[Congressional Record Volume 150, Number 32 (Friday, March 12, 2004)]
[Senate]
[Pages S2778-S2802]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mr. LEVIN (for himself and Mr. Coleman);
  S. 2210. A bill to restrict the use of abusive tax shelters and 
offshore tax

[[Page S2779]]

havens to inappropriately avoid Federal taxation, and for other 
purposes; to the Committee on Finance.
  Mr. LEVIN. Mr. President, I would like to introduce today, with 
Senator Norm Coleman, a comprehensive tax reform bill called the Tax 
Shelter and Tax Haven Reform Act. This bill is intended to respond to 
the ever increasing tax shelter and tax haven abuses that are 
undermining the integrity of our tax system, robbing the Treasury of 
tens of billions of dollars each year, and shifting the tax burden from 
high income corporations and individuals onto the backs of the middle 
class. Abusive tax shelters and the misuse of tax havens must be 
stopped.
  For more than a year, the Permanent Subcommittee on Investigations, 
on which I serve, has been conducting an investigation at my request 
into the design, sale, and implementation of abusive tax shelters. I 
initiated this investigation back in 2002, but it has since been 
carried out in a bipartisan fashion with the support of Senator 
Coleman, who is our current Subcommittee Chairman.
  What the subcommittee investigation has found is that many of the 
abusive tax shelters were not dreamed up by the taxpayers who used 
them. Instead, most were devised by tax professionals, like 
accountants, lawyers, bankers, and investment advisors, who then sold 
the tax shelter to clients for a fee. In fact, as our investigation 
widened, we found hordes of tax advisors cooking up one complex scheme 
after another, packaging them up as generic ``tax products'' with 
boiler-plate legal and tax opinions, and then undertaking elaborate 
marketing schemes to peddle these products to literally thousands of 
persons across the country. In return, these tax shelter promoters were 
getting hundreds of millions of dollars in fees, while diverting 
billions of dollars in tax revenues from the U.S. Treasury each year.
  In November 2003, our subcommittee held two days of hearings and 
released a report prepared by my staff which pulled back the curtain 
and provided an inside looks at how even some respected accounting 
firms, banks, investment advisors, and lawyers have become the engines 
pushing the design and sale of abusive tax shelters to corporations and 
individuals across this country. It was this investigative effort that 
inspired many of the provisions in the bill to combat abusive tax 
shelters and the professionals who promote them.
  Another part of this bill results from subcommittee investigations 
examining how tax havens around the globe help taxpayers dodge their 
U.S. tax obligations, using corporate, bank, and tax secrecy laws to 
impede U.S. tax enforcement efforts. At one subcommittee hearing in 
2001, a former owner of an offshore bank in the Caribbean testified 
that he believed 100% of his bank clients were engaged in tax evasion. 
He said that almost all were from the United States, described 
elaborate measures taken to avoid IRS detection of his clients' money 
transfers, and expressed confidence that the Government would defend 
client secrecy in order to attract business to the island. For the past 
few years, the IRS has made detection of offshore bank accounts used by 
individuals to conceal taxable income an enforcement priority, 
estimating that as many as 1 to 2 million U.S. taxpayers are hiding 
funds in offshore tax havens.
  Corporations are also using tax havens to reduce their U.S. tax 
liability. A subcommittee hearing held in 2003, on an Enron tax shelter 
known as Slapshot, as well as Senate Finance Committee hearings on 
other Enron tax scams, show how corporations can utilize tax havens to 
avoid U.S. taxes. A GAO report recently released by Senator Dorgan and 
myself shows that nearly two-thirds of the top 100 companies doing 
business with the United States now have one or more subsidiaries in a 
tax haven. One company, Tyco International, has 115 tax haven 
subsidiaries. Data recently released by the Commerce Department further 
demonstrates the extent of U.S. corporate use of tax havens, indicating 
that, as of 2001, almost half of all foreign profits of U.S. 
corporations were in tax havens.
  Over the years, subcommittee investigations have uncovered numerous 
instances of how U.S. tax enforcement efforts examining transactions, 
bank accounts, and other activities in tax havens have been delayed or 
impeded by tax haven secrecy laws and practices. This bill is intended 
to give the U.S. Government new tools to stop uncooperative tax havens 
from continuing to help corporations and individuals dodge their U.S. 
tax obligations.
  Stop and think what is at stake here. Men and women in our military 
are putting their lives on the line every day for our Nation. They are 
in Iraq, Afghanistan, the Balkans, and now Haiti. To make sure we can 
provide them with the resources they need, all Americans need to 
contribute their fair share in taxes. Unfortunately, there are too many 
companies and individuals that finagle ways to avoid paying what they 
owe, despite the benefits they receive from this country. These tax 
dodgers deprive our Nation of billions of dollars in resources and add 
to the tax burdens of the rest of us.
  Companies benefit from so much here in America: our stock market, 
telecommunications infrastructure, patent protections, educated 
workforce, research support, sophisticated financial systems, and basic 
law enforcement. Yet, too many companies run to use tax avoidance 
schemes based on abusive tax shelters and tax havens like a car 
speeding through a tollbooth, leaving the rest of us to pitch in the 
required fare and subsidize their free ride.
  Corporate and individual tax dodges today take many forms. They 
include the following: Abusive tax shelters in which taxpayers use 
complex investment schemes with no real business purpose other than to 
evade tax; corporate inversions in which companies pretend to move 
their headquarters to an offshore tax haven just to avoid their U.S. 
tax bill; foreign tax havens in which taxpayers use bank accounts and 
shell entities in foreign tax havens to escape detection while dodging 
taxes; and structured financial transactions in which companies use 
shell entities in convoluted setups or improper transfer pricing 
schemes to avoid taxes. In most cases, these tax dodges are designed, 
sold and implemented by tax professionals who receive lucrative fees to 
help their clients avoid their tax obligations. To provide a better 
picture of some of these abuses, here are a few recent examples.
  Perhaps the best-known corporate inverter is Tyco International, 
which operates out of New Hampshire and New Jersey, but claims a 
mailing address in Bermuda to avoid U.S. taxes. This tax dodge is a 
slap in the face of U.S. taxpayers, especially in light of the $300 
million in Federal defense and homeland security contracts awarded to 
Tyco in FY 2002, as well as the months-long, taxpayer-financed 
prosecution of Tyco's former officers for diverting $600 million in 
corporate assets to their personal use. Tyco, once a proud U.S. 
corporation, has sunk to new lows in its attempts to avoid paying its 
U.S. taxes.
  Corporate tax abuses aren't confined to large U.S. companies. One 
example of an abusive tax shelter being used by some small companies is 
called ``SC2,'' which was one of the tax shelters featured in our 
recent Subcommittee hearings and staff report. In this shelter, a 
closely-held corporation temporarily grants nonvoting stock to a tax-
exempt charity and then allocates--on paper--a significant portion of 
the company's profits to that charity. Beforehand, the company takes 
steps to limit or suspend any obligation to actually distribute income 
allocated to its shareholders. The charity pays no tax on the paper 
profits allocated to it. When the original corporate owners eventually 
reclaim both the stock and undistributed profits, they claim that 
capital gains taxes, rather than higher ordinary income taxes, apply to 
the income previously allocated to the charity. The charity gets paid 
for its complicity, the corporate owners evade a lot of tax, and Uncle 
Sam is the loser.
  A third tax shelter example involves a massive, $20 billion transfer 
pricing tax scam recently disclosed in a report issued by the 
bankruptcy examiner for Worldcom-MCI. The report states that Worldcom 
avoided paying hundreds of millions of dollars in state and Federal 
taxes over a four-year period, from 1998 to 2001, by claiming 
questionable expenses from related shell companies, including for a 
bogus intangible asset called ``management foresight.'' The

[[Page S2780]]

bankruptcy examiner, former Attorney General Richard Thornburgh, called 
on the company to sue its tax advisor and auditor, KPMG, for landing 
the company in this tax disaster, but Worldcom-MCI has, instead 
brazenly decided to continue using the tax dodge. This is the same 
company, by the way, that profits from billions of dollars in Federal 
and State contracts paid for--that's right--with taxpayer dollars.
  The tax chiseling seems endless. Some of the tax ploys are arguably 
technically legal and require a change in law or regulation. Others 
appear blatantly illegal, yet elicit little or no penalty. Companies 
keep using them, and their competitors are put at a disadvantage unless 
they join in.
  Too many respected accounting firms, financial institutions, and 
lawyers have joined in the sickening games by peddling tax dodges and 
taking a cut of the billions of dollars diverted from the U.S. 
Treasury. As IRS Commissioner Mark Everson has pointed out, accountants 
and lawyers should be the pillars of our system of voluntary tax 
compliance, not the architects of its circumvention.
  This tax chiseling hurts average taxpayers, not only by leaving them 
with the burden of making up the lost revenues, but also by 
constricting resources for essential government programs. It is a lack 
of resources that results in the new Medicare drug prescription plan 
having a huge gap in coverage that denies elderly help with their 
prescription drug bills when they most need it. It's why our schools 
are burdened with unfunded mandates. It's why we have a giant and 
deepening deficit ditch threatening our children's economic well-being. 
The list of harmful consequences of tax dodging is long and 
disquieting.

