you cannot invest money or spend money if you
are a business that you would not invest in if the Tax Code did not
exist.
Most businesses wish the Tax Code did not exist, but it does exist
and it does affect the bottom line. It does affect decisionmaking. How
many Americans would buy a home if there was no Tax Code incentive to
buy that home?
Do we want to say we cannot make any decisions in the country, make
it illegal to make any decisions in the country based on tax policy?
How many decisions are made by Americans every single day based upon
the tax policy of the country? This is a very complicated thing. It
does not belong on this bill.
Mr. Speaker, I ask unanimous consent to yield the balance of my time
to the gentleman from Texas (Mr. Sam Johnson), and that as a member of
the Committee on Ways and Means, he may control that time.
The SPEAKER pro tempore (Mr. Terry). Is there objection to the
request of the gentleman from Missouri that the gentleman from Texas
control the balance of the time and be given the right to close debate?
There was no objection.
Mr. CARDIN. Mr. Speaker, I yield 1\1/2\ minutes to the gentleman from
Texas (Mr. Edwards).
Mr. EDWARDS. Mr. Speaker, I support the substitute because I think we
ought to be sensitive about the largest deficit in American history. I
would also like to go back to something mentioned that the gentleman
from Missouri (Mr. Blunt) responded to. I said I have a concern about
this bill. It limits the amount of money that National Guardsmen and
Reservists can charge off as tax deductions when they have expenses
serving their country, such as going overnight to their local reserve
location.
I also object to the fact that this bill will actually provide
increased taxes on military death benefits if we increase those
benefits, for example, for our Iraqi troops today.
The gentleman from Missouri (Mr. Blunt) responded by saying that bill
we have sent to the Senate. I would like to clarify the rest of that
story. That bill, to my knowledge, is sitting at the Speaker's desk
today, and it has been sitting there since March. I would be happy to
yield to the gentleman if he would be willing to work on a unanimous
consent basis to bring that bill from the Speaker's desk today, and
before we leave because of the impending rain, we could actually
provide increased tax benefits to our servicemen and -women. If the
gentleman would agree to a unanimous consent request, we could do it
that way; or the Republican leadership can vote for our motion to
recommit, which would provide those increased military benefits today.
What bothers me is the reason that bill is being held up there is it
seems some in the Republican leadership have more interest in tax
breaks for people who renounce their citizenship than in tax benefits
to Guardsmen and Reservists and men and women serving very
patriotically and at great risk to their lives in Iraq and Afghanistan
today. I do not think that reflects the values of the American people.
Mr. CARDIN. Mr. Speaker, I yield myself the balance of my time.
Mr. Speaker, in closing, first let me reiterate what I said earlier.
I support the underlying bill. I think the gentleman from Missouri (Mr.
Blunt) and the gentleman from Tennessee (Mr. Ford) have done an
excellent job in bringing forth an excellent bill, and I compliment
them for that.
I noticed that many of the speakers on the opposition side of my
amendment were speaking in support of the underlying bill which I
support and which is incorporated in the amendment that I offer. I want
to make it clear if Members support the underlying bill, they can
certainly support this amendment, as the gentleman from Tennessee (Mr.
Ford) supports this amendment.
So let me deal with the points which have been made in opposition to
this amendment. I hope Members will take this into consideration when
voting on the amendment.
First, the issue of relevancy has been waged as to why the social
services block grant is included in this underlying bill. As pointed
out, the underlying bill includes the TANF legislation giving
authorization for the transfer of social services block grants. If it
is relevant for the body of the bill, it is certainly relevant for our
amendment.
Secondly, if we ask the charitable groups as to what will help them
the most in carrying out the social functions that we want them to do,
they all support the increasing of the social services block grant. The
next issue which has been raised is do the States really need this and
are the funds really necessary? After all, we have TANF reserves.
As I pointed out, the States are spending more every year in TANF
funds than they are receiving from the Federal Government. They are
running deficits right now.
{time} 1415
In regards to the multiyear authorization, almost all those funds
have been committed. If you look at the deficits our States are
currently confronting in their budgets, it is just intuitive that we
know they need the money. Lastly, this was a commitment we made when we
passed welfare reform, that we would restore the social services block
grant funds in 2003. Congress should live up to its commitment. They
should adopt that amendment.
Then I hear criticisms about the offset. I hear that it is going to
be hard to enforce. It is our responsibility to clarify the law.
Currently it is being implemented by the court on a case-by-case basis.
That is certainly not in the best interest of tax policy. It is our
responsibility to do that. The way that we have drafted this in regards
to effective dates, et cetera, is consistent with the prior policy of
this body in passing tax legislation. We frequently note dates and that
is exactly what the other body did. This is very consistent.
Then lastly, Mr. Speaker, I have heard just about every Member lament
the fact that we are adding to the national debt and we have to do
something about it, that we have to exercise fiscal restraint. When are
we going to do it? Here is an easy one, my colleagues. This is an easy
one. Closing a loophole that if you ask any tax accountant or tax
attorney, they will tell you it is the right thing to do. Shelters do
not help our economy. That is why the courts are taking it on when we
should be taking it on and that is why the other body passed it in
their legislation. It is time for us to stand up to our responsibility,
to do the right thing. This is a bipartisan bill. Both of these
recommendations have been brought forward with bipartisan support, both
the increase in the social services block grant and the funding
mechanism. It passed the other body by a vote of 95 to 5.
The last point I make, Mr. Speaker, is that we have a lot of work to
do between now and adjournment. The more work we put in conference, the
less likely it is going to come out of conference. Here is our chance
to really make it likely that we could enact a bill that is going to
help our charitable groups by moving closer to the other body
consistent with the policy of this
[[Page H8345]]
body, consistent with both Democrats and Republicans. I urge my
colleagues to continue the tradition of this legislation which has
moved in a bipartisan manner and look at this amendment objectively. I
hope you will vote with me. Vote your conscience. Vote in support of
the Cardin amendment.
Mr. Speaker, I yield back the balance of my time.
Mr. SAM JOHNSON of Texas. Mr. Speaker, I yield myself such time as I
may consume.
It is impossible for me to figure out why we need an amendment when
this bill passed the Committee on Ways and Means unanimously. Our
country's charities are facing a crunch. This bill is targeted for all
charities. So it does not need amending. This is a tax cut with a punch
and it will spur investment in organizations that make a difference in
the places we live and work. The basic bill is what we should vote for,
not the amendment.
Mr. Speaker, I yield such time as he may consume to the gentleman
from Missouri (Mr. Blunt).
Mr. BLUNT. I thank the gentleman from Texas (Mr. Sam Johnson) for
yielding me this time and for being here to represent the committee on
this bill. I want to thank the committee for voting the bill out of
committee unanimously and my chief cosponsor the gentleman from
Tennessee (Mr. Ford) and all of the other bipartisan cosponsors that
have gotten behind this bill. This will make a difference in the
charitable community. I am confident that our commitment to this bill
will be so great today that we will be able to move quickly to a
conference, quickly to the President's desk and begin to see the impact
of this bill right away. Certainly I urge my colleagues to reject the
substitute, reject any further efforts to delay this measure. Let us
get this bill passed today, get it headed toward a final conclusion and
toward the President's desk.
Mr. SAM JOHNSON of Texas. Mr. Speaker, I yield back the balance of my
time.
The SPEAKER pro tempore (Mr. Terry). Pursuant to House Resolution
370, the previous question is ordered on the bill and on the amendment
in the nature of a substitute offered by the gentleman from Maryland
(Mr. Cardin).
The question is on the amendment in the nature of a substitute
offered by the gentleman from Maryland (Mr. Cardin).
The question was taken; and the Speaker pro tempore announced that
the noes appeared to have it.
Mr. CARDIN. Mr. Speaker, I object to the vote on the ground that a
quorum is not present and make the point of order that a quorum is not
present.
The SPEAKER pro tempore. Evidently a quorum is not present.
The Sergeant at Arms will notify absent Members.
The vote was taken by electronic device, and there were--yeas 203,
nays 220, not voting 11, as follows:
[Roll No. 506]
YEAS--203
Abercrombie
Ackerman
Alexander
Allen
Andrews
Baca
Baird
Baldwin
Ballance
Becerra
Bell
Berkley
Berman
Bishop (GA)
Bishop (NY)
Blumenauer
Boswell
Boucher
Boyd
Brady (PA)
Brown (OH)
Brown, Corrine
Capps
Capuano
Cardin
Cardoza
Carson (IN)
Carson (OK)
Case
Castle
Clay
Clyburn
Conyers
Cooper
Costello
Cramer
Crowley
Cummings
Davis (AL)
Davis (CA)
Davis (FL)
Davis (IL)
Davis (TN)
DeFazio
DeGette
Delahunt
DeLauro
Deutsch
Dicks
Dingell
Doggett
Dooley (CA)
Doyle
Edwards
Emanuel
Engel
Eshoo
Etheridge
Evans
Farr
Fattah
Filner
Ford
Frank (MA)
Frost
Gonzalez
Gordon
Green (TX)
Grijalva
Gutierrez
Hall
Harman
Hastings (FL)
Hill
Hinchey
Hinojosa
Hoeffel
Holden
Holt
Honda
Hooley (OR)
Hoyer
Inslee
Israel
Jackson (IL)
Jackson-Lee (TX)
Jefferson
John
Johnson, E. B.
Jones (OH)
Kanjorski
Kaptur
Kennedy (RI)
Kildee
Kilpatrick
Kind
Kleczka
Kucinich
Lampson
Langevin
Lantos
Larsen (WA)
Larson (CT)
Leach
Lee
Levin
Lewis (GA)
Lipinski
Lofgren
Lowey
Lucas (KY)
Lynch
Majette
Maloney
Markey
Marshall
Matheson
Matsui
McCarthy (MO)
McCarthy (NY)
McCollum
McDermott
McGovern
McNulty
Meehan
Meek (FL)
Meeks (NY)
Menendez
Michaud
Millender-McDonald
Miller (NC)
Miller, George
Mollohan
Moore
Moran (VA)
Murtha
Nadler
Napolitano
Neal (MA)
Oberstar
Obey
Olver
Ortiz
Owens
Pallone
Pascrell
Pastor
Payne
Pelosi
Pomeroy
Price (NC)
Rahall
Rangel
Reyes
Rodriguez
Ross
Rothman
Roybal-Allard
Ruppersberger
Ryan (OH)
Sabo
Sanchez, Linda T.
Sanchez, Loretta
Sanders
Sandlin
Schakowsky
Schiff
Scott (GA)
Scott (VA)
Serrano
Sherman
Skelton
Slaughter
Smith (WA)
Snyder
Solis
Spratt
Stark
Stenholm
Strickland
Stupak
Tancredo
Tanner
Tauscher
Taylor (MS)
Thompson (MS)
Tierney
Towns
Turner (TX)
Udall (CO)
Udall (NM)
Van Hollen
Velazquez
Visclosky
Waters
Watson
Watt
Waxman
Weiner
Wexler
Woolsey
Wu
Wynn
NAYS--220
Aderholt
Akin
Bachus
Baker
Ballenger
Barrett (SC)
Bartlett (MD)
Barton (TX)
Bass
Beauprez
Bereuter
Biggert
Bilirakis
Bishop (UT)
Blackburn
Blunt
Boehlert
Boehner
Bonilla
Bonner
Bono
Boozman
Bradley (NH)
Brady (TX)
Brown (SC)
Brown-Waite, Ginny
Burgess
Burns
Burr
Burton (IN)
Buyer
Calvert
Camp
Cannon
Cantor
Capito
Carter
Chabot
Chocola
Coble
Cole
Collins
Cox
Crane
Crenshaw
Culberson
Cunningham
Davis, Jo Ann
Davis, Tom
Deal (GA)
DeLay
DeMint
Diaz-Balart, L.
Diaz-Balart, M.
Doolittle
Dreier
Duncan
Dunn
Ehlers
Emerson
English
Everett
Feeney
Ferguson
Flake
Fletcher
Foley
Fossella
Franks (AZ)
Frelinghuysen
Gallegly
Garrett (NJ)
Gerlach
Gibbons
Gilchrest
Gillmor
Gingrey
Goode
Goodlatte
Goss
Granger
Graves
Green (WI)
Greenwood
Gutknecht
Harris
Hart
Hastings (WA)
Hayes
Hayworth
Hefley
Hensarling
Herger
Hobson
Hoekstra
Hostettler
Houghton
Hulshof
Hunter
Hyde
Isakson
Issa
Istook
Janklow
Jenkins
Johnson (CT)
Johnson (IL)
Johnson, Sam
Jones (NC)
Keller
Kelly
Kennedy (MN)
King (IA)
King (NY)
Kingston
Kirk
Kline
Knollenberg
Kolbe
LaHood
Latham
LaTourette
Lewis (CA)
Lewis (KY)
Linder
LoBiondo
Lucas (OK)
Manzullo
McCotter
McCrery
McHugh
McInnis
McKeon
Mica
Miller (MI)
Miller, Gary
Moran (KS)
Murphy
Musgrave
Myrick
Nethercutt
Neugebauer
Ney
Northup
Norwood
Nunes
Nussle
Osborne
Ose
Otter
Oxley
Paul
Pearce
Pence
Peterson (MN)
Peterson (PA)
Petri
Pickering
Pitts
Pombo
Porter
Portman
Pryce (OH)
Putnam
Quinn
Radanovich
Ramstad
Regula
Rehberg
Renzi
Reynolds
Rogers (AL)
Rogers (KY)
Rogers (MI)
Ros-Lehtinen
Royce
Ryan (WI)
Ryun (KS)
Saxton
Schrock
Sensenbrenner
Sessions
Shadegg
Shaw
Shays
Sherwood
Shimkus
Shuster
Simmons
Simpson
Smith (MI)
Smith (NJ)
Smith (TX)
Souder
Sullivan
Sweeney
Tauzin
Taylor (NC)
Terry
Thomas
Thornberry
Tiahrt
Tiberi
Toomey
Turner (OH)
Upton
Vitter
Walden (OR)
Walsh
Wamp
Weldon (FL)
Weldon (PA)
Weller
Whitfield
Wicker
Wilson (NM)
Wilson (SC)
Wolf
Young (AK)
Young (FL)
NOT VOTING--11
Berry
Cubin
Forbes
Gephardt
McIntyre
Miller (FL)
Platts
Rohrabacher
Rush
Stearns
Thompson (CA)
Announcement by the Speaker Pro Tempore
The SPEAKER pro tempore (Mr. Terry) (during the vote). Members are
advised there are 2 minutes remaining in this vote.
{time} 1447
Ms. ROS-LEHTINEN, Mr. LoBIONDO and Mr. TAUZIN changed their vote from
``yea'' to ``nay.''
Mr. MOLLOHAN and Mr. MURTHA changed their vote from ``nay'' to
``yea.''
So the amendment in the nature of a substitute was rejected.
The result of the vote was announced as above recorded.
Stated against:
Mr. TANCREDO. Mr. Speaker, on rollcall No. 506. I inadvertently voted
``yea.'' I would like the Record to reflect I meant to vote ``nay.''
The SPEAKER pro tempore (Mr. Terry). The question is on the
engrossment and third reading of the bill.
The bill was ordered to be engrossed and read a third time, and was
read the third time.
Motion to Recommit Offered by Mr. Neal of Massachusetts
Mr. NEAL of Massachusetts. Mr. Speaker, I offer a motion to recommit.
The SPEAKER pro tempore. Is the gentleman opposed to the bill?
Mr. NEAL of Massachusetts. I am opposed to this bill in its current
form.
[[Page H8346]]
The SPEAKER pro tempore. The Clerk will report the motion to
recommit.
The Clerk read as follows:
Mr. Neal of Massachusetts moves to recommit the bill HR. 7
to the Committee on Ways and Means with instructions that the
Committee report the same back to the House forthwith with
the following amendment:
At the end of the bill insert the following new titles (and
conform the table of contents accordingly):
TITLE IV--TAX RELIEF FOR WORKING FAMILIES
Subtitle A--Child Tax Credit
SEC. 401. ACCELERATION OF INCREASE IN REFUNDABILITY OF THE
CHILD TAX CREDIT.
(a) Acceleration of Refundability.--
(1) In general.--Section 24(d)(1)(B)(i) of the Internal
Revenue Code of 1986 (relating to portion of credit
refundable) is amended by striking ``(10 percent in the case
of taxable years beginning before January 1, 2005)''.
(2) Advance payment.--Subsection (b) of section 6429 of
such Code (relating to advance payment of portion of
increased child credit for 2003) 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 new paragraph:
``(4) section 24(d)(1)(B)(i) applied without regard to the
first parenthetical therein.''.
(3) Earned income includes combat pay.--Section 24(d)(1) of
such Code is amended by adding at the end the following new
sentence: ``For purposes of subparagraph (B), any amount
excluded from gross income by reason of section 112 shall be
treated as earned income which is taken into account in
computing taxable income for the taxable year.''.
(b) Effective Dates.--
(1) Subsections (a)(1) and (a)(3).--The amendments made by
subsections (a)(1) and (a)(3) shall take effect on October 1,
2003, and apply to taxable years ending on or after such
date.
(2) Subsection (a)(2).--The amendments made by subsection
(a)(2) shall take effect as if included in the amendments
made by section 101(b) of the Jobs and Growth Tax Relief
Reconciliation Act of 2003.
SEC. 402. REDUCTION IN MARRIAGE PENALTY IN CHILD TAX CREDIT.
(a) In General.--Section 24(b)(2) of the Internal Revenue
Code of 1986 (defining threshold amount) is amended--
(1) by inserting ``($115,000 for taxable years beginning in
2008 or 2009, and $150,000 for taxable years beginning in
2010)'' after ``$110,000'', and
(2) by striking ``$55,000'' in subparagraph (C) and
inserting ``\1/2\ of the amount in effect under subparagraph
(A)''.
(b) Effective Date.--The amendments made by this section
shall take effect on October 1, 2003, and apply to taxable
years ending on or after such date.
SEC. 103. APPLICATION OF EGTRRA SUNSET TO THIS SECTION.
Each amendment made by this title 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.
Subtitle B--Uniform Definition of Child
SEC. 411. UNIFORM DEFINITION OF CHILD, ETC.
Section 152 of the Internal Revenue Code of 1986 is amended
to read as follows:
``SEC. 152. DEPENDENT DEFINED.
``(a) In General.--For purposes of this subtitle, the term
`dependent' means--
``(1) a qualifying child, or
``(2) a qualifying relative.
``(b) Exceptions.--For purposes of this section--
``(1) Dependents ineligible.--If an individual is a
dependent of a taxpayer for any taxable year of such taxpayer
beginning in a calendar year,
such individual shall be treated as having no dependents for
any taxable year of such individual beginning in such
calendar year. ``(2) Married dependents.--An individual
shall not be treated as a dependent of a taxpayer under
subsection (a) if such individual has made a joint return
with the individual's spouse under section 6013 for the
taxable year beginning in the calendar year in which the
taxable year of the taxpayer begins.
``(3) Citizens or nationals of other countries.--
``(A) In general.--The term `dependent' does not include an
individual who is not a citizen or national of the United
States unless such individual is a resident of the United
States or a country contiguous to the United States.
``(B) Exception for adopted child.--Subparagraph (A) shall
not exclude any child of a taxpayer (within the meaning of
subsection (f)(1)(B)) from the definition of `dependent' if--
``(i) for the taxable year of the taxpayer, the child's
principal place of abode is the home of the taxpayer, and
``(ii) the taxpayer is a citizen or national of the United
States.
``(c) Qualifying Child.--For purposes of this section--
``(1) In general.--The term `qualifying child' means, with
respect to any taxpayer for any taxable year, an individual--
``(A) who bears a relationship to the taxpayer described in
paragraph (2),
``(B) who has the same principal place of abode as the
taxpayer for more than one-half of such taxable year,
``(C) who meets the age requirements of paragraph (3), and
``(D) who has not provided over one-half of such
individual's own support for the calendar year in which the
taxable year of the taxpayer begins.
``(2) Relationship test.--For purposes of paragraph (1)(A),
an individual bears a relationship to the taxpayer described
in this paragraph if such individual is--
``(A) a child of the taxpayer or a descendant of such a
child, or
``(B) a brother, sister, stepbrother, or stepsister of the
taxpayer or a descendant of any such relative.
``(3) Age requirements.--
``(A) In general.--For purposes of paragraph (1)(C), an
individual meets the requirements of this paragraph if such
individual--
``(i) has not attained the age of 19 as of the close of the
calendar year in which the taxable year of the taxpayer
begins, or
``(ii) is a student who has not attained the age of 24 as
of the close of such calendar year.
``(B) Special rule for disabled.--In the case of an
individual who is permanently and totally disabled (as
defined in section 22(e)(3)) at any time during such calendar
year, the requirements of subparagraph (A) shall be treated
as met with respect to such individual.
``(4) Special rule relating to 2 or more claiming
qualifying child.--
``(A) In general.--Except as provided in subparagraph (B)
and subsection (e), if (but for this paragraph) an individual
may be and is claimed as a qualifying child by 2 or more
taxpayers for a taxable year beginning in the same calendar
year, such individual shall be treated as the qualifying
child of the taxpayer who is--
``(i) a parent of the individual, or
``(ii) if clause (i) does not apply, the taxpayer with the
highest adjusted gross income for such taxable year.
``(B) More than 1 parent claiming qualifying child.--If the
parents claiming any qualifying child do not file a joint
return together, such child shall be treated as the
qualifying child of--
``(i) the parent with whom the child resided for the
longest period of time during the taxable year, or
``(ii) if the child resides with both parents for the same
amount of time during such taxable year, the parent with the
highest adjusted gross income.
``(d) Qualifying Relative.--For purposes of this section--
``(1) In general.--The term `qualifying relative' means,
with respect to any taxpayer for any taxable year, an
individual--
``(A) who bears a relationship to the taxpayer described in
paragraph (2),
``(B) whose gross income for the calendar year in which
such taxable year begins is less than the exemption amount
(as defined in section 151(d)),
``(C) with respect to whom the taxpayer provides over one-
half of the individual's support for the calendar year in
which such taxable year begins, and
``(D) who is not a qualifying child of such taxpayer or of
any other taxpayer for any taxable year beginning in the
calendar year in which such taxable year begins.
``(2) Relationship.--For purposes of paragraph (1)(A), an
individual bears a relationship to the taxpayer described in
this paragraph if the individual is any of the following with
respect to the taxpayer:
``(A) A child or a descendant of a child.
``(B) A brother, sister, stepbrother, or stepsister.
``(C) The father or mother, or an ancestor of either.
``(D) A stepfather or stepmother.
``(E) A son or daughter of a brother or sister of the
taxpayer.
``(F) A brother or sister of the father or mother of the
taxpayer.
``(G) A son-in-law, daughter-in-law, father-in-law, mother-
in-law, brother-in-law, or sister-in-law.
``(H) An individual (other than an individual who at any
time during the taxable year was the spouse, determined
without regard to section 7703, of the taxpayer) who, for the
taxable year of the taxpayer, has as such individual's
principal place of abode the home of the taxpayer and is a
member of the taxpayer's household.