  The Tax Shelter and Tax Haven Reform Act we are introducing today 
contains a number of measures to put an end to these tax dodges:
  To curb abusive tax shelters, the bill strengthens the penalties on 
tax shelter promoters and codifies the economic substance doctrine 
eliminating tax benefits for transactions that have no real business 
purpose or real economic impact apart from those tax benefits.
  To crack down on the misuse of tax havens, we authorize Treasury to 
issue an annual list of ``uncooperative tax havens'' and suspend U.S. 
tax benefits for income attributed to those jurisdictions.
  We also require the Treasury Department to issue standards for tax 
shelter opinion letters, and give the IRS new tools to take tough 
enforcement action against the accounts, lawyers, bankers and other 
financial professionals promoting or facilitating deceptive tax 
schemes.
  Let me be more specific.
  Title I of the bill strengthens a host of tax shelter penalties, 
which are currently so weak they provide no deterrent effect at all. 
Tow examples demonstrate the problem:
  First, consider the penalty for promoting an abusive tax shelter, as 
set forth in section 6700 of the tax code. Currently, the penalty is 
the lesser of $1,000 or 100 percent of the promoter's gross income 
derived from the prohibited activity. That means in most cases, the 
maximum fine is $1,000. That figure is laughable, when many abusive tax 
shelters are selling for $100,000 or $250,000 a piece. Our 
investigation uncovered some tax shelters that were sold for $900,000 
or even $2 million each, and instances in which the same cookie-cutter 
tax opinion letter was sold to 100 or even 200 clients. A $1,000 fine 
just doesn't cut it.
  If further proof were needed, one document uncovered by our 
investigation contains the cold calculation by a senior tax 
professional at KPMG comparing possible tax shelter fees with possible 
tax shelter penalties if the firm were caught promoting an illegal tax 
shelter. This senior tax professional wrote the following: ``[O]ur 
average deal would result in KPMG fees of $360,000 with a maximum 
penalty exposure of only $31,000.'' He then recommended the obvious--
going forward with sales of the abusive tax shelter on a cost-benefit 
basis.
  Proposals to increase the penalty for promoting abusive tax shelters 
have already passed the Senate three times and are included in the JOBS 
Act pending in the Senate. But these proposals are not tough enough to 
do the job that needs to be done. In general, they increase the penalty 
for promoting abusive tax shelters to a maximum of 50 percent of the 
promoters' gross income from the prohibited activity. Now, think about 
that. Why should anyone who illegally pushes an abusive tax shelter be 
allowed--if they get caught--to keep half of their profits? What 
deterrent effect is created by a penalty that allows promoters to keep 
half of their wages if caught, and all of them if they are not?
  Penalities for those who peddle abusive tax shelters need to be a lot 
tougher. They should, first, make sure a tax shelter promoter is 
deprived of every penny of the profits earned from selling or providing 
legal advice on the shelter, and then pay a fine on top of that. Only 
that way is the promoter actually penalized for misconduct. Secondly, 
tax shelter promoters ought to face a penalty that is at least as harsh 
as the penalty imposed on the taxpayer who purchased their tax product, 
not only because the promoter is usually as culpable as the taxpayer, 
but also so promoters think twice about pushing tax schemes. 
Specifically, section 101 of the bill would increase the penalty on tax 
shelter promoters to an amount up to the greater of either 150 percent 
of the promoters' gross income from the prohibited activity, or the 
amount assessed against the taxpayer--including backtaxes, interest and 
penalties--for using the abusive shelter.
  A second penalty provision in the bill involves what our 
investigation found to be one of the biggest problems--the knowing 
assistance of accounting firms, law firms, banks, and others helping 
taxpayers understate their taxes. Right now, under Section 6701 of the 
tax code, persons who knowingly aid and abet a taxpayer in understating 
their tax liability face a maximum penalty of $1,000 for assisting 
individual taxpayers and $10,000 for assisting corporate taxpayers. 
These paltry amounts provide no deterrent at all. Worse yet, the 
penalty applies only to so-called ``tax return preparers.'' Current law 
imposes no penalty at all on those who knowingly design and carry out 
the abusive tax shelter, so long as those persons don't actually 
prepare the taxpayer's return.
  Section 102 of the bill would strengthen this penalty significantly, 
subjecting aiders and abettors to a maximum fine up to the greater of 
either 150 percent of the aider and abettor's gross income from the 
prohibited activity, or the amount assessed against the taxpayer for 
using the abusive shelter. And this penalty would apply to all aiders 
and abettors, not just tax return preparers.
  These are just two of the penalties strengthened by the Tax Shelter 
and Tax Haven Reform Act. Others include stronger penalties for tax 
shelter promoters who fail to register a new shelter with the IRS or 
fail to provide the IRS with a client list when requested, and stronger 
penalties for taxpayers who fail to disclose a tax shelter on their tax 
return or fail to disclose an offshore bank account.
  Title II also contains many provisions to combat abusive tax 
shelters, but first I want to mention Title III, which focuses on the 
economic substance doctrine, and Title IV which addresses offshore tax 
havens.
  Title III of the bill would include in Federal tax statutes for the 
first time what is known as the economic substance doctrine. This anti-
abuse doctrine was fashioned by Federal Courts asked to evaluate 
transactions which appeared to have little or no business purpose or 
economic substance apart from tax avoidance. It has become a powerful 
analytical tool used by courts to invalidate abusive tax shelters. At 
the same time, because there is no statute underlying this doctrine and 
the courts have developed and applied it differently in different 
judicial districts, the existing case law has many ambiguities and 
conflicting interpretations.
  Under the leadership of Senators Grassley and Baucus, the Chairman 
and Ranking Member of the Finance Committee, the Senate has voted three 
times to codify the economic substance doctrine, but it has yet to be 
enacted into law. Since no tax shelter legislation would be complete 
without addressing this issue, Title III of this comprehensive bill 
proposes once more to include the economic substance doctrine in the 
tax code.

[[Page S2781]]