``(3) Special rule relating to multiple support
agreements.--For purposes of paragraph (1)(C), over one-half
of the support of an individual for a calendar year shall be
treated as received from the taxpayer if--
``(A) no one person contributed over one-half of such
support,
``(B) over one-half of such support was received from 2 or
more persons each of whom, but for the fact that any such
person alone did not contribute over one-half of such
support, would have been entitled to claim such individual as
a dependent for a taxable year beginning in such calendar
year,
``(C) the taxpayer contributed over 10 percent of such
support, and
``(D) each person described in subparagraph (B) (other than
the taxpayer) who contributed over 10 percent of such support
files a written declaration (in such manner and form as the
Secretary may by regulations prescribe) that such person will
not claim such individual as a dependent for any taxable year
beginning in such calendar year.
``(4) Special rule relating to income of handicapped
dependents.--
[[Page H8347]]
``(A) In general.--For purposes of paragraph (1)(B), the
gross income of an individual who is permanently and totally
disabled (as defined in section 22(e)(3)) at any time during
the taxable year shall not include income attributable to
services performed by the individual at a sheltered workshop
if--
``(i) the availability of medical care at such workshop is
the principal reason for the individual's presence there, and
``(ii) the income arises solely from activities at such
workshop which are incident to such medical care.
``(B) Sheltered workshop defined.--For purposes of
subparagraph (A), the term `sheltered workshop' means a
school--
``(i) which provides special instruction or training
designed to alleviate the disability of the individual, and
``(ii) which is operated by an organization described in
section 501(c)(3) and exempt from tax under section 501(a),
or by a State, a possession of the United States, any
political subdivision of any of the foregoing, the United
States, or the District of Columbia.
``(5) Special support test in case of students.--For
purposes of paragraph (1)(C), in the case of an individual
who is--
``(A) a child of the taxpayer, and
``(B) a student,
amounts received as scholarships for study at an educational
organization described in section 170(b)(1)(A)(ii) shall not
be taken into account in determining whether such individual
received more than one-half of such individual's support from
the taxpayer.
``(6) Special rules for support.--For purposes of this
subsection--
``(A) payments to a spouse which are includible in the
gross income of such spouse under section 71 or 682 shall not
be treated as a payment by the payor spouse for the support
of any dependent,
``(B) amounts expended for the support of a child or
children shall be treated as received from the noncustodial
parent (as defined in subsection (e)(3)(B)) to the extent
that such parent provided amounts for such support, and
``(C) in the case of the remarriage of a parent, support of
a child received from the parent's spouse shall be treated as
received from the parent.
``(e) Special Rule for Divorced Parents.--
``(1) In general.--Notwithstanding subsection (c)(4) or
(d)(1)(C), if--
``(A) a child receives over one-half of the child's support
during the calendar year from the child's parents--
``(i) who are divorced or legally separated under a decree
of divorce or separate maintenance,
``(ii) who are separated under a written separation
agreement, or
``(iii) who live apart at all times during the last 6
months of the calendar year, and
``(B) such child is in the custody of 1 or both of the
child's parents for more than \1/2\ of the calendar year,
such child shall be treated as being the qualifying child or
qualifying relative of the noncustodial parent for a calendar
year if the requirements described in paragraph (2) are met.
``(2) Requirements.--For purposes of paragraph (1), the
requirements described in this paragraph are met if--
``(A) a decree of divorce or separate maintenance or
written separation agreement between the parents applicable
to the taxable year beginning in such calendar year provides
that--
``(i) the noncustodial parent shall be entitled to any
deduction allowable under section 151 for such child, or
``(ii) the custodial parent will sign a written declaration
(in such manner and form as the Secretary may prescribe) that
such parent will not claim such child as a dependent for such
taxable year, and
``(B) in the case of such an agreement executed before
January 1, 1985, the noncustodial parent provides at least
$600 for the support of such child during such calendar year.
``(3) Custodial parent and noncustodial parent.--For
purposes of this subsection--
``(A) Custodial parent.--The term `custodial parent' means
the parent with whom a child shared the same principal place
of abode for the greater portion of the calendar year.
``(B) Noncustodial parent.--The term `noncustodial parent'
means the parent who is not the custodial parent.
``(4) Exception for multiple-support agreements.--This
subsection shall not apply in any case where over one-half of
the support of the child is treated as having been received
from a taxpayer under the provision of subsection (d)(3).
``(f) Other Definitions and Rules.--For purposes of this
section--
``(1) Child defined.--
``(A) In general.--The term `child' means an individual who
is--
``(i) a son, daughter, stepson, or stepdaughter of the
taxpayer, or
``(ii) an eligible foster child of the taxpayer.
``(B) Adopted child.--In determining whether any of the
relationships specified in subparagraph (A)(i) or paragraph
(4) exists, a legally adopted individual of the taxpayer, or
an individual who is placed with the taxpayer by an
authorized placement agency for adoption by the taxpayer,
shall be treated as a child of such individual by blood.
``(C) Eligible foster child.--For purposes of subparagraph
(A)(ii), the term `eligible foster child' means an individual
who is placed with the taxpayer by an authorized placement
agency or by judgment, decree, or other order of any court of
competent jurisdiction.
``(2) Student defined.--The term `student' means an
individual who during each of 5 calendar months during the
calendar year in which the taxable year of the taxpayer
begins--
``(A) is a full-time student at an educational organization
described in section 170(b)(1)(A)(ii), or
``(B) is pursuing a full-time course of institutional on-
farm training under the supervision of an accredited agent of
an educational organization described in section
170(b)(1)(A)(ii) or of a State or political subdivision of a
State.
``(3) Place of abode.--An individual shall not be treated
as having the same principal place of abode of the taxpayer
if at any time during the taxable year of the taxpayer the
relationship between the individual and the taxpayer is in
violation of local law.
``(4) Brother and sister.--The terms `brother' and `sister'
include a brother or sister by the half blood.
``(5) Treatment of missing children.--
``(A) In general.--Solely for the purposes referred to in
subparagraph (B), a child of the taxpayer--
``(i) who is presumed by law enforcement authorities to
have been kidnapped by someone who is not a member of the
family of such child or the taxpayer, and
``(ii) who had, for the taxable year in which the
kidnapping occurred, the same principal place of abode as the
taxpayer for more than one-half of the portion of such year
before the date of the kidnapping,
shall be treated as meeting the requirement of subsection
(c)(1)(B) with respect to a taxpayer for all taxable years
ending during the period that the individual is kidnapped.
``(B) Purposes.--Subparagraph (A) shall apply solely for
purposes of determining--
``(i) the deduction under section 151(c),
``(ii) the credit under section 24 (relating to child tax
credit),
``(iii) whether an individual is a surviving spouse or a
head of a household (as such terms are defined in section 2),
and
``(iv) the earned income credit under section 32.
``(C) Comparable treatment of certain qualifying
relatives.--For purposes of this section, a child of the
taxpayer--
``(i) who is presumed by law enforcement authorities to
have been kidnapped by someone who is not a member of the
family of such child or the taxpayer, and
``(ii) who was (without regard to this paragraph) a
qualifying relative of the taxpayer for the portion of the
taxable year before the date of the kidnapping,
shall be treated as a qualifying relative of the taxpayer for
all taxable years ending during the period that the child is
kidnapped.
``(D) Termination of treatment.--Subparagraphs (A) and (C)
shall cease to apply as of the first taxable year of the
taxpayer beginning after the calendar year in which there is
a determination that the child is dead (or, if earlier, in
which the child would have attained age 18).
``(6) Cross references.--
``For provision treating child as dependent of both parents for
purposes of certain provisions, see sections 105(b), 132(h)(2)(B), and
213(d)(5).''.
SEC. 412. MODIFICATIONS OF DEFINITION OF HEAD OF HOUSEHOLD.
(a) Head of Household.--Clause (i) of section 2(b)(1)(A) of
the Internal Revenue Code of 1986 is amended to read as
follows:
``(i) a qualifying child of the individual (as defined in
section 152(c), determined without regard to section 152(e)),
but not if such child--
``(I) is married at the close of the taxpayer's taxable
year, and
``(II) is not a dependent of such individual by reason of
section 152(b)(2) or 152(b)3), or both, or''.
(b) Conforming Amendments.--
(1) Section 2(b)(2) of the Internal Revenue Code of 1986 is
amended by striking subparagraph (A) and by redesignating
subparagraphs (B), (C), and (D) as subparagraphs (A), (B),
and (C), respectively.
(2) Clauses (i) and (ii) of section 2(b)(3)(B) of such Code
are amended to read as follows:
``(i) subparagraph (H) of section 152(d)(2), or
``(ii) paragraph (3) of section 152(d).''.
SEC. 413. MODIFICATIONS OF DEPENDENT CARE CREDIT.
(a) In General.--Section 21(a)(1) of the Internal Revenue
Code of 1986 is amended by striking ``In the case of an
individual who maintains a household which includes as a
member one or more qualifying individuals (as defined in
subsection (b)(1))'' and inserting ``In the case of an
individual for which there are 1 or more qualifying
individuals (as defined in subsection (b)(1)) with respect to
such individual''.
(b) Qualifying Individual.--Paragraph (1) of section 21(b)
of the Internal Revenue Code of 1986 is amended to read as
follows:
``(1) Qualifying individual.--The term `qualifying
individual' means--
``(A) a dependent of the taxpayer (as defined in section
152(a)(1)) who has not attained age 13,
``(B) a dependent of the taxpayer who is physically or
mentally incapable of caring for himself or herself and who
has the same
[[Page H8348]]
principal place of abode as the taxpayer for more than one-
half of such taxable year, or
``(C) the spouse of the taxpayer, if the spouse is
physically or mentally incapable of caring for himself or
herself and who has the same principal place of abode as the
taxpayer for more than one-half of such taxable year.''.
(c) Conforming Amendment.--Paragraph (1) of section 21(e)
of the Internal Revenue Code of 1986 is amended to read as
follows:
``(1) Place of abode.--An individual shall not be treated
as having the same principal place of abode of the taxpayer
if at any time during the taxable year of the taxpayer the
relationship between the individual and the taxpayer is in
violation of local law.''.
SEC. 414. MODIFICATIONS OF CHILD TAX CREDIT.
(a) In General.--Paragraph (1) of section 24(c) of the
Internal Revenue Code of 1986 is amended to read as follows:
``(1) In general.--The term `qualifying child' means a
qualifying child of the taxpayer (as defined in section
152(c)) who has not attained age 17.''.
(b) Conforming Amendment.--Section 24(c)(2) of the Internal
Revenue Code of 1986 is amended by striking ``the first
sentence of section 152(b)(3)'' and inserting ``subparagraph
(A) of section 152(b)(3)''.
SEC. 415. MODIFICATIONS OF EARNED INCOME CREDIT.
(a) Qualifying Child.--Paragraph (3) of section 32(c) of
the Internal Revenue Code of 1986 is amended to read as
follows:
``(3) Qualifying child.--
``(A) In general.--The term `qualifying child' means a
qualifying child of the taxpayer (as defined in section
152(c), determined without regard to paragraph (1)(D) thereof
and section 152(e)).
``(B) Married individual.--The term `qualifying child'
shall not include an individual who is married as of the
close of the taxpayer's taxable year unless the taxpayer is
entitled to a deduction under section 151 for such taxable
year with respect to such individual (or would be so entitled
but for section 152(e)).
``(C) Place of abode.--For purposes of subparagraph (A),
the requirements of section 152(c)(1)(B) shall be met only if
the principal place of abode is in the United States.
``(D) Identification requirements.--
``(i) In general.--A qualifying child shall not be taken
into account under subsection (b) unless the taxpayer
includes the name, age, and TIN of the qualifying child on
the return of tax for the taxable year.
``(ii) Other methods.--The Secretary may prescribe other
methods for providing the information described in clause
(i).''.
(b) Conforming Amendments.--
(1) Section 32(c)(1) of the Internal Revenue Code of 1986
is amended by striking subparagraph (C) and by redesignating
subparagraphs (D), (E), (F), and (G) as subparagraphs (C),
(D), (E), and (F), respectively.