  Sections 401 and 402 in the Tax Shelter and Tax Haven Reform Act also 
tackle the issue of tax havens by deterring use of tax havens that fail 
to cooperate with U.S. tax enforcement efforts. There are dozens of 
jurisdictions around the world that have enacted corporate, bank, and 
tax secrecy laws and then, in too many cases, used these laws to 
justify a failure to provide timely information to U.S. law enforcement 
about persons suspected of either hiding funds in the jurisdiction's 
offshore bank accounts or using offshore corporations and deceptive 
transactions to disguise their income or create phony losses to shelter 
their income from taxation.
  Section 401 of the bill would tackle the problem by giving the 
Treasury Secretary the discretion to designate offshore tax havens as 
``uncooperative'' and to publish an annual list of these uncooperative 
tax havens. The Treasury Secretary is intended to develop this list by 
evaluating the actual record of cooperation experienced by the United 
States in its dealings with specific jurisdictions around the world. 
While many offshore tax havens have recently signed treaties with the 
United States promising for the first time to cooperate with U.S. civil 
and criminal tax enforcement, it is undetermined what level of 
cooperation will actually result. For example, after one country signed 
a tax treaty with the United States, the government that led the effort 
was voted out of office by treaty opponents. Treasury needs a way to 
ensure that tax treaty obligations are met and to send a message to 
jurisdictions that impede U.S. tax enforcement. This bill will help 
Treasury get the cooperation it needs.
  in addition to authorizing Treasury to publish an annual list of 
uncooperative tax havens, section 401 and 402 of the bill would deter 
use of uncooperative tax havens by imposing two types of restrictions 
on taxpayers doing business in the designated jurisdictions. First, 
taxpayers would be required to provide greater disclosure of their 
activities on their tax returns, including disclosing on their returns 
any payment above $10,000 to a person or account located in a 
designated tax haven. Second, the bill would disallow any tax benefits, 
such as foreign tax credits or deferral of taxation, for income 
attributable to a designated tax haven. These restrictions would 
provide the United States with powerful weapons to compel tax havens to 
begin to cooperate with U.S. tax enforcement efforts.
  In addition to addressing the need to increase tax shelter penalties, 
codify the economic substance doctrine and deter use of uncooperative 
tax havens, the bill includes a number of measures in Title II that 
would address other aspects of abusive tax shelters. I'd like to 
discuss a few of these.
  Title II of the bill includes a number of additional measures to 
crack down on abusive tax dodges. Section 201 of the bill would, in 
part, direct the Department of the Treasury to issue as part of 
Circular 230 new standards for tax practitioners issuing opinion 
letters on the tax implications of tax shelters. The public has 
traditionally relied on tax opinion letters to obtain informed and 
trustworthy advice about whether a tax-motivated transaction meets the 
requirements of the law. The investigation conducted by the Permanent 
Subcommittee on Investigations found that, in too many cases, tax 
opinion letters no longer contain disinterested and reliable tax 
advice, even when issued by supposedly reputable accounting or law 
firms. Instead, too many tax opinion letters have become marketing 
tools used by tax shelter promoters and their allies to sell clients on 
their latest tax products. In too many of these cases, financial 
interests and biases were concealed, unreasonable factual assumptions 
were used to justify dubious legal conclusions, and taxpayers were 
misled about the risks that the proposed transaction would later be 
designated an illegal tax shelter. Reforms are essential to address 
these abuses and restore the integrity of tax opinion letters issued by 
reputable firms.
  Treasury recently proposed standards that would address some of the 
ongoing abuses affecting tax shelter opinion letters; however, the 
proposed standards do not take all the steps needed. Our bill would 
require Treasury to issue standards addressing a wider spectrum of tax 
shelter opinion letter problems, including: (1) the independence of the 
opinion letter writer from tax shelter promoters, (2) collaboration 
among letter writers resulting in joint financial interest, (3) 
avoidance of conflicts of interest that would impair auditor 
independence, (4) review and approval procedures by a firm for opinion 
letters issued in the name of the firm, (5) reliance on reasonable 
factual representations, and (6) the appropriateness of fee charges. By 
addressing each of these areas, Circular 230 could help reduce the 
ongoing abusive practices related to tax shelter opinion letters.
  During the November tax shelter hearings before the Permanent 
Subcommittee on Investigations, IRS Commissioner Mark Everson testified 
that his agency was barred by section 6103 of the tax code from 
communicating information to other Federal agencies that would assist 
those agencies in their law enforcement duties. He indicated, for 
example, that the IRS was barred from providing tax return information 
to the SEC, Federal bank regulators, and the Public Company Accounting 
Oversight Board, or PCAOB, even when that information might assist a 
Federal agency in evaluating whether an abusive tax shelter resulted in 
deceptive accounting in a public company's financial statements, 
whether a bank selling tax products to its clients had violated the law 
against promoting abusive tax shelters, or whether an accounting firm 
had impaired its independence by selling tax shelters to its audit 
clients.

  These communication barriers between our key Federal civil 
enforcement agencies are outdated, inefficient, and ill-suited to 
stopping the torrent of tax shelter abuses now affecting or being 
promoted by so many of our public companies, banks, and accounting 
firms. To address this problem, section 203 of the bill would authorize 
the Treasury Secretary, with appropriate privacy safeguards, to 
disclose to the SEC, Federal banking agencies, and the PCAOB, upon 
request, tax return information related to abusive tax shelters, 
inappropriate tax avoidance, or tax evasion. The agencies could then 
use this information only for law enforcement purposes, such as 
preventing accounting firms or banks from promoting abusive tax 
shelters or aiding or abetting tax evasion, and detecting and punishing 
accounting fraud related to illegal tax shelters employed by public 
companies. Improved information sharing for law enforcement purposes 
would greatly aid our agencies in their enforcement efforts.
  The bill would also provide for increased disclosure to Congress. 
Section 204 of the bill would make it clear, for example, that 
companies providing tax return preparation services to taxpayers cannot 
refuse to comply with a Congressional document subpoena by citing a 
consumer protection provision in the tax code, section 7216, 
prohibiting tax return preparers from disclosing taxpayer information 
to third parties. Several accounting and law firms raised this claim in 
response to document subpoenas issued by the Permanent Subcommittee on 
Investigations, contending they were barred by the nondisclosure 
provision in section 721 from producing documents related to the sale 
of abusive tax shelters to clients for a fee. The accounting and law 
firms maintained this position despite an analysis provided by the 
Senate legal counsel showing that the nondisclosure provision was never 
intended to create a privilege or to override a Senate subpoena, as 
demonstrated in Federal regulations interpreting the provision. To 
clarify the law, the bill would codify the existing regulations 
interpreting section 7216 and make it clear that congressional document 
subpoenas must be honored.
  Section 204 would also ensure Congress has access to information 
about decisions by Treasury related to an organization's tax exempt 
status. A 2003 decision by the D.C. Circuit Court of Appeals, Tax 
Analysts v. IRS, struck down certain IRS regulations and held that the 
IRS must disclose letters denying or revoking an organization's tax 
exempt status to the public. The IRS has been reluctant to disclose 
such information, not only to the public, but also to Congress, 
including in response to requests by the Permanent Subcommittee on 
Investigations. This

[[Page S2782]]

section of the bill would make it clear that, upon receipt of a request 
form a Congressional committee or subcommittee, the IRS must disclose 
documents, other than a tax return, related to the agency's 
determination to grant, deny, revoke or restore an organization's 
exemption from taxation.
  Still another finding of the subcommittee investigation is that tax 
practitioners are circumventing current State and Federal constraints 
on charging tax service fees that are contingent on actual or projected 
tax savings. Traditionally, accounting firms charged flat fees or 
hourly fees for their tax services. In the 1990s, however, they began 
charging ``value added'' fees based on, in the words of a one 
accounting firm's manual, ``the value of the services provided, as 
opposed to the time required to perform the services.'' In addition, 
some firms began charging ``contingent fees'' that were based on a 
client's obtaining specified results from the services offered, such as 
projected tax savings. In response, many States prohibited accounting 
firms from charging contingent fees for tax work to avoid creating 
incentives for these firms to devise ways to shelter substantial sums. 
The SEC and the American Institute of Certified Public Accountants also 
issued rules restricting contingent fees, allowing them in only limited 
circumstances.
  The subcommittee investigation found that tax shelter fees, which are 
typically substantial and sometimes exceed $1 million, are often linked 
to the taxpayer's projected tax savings or paper losses to be used to 
shelter income from taxation. For example, in three tax shelters 
examined by the Subcommittee, documents show that the fees were equal 
to a percentage of the paper loss to be generated by the transaction. 
In one case, the fees were typically set at 7 percent of the 
transaction's generated ``tax loss'' that clients could sue to shelter 
other taxable income. In addition, other evidence indicated that, in at 
least some instances, a tax advisor was willing to deliberately 
manipulate the way it handled certain tax products to circumvent the 
contingent fee prohibitions. One internal document at an accounting 
firm related to a specific tax shelter, for example, identified the 
states that prohibited contingent fees. Then, rather than prohibit the 
tax shelter transactions in those States or require an alternative fee 
structure, the memorandum directed the firm's tax professionals to make 
sure the engagement letter was signed, the engagement was managed, and 
the bulk of services was performed ``in a jurisdiction that does not 
prohibit contingency fees.''
  Right now, the prohibitions on contingent fees are complex and must 
be evaluated in the context of a patchwork of Federal, State and 
professional ethics rules. Section 205 of the bill would simplify the 
existing prohibitions on contingency fees by putting into place a 
single enforceable rule, applicable nationwide, that would prohibit tax 
practitioners from charging fees which are ``contingent upon the actual 
or projected achievement of Federal tax savings or benefits, or of 
losses which can be used to offset other taxable income.''
  Section 206 of the bill would establish that it is the sense of the 
Senate that additional funds should be appropriated for IRS 
enforcement, and that the IRS should devote proportionately more of its 
enforcement funds to combat rampant tax shelter and tax haven abuses. 
Specifically, the bill would direct increased funding toward 
enforcement efforts combating the promotion of abusive tax shelters for 
corporations and high net worth individuals and the aiding and abetting 
of tax evasion; the involvement of accounting, law and financial firms 
in such promotion and aiding and abetting; and the use of offshore 
financial account to conceal taxable income.
  In a bipartisan letter that was recently sent to the Senate 
appropriations committee by Senators Coleman, Collins, Lieberman and 
myself, we wrote that, ``Tax enforcement is one area where a relatively 
small increase in spending can pay for itself many times over.'' Tens 
of billions in revenues that should support this country would actually 
reach the Treasury if we would hire adequate enforcement personnel, 
close the tax loopholes, and put an end to tax dodges.
  It is past time to get serious about tax shelter abuses, 
uncooperative tax havens, and the tax dodgers who use them. This bill 
would send the message to tax dodgers that their shenanigans are 
unfair, unpatriotic, and unacceptable. We need to stop putting a 
disproportionate burden on the shoulders of the average American and 
make sure all taxpayers are paying their fair share.
  I ask unanimous consent that a summary of the bill and the text of 
the bill be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

    Summary of Senator Levin's Tax Shelter and Tax Haven Reform Act

       (See attached, more detailed summary that reflects which 
     parts of this bill are patterned after or incorporated in the 
     Grassley/Baucus revenue raisers that have previously passed 
     the Senate and are included in the upcoming JOBS Act.)
       Title I--Strengthen Tax Shelter Penalties:
       Strengthen penalties for promoting abusive tax shelters, 
     aiding or abetting tax evasion, failing to register or 
     disclose potentially abusive tax shelters, failing to 
     maintain and disclose required tax shelter client lists, and 
     failing to disclose offshore bank accounts;
       Extend statute of limitations for undisclosed tax shelters; 
     and
       Expand injunctive relief to stop certain conduct related to 
     abusive tax shelters.
       Title II--Prevent Abusive Tax Shelters:
       Authorize censure, civil fines, and tax shelter opinion 
     standards for tax practitioners;
       Expand tax shelter exception to tax practitioner privilege 
     to cover all abusive tax shelters;
       Authorize IRS to disclose certain tax shelter information 
     to certain federal agencies to strengthen civil law 
     enforcement;
       Increase disclosure of certain tax shelter promoter 
     information to Congress;
       Prohibit use of fees contingent on specified amount of tax 
     avoidance; and
       Sense of the Senate on IRS tax enforcement priorities, 
     advocating more enforcement funds and more enforcement action 
     to stop tax shelter promoters and combat use of offshore bank 
     accounts to conceal taxable income.
       Title III--Require Economic Substance:
       Clarify and codify the economic substance doctrine;
       Strenghten penalty for tax transactions lacking economic 
     substance; and
       Eliminate tax deduction for interest on unpaid taxes 
     attributable to transactions determined to be without 
     economic substance.
       Title IV--Deter Uncooperative Tax Havens:
       Require disclosure of payments to uncooperative tax havens; 
     and
       Restrict tax benefits for income earned in uncooperative 
     tax havens.


              title i--strengthening Tax shelter penalties

     Sections 101-109
       Strengthens the penalties for (see chart on last page of 
     this summary): promoting abusive tax shelters (Sec. 101); 
     knowingly aiding or abetting a taxpayer in understating tax 
     liability (Sec. 102); failing to register potentially abusive 
     tax shelters with the IRS or to provide required information 
     about such shelters to the IRS (Sec. 103, Sec. 106); failing 
     to maintain and disclose to the IRS upon request tax shelter 
     client lists (Sec. 104); and failing to disclose offshore 
     bank accounts (Sec. 109).
       Extends statute of limitations for undisclosed tax shelters 
     (Sec. 107), and expands the IRS' ability to seek injunctions 
     against tax shelter promoters and material advisors 
     (Sec. 108). Modeled after provisions in the Grassley/Baucus 
     legislation that has passed the Senate three times.


         title ii--preventing abusive tax shelter transactions

     Section 201--Authorize censure, civil fines, and tax shelter 
         opinion standards for tax practitioners
       Authorizes Treasury to censure or impose civil fines on tax 
     practitioners (such as accountants and attorneys) who violate 
     specified standards of practice in Circular 230, for persons 
     representing clients before the IRS. Modeled after provision 
     in the Grassley/Baucus legislation that has passed the Senate 
     three times.
       Directs Treasury to issue Circular 230 standards for tax 
     practitioners providing ``opinion letters'' on specific tax 
     shelter transactions. Requires standards to address: (1) 
     independence of letter writer from tax shelter promoters, (2) 
     collaboration among letter writers resulting in joint 
     financial interests, (3) avoidance of conflicts of interest 
     that would impair auditor independence, (4) review and 
     approval by a firm of opinion letters issued in the name of 
     the firm, (5) reasonable reliance on factual representations, 
     and (6) the appropriateness of fee charges. Expands upon 
     standards recently proposed by Treasury.
     Section 202--Expand tax shelter exception to tax practitioner 
         privilege
       Expands existing tax shelter exception to the 
     confidentiality privilege for communications between a 
     federally authorized tax practitioner and taxpayer, so that 
     the exception applies to communications not only about 
     corporate tax shelters, but other tax

[[Page S2783]]

     shelters as well. Modeled after provision in the Grassley/
     Baucus legislation that has passed the Senate three times.
     Sections 203-204--Increase disclosure of certain tax shelter 
         information
       Authorizes Treasury to share certain tax return information 
     with the SEC, federal bank regulators, or PCAOB, under 
     certain circumstances, to enhance tax shelter enforcement or 
     combat financial accounting fraud. (Sec. 204)
       Clarifies that Congress has the same subpoena authority as 
     federal, state, and local authorities to obtain information 
     from tax return preparers. Expands Congress' authority to 
     obtain certain tax information (but not a taxpayer return) 
     from Treasury related to an IRS decision to grant, deny, 
     revoke, or restore an organization's tax exempt status. 
     (Sec. 205)
     Section 205--Prohibit tax service fees contingent on specific 
         tax savings
       Prohibits charging a fee for tax services in an amount 
     contingent upon the actual or projected achievement of a 
     specified amount of tax savings or income loss to offset 
     taxable income. Builds on existing contingent fee 
     prohibitions in more than 20 states, AICPA rules applicable 
     to accountants, and SEC regulations applicable to auditors of 
     publicly traded corporations. Based upon investigation by 
     Permanent Subcommittee on Investigations showing tax 
     practitioners are circumventing current constraints.
     Section 206--``Sense of the Senate'' on IRS Enforcement 
         Priorities
       Establishes the Sense of the Senate that additional funds 
     should be appropriated for IRS enforcement, and that the IRS 
     should devote proportionately more of its enforcement funds 
     to combat: (1) the promotion of abusive tax shelters for 
     corporations and high net worth individuals and the aiding or 
     abetting of tax evasion, (2) the involvement of accounting, 
     law and financial firms in such promotion and aiding or 
     abetting, and (3) the use of offshore financial accounts to 
     conceal taxable income.


                title iii--requiring economic substance

     Sections 301-303--Strengthen the Economic Substance Doctrine
       Stengthens and codifies the economic substance doctrine to 
     invalidate transactions that have no economic substance or 
     business purpose apart from tax avoidance or evasion. Also 
     increases penalties for understatements and eliminates 
     deductibility of interest on unpaid taxes when the penalties 
     or interest are attributable to a transaction lacking in 
     economic substance. Modeled after provisions in the Grassley/
     Baucus legislation that has passed the Senate three times. 
     Estimated to raise $13.7 billion over ten years.


              title iv--deterring uncooperative tax havens

     Section 401-402--Deter Uncooperative Tax Havens
       Deters taxpayer use of uncooperative tax havens with 
     corporate, bank or tax secrecy laws, procedures, or practices 
     that impede U.S. enforcement of its tax laws by: (1) 
     requiring disclosure on taxpayer returns of any payments 
     above $10,000 to accounts or persons located in such tax 
     havens (Sec. 401), and (2) ending tax benefits for any income 
     earned in such tax havens (Sec. 402). Gives Treasury 
     Secretary discretion to designate a tax haven as 
     uncooperative and publish an annual list of those 
     jurisdictions.