(2) Section 32(c)(4) of such Code is amended by striking
``(3)(E)'' and inserting ``(3)(C)''.
(3) Section 32(m) of such Code is amended by striking
``subsections (c)(1)(F)'' and inserting ``subsections
(c)(1)(E)''.
SEC. 416. MODIFICATIONS OF DEDUCTION FOR PERSONAL EXEMPTION
FOR DEPENDENTS.
Subsection (c) of section 151 of the Internal Revenue Code
of 1986 is amended to read as follows:
``(c) Additional Exemption for Dependents.--An exemption of
the exemption amount for each individual who is a dependent
(as defined in section 152) of the taxpayer for the taxable
year.''.
SEC. 417. TECHNICAL AND CONFORMING AMENDMENTS.
(1) Section 2(a)(1)(B)(i) of such Code is amended by
inserting ``, determined without regard to subsections
(b)(1), (b)(2), and (d)(1)(B) thereof'' after ``section
152''.
(2) Section 21(e)(5) of the Internal Revenue Code of 1986
is amended--
(A) by striking ``paragraph (2) or (4) of'' in subparagraph
(A), and
(B) by striking ``within the meaning of section 152(e)(1)''
and inserting ``as defined in section 152(e)(3)(A)''.
(3) Section 21(e)(6)(B) of such Code is amended by striking
``section 151(c)(3)'' and inserting ``section 152(f)(1)''.
(4) Section 25B(c)(2)(B) of such Code is amended by
striking ``151(c)(4)'' and inserting ``152(f)(2)''.
(5)(A) Subparagraphs (A) and (B) of section 51(i)(1) of
such Code are each amended by striking ``paragraphs (1)
through (8) of section 152(a)'' both places it appears and
inserting ``subparagraphs (A) through (G) of section
152(d)(2)''.
(B) Section 51(i)(1)(C) of such Code is amended by striking
``152(a)(9)'' and inserting ``152(d)(2)(H)''.
(6) Section 72(t)(2)(D)(i)(III) of such Code is amended by
inserting ``, determined without regard to subsections
(b)(1), (b)(2), and (d)(1)(B) thereof'' after ``section
152''.
(7) Section 72(t)(7)(A)(iii) of such Code is amended by
striking ``151(c)(3)'' and inserting ``152(f)(1)''.
(8) Section 42(i)(3)(D)(ii)(I) of such Code is amended by
inserting ``, determined without regard to subsections
(b)(1), (b)(2), and (d)(1)(B) thereof'' after ``section
152''.
(9) Subsections (b) and (c)(1) of section 105 of such Code
are amended by inserting ``, determined without regard to
subsections (b)(1), (b)(2), and (d)(1)(B) thereof'' after
``section 152''.
(10) Section 120(d)(4) of such Code is amended by inserting
``(determined without regard to subsections (b)(1), (b)(2),
and (d)(1)(B) thereof)'' after ``section 152''.
(11) Section 125(e)(1)(D) of such Code is amended by
inserting ``, determined without regard to subsections
(b)(1), (b)(2), and (d)(1)(B) thereof'' after ``section
152''.
(12) Section 129(c)(2) of such Code is amended by striking
``151(c)(3)'' and inserting ``152(f)(1)''.
(13) The first sentence of section 132(h)(2)(B) of such
Code is amended by striking ``151(c)(3)'' and inserting
``152(f)(1)''.
(14) Section 153 of such Code is amended by striking
paragraph (1) and by redesignating paragraphs (2), (3), and
(4) as paragraphs (1), (2), and (3), respectively.
(15) Section 170(g)(1) of such Code is amended by inserting
``(determined without regard to subsections (b)(1), (b)(2),
and (d)(1)(B) thereof)'' after ``section 152''.
(16) Section 170(g)(3) of such Code is amended by striking
``paragraphs (1) through (8) of section 152(a)'' and
inserting ``subparagraphs (A) through (G) of section
152(d)(2)''.
(17) Section 213(a) of such Code is amended by inserting
``, determined without regard to subsections (b)(1), (b)(2),
and (d)(1)(B) thereof'' after ``section 152''.
(18) The second sentence of section 213(d)(11) of such Code
is amended by striking ``paragraphs (1) through (8) of
section 152(a)'' and inserting ``subparagraphs (A) through
(G) of section 152(d)(2)''.
(19) Section 220(d)(2)(A) of such Code is amended by
inserting ``, determined without regard to subsections
(b)(1), (b)(2), and (d)(1)(B) thereof'' after ``section
152''.
(20) Section 221(d)(4) of such Code is amended by inserting
``(determined without regard to subsections (b)(1), (b)(2),
and (d)(1)(B) thereof)'' after ``section 152''.
(21) Section 529(e)(2)(B) of such Code is amended by
striking ``paragraphs (1) through (8) of section 152(a)'' and
inserting ``subparagraphs (A) through (G) of section
152(d)(2)''.
(22) Section 2032A(c)(7)(D) of such Code is amended by
striking ``section 151(c)(4)'' and inserting ``section
152(f)(2)''.
(23) Section 2057(d)(2)(B) of such Code is amended by
inserting ``, determined without regard to subsections
(b)(1), (b)(2), and (d)(1)(B) thereof'' after ``section
152''.
(24) Section 7701(a)(17) of such Code is amended by
striking ``152(b)(4), 682,'' and inserting ``682''.
(25) Section 7702B(f)(2)(C)(iii) of such Code is amended by
striking ``paragraphs (1) through (8) of section 152(a)'' and
inserting ``subparagraphs (A) through (G) of section
152(d)(2)''.
(26) Section 7703(b)(1) of such Code is amended--
(A) by striking ``151(c)(3)'' and inserting ``152(f)(1)'',
and
(B) by striking ``paragraph (2) or (4) of''.
SEC. 418. EFFECTIVE DATE.
The amendments made by this title shall take effect on
October 1, 2003, and apply to taxable years ending on or
after such date.
Subtitle C--Customs User Fees
SEC. 421. FEES FOR CERTAIN CUSTOMS SERVICES.
(a) In General.--Subtitle A of the Internal Revenue Code of
1986 is amended by inserting after chapter 55 the following
new chapter:
``CHAPTER 56--FEES FOR CERTAIN CUSTOMS SERVICES
``Sec. 5896. Imposition of fees.
``SEC. 5896. IMPOSITION OF FEES.
``(a) In General.--The Secretary shall charge and collect
fees under this title which are equivalent to the fees which
would be imposed by section 13031 of the Consolidated Omnibus
Budget Reconciliation Act of 1985 (19 U.S.C. 58c) were such
section in effect after September 30, 2003.
``(b) Collection and Disposition of Fees, Etc.--References
in such section 13031 to fees thereunder shall be treated as
including references to the fees charged under this
section.''
(b) Clerical Amendment.--The table of chapters for subtitle
A of such Code is amended by adding at the end the following
new item:
``Chapter 56. Fees for certain customs services.''
(c) Effective date.--The amendments made by this section
shall take effect on October 1, 2003.
TITLE V--ARMED FORCES TAX FAIRNESS
Subtitle A--Improving Tax Equity For Military Personnel
SEC. 501. 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 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--
[[Page H8349]]
``(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. 502. 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. 503. 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. 504. 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. 505. 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. 506. 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 502, 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. 507. 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. 508. SUSPENSION OF TAX-EXEMPT STATUS OF TERRORIST
ORGANIZATIONS.
(a) In General.--Section 501 (relating to exemption from
tax on corporations, certain trusts, etc.) is amended by
redesignating subsection (p) as subsection (q) and by
inserting after subsection (o) the following new subsection:
``(p) Suspension of Tax-Exempt Status of Terrorist
Organizations.--
``(1) In general.--The exemption from tax under subsection
(a) with respect to any organization described in paragraph
(2), and the eligibility of any organization described in
paragraph (2) to apply for recognition of exemption under
subsection (a), shall be suspended during the period
described in paragraph (3).
``(2) Terrorist organizations.--An organization is
described in this paragraph if such organization is
designated or otherwise individually identified--
``(A) under section 212(a)(3)(B)(vi)(II) or 219 of the
Immigration and Nationality Act as a terrorist organization
or foreign terrorist organization,
``(B) in or pursuant to an Executive order which is related
to terrorism and issued under the authority of the
International Emergency Economic Powers Act or section 5 of
the United Nations Participation Act of 1945 for the purpose
of imposing on such organization an economic or other
sanction, or
[[Page H8350]]
``(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. 509. 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. 510. 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.
Subtitle B--Other Provisions
SEC. 521. EXTENSION OF INTERNAL REVENUE SERVICE USER FEES.
(a) In General.--Chapter 77 (relating to miscellaneous
provisions) is amended by adding at the end the following new
section:
``SEC. 7528. INTERNAL REVENUE SERVICE USER FEES.
``(a) General Rule.--The Secretary shall establish a
program requiring the payment of user fees for--
``(1) requests to the Internal Revenue Service for ruling
letters, opinion letters, and determination letters, and
``(2) other similar requests.
``(b) Program Criteria.--
``(1) In general.--The fees charged under the program
required by subsection (a)--
``(A) shall vary according to categories (or subcategories)
established by the Secretary,
``(B) shall be determined after taking into account the
average time for (and difficulty of) complying with requests
in each category (and subcategory), and
``(C) shall be payable in advance.
``(2) Exemptions, etc.--
``(A) In general.--The Secretary shall provide for such
exemptions (and reduced fees) under such program as the
Secretary determines to be appropriate.
``(B) Exemption for certain requests regarding pension
plans.--The Secretary shall not require payment of user fees
under such program for requests for determination letters
with respect to the qualified status of a pension benefit
plan maintained solely by 1 or more eligible employers or any
trust which is part of the plan. The preceding sentence shall
not apply to any request--
``(i) made after the later of--
``(I) the fifth plan year the pension benefit plan is in
existence, or
``(II) the end of any remedial amendment period with
respect to the plan beginning within the first 5 plan years,
or
``(ii) made by the sponsor of any prototype or similar plan
which the sponsor intends to market to participating
employers.
``(C) Definitions and special rules.--For purposes of
subparagraph (B)--
``(i) Pension benefit plan.--The term `pension benefit
plan' means a pension, profit-sharing, stock bonus, annuity,
or employee stock ownership plan.
``(ii) Eligible employer.--The term `eligible employer'
means an eligible employer (as defined in section
408(p)(2)(C)(i)(I)) which has
[[Page H8351]]
at least 1 employee who is not a highly compensated employee
(as defined in section 414(q)) and is participating in the
plan. The determination of whether an employer is an eligible
employer under subparagraph (B) shall be made as of the date
of the request described in such subparagraph.
``(iii) Determination of average fees charged.--For
purposes of any determination of average fees charged, any
request to which subparagraph (B) applies shall not be taken
into account.
``(3) Average fee requirement.--The average fee charged
under the program required by subsection (a) shall not be
less than the amount determined under the following table:
Average
``Category fee
Employee plan ruling and opinion............................$250 ....
Exempt organization ruling..................................$350 ....
Employee plan determination.................................$300 ....
Exempt organization determination...........................$275 ....
Chief counsel ruling........................................$200.....
``(c) Termination.--No fee shall be imposed under this
section with respect to requests made after September 30,
2013.''.
(b) Conforming Amendments.--
(1) The table of sections for chapter 77 is amended by
adding at the end the following new item:
``Sec. 7528. Internal Revenue Service user fees.''.
(2) Section 10511 of the Revenue Act of 1987 is repealed.
(3) Section 620 of the Economic Growth and Tax Relief
Reconciliation Act of 2001 is repealed.
(c) Limitations.--Notwithstanding any other provision of
law, any fees collected pursuant to section 7528 of the
Internal Revenue Code of 1986, as added by subsection (a),
shall not be expended by the Internal Revenue Service unless
provided by an appropriations Act.
(d) Effective Date.--The amendments made by this section
shall apply to requests made after the date of the enactment
of this Act.