                   COMPARISON OF TITLE I PENALTY PROVISIONS--STRENGTHEN TAX SHELTER PENALTIES
----------------------------------------------------------------------------------------------------------------
                                                                        Penalty
                                      --------------------------------------------------------------------------
              Violation                                                                     Provisions in Tax
                                             Current law         Provisions in JOBS Act   Shelter and Tax Haven
                                                                       (S. 1637)                Reform Act
----------------------------------------------------------------------------------------------------------------
Promotion of abusive tax shelters.     Lesser of $1,000 or      50% of the promoters'    Not to exceed the
 IRS Sec.  6700.                        100% of the promoters'   gross income from the    greater of: (i) 150%
                                        gross income derived     activity. (Sec.  415).   of the promoters'
                                        from the prohibited                               gross income from the
                                        activity.                                         prohibited activity,
                                                                                          or (ii) amount
                                                                                          assessed against the
                                                                                          taxpayer for using
                                                                                          abusive shelter
                                                                                          (including backtaxes,
                                                                                          penalties and
                                                                                          interest) (Sec.  101).
Knowingly aiding and abetting          Maximum of $1,000        No provision included..  Not to exceed the
 understatement of tax liability. IRC   ($10,000 for a                                    greater of: (i) 150%
 Sec.  6701.                            corporation). Penalty                             of the aider/abettor's
                                        applies only to tax                               gross income from the
                                        return preparer.                                  prohibited activity,
                                                                                          or (ii) amount
                                                                                          assessed against the
                                                                                          taxpayer for the
                                                                                          understatement
                                                                                          (including backtaxes,
                                                                                          penalties and
                                                                                          interest). Penalty
                                                                                          applies to all aiders/
                                                                                          abettors, not just
                                                                                          preparers (Sec.  102).
Failure to timely register with IRS a  Non-confidential         $50,000. No distinction  $50,000 to $100,000. No
 shelter or provision of false or       shelter: Greater of      between confidential     distinction between
 incomplete information with respect    $500 or 1% of the        and non-confidential.    confidential and non-
 to it. IRC Sec.  6707(a).              amount invested.         However, if relates to   confidential. However,
                                       Confidential shelter:     a tax shelter            if relates to a tax
                                        Greater of $10,000 or    previously identified    shelter previously
                                        50% of the promoters'    by the IRS, no less      identified by the IRS,
                                        fees (75% if violation   than $200,000 but not    no less than $200,000
                                        is intentional).         greater than 50% of      but not greater than
                                                                 the promoter's income    100% of the promoter's
                                                                 from the shelter (75%    income from the
                                                                 if violation is          shelter (150% if
                                                                 intentional). Material   violation is
                                                                 advisors must also       intentional). Material
                                                                 register. (Sec.  408).   advisors must also
                                                                                          register (Sec.  103).
Failure by taxpayer to include with    $250 per failure to      Significantly broadens   Similiar disclosure
 return the required information        include tax shelter ID   disclosure               requirements as JOBS
 regarding a potentially abusive        number, (There are       requirements. $50,000,   Act. $50,000, but
 shelter. IRC Sec.  6707(b)(2).         additional penalties     but $100,000 if          $100,000 if failure
                                        on the taxpayer that     failure relates to a     relates to a tax
                                        relate to                tax shelter previously   shelter previously
                                        understatement or        identified by the IRS.   identified by the IRS.
                                        underpayment.).          Doubled amounts if the   Doubled amounts if
                                                                 taxpayer is a large      intentional (Sec.
                                                                 entity or high net       105).
                                                                 worth individual.
                                                                 (Sec.  402).
Failure to maintain list of            $50 per name, with a     $10,000 per day after    Same as JOBS Act, plus
 participants in potentially abusive    maximum penalty per      the person has failed    if an incomplete list
 tax shelters. IRC Sec.  6708.          year of $100,000.        for 20 days to provide   is given to the IRS,
                                                                 a list to the IRS        $100 per omitted
                                                                 after the agency         investor per day (Sec.
                                                                 requested it. (Sec.       104).
                                                                 409).
Failure to report interests in         Maximum of $100,000,     Maximum of $5,000, but   Maximum of $10,000, but
 foreign financial accounts. 31 USC     but failure must be      if willful, up to        if willful, minimum of
 Sec.  5321.                            willful for any          $100,000. (Sec.  412).   $5,000 and up to 50%
                                        penalty to be assessed.                           of the funds in the
                                                                                          account over which the
                                                                                          taxpayer has control
                                                                                          (Sec.  109).
----------------------------------------------------------------------------------------------------------------

                                S. 2210

       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 ``Tax 
     Shelter and Tax Haven Reform Act''.
       (b) Amendment of 1986 Code.--Except as otherwise expressly 
     provided, whenever in this Act an amendment or repeal is 
     expressed in terms of an amendment to, or repeal of, a 
     section or other provision, the reference shall be considered 
     to be made to a section or other provision of the Internal 
     Revenue Code of 1986.
       (c) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title; etc.

              TITLE I--STRENGTHENING TAX SHELTER PENALTIES

Sec. 101. Penalty for promoting abusive tax shelters.
Sec. 102. Penalty for aiding and abetting the understatement of tax 
              liability.
Sec. 103. Penalty for failing to register tax shelter.
Sec. 104. Penalty for failing to maintain client list.
Sec. 105. Penalty for failing to disclose potentially abusive tax 
              shelter.
Sec. 106. Improved disclosure of potentially abusive tax shelters.
Sec. 107. Extension of statute of limitations for undisclosed tax 
              shelter.
Sec. 108. Expansion of injunctive relief to stop certain conduct 
              related to tax shelter or understatement of tax 
              liability.
Sec. 109. Penalty for failing to report interests in foreign financial 
              accounts.

               TITLE II--PREVENTING ABUSIVE TAX SHELTERS

Sec. 201. Censure, civil fines, and tax opinion standards for tax 
              practitioners.
Sec. 202. Expansion of tax shelter exception to tax practitioner 
              privilege.
Sec. 203. Information sharing for enforcement purposes.
Sec. 204. Disclosure of information to Congress.
Sec. 205. Contingent fee prohibition.
Sec. 206. Sense of the Senate on tax enforcement priorities.

                TITLE III--REQUIRING ECONOMIC SUBSTANCE

Sec. 301. Clarification of economic substance doctrine.
Sec. 302. Accuracy-related penalty for listed transactions and other 
              potentially abusive tax shelters having a significant tax 
              avoidance purpose.
Sec. 303. Penalty for understatements attributable to transactions 
              lacking economic substance, etc.
Sec. 304. Denial of deduction for interest on underpayments 
              attributable to noneconomic substance transactions.

              TITLE IV--DETERRING UNCOOPERATIVE TAX HAVENS

Sec. 401. Disclosing payments to persons in uncooperative tax havens.
Sec. 402. Deterring uncooperative tax havens by restricting allowable 
              tax benefits.

              TITLE I--STRENGTHENING TAX SHELTER PENALTIES

     SEC. 101. PENALTY FOR PROMOTING ABUSIVE TAX SHELTERS.

       (a) Penalty for Promoting Abusive Tax Shelters.--Section 
     6700 (relating to promoting abusive tax shelters, etc.) is 
     amended--
       (1) by redesignating subsections (b) and (c) as subsections 
     (d) and (e), respectively,

[[Page S2784]]

       (2) by striking ``a penalty'' and all that follows through 
     the period in the first sentence of subsection (a) and 
     inserting ``a penalty determined under subsection (b)'', and
       (3) by inserting after subsection (a) the following new 
     subsections:
       ``(b) Amount of Penalty; Calculation of Penalty; Liability 
     for Penalty.--
       ``(1) Amount of penalty.--The amount of the penalty imposed 
     by subsection (a) shall not exceed the greater of--
       ``(A) 150 percent of the gross income derived (or to be 
     derived) from such activity by the person or persons subject 
     to such penalty, and
       ``(B) if readily subject to calculation, the total amount 
     of underpayment by the taxpayer (including penalties, 
     interest, and taxes) in connection with such activity.
       ``(2) Calculation of penalty.--The penalty amount 
     determined under paragraph (1) shall be calculated with 
     respect to each instance of an activity described in 
     subsection (a), each instance in which income was derived by 
     the person or persons subject to such penalty, and each 
     person who participated in such an activity.
       ``(3) Liability for penalty.--If more than 1 person is 
     liable under subsection (a) with respect to such activity, 
     all such persons shall be jointly and severally liable for 
     the penalty under such subsection.
       ``(c) Penalty Not Deductible.--The payment of any penalty 
     imposed under this section or the payment of any amount to 
     settle or avoid the imposition of such penalty shall not be 
     considered an ordinary and necessary expense in carrying on a 
     trade or business for purposes of this title and shall not be 
     deductible by the person who is subject to such penalty or 
     who makes such payment.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to activities after the date of the enactment of 
     this Act.