SEC. 522. PARTIAL PAYMENT OF TAX LIABILITY IN INSTALLMENT
AGREEMENTS.
(a) In General.--
(1) Section 6159(a) (relating to authorization of
agreements) is amended--
(A) by striking ``satisfy liability for payment of'' and
inserting ``make payment on'', and
(B) by inserting ``full or partial'' after ``facilitate''.
(2) Section 6159(c) (relating to Secretary required to
enter into installment agreements in certain cases) is
amended in the matter preceding paragraph (1) by inserting
``full'' before ``payment''.
(b) Requirement To Review Partial Payment Agreements Every
Two Years.--Section 6159 is amended by redesignating
subsections (d) and (e) as subsections (e) and (f),
respectively, and inserting after subsection (c) the
following new subsection:
``(d) Secretary Required To Review Installment Agreements
for Partial Collection Every Two Years.--In the case of an
agreement entered into by the Secretary under subsection (a)
for partial collection of a tax liability, the Secretary
shall review the agreement at least once every 2 years.''.
(c) Effective Date.--The amendments made by this section
shall apply to agreements entered into on or after the date
of the enactment of this Act.
SEC. 523. REVISION OF TAX RULES ON EXPATRIATION.
(a) In General.--Subpart A of part II of subchapter N of
chapter 1 is amended by inserting after section 877 the
following new section:
``SEC. 877A. TAX RESPONSIBILITIES OF EXPATRIATION.
``(a) General Rules.--For purposes of this subtitle--
``(1) Mark to market.--Except as provided in subsections
(d) and (f), all property of a covered expatriate to whom
this section applies shall be treated as sold on the day
before the expatriation date for its fair market value.
``(2) Recognition of gain or loss.--In the case of any sale
under paragraph (1)--
``(A) notwithstanding any other provision of this title,
any gain arising from such sale shall be taken into account
for the taxable year of the sale, and
``(B) any loss arising from such sale shall be taken into
account for the taxable year of the sale to the extent
otherwise provided by this title, except that section 1091
shall not apply to any such loss.
Proper adjustment shall be made in the amount of any gain or
loss subsequently realized for gain or loss taken into
account under the preceding sentence.
``(3) Exclusion for certain gain.--
``(A) In general.--The amount which, but for this
paragraph, would be includible in the gross income of any
individual by reason of this section shall be reduced (but
not below zero) by $600,000. For purposes of this paragraph,
allocable expatriation gain taken into account under
subsection (f)(2) shall be treated in the same manner as an
amount required to be includible in gross income.
``(B) Cost-of-living adjustment.--
``(i) In general.--In the case of an expatriation date
occurring in any calendar year after 2003, the $600,000
amount under subparagraph (A) shall be increased by an amount
equal to--
``(I) such dollar amount, multiplied by
``(II) the cost-of-living adjustment determined under
section 1(f)(3) for such calendar year, determined by
substituting `calendar year 2002' for `calendar year 1992' in
subparagraph (B) thereof.
``(ii) Rounding rules.--If any amount after adjustment
under clause (i) is not a multiple of $1,000, such amount
shall be rounded to the next lower multiple of $1,000.
``(4) Election to continue to be taxed as united states
citizen.--
``(A) In general.--If a covered expatriate elects the
application of this paragraph--
``(i) this section (other than this paragraph and
subsection (i)) shall not apply to the expatriate, but
``(ii) in the case of property to which this section would
apply but for such election, the expatriate shall be subject
to tax under this title in the same manner as if the
individual were a United States citizen.
``(B) Requirements.--Subparagraph (A) shall not apply to an
individual unless the individual--
``(i) provides security for payment of tax in such form and
manner, and in such amount, as the Secretary may require,
``(ii) consents to the waiver of any right of the
individual under any treaty of the United States which would
preclude assessment or collection of any tax which may be
imposed by reason of this paragraph, and
``(iii) complies with such other requirements as the
Secretary may prescribe.
``(C) Election.--An election under subparagraph (A) shall
apply to all property to which this section would apply but
for the election and, once made, shall be irrevocable. Such
election shall also apply to property the basis of which is
determined in whole or in part by reference to the property
with respect to which the election was made.
``(b) Election To Defer Tax.--
``(1) In general.--If the taxpayer elects the application
of this subsection with respect to any property treated as
sold by reason of subsection (a), the payment of the
additional tax attributable to such property shall be
postponed until the due date of the return for the taxable
year in which such property is disposed of (or, in the case
of property disposed of in a transaction in which gain is not
recognized in whole or in part, until such other date as the
Secretary may prescribe).
``(2) Determination of tax with respect to property.--For
purposes of paragraph (1), the additional tax attributable to
any property is an amount which bears the same ratio to the
additional tax imposed by this chapter for the taxable year
solely by reason of subsection (a) as the gain taken into
account under subsection (a) with respect to such property
bears to the total gain taken into account under subsection
(a) with respect to all property to which subsection (a)
applies.
``(3) Termination of postponement.--No tax may be postponed
under this subsection later than the due date for the return
of tax imposed by this chapter for the taxable year which
includes the date of death of the expatriate (or, if earlier,
the time that the security provided with respect to the
property fails to meet the requirements of paragraph (4),
unless the taxpayer corrects such failure within the time
specified by the Secretary).
``(4) Security.--
``(A) In general.--No election may be made under paragraph
(1) with respect to any property unless adequate security is
provided to the Secretary with respect to such property.
``(B) Adequate security.--For purposes of subparagraph (A),
security with respect to any property shall be treated as
adequate security if--
``(i) it is a bond in an amount equal to the deferred tax
amount under paragraph (2) for the property, or
``(ii) the taxpayer otherwise establishes to the
satisfaction of the Secretary that the security is adequate.
``(5) Waiver of certain rights.--No election may be made
under paragraph (1) unless the taxpayer consents to the
waiver of any right under any treaty of the United States
which would preclude assessment or collection of any tax
imposed by reason of this section.
``(6) Elections.--An election under paragraph (1) shall
only apply to property described in the election and, once
made, is irrevocable. An election may be made under paragraph
(1) with respect to an interest in a trust with respect to
which gain is required to be recognized under subsection
(f)(1).
``(7) Interest.--For purposes of section 6601--
``(A) the last date for the payment of tax shall be
determined without regard to the election under this
subsection, and
``(B) section 6621(a)(2) shall be applied by substituting
`5 percentage points' for `3 percentage points' in
subparagraph (B) thereof.
``(c) Covered Expatriate.--For purposes of this section--
``(1) In general.--Except as provided in paragraph (2), the
term `covered expatriate' means an expatriate.
``(2) Exceptions.--An individual shall not be treated as a
covered expatriate if--
``(A) the individual--
``(i) became at birth a citizen of the United States and a
citizen of another country and, as of the expatriation date,
continues to be a citizen of, and is taxed as a resident of,
such other country, and
``(ii) has not been a resident of the United States (as
defined in section 7701(b)(1)(A)(ii)) during the 5 taxable
years ending with the taxable year during which the
expatriation date occurs, or
[[Page H8352]]
``(B)(i) the individual's relinquishment of United States
citizenship occurs before such individual attains age 18\1/
2\, and
``(ii) the individual has been a resident of the United
States (as so defined) for not more than 5 taxable years
before the date of relinquishment.
``(d) Exempt Property; Special Rules for Pension Plans.--
``(1) Exempt property.--This section shall not apply to the
following:
``(A) United states real property interests.--Any United
States real property interest (as defined in section
897(c)(1)), other than stock of a United States real property
holding corporation which does not, on the day before the
expatriation date, meet the requirements of section
897(c)(2).
``(B) Specified property.--Any property or interest in
property not described in subparagraph (A) which the
Secretary specifies in regulations.
``(2) Special rules for certain retirement plans.--
``(A) In general.--If a covered expatriate holds on the day
before the expatriation date any interest in a retirement
plan to which this paragraph applies--
``(i) such interest shall not be treated as sold for
purposes of subsection (a)(1), but
``(ii) an amount equal to the present value of the
expatriate's nonforfeitable accrued benefit shall be treated
as having been received by such individual on such date as a
distribution under the plan.
``(B) Treatment of subsequent distributions.--In the case
of any distribution on or after the expatriation date to or
on behalf of the covered expatriate from a plan from which
the expatriate was treated as receiving a distribution under
subparagraph (A), the amount otherwise includible in gross
income by reason of the subsequent distribution shall be
reduced by the excess of the amount includible in gross
income under subparagraph (A) over any portion of such amount
to which this subparagraph previously applied.
``(C) Treatment of subsequent distributions by plan.--For
purposes of this title, a retirement plan to which this
paragraph applies, and any person acting on the plan's
behalf, shall treat any subsequent distribution described in
subparagraph (B) in the same manner as such distribution
would be treated without regard to this paragraph.
``(D) Applicable plans.--This paragraph shall apply to--
``(i) any qualified retirement plan (as defined in section
4974(c)),
``(ii) an eligible deferred compensation plan (as defined
in section 457(b)) of an eligible employer described in
section 457(e)(1)(A), and
``(iii) to the extent provided in regulations, any foreign
pension plan or similar retirement arrangements or programs.
``(e) Definitions.--For purposes of this section--
``(1) Expatriate.--The term `expatriate' means--
``(A) any United States citizen who relinquishes
citizenship, and
``(B) any long-term resident of the United States who--
``(i) ceases to be a lawful permanent resident of the
United States (within the meaning of section 7701(b)(6)), or
``(ii) commences to be treated as a resident of a foreign
country under the provisions of a tax treaty between the
United States and the foreign country and who does not waive
the benefits of such treaty applicable to residents of the
foreign country.
``(2) Expatriation date.--The term `expatriation date'
means--
``(A) the date an individual relinquishes United States
citizenship, or
``(B) in the case of a long-term resident of the United
States, the date of the event described in clause (i) or (ii)
of paragraph (1)(B).
``(3) Relinquishment of citizenship.--A citizen shall be
treated as relinquishing United States citizenship on the
earliest of--
``(A) the date the individual renounces such individual's
United States nationality before a diplomatic or consular
officer of the United States pursuant to paragraph (5) of
section 349(a) of the Immigration and Nationality Act (8
U.S.C. 1481(a)(5)),
``(B) the date the individual furnishes to the United
States Department of State a signed statement of voluntary
relinquishment of United States nationality confirming the
performance of an act of expatriation specified in paragraph
(1), (2), (3), or (4) of section 349(a) of the Immigration
and Nationality Act (8 U.S.C. 1481(a)(1)-(4)),
``(C) the date the United States Department of State issues
to the individual a certificate of loss of nationality, or
``(D) the date a court of the United States cancels a
naturalized citizen's certificate of naturalization.
Subparagraph (A) or (B) shall not apply to any individual
unless the renunciation or voluntary relinquishment is
subsequently approved by the issuance to the individual of a
certificate of loss of nationality by the United States
Department of State.
``(4) Long-term resident.--The term `long-term resident'
has the meaning given to such term by section 877(e)(2).
``(f) Special Rules Applicable to Beneficiaries' Interests
in Trust.--
``(1) In general.--Except as provided in paragraph (2), if
an individual is determined under paragraph (3) to hold an
interest in a trust on the day before the expatriation date--
``(A) the individual shall not be treated as having sold
such interest,
``(B) such interest shall be treated as a separate share in
the trust, and
``(C)(i) such separate share shall be treated as a separate
trust consisting of the assets allocable to such share,
``(ii) the separate trust shall be treated as having sold
its assets on the day before the expatriation date for their
fair market value and as having distributed all of its assets
to the individual as of such time, and
``(iii) the individual shall be treated as having
recontributed the assets to the separate trust.
Subsection (a)(2) shall apply to any income, gain, or loss of
the individual arising from a distribution described in
subparagraph (C)(ii). In determining the amount of such
distribution, proper adjustments shall be made for
liabilities of the trust allocable to an individual's share
in the trust.