     SEC. 102. PENALTY FOR AIDING AND ABETTING THE UNDERSTATEMENT 
                   OF TAX LIABILITY.

       (a) In General.--Section 6701(a) (relating to imposition of 
     penalty) is amended--
       (1) by inserting ``the tax liability or'' after ``respect 
     to,'' in paragraph (1),
       (2) by inserting ``aid, assistance, procurement, or advice 
     with respect to such'' before ``portion'' both places it 
     appears in paragraphs (2) and (3), and
       (3) by inserting ``instance of aid, assistance, 
     procurement, or advice or each such'' before ``document'' in 
     the matter following paragraph (3).
       (b) Amount of Penalty.--Subsection (b) of section 6701 
     (relating to penalties for aiding and abetting understatement 
     of tax liability) is amended to read as follows:
       ``(b) Amount of Penalty; Calculation of Penalty; Liability 
     for Penalty.--
       ``(1) Amount of penalty.--The amount of the penalty imposed 
     by subsection (a) shall not exceed the greater of--
       ``(i) 150 percent of the gross income derived (or to be 
     derived) from such aid, assistance, procurement, or advice 
     provided by the person or persons subject to such penalty, 
     and
       ``(ii) if readily subject to calculation, the total amount 
     of underpayment by the taxpayer (including penalties, 
     interest, and taxes) in connection with the understatement of 
     the liability for tax.
       ``(2) Calculation of penalty.--The penalty amount 
     determined under paragraph (1) shall be calculated with 
     respect to each instance of aid, assistance, procurement, or 
     advice described in subsection (a), each instance in which 
     income was derived by the person or persons subject to such 
     penalty, and each person who made such an understatement of 
     the liability for tax.
       ``(3) Liability for penalty.--If more than 1 person is 
     liable under subsection (a) with respect to providing such 
     aid, assistance, procurement, or advice, all such persons 
     shall be jointly and severally liable for the penalty under 
     such subsection.''.
       (c) Penalty Not Deductible.--Section 6701 is amended by 
     adding at the end the following new subsection:
       ``(g) Penalty Not Deductible.--The payment of any penalty 
     imposed under this section or the payment of any amount to 
     settle or avoid the imposition of such penalty shall not be 
     considered an ordinary and necessary expense in carrying on a 
     trade or business for purposes of this title and shall not be 
     deductible by the person who is subject to such penalty or 
     who makes such payment.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to activities after the date of the enactment of 
     this Act.

     SEC. 103. PENALTY FOR FAILURE TO REGISTER TAX SHELTER.

       (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 ON POTENTIALLY 
                   ABUSIVE TAX SHELTER OR LISTED TRANSACTION.

       ``(a) In General.--If a person who is required to file a 
     return under section 6111 with respect to any potentially 
     abusive tax shelter--
       ``(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 shelter,
     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 not less than $50,000 and not more than 
     $100,000.
       ``(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) 100 percent of the gross income derived by such 
     person for providing aid, assistance, procurement, advice, or 
     other services with respect to the listed transaction before 
     the date the return including the transaction is filed under 
     section 6111.
     Subparagraph (B) shall be applied by substituting `150 
     percent' for `100 percent' in the case of an intentional 
     failure or act described in subsection (a).
       ``(c) Certain Rules To Apply.--The provisions of section 
     6707A(d) allowing the Commissioner of Internal Revenue to 
     rescind a penalty under certain circumstances shall apply to 
     any penalty imposed under this section.
       ``(d) Potentially Abusive Tax Shelters and Listed 
     Transactions.--The terms `potentially abusive tax shelter' 
     and `listed transaction' have the respective meanings given 
     to such terms by section 6707A(c).
       ``(e) Penalty Not Deductible.--The payment of any penalty 
     imposed under this section or the payment of any amount to 
     settle or avoid the imposition of such penalty shall not be 
     considered an ordinary and necessary expense in carrying on a 
     trade or business for purposes of this title and shall not be 
     deductible by the person who is subject to such penalty or 
     who makes such payment.''.
       (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 ``regarding tax shelters'' 
     and inserting ``on potentially abusive tax shelter or listed 
     transaction''.
       (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. 104. PENALTY FOR FAILING TO MAINTAIN CLIENT LIST.

       (a) In General.--Subsection (a) of section 6708 (relating 
     to failure to maintain lists of investors in potentially 
     abusive tax shelters) 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. If such person makes available an incomplete list 
     upon such request, such person shall pay a penalty of $100 
     per each omitted name for each day of such omission after 
     such 20th day.
       ``(2) Good cause exception.--No penalty shall be imposed by 
     paragraph (1) with respect to the failure on any day if, in 
     the judgment of the Secretary, such failure is due to good 
     cause.''.
       (b) Penalty Not Deductible.--Section 6708 is amended by 
     adding at the end the following new subsection:
       ``(c) Penalty Not Deductible.--The payment of any penalty 
     imposed under this section or the payment of any amount to 
     settle or avoid the imposition of such penalty shall not be 
     considered an ordinary and necessary expense in carrying on a 
     trade or business for purposes of this title and shall not be 
     deductible by the person who is subject to such penalty or 
     who makes such payment.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to requests made by the Secretary of the Treasury 
     after the date of the enactment of this Act.

     SEC. 105. PENALTY FOR FAILING TO DISCLOSE POTENTIALLY ABUSIVE 
                   TAX SHELTER.

       (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 POTENTIALLY 
                   ABUSIVE TAX SHELTER 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 potentially abusive tax shelter 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.--Except as provided in paragraph 
     3, the amount of the penalty under subsection (a) with 
     respect to a listed transaction shall be $100,000.
       ``(3) Increase in penalty for intentional nondisclosure.--
     In the case of an intentional failure by any person under 
     subsection (a), the penalty under paragraph (1) shall be 
     $100,000 and the penalty under paragraph (2) shall be 
     $200,000.
       ``(c) Definitions.--For purposes of this section--
       ``(1) Potentially abusive tax shelter.--The term 
     `potentially abusive tax shelter' means any transaction with 
     respect to which information is required to be included with 
     a return or statement, because the Secretary has determined 
     by regulation or otherwise that such transaction has a 
     potential for tax avoidance or evasion.

[[Page S2785]]

       ``(2) Listed transaction.--Except as provided in 
     regulations, the term `listed transaction' means a 
     potentially abusive tax shelter 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 a penalty imposed by this 
     section with respect to any violation if--
       ``(A) the violation is with respect to a potentially 
     abusive tax shelter 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.
     A copy of such opinion shall be provided upon written request 
     to the Committee on Ways and Means of the House of 
     Representatives, the Committee on Finance of the Senate, the 
     Joint Committee on Taxation, or the General Accounting 
     Office.
       ``(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 potentially abusive tax shelter 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) Penalty in Addition to Other Penalties.--The penalty 
     imposed by this section shall be in addition to any other 
     penalty provided by law.
       ``(g) Penalty Not Deductible.--The payment of any penalty 
     imposed under this section or the payment of any amount to 
     settle or avoid the imposition of such penalty shall not be 
     considered an ordinary and necessary expense in carrying on a 
     trade or business for purposes of this title and shall not be 
     deductible by the person who is subject to such penalty or 
     who makes such payment.''.
       (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 potentially abusive tax 
              shelter 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. 106. IMPROVED DISCLOSURE OF POTENTIALLY ABUSIVE TAX 
                   SHELTERS.

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

     ``SEC. 6111. DISCLOSURE OF POTENTIALLY ABUSIVE TAX SHELTERS.

       ``(a) In General.--Each material advisor with respect to 
     any potentially abusive tax shelter shall make a return (in 
     such form as the Secretary may prescribe) setting forth--
       ``(1) information identifying and describing such shelter,
       ``(2) information describing any potential tax benefits 
     expected to result from the shelter, and
       ``(3) such other information as the Secretary may 
     prescribe.
     Such return shall be filed not later than the date which is 
     30 days before the date on which the first sale of such 
     shelter occurs or on any other 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 designing, organizing, managing, promoting, 
     selling, implementing, or carrying out any potentially 
     abusive tax shelter, 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 potentially abusive tax 
     shelter substantially all of the tax benefits from which are 
     provided to natural persons, and
       ``(ii) $100,000 in any other case.
       ``(2) Potentially abusive tax shelter.--The term 
     `potentially abusive tax shelter' 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 potentially abusive tax shelters.''.

       (2)(A) So much of section 6112 as precedes subsection (c) 
     thereof is amended to read as follows:

     ``SEC. 6112. MATERIAL ADVISORS OF POTENTIALLY ABUSIVE TAX 
                   SHELTERS MUST KEEP CLIENT LISTS.

       ``(a) In General.--Each material advisor (as defined in 
     section 6111) with respect to any potentially abusive tax 
     shelter (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 
     shelter, 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 potentially abusive tax shelters must 
              keep client lists.''.

       (3)(A) The heading for section 6708 is amended to read as 
     follows:

     ``SEC. 6708. FAILURE TO MAINTAIN CLIENT LISTS WITH RESPECT TO 
                   POTENTIALLY ABUSIVE TAX SHELTERS.''.

       (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 client lists with respect to 
              potentially abusive tax shelters.''.
       (c) Required Disclosure Not Subject to Claim of 
     Confidentiality.--Section 6112(b)(1), as redesignated by 
     subsection (b)(2)(B), is amended by adding at the end the 
     following new flush sentence:
     ``For purposes of this section, the identity of any person on 
     such list shall not be privileged.''.
       (d) Effective Date.--
       (1) In general.--Except as provided in paragraph (2), 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.
       (2) No claim of confidentiality against disclosure.--The 
     amendment made by subsection (c) shall take effect as if 
     included in the amendments made by section 142 of the Deficit 
     Reduction Act of 1984.

     SEC. 107. EXTENSION OF STATUTE OF LIMITATIONS FOR UNDISCLOSED 
                   TAX SHELTER.

       (a) In General.--Section 6501(c) (relating to exceptions) 
     is amended by adding at the end the following new paragraph:
       ``(10) Potentially abusive tax shelters.--If a taxpayer 
     fails to include on any return or statement for any taxable 
     year any information with respect to a potentially abusive 
     tax shelter (as defined in section 6707A(c)) which is 
     required under section 6011

[[Page S2786]]

     to be included with such return or statement, the time for 
     assessment of any tax imposed by this title with respect to 
     such transaction shall not expire before the date which is 2 
     years after the earlier of--
       ``(A) the date on which the Secretary is furnished the 
     information so required; or
       ``(B) the date that a material advisor (as defined in 
     section 6111) meets the requirements of section 6112 with 
     respect to a request by the Secretary under section 6112(b) 
     relating to such transaction with respect to such 
     taxpayer.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years with respect to which the period 
     for assessing a deficiency did not expire before the date of 
     the enactment of this Act.

     SEC. 108. EXPANSION OF INJUNCTIVE RELIEF TO STOP CERTAIN 
                   CONDUCT RELATED TO TAX SHELTER OR 
                   UNDERSTATEMENT OF TAX LIABILITY.

       (a) In General.--Section 7408 (relating to action to enjoin 
     promoters of abusive tax shelters, etc.) is amended by 
     redesignating subsection (c) as subsection (d) and by 
     striking subsections (a) and (b) and inserting the following 
     new subsections:
       ``(a) Authority To Seek Injunction.--A civil action in the 
     name of the United States to enjoin any person from further 
     engaging in specified conduct may be commenced at the request 
     of the Secretary. Any action under this section shall be 
     brought in the district court of the United States for the 
     district in which such person resides, has his principal 
     place of business, or has engaged in specified conduct. The 
     court may exercise its jurisdiction over such action (as 
     provided in section 7402(a)) separate and apart from any 
     other action brought by the United States against such 
     person.
       ``(b) Adjudication and Decree.--In any action under 
     subsection (a), if the court finds--
       ``(1) that the person has engaged in any specified conduct, 
     and
       ``(2) that injunctive relief is appropriate to prevent 
     recurrence of such conduct,
     the court may enjoin such person from engaging in such 
     conduct or in any other activity subject to penalty under 
     this title.
       ``(c) Specified Conduct.--For purposes of this section, the 
     term `specified conduct' means any action, or failure to take 
     action, subject to penalty under section 6700, 6701, 6707, 
     6707A, 6708, or 7206.''.
       (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 SHELTER OR UNDERSTATEMENT OF TAX 
                   LIABILITY.''.

       (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 shelter 
              or understatement of liability.''.

       (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. 109. PENALTY FOR FAILING 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 $10,000.
       ``(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, the amount of the civil 
     penalty imposed under subparagraph (A) shall be--
       ``(i) not less than $5,000,
       ``(ii) not more than 50 percent of the amount determined 
     under subparagraph (D), and
       ``(iii) 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.

               TITLE II--PREVENTING ABUSIVE TAX SHELTERS

     SEC. 201. CENSURE, CIVIL FINES, AND TAX OPINION STANDARDS FOR 
                   TAX PRACTITIONERS.

       (a) Censure; Imposition of Monetary 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 
     may be in addition to, or in lieu of, any suspension, 
     disbarment, or censure of the representative.''.
       (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 Opinion Standards.--Section 330 of such title 31 is 
     amended by adding at the end the following new subsection:
       ``(d) The Secretary of the Treasury shall impose standards 
     applicable to the rendering of written advice with respect to 
     any potentially abusive tax shelter or any entity, plan, 
     arrangement, or transaction which has a potential for tax 
     avoidance or evasion. Such standards shall address, but not 
     be limited to, the following issues:
       ``(1) Independence of the practitioner issuing such written 
     advice from persons promoting, marketing, or recommending the 
     subject of the advice.
       ``(2) Collaboration among practitioners, or between a 
     practitioner and other party, which could result in such 
     collaborating parties having a joint financial interest in 
     the subject of the advice.
       ``(3) Avoidance of conflicts of interest which would impair 
     auditor independence.
       ``(4) For written advice issued by a firm, standards for 
     reviewing the advice and ensuring the consensus support of 
     the firm for positions taken.
       ``(5) Reliance on reasonable factual representations by the 
     taxpayer and other parties.
       ``(6) Appropriateness of the fees charged by the 
     practitioner for the written advice.''.

     SEC. 202. EXPANSION OF TAX SHELTER EXCEPTION TO TAX 
                   PRACTITIONER PRIVILEGE.

       (a) In General.--Subsection (b) of section 7525 (relating 
     to confidentiality privileges relating to taxpayer 
     communications) is amended to read as follows:
       ``(b) No Privilege for Communications Regarding Tax 
     Shelters.--The privilege under subsection (a) shall not apply 
     to any 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), 6662, or 6707A).''.
       (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. 203. INFORMATION SHARING FOR ENFORCEMENT PURPOSES.

       (a) Promotion of Prohibited Tax Shelters or Tax Avoidance 
     Schemes.--Section 6103(h) (relating to disclosure to certain 
     Federal officers and employees for purposes of tax 
     administration, etc.) is amended by adding at the end the 
     following new paragraph:
       ``(7) Disclosure of returns and return information related 
     to promotion of prohibited tax shelters or tax avoidance 
     schemes.--
       ``(A) Written request.--Upon receipt by the Secretary of a 
     written request which meets the requirements of subparagraph 
     (B) from the head of the United States Securities and 
     Exchange Commission, an appropriate Federal banking agency as 
     defined under section 1813(q) of title 12, United States 
     Code, or the Public Company Accounting Oversight Board, a 
     return or return information shall be disclosed to such 
     requestor's officers and employees who are personally and 
     directly engaged in an investigation, examination, or 
     proceeding by such requestor to evaluate, determine, 
     penalize, or deter conduct by a financial institution, 
     issuer, or public accounting firm, or associated person, in 
     connection with a potential or actual violation of section 
     6700 (promotion of abusive tax shelters), 6701 (aiding and 
     abetting understatement of tax liability), or activities 
     related to promoting or facilitating inappropriate tax 
     avoidance or tax evasion. Such disclosure shall be solely for 
     use by such officers and employees in such investigation, 
     examination, or proceeding.
       ``(B) Requirements.--A request meets the requirements of 
     this subparagraph if it sets forth--
       ``(i) the nature of the investigation, examination, or 
     proceeding,
       ``(ii) the statutory authority under which such 
     investigation, examination, or proceeding is being conducted,
       ``(iii) the name or names of the financial institution, 
     issuer, or public accounting firm to which such return 
     information relates,
       ``(iv) the taxable period or periods to which such return 
     information relates, and