``(2) Special rules for interests in qualified trusts.--
``(A) In general.--If the trust interest described in
paragraph (1) is an interest in a qualified trust--
``(i) paragraph (1) and subsection (a) shall not apply, and
``(ii) in addition to any other tax imposed by this title,
there is hereby imposed on each distribution with respect to
such interest a tax in the amount determined under
subparagraph (B).
``(B) Amount of tax.--The amount of tax under subparagraph
(A)(ii) shall be equal to the lesser of--
``(i) the highest rate of tax imposed by section 1(e) for
the taxable year which includes the day before the
expatriation date, multiplied by the amount of the
distribution, or
``(ii) the balance in the deferred tax account immediately
before the distribution determined without regard to any
increases under subparagraph (C)(ii) after the 30th day
preceding the distribution.
``(C) Deferred tax account.--For purposes of subparagraph
(B)(ii)--
``(i) Opening balance.--The opening balance in a deferred
tax account with respect to any trust interest is an amount
equal to the tax which would have been imposed on the
allocable expatriation gain with respect to the trust
interest if such gain had been included in gross income under
subsection (a).
``(ii) Increase for interest.--The balance in the deferred
tax account shall be increased by the amount of interest
determined (on the balance in the account at the time the
interest accrues), for periods after the 90th day after the
expatriation date, by using the rates and method applicable
under section 6621 for underpayments of tax for such periods,
except that section 6621(a)(2) shall be applied by
substituting `5 percentage points' for `3 percentage points'
in subparagraph (B) thereof.
``(iii) Decrease for taxes previously paid.--The balance in
the tax deferred account shall be reduced--
``(I) by the amount of taxes imposed by subparagraph (A) on
any distribution to the person holding the trust interest,
and
``(II) in the case of a person holding a nonvested
interest, to the extent provided in regulations, by the
amount of taxes imposed by subparagraph (A) on distributions
from the trust with respect to nonvested interests not held
by such person.
``(D) Allocable expatriation gain.--For purposes of this
paragraph, the allocable expatriation gain with respect to
any beneficiary's interest in a trust is the amount of gain
which would be allocable to such beneficiary's vested and
nonvested interests in the trust if the beneficiary held
directly all assets allocable to such interests.
``(E) Tax deducted and withheld.--
``(i) In general.--The tax imposed by subparagraph (A)(ii)
shall be deducted and withheld by the trustees from the
distribution to which it relates.
``(ii) Exception where failure to waive treaty rights.--If
an amount may not be deducted and withheld under clause (i)
by reason of the distributee failing to waive any treaty
right with respect to such distribution--
``(I) the tax imposed by subparagraph (A)(ii) shall be
imposed on the trust and each trustee shall be personally
liable for the amount of such tax, and
``(II) any other beneficiary of the trust shall be entitled
to recover from the distributee the amount of such tax
imposed on the other beneficiary.
``(F) Disposition.--If a trust ceases to be a qualified
trust at any time, a covered expatriate disposes of an
interest in a qualified trust, or a covered expatriate
holding an interest in a qualified trust dies, then, in lieu
of the tax imposed by subparagraph (A)(ii), there is hereby
imposed a tax equal to the lesser of--
``(i) the tax determined under paragraph (1) as if the day
before the expatriation date were the date of such cessation,
disposition, or death, whichever is applicable, or
``(ii) the balance in the tax deferred account immediately
before such date.
Such tax shall be imposed on the trust and each trustee shall
be personally liable for the amount of such tax and any other
beneficiary of the trust shall be entitled to recover from
the covered expatriate or the estate the amount of such tax
imposed on the other beneficiary.
``(G) Definitions and special rules.--For purposes of this
paragraph--
``(i) Qualified trust.--The term `qualified trust' means a
trust which is described in section 7701(a)(30)(E).
[[Page H8353]]
``(ii) Vested interest.--The term `vested interest' means
any interest which, as of the day before the expatriation
date, is vested in the beneficiary.
``(iii) Nonvested interest.--The term `nonvested interest'
means, with respect to any beneficiary, any interest in a
trust which is not a vested interest. Such interest shall be
determined by assuming the maximum exercise of discretion in
favor of the beneficiary and the occurrence of all
contingencies in favor of the beneficiary.
``(iv) Adjustments.--The Secretary may provide for such
adjustments to the bases of assets in a trust or a deferred
tax account, and the timing of such adjustments, in order to
ensure that gain is taxed only once.
``(v) Coordination with retirement plan rules.--This
subsection shall not apply to an interest in a trust which is
part of a retirement plan to which subsection (d)(2) applies.
``(3) Determination of beneficiaries' interest in trust.--
``(A) Determinations under paragraph (1).--For purposes of
paragraph (1), a beneficiary's interest in a trust shall be
based upon all relevant facts and circumstances, including
the terms of the trust instrument and any letter of wishes or
similar document, historical patterns of trust distributions,
and the existence of and functions performed by a trust
protector or any similar adviser.
``(B) Other determinations.--For purposes of this section--
``(i) Constructive ownership.--If a beneficiary of a trust
is a corporation, partnership, trust, or estate, the
shareholders, partners, or beneficiaries shall be deemed to
be the trust beneficiaries for purposes of this section.
``(ii) Taxpayer return position.--A taxpayer shall clearly
indicate on its income tax return--
``(I) the methodology used to determine that taxpayer's
trust interest under this section, and
``(II) if the taxpayer knows (or has reason to know) that
any other beneficiary of such trust is using a different
methodology to determine such beneficiary's trust interest
under this section.
``(g) Termination of Deferrals, etc.--In the case of any
covered expatriate, notwithstanding any other provision of
this title--
``(1) any period during which recognition of income or gain
is deferred shall terminate on the day before the
expatriation date, and
``(2) any extension of time for payment of tax shall cease
to apply on the day before the expatriation date and the
unpaid portion of such tax shall be due and payable at the
time and in the manner prescribed by the Secretary.
``(h) Imposition of Tentative Tax.--
``(1) In general.--If an individual is required to include
any amount in gross income under subsection (a) for any
taxable year, there is hereby imposed, immediately before the
expatriation date, a tax in an amount equal to the amount of
tax which would be imposed if the taxable year were a short
taxable year ending on the expatriation date.
``(2) Due date.--The due date for any tax imposed by
paragraph (1) shall be the 90th day after the expatriation
date.
``(3) Treatment of tax.--Any tax paid under paragraph (1)
shall be treated as a payment of the tax imposed by this
chapter for the taxable year to which subsection (a) applies.
``(4) Deferral of tax.--The provisions of subsection (b)
shall apply to the tax imposed by this subsection to the
extent attributable to gain includible in gross income by
reason of this section.
``(i) Special Liens for Deferred Tax Amounts.--
``(1) Imposition of lien.--
``(A) In general.--If a covered expatriate makes an
election under subsection (a)(4) or (b) which results in the
deferral of any tax imposed by reason of subsection (a), the
deferred amount (including any interest, additional amount,
addition to tax, assessable penalty, and costs attributable
to the deferred amount) shall be a lien in favor of the
United States on all property of the expatriate located in
the United States (without regard to whether this section
applies to the property).
``(B) Deferred amount.--For purposes of this subsection,
the deferred amount is the amount of the increase in the
covered expatriate's income tax which, but for the election
under subsection (a)(4) or (b), would have occurred by reason
of this section for the taxable year including the
expatriation date.
``(2) Period of lien.--The lien imposed by this subsection
shall arise on the expatriation date and continue until--
``(A) the liability for tax by reason of this section is
satisfied or has become unenforceable by reason of lapse of
time, or
``(B) it is established to the satisfaction of the
Secretary that no further tax liability may arise by reason
of this section.
``(3) Certain rules apply.--The rules set forth in
paragraphs (1), (3), and (4) of section 6324A(d) shall apply
with respect to the lien imposed by this subsection as if it
were a lien imposed by section 6324A.
``(j) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out
the purposes of this section.''.
(b) Inclusion in Income of Gifts and Bequests Received by
United States Citizens and Residents From Expatriates.--
Section 102 (relating to gifts, etc. not included in gross
income) is amended by adding at the end the following new
subsection:
``(d) Gifts and Inheritances From Covered Expatriates.--
``(1) In general.--Subsection (a) shall not exclude from
gross income the value of any property acquired by gift,
bequest, devise, or inheritance from a covered expatriate
after the expatriation date. For purposes of this subsection,
any term used in this subsection which is also used in
section 877A shall have the same meaning as when used in
section 877A.
``(2) Exceptions for transfers otherwise subject to estate
or gift tax.--Paragraph (1) shall not apply to any property
if either--
``(A) the gift, bequest, devise, or inheritance is--
``(i) shown on a timely filed return of tax imposed by
chapter 12 as a taxable gift by the covered expatriate, or
``(ii) included in the gross estate of the covered
expatriate for purposes of chapter 11 and shown on a timely
filed return of tax imposed by chapter 11 of the estate of
the covered expatriate, or
``(B) no such return was timely filed but no such return
would have been required to be filed even if the covered
expatriate were a citizen or long-term resident of the United
States.''.
(c) Definition of Termination of United States
Citizenship.--Section 7701(a) is amended by adding at the end
the following new paragraph:
``(48) Termination of united states citizenship.--
``(A) In general.--An individual shall not cease to be
treated as a United States citizen before the date on which
the individual's citizenship is treated as relinquished under
section 877A(e)(3).
``(B) Dual citizens.--Under regulations prescribed by the
Secretary, subparagraph (A) shall not apply to an individual
who became at birth a citizen of the United States and a
citizen of another country.''.
(d) Ineligibility for Visa or Admission to United States.--
(1) In general.--Section 212(a)(10)(E) of the Immigration
and Nationality Act (8 U.S.C. 1182(a)(10)(E)) is amended to
read as follows:
``(E) Former citizens not in compliance with expatriation
revenue provisions.--Any alien who is a former citizen of the
United States who relinquishes United States citizenship
(within the meaning of section 877A(e)(3) of the Internal
Revenue Code of 1986) and who is not in compliance with
section 877A of such Code (relating to expatriation).''.
(2) Availability of information.--
(A) In general.--Section 6103(l) (relating to disclosure of
returns and return information for purposes other than tax
administration) is amended by adding at the end the following
new paragraph:
``(19) Disclosure to deny visa or admission to certain
expatriates.--Upon written request of the Attorney General or
the Attorney General's delegate, the Secretary shall disclose
whether an individual is in compliance with section 877A (and
if not in compliance, any items of noncompliance) to officers
and employees of the Federal agency responsible for
administering section 212(a)(10)(E) of the Immigration and
Nationality Act solely for the purpose of, and to the extent
necessary in, administering such section 212(a)(10)(E).''.
(B) Safeguards.--
(i) Technical amendments.--Paragraph (4) of section 6103(p)
of the Internal Revenue Code of 1986, as amended by section
202(b)(2)(B) of the Trade Act of 2002 (Public Law 107-210;
116 Stat. 961), is amended by striking ``or (17)'' after
``any other person described in subsection (l)(16)'' each
place it appears and inserting ``or (18)''.
(ii) Conforming amendments.--Section 6103(p)(4) (relating
to safeguards), as amended by clause (i), is amended by
striking ``or (18)'' after ``any other person described in
subsection (l)(16)'' each place it appears and inserting
``(18), or (19)''.
(3) Effective dates.--
(A) In general.--Except as provided in subparagraph (B),
the amendments made by this subsection shall apply to
individuals who relinquish United States citizenship on or
after the date of the enactment of this Act.
(B) Technical amendments.--The amendments made by paragraph
(2)(B)(i) shall take effect as if included in the amendments
made by section 202(b)(2)(B) of the Trade Act of 2002 (Public
Law 107-210; 116 Stat. 961).
(e) Conforming Amendments.--
(1) Section 877 is amended by adding at the end the
following new subsection:
``(g) Application.--This section shall not apply to an
expatriate (as defined in section 877A(e)) whose expatriation
date (as so defined) occurs on or after February 5, 2003.''.
(2) Section 2107 is amended by adding at the end the
following new subsection:
``(f) Application.--This section shall not apply to any
expatriate subject to section 877A.''.
(3) Section 2501(a)(3) is amended by adding at the end the
following new subparagraph:
``(F) Application.--This paragraph shall not apply to any
expatriate subject to section 877A.''.
(4)(A) Paragraph (1) of section 6039G(d) is amended by
inserting ``or 877A'' after ``section 877''.
(B) The second sentence of section 6039G(e) is amended by
inserting ``or who relinquishes
[[Page H8354]]
United States citizenship (within the meaning of section
877A(e)(3))'' after ``877(a))''.
(C) Section 6039G(f) is amended by inserting ``or
877A(e)(2)(B)'' after ``877(e)(1)''.
(f) Clerical Amendment.--The table of sections for subpart
A of part II of subchapter N of chapter 1 is amended by
inserting after the item relating to section 877 the
following new item:
``Sec. 877A. Tax responsibilities of expatriation.''.
(g) Effective Date.--
(1) In general.--Except as provided in this subsection, the
amendments made by this section shall apply to expatriates
(within the meaning of section 877A(e) of the Internal
Revenue Code of 1986, as added by this section) whose
expatriation date (as so defined) occurs on or after February
5, 2003.
(2) Gifts and bequests.--Section 102(d) of the Internal
Revenue Code of 1986 (as added by subsection (b)) shall apply
to gifts and bequests received on or after February 5, 2003,
from an individual or the estate of an individual whose
expatriation date (as so defined) occurs after such date.
(3) Due date for tentative tax.--The due date under section
877A(h)(2) of the Internal Revenue Code of 1986, as added by
this section, shall in no event occur before the 90th day
after the date of the enactment of this Act.
Mr. NEAL of Massachusetts (during the reading). Mr. Speaker, I ask
unanimous consent that the motion be considered as read and printed in
the Record.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Massachusetts?
There was no objection.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
Massachusetts (Mr. Neal) is recognized for 5 minutes in support of his
motion.
Mr. NEAL of Massachusetts. Mr. Speaker, my motion is indeed very
simple. It adds two matters to this charity tax bill: tax benefits for
our military families and an enhanced child tax credit.
Both the Senate and House versions provide much-needed military tax
relief, including the expansion of combat zone filing rules and
clarification of dependent care benefits, as well as relief for
families of as the Columbia Space Shuttle astronauts. But the Senate
bill is better in several ways. It would not tax any increase in death
benefits, whereas the House bill would; it provides a 10-year extension
of tax relief from the gains on the sale of a residence by a military
member, whereas the House bill only provides 5 years; and the Senate
bill has no limit on the deduction for overnight travel expenses of the
National Guard and Reserve members, whereas the House limits this
deduction.
Mr. Speaker, at a time when our Reservists are being told that 1-year
deployments will quickly turn into 2, when our brave soldiers are
facing even longer periods of absence from family and home, this
Congress should, at a minimum, provide some relief for those families.
The delay is inexcusable.
Secondly, Mr. Speaker, this motion to recommit will add the Senate-
passed child tax credit bill. Since June we have debated whether 12
million children in low-income families are worthy of the same enhanced
tax credit as children of wealthier families, and one, indeed, that
they have already received. While President Bush said the child credit
must be given to low-income Americans as well, there has been
resistance from the majority in this institution. In fact, I might
quote two: ``Ain't going to happen,'' said one of the leaders. ``All
but dead,'' said another, in a quote last week.
The conferees have never even met, and every vote to revive this
legislation thus far has failed. But today we have a chance to pass the
Senate version, which eliminates one terrible flaw. Under the House
bill, 200,000 military families who were formerly ineligible for
enhanced tax credit would receive it, even though they served honorably
in Iraq and Afghanistan and other combat zones.
Before we leave here today in anticipation of Isabel, let us resolve
ourselves to do something good for these families. Let us encourage
more charitable giving, let us provide much-needed tax relief to the
families of our brave soldiers, and let us heed President Bush's call
to help those struggling families at the bottom of the ladder with the
same benefits that those at the top have already received.
I hope there will be broad support for this motion to recommit.
Mr. Speaker, I yield the balance of my time to the gentleman from
Texas (Mr. Edwards).
Mr. EDWARDS. Mr. Speaker, this issue is simple, but important, to our
military families. If you want to support increased tax benefits for
the loved ones who have lost a soldier, sailor, airman or Marine in
Iraq, then you should vote for this motion to recommit. If you want to
help Guardsmen and Reservists who take money out of their own pocket to
serve our country to travel over 100 miles and stay in hotels to do the
duty that our country asked them to do, if you want to help those
people with tax benefits on those expenses, then you ought to vote
``yes'' on this motion to recommit.
Mr. Speaker, I think the American people would be offended to find
out why we have to support this motion to recommit. For 6 months there
has been a bill sitting in this Chamber at the Speaker's desk that
would provide these benefits, earned benefits, to our servicemen and -
women and to the families of servicemen and -women killed in combat.
But do you know why that bill has been held up by the House
Republican leadership? Because the military tax benefits are paid for
by closing the loophole of tax benefits for those who leave this
country and renounce their American citizenship in order not to pay
taxes.
Let me repeat that. A bill has been held up for 6 months at the
Speaker's desk. We could pass it by unanimous consent today if the
Republican leadership would work with us on it. But for 6 months it has
been held up. We are holding up military benefits because the
Republican House leadership is more interested in protecting tax
benefits for those who would renounce their American citizenship.
Mr. Speaker, that offends every American value that I have ever been
taught. I think that goes against the grain of every patriotic speech
that has been given on the floor this year saluting the sacrifices of
our servicemen and -women.
I know we all intend to support our servicemen and -women, but in
Congress we should be judged not by what we say, but by what we do.
Right now, on a bipartisan basis, we can vote to provide increased
military tax benefits to those who have not only served our country,
but the families of those who have died for our country.
The SPEAKER pro tempore. The gentleman's time has expired.
Mr. THOMAS. Mr. Speaker, I rise in opposition to the motion to
recommit.
The SPEAKER pro tempore. The gentleman from California is recognized
for 5 minutes.
Mr. THOMAS. Mr. Speaker, first of all, I want to compliment the
gentleman from Massachusetts for structuring this motion to recommit
actually as a motion to recommit, rather than one which cannot be
honored. So what we do is we look at the content of the motion to
recommit, rather than the key words that determine whether or not he is
serious. The gentleman from Massachusetts, by the way he has structured
his motion to recommit, is serious.
If in fact the House is judged on what we do, rather than what we
say, all you have to do is go back to last March when this House passed
the provisions which deal directly with this issue. Way before
hurricane season, the House of Representatives said a child credit
should be $1,000 and it should stay at $1,000 for the rest of the
decade. If the Senate bill is better, why does the Senate bill contain
a snap-back to $700 in December of 2004, right after the election?
If the Senate bill is better, the House bill said marriage penalty,
now, for the rest of the decade. The Senate bill says marriage penalty
eliminated in 2010. They say, therefore, helping the military. The bill
we passed last March offers more help dollar-wise and substance-wise to
the military than the one they are proposing now.
So I think it is fairly ironic that they are asking us to do what we
have done.
The argument that the conference on this bill has not met should not
be directed to the House; it should be directed to the other body,
because the other body chairs that conference. No call has been made.
What we need to do for the rest of the afternoon is simple: vote
``no'' for 15 minutes, vote ``yes'' for 5 minutes, and we can beat the
hurricane home.
Ms. JONES of Ohio. Mr. Speaker, I want to take this opportunity to
support my colleague
[[Page H8355]]
from Massachusetts who has offered this motion to recommit H.R. 7 to
the Ways and Means Committee with instructions to incorporate
provisions that have not received the attention they deserve from this
Congress.
I am speaking of course about the child tax credit that Democrats
have been calling to strengthen, only to see our calls fall on deaf
ears, despite the clear benefits such action will have on strengthening
our stagnant economy.
This plea was ignored while Congress went on vacation, it was ignored
while a tax cut that increased our Federal deficit to new highs was
signed into law, it was ignored while young men and women were sent to
fight in Iraq, and is being ignored while the Congress is being asked
to consider authorizing even more money for Iraq operations. It is
being ignored while those very men and women who we sent to Iraq could
benefit from action expanding the child tax credit to lower income
families.
In a time where a saying like ``I support the troops'' is a common
mantra among Congressional leaders on both sides of the aisle, in both
chambers of Congress, and among all walks of life and ideologies, I
call on my colleagues in the House of Representatives to put your money
where your mouth is and support this motion to recommit that will bring
much needed, much appreciated, and much deserved tax relief to
Americans who will most benefit from it.
Mr. THOMAS. Mr. Speaker, I yield back the balance of my time.
The SPEAKER pro tempore. Without objection, the previous question is
ordered on the motion to recommit.
There was no objection.
The SPEAKER pro tempore. The question is on the motion to recommit.
The question was taken; and the Speaker pro tempore announced that
the noes appeared to have it.
Recorded Vote
Mr. NEAL of Massachusetts. Mr. Speaker, I demand a recorded vote.
A recorded vote was ordered.
The SPEAKER pro tempore. Pursuant to clause 9, rule XX, the Chair
will reduce to 5 minutes the minimum time for any electronic vote on
the question of passage.
The vote was taken by electronic device, and there were--ayes 201,
noes 221, not voting 12, as follows:
[Roll No. 507]
AYES--201
Abercrombie
Ackerman
Alexander
Allen
Andrews
Baca
Baird
Baldwin
Ballance
Becerra
Bell
Berkley
Berman
Bishop (GA)
Bishop (NY)
Blumenauer
Boswell
Boucher
Boyd
Brady (PA)
Brown (OH)
Brown, Corrine
Capps
Capuano
Cardin
Cardoza
Carson (IN)
Carson (OK)
Case
Castle
Clay
Clyburn
Conyers
Cooper
Costello
Cramer
Crowley
Cummings
Davis (AL)
Davis (CA)
Davis (FL)
Davis (IL)
Davis (TN)
DeFazio
DeGette
Delahunt
DeLauro
Deutsch
Dicks
Dingell
Doggett
Dooley (CA)
Doyle
Edwards
Emanuel
Engel
Eshoo
Etheridge
Evans
Farr
Fattah
Filner
Ford
Frank (MA)
Frost
Gonzalez
Gordon
Green (TX)
Grijalva
Gutierrez
Hall
Harman
Hastings (FL)
Hill
Hinchey
Hinojosa
Hoeffel
Holden
Holt
Honda
Hooley (OR)
Inslee
Israel
Jackson (IL)
Jackson-Lee (TX)
Jefferson
John
Johnson, E. B.
Jones (OH)
Kanjorski
Kaptur
Kennedy (RI)
Kildee
Kilpatrick
Kind
Kleczka
Kucinich
Lampson
Langevin
Lantos
Larsen (WA)
Larson (CT)
Lee
Levin
Lewis (GA)
Lipinski
Lofgren
Lowey
Lucas (KY)
Lynch
Majette
Maloney
Markey
Marshall
Matheson
Matsui
McCarthy (MO)
McCarthy (NY)
McCollum
McDermott
McGovern
McNulty
Meehan
Meek (FL)
Meeks (NY)
Menendez
Michaud
Millender-McDonald
Miller (NC)
Miller, George
Mollohan
Moore
Moran (VA)
Murtha
Nadler
Napolitano
Neal (MA)
Oberstar
Obey
Olver
Ortiz
Owens
Pallone
Pascrell
Pastor
Payne
Pelosi
Peterson (MN)
Pomeroy
Price (NC)
Rahall
Rangel
Reyes
Rodriguez
Ross
Rothman
Roybal-Allard
Ruppersberger
Ryan (OH)
Sabo
Sanchez, Linda T.
Sanchez, Loretta
Sanders
Sandlin
Schakowsky
Schiff
Scott (GA)
Scott (VA)
Serrano
Sherman
Skelton
Slaughter
Smith (WA)
Snyder
Solis
Spratt
Stark
Stenholm
Strickland
Stupak
Tanner
Tauscher
Taylor (MS)
Thompson (MS)
Tierney
Towns
Turner (TX)
Udall (CO)
Udall (NM)
Van Hollen
Velazquez
Visclosky
Waters
Watson
Watt
Waxman
Weiner
Wexler
Woolsey
Wu
Wynn
NOES--221
Aderholt
Akin
Bachus
Baker
Ballenger
Barrett (SC)
Bartlett (MD)
Barton (TX)
Bass
Beauprez
Bereuter
Biggert
Bilirakis
Bishop (UT)
Blackburn
Blunt
Boehlert
Boehner
Bonilla
Bonner
Bono
Boozman
Bradley (NH)
Brady (TX)
Brown (SC)
Brown-Waite, Ginny
Burgess
Burns
Burr
Burton (IN)
Buyer
Calvert
Camp
Cannon
Cantor
Capito
Carter
Chabot
Chocola
Coble
Cole
Collins
Cox
Crane
Crenshaw
Culberson
Cunningham
Davis, Jo Ann
Davis, Tom
Deal (GA)
DeLay
DeMint
Diaz-Balart, L.
Diaz-Balart, M.
Doolittle
Dreier
Duncan
Dunn
Ehlers
Emerson
English
Everett
Feeney
Ferguson
Flake
Fletcher
Foley
Fossella
Franks (AZ)
Frelinghuysen
Gallegly
Garrett (NJ)
Gerlach
Gibbons
Gilchrest
Gillmor
Gingrey
Goode
Goodlatte
Goss
Granger
Graves
Green (WI)
Greenwood
Gutknecht
Harris
Hart
Hastings (WA)
Hayes
Hayworth
Hefley
Hensarling
Herger
Hobson
Hoekstra
Hostettler
Houghton
Hulshof
Hunter
Hyde
Isakson
Issa
Istook
Janklow
Jenkins
Johnson (CT)
Johnson (IL)
Johnson, Sam
Jones (NC)
Keller
Kelly
Kennedy (MN)
King (IA)
King (NY)
Kingston
Kirk
Kline
Knollenberg
Kolbe
LaHood
Latham
LaTourette
Leach
Lewis (CA)
Lewis (KY)
Linder
LoBiondo
Lucas (OK)
Manzullo
McCotter
McCrery
McHugh
McInnis
McKeon
Mica
Miller (MI)
Miller, Gary
Moran (KS)
Murphy
Musgrave
Myrick
Nethercutt
Neugebauer
Ney
Northup
Norwood
Nunes
Nussle
Osborne
Ose
Otter
Oxley
Paul
Pearce
Pence
Peterson (PA)
Petri
Pickering
Pitts
Pombo
Porter
Portman
Pryce (OH)
Putnam
Quinn
Radanovich
Ramstad
Regula
Rehberg
Renzi
Reynolds
Rogers (AL)
Rogers (KY)
Rogers (MI)
Ros-Lehtinen
Royce
Ryan (WI)
Ryun (KS)
Saxton
Schrock
Sensenbrenner
Sessions
Shadegg
Shaw
Shays
Sherwood
Shimkus
Shuster
Simmons
Simpson
Smith (MI)
Smith (NJ)
Smith (TX)
Souder
Sullivan
Sweeney
Tancredo
Tauzin
Taylor (NC)
Terry
Thomas
Thornberry
Tiahrt
Tiberi
Toomey
Turner (OH)
Upton
Vitter
Walden (OR)
Walsh
Wamp
Weldon (FL)
Weldon (PA)
Weller
Whitfield
Wicker
Wilson (NM)
Wilson (SC)
Wolf
Young (AK)
Young (FL)
NOT VOTING--12
Berry
Cubin
Forbes
Gephardt
Hoyer
McIntyre
Miller (FL)
Platts
Rohrabacher
Rush
Stearns
Thompson (CA)
Announcement by the Speaker Pro Tempore
The SPEAKER pro tempore (Mr. Terry) (during the vote). Members are
advised that there are 2 minutes in this vote.
{time} 1515
Mrs. MYRICK changed her vote from ``aye'' to ``no.''
So the motion to recommit was rejected.
The result of the vote was announced as above recorded.
The SPEAKER pro tempore. The question is on passage of the bill.
The question was taken; and the Speaker pro tempore announced that
the ayes appeared to have it.
Mr. KLECZKA. Mr. Speaker, on that I demand the yeas and nays.
The yeas and nays were ordered.
The SPEAKER pro tempore. This will be a 5-minute vote.
The vote was taken by electronic device, and there were--yeas 408,
nays 13, not voting 13, as follows:
[Roll No. 508]
YEAS--408
Abercrombie
Ackerman
Aderholt
Akin
Alexander
Allen
Andrews
Baca
Bachus
Baird
Baker
Baldwin
Ballance
Ballenger
Barrett (SC)
Bartlett (MD)
Barton (TX)
Bass
Beauprez
Becerra
Bell
Bereuter
Berkley
Berman
Biggert
Bilirakis
Bishop (GA)
Bishop (NY)
Bishop (UT)
Blackburn
Blunt
Boehlert
Boehner
Bonilla
Bonner
Bono
Boozman
Boswell
Boucher
Boyd
Bradley (NH)
Brady (PA)
Brady (TX)
Brown (OH)
Brown (SC)
Brown, Corrine
Brown-Waite, Ginny
Burgess
Burns
Burr
Burton (IN)
Buyer
Calvert
Camp
Cannon
Cantor
Capito
Capps
Capuano
Cardin
Cardoza
Carson (IN)
Carson (OK)
Carter
Case
Castle
Chabot
Chocola
Clay
Clyburn
Coble
Cole
Collins
Conyers
Cooper
Costello
Cox
Cramer
Crane
Crenshaw
Crowley
Culberson
Cummings
Cunningham
Davis (AL)
Davis (CA)
Davis (FL)
Davis (IL)
Davis (TN)
Davis, Jo Ann
Davis, Tom
Deal (GA)
DeGette
Delahunt
DeLauro
DeLay
DeMint
Deutsch
Diaz-Balart, L.
Diaz-Balart, M.
Dicks
Dingell
Dooley (CA)
Doolittle
[[Page H8356]]
Doyle
Dreier
Duncan
Dunn
Edwards
Ehlers
Emanuel
Emerson
Engel
English
Eshoo
Etheridge
Evans
Everett
Farr
Fattah
Feeney
Ferguson
Filner
Flake
Fletcher
Foley
Ford
Fossella
Frank (MA)
Franks (AZ)
Frelinghuysen
Frost
Gallegly
Garrett (NJ)
Gerlach
Gibbons
Gilchrest
Gillmor
Gingrey
Gonzalez
Goode
Goodlatte
Gordon
Goss
Granger
Graves
Green (TX)
Green (WI)
Greenwood
Grijalva
Gutierrez
Gutknecht
Hall
Harman
Harris
Hart
Hastings (FL)
Hastings (WA)
Hayes
Hayworth
Hefley
Hensarling
Herger
Hinchey
Hinojosa
Hobson
Hoeffel
Hoekstra
Holden
Holt
Honda
Hooley (OR)
Hostettler
Houghton
Hoyer
Hulshof
Hunter
Hyde
Inslee
Isakson
Israel
Issa
Istook
Jackson (IL)
Jackson-Lee (TX)
Janklow
Jefferson
Jenkins
John
Johnson (CT)
Johnson (IL)
Johnson, E. B.
Johnson, Sam
Jones (NC)
Jones (OH)
Kaptur
Keller
Kelly
Kennedy (MN)
Kennedy (RI)
Kildee
Kilpatrick
Kind
King (IA)
King (NY)
Kingston
Kirk
Kline
Knollenberg
Kolbe
LaHood
Lampson
Langevin
Lantos
Larsen (WA)
Larson (CT)
Latham
LaTourette
Leach
Lee
Levin
Lewis (CA)
Lewis (GA)
Lewis (KY)
Linder
Lipinski
LoBiondo
Lofgren
Lowey
Lucas (KY)
Lucas (OK)
Lynch
Majette
Maloney
Manzullo
Markey
Marshall
Matheson
Matsui
McCarthy (MO)
McCarthy (NY)
McCollum
McCotter
McCrery
McGovern
McHugh
McInnis
McKeon
McNulty
Meehan
Meek (FL)
Meeks (NY)
Menendez
Mica
Michaud
Millender-McDonald
Miller (MI)
Miller (NC)
Miller, Gary
Miller, George
Moore
Moran (KS)
Moran (VA)
Murphy
Musgrave
Myrick
Nadler
Napolitano
Neal (MA)
Nethercutt
Neugebauer
Ney
Northup
Norwood
Nunes
Nussle
Oberstar
Obey
Olver
Ortiz
Osborne
Ose
Otter
Owens
Oxley
Pallone
Pastor
Paul
Payne
Pearce
Pelosi
Pence
Peterson (MN)
Peterson (PA)
Petri
Pickering
Pitts
Pombo
Pomeroy
Porter
Portman
Price (NC)
Pryce (OH)
Putnam
Quinn
Radanovich
Rahall
Ramstad
Rangel
Regula
Rehberg
Renzi
Reyes
Reynolds
Rodriguez
Rogers (AL)
Rogers (KY)
Rogers (MI)
Ros-Lehtinen
Ross
Rothman
Roybal-Allard
Royce
Ruppersberger
Ryan (OH)
Ryan (WI)
Ryun (KS)
Sabo
Sanchez, Linda T.
Sanchez, Loretta
Sanders
Sandlin
Saxton
Schakowsky
Schiff
Schrock
Scott (GA)
Scott (VA)
Sensenbrenner
Serrano
Sessions
Shadegg
Shaw
Shays
Sherman
Sherwood
Shimkus
Shuster
Simmons
Simpson
Skelton
Slaughter
Smith (MI)
Smith (NJ)
Smith (TX)
Smith (WA)
Snyder
Solis
Souder
Spratt
Strickland
Stupak
Sullivan
Sweeney
Tancredo
Tanner
Tauscher
Tauzin
Taylor (NC)
Terry
Thomas
Thompson (MS)
Thornberry
Tiahrt
Tiberi
Toomey
Towns
Turner (OH)
Turner (TX)
Udall (CO)
Udall (NM)
Upton
Van Hollen
Velazquez
Visclosky
Vitter
Walden (OR)
Walsh
Wamp
Waters
Watson
Watt
Waxman
Weiner
Weldon (FL)
Weldon (PA)
Weller
Wexler
Whitfield
Wicker
Wilson (NM)
Wilson (SC)
Wolf
Woolsey
Wu
Wynn
Young (AK)
Young (FL)
NAYS--13
Doggett
Hill
Kanjorski
Kleczka
Kucinich
McDermott
Mollohan
Murtha
Pascrell
Stark
Stenholm
Taylor (MS)
Tierney
NOT VOTING--13
Berry
Blumenauer
Cubin
DeFazio
Forbes
Gephardt
McIntyre
Miller (FL)
Platts
Rohrabacher
Rush
Stearns
Thompson (CA)
Announcement by the Speaker Pro Tempore
The SPEAKER pro tempore (during the vote). Members are advised that
there are 2 minutes remaining in the vote.
{time} 1526
Ms. Jackson-Lee of Texas changed her vote from ``nay'' to ``yea''.
So the bill was passed.
The result of the vote was announced as above recorded.
A motion to reconsider was laid upon the table.
____________________