[[Page S2787]]

       ``(v) the specific reason or reasons why such disclosure 
     is, or may be, relevant to such investigation, examination or 
     proceeding.
       ``(C) Financial institution.--For the purposes of this 
     paragraph, the term `financial institution' means a 
     depository institution, foreign bank, insured institution, 
     industrial loan company, broker, dealer, investment company, 
     investment advisor, or other entity subject to regulation or 
     oversight by the United States Securities and Exchange 
     Commission or an appropriate Federal banking agency.''.
       (b) Financial and Accounting Fraud Investigations.--Section 
     6103(i) (relating to disclosure to Federal officers or 
     employees for administration of Federal laws not relating to 
     tax administration) is amended by adding at the end the 
     following new paragraph:
       ``(9) Disclosure of returns and return information for use 
     in financial and accounting fraud investigations.--
       ``(A) Written request.--Upon receipt by the Secretary of a 
     written request which meets the requirements of subparagraph 
     (B) from the head of the United States Securities and 
     Exchange Commission or the Public Company Accounting 
     Oversight Board, a return or return information shall be 
     disclosed to such requestor's officers and employees who are 
     personally and directly engaged in an investigation, 
     examination, or proceeding by such requester to evaluate the 
     accuracy of a financial statement or report or to determine, 
     require a restatement, penalize, or deter conduct by an 
     issuer, investment company, or public accounting firm, or 
     associated person, in connection with a potential or actual 
     violation of auditing standards or prohibitions against false 
     or misleading statements or omissions in financial statements 
     or reports. Such disclosure shall be solely for use by such 
     officers and employees in such investigation, examination or 
     proceeding.
       ``(B) Requirements.--A request meets the requirements of 
     this subparagraph if it sets forth--
       ``(i) the nature of the investigation, examination, or 
     proceeding,
       ``(ii) the statutory authority under which such 
     investigation, examination, or proceeding is being conducted,
       ``(iii) the name or names of the issuer, investment 
     company, or public accounting firm to which such return 
     information relates,
       ``(iv) the taxable period or periods to which such return 
     information relates, and
       ``(v) the specific reason or reasons why such disclosure 
     is, or may be, relevant to such investigation, examination or 
     proceeding.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to disclosures and to information and document 
     requests made after the date of the enactment of this Act.

     SEC. 204. DISCLOSURE OF INFORMATION TO CONGRESS.

       (a) Disclosure by Tax Return Preparer.--
       (1) In general.--Subparagraph (B) of section 7216(b)(1) 
     (relating to disclosures) is amended to read as follows:
       ``(B) pursuant to any 1 of the following documents, if 
     clearly identified:
       ``(i) The order of any Federal, State, or local court of 
     record.
       ``(ii) A subpoena issued by a Federal or State grand jury.
       ``(iii) An administrative order, summons, or subpoena which 
     is issued in the performance of its duties by--

       ``(I) any Federal agency, including Congress or any 
     committee or subcommittee thereof, or
       ``(II) any State agency, body, or commission charged under 
     the laws of the State or a political subdivision of the State 
     with the licensing, registration, or regulation of tax return 
     preparers.''.

       (2) Effective date.--The amendment made by this subsection 
     shall apply to disclosures made after the date of the 
     enactment of this Act pursuant to any document in effect on 
     or after such date.
       (b) Disclosure by Secretary.--Paragraph (2) of section 
     6104(a) (relating to inspection of applications for tax 
     exemption or notice of status) is amended to read as follows:
       ``(2) Inspection by congress.--
       ``(A) In general.--Upon receipt of a written request from a 
     committee or subcommittee of Congress, copies of documents 
     related to a determination by the Secretary to grant, deny, 
     revoke, or restore an organization's exemption from taxation 
     under section 501 or 527 shall be provided to such committee 
     or subcommittee, including any application, notice of status, 
     or supporting information provided by such organization to 
     the Internal Revenue Service; any letter, analysis or other 
     document produced by or for the Internal Revenue Service 
     evaluating, determining, explaining, or relating to the tax 
     exempt status of such organization (other than returns, 
     unless such returns are available to the public under this 
     section or section 6103 or 6110); and any communication 
     between the Internal Revenue Service and any other party 
     relating to the tax exempt status of such organization.
       ``(B) Additional information.--Section 6103(f) shall apply 
     with respect to--
       ``(i) the application for exemption of any organization 
     described in subsection (c) or (d) of section 501 which is 
     exempt from taxation under section 501(a) for any taxable 
     year or notice of status of any political organization which 
     is exempt from taxation under section 527 for any taxable 
     year, and any application referred to in subparagraph (B) of 
     subsection (a)(1) of this section, and
       ``(ii) any other papers which are in the possession of the 
     Secretary and which relate to such application,
     as if such papers constituted returns.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to disclosures and to information and document 
     requests made after the date of the enactment of this Act.

     SEC. 205. CONTINGENT FEE PROHIBITION.

       (a) In General.--Section 6701, as amended by this Act, is 
     amended--
       (1) by redesignating subsections (f) and (g) as subsections 
     (g) and (h), respectively,
       (2) by striking ``subsection (a).'' in paragraphs (2) and 
     (3) of subsection (g) (as redesignated by paragraph (1)) and 
     inserting ``subsection (a) or (f).'', and
       (3) by inserting after subsection (e) the following new 
     subsection:
       ``(f) Contingent Fee Prohibition.--
       ``(1) In general.--Any person who makes an agreement for, 
     charges, or collects a fee which is for services provided in 
     connection with the internal revenue laws, and which is 
     contingent upon the actual or projected achievement of--
       ``(A) Federal tax savings or benefits, or
       ``(B) losses which can be used to offset other taxable 
     income,

     shall pay a penalty with respect to each such fee activity in 
     the amount determined under subsection (b).
       ``(2) Regulations.--The Secretary may issue rules to carry 
     out the purposes of this subsection and may provide for 
     exceptions for fee arrangements that are in the public 
     interest.''.
       (b) Effective date.--The amendments made by this section 
     shall apply to fee agreements, charges, and collections made 
     after the date of the enactment of this Act.

     SEC. 206. SENSE OF THE SENATE ON TAX ENFORCEMENT PRIORITIES.

       It is the sense of the Senate that additional funds should 
     be appropriated for Internal Revenue Service enforcement 
     efforts and that the Internal Revenue Service should devote 
     proportionately more of its enforcement funds--
       (1) to combat the promotion of abusive tax shelters for 
     corporations and high net worth individuals and the aiding 
     and abetting of tax evasion,
       (2) to stop accounting, law, and financial firms involved 
     in such promotion and aiding and abetting, and
       (3) to combat the use of offshore financial accounts to 
     conceal taxable income.

                TITLE III--REQUIRING ECONOMIC SUBSTANCE

     SEC. 301. CLARIFICATION OF ECONOMIC SUBSTANCE DOCTRINE.

       (a) In General.--Section 7701 (relating to definitions) is 
     amended by redesignating subsection (n) as subsection (o) and 
     by inserting after subsection (m) the following new 
     subsection:
       ``(n) Clarification of Economic Substance Doctrine; Etc.--
       ``(1) General rules.--
       ``(A) In general.--In applying the economic substance 
     doctrine, the determination of whether a transaction 
     satisfies such doctrine shall be made as provided in this 
     subsection.
       ``(B) Application of economic substance doctrine.--For 
     purposes of subparagraph (A)--
       ``(i) In general.--A transaction satisfies the economic 
     substance doctrine 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.

     In applying subclause (II), a purpose of achieving a 
     financial accounting benefit shall not be taken into account 
     in determining whether a transaction has a substantial nontax 
     purpose if the origin of such financial accounting benefit is 
     a reduction of income tax or achievement of a tax benefit.
       ``(ii) Special rule where taxpayer relies on profit 
     potential.--A transaction shall not be treated as satisfying 
     the economic substance doctrine 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

[[Page S2788]]

     deductions to be claimed with respect to the transaction is 
     substantially in excess of the present value of the 
     anticipated economic returns of the person lending the money 
     or providing the financial capital. A public offering shall 
     be treated as a borrowing, or an acquisition of financial 
     capital, from a tax-indifferent party if it is reasonably 
     expected that at least 50 percent of the offering will be 
     placed with tax-indifferent parties.
       ``(B) Artificial income shifting and basis adjustments.--
     The form of a transaction with a tax-indifferent party shall 
     not be respected if--
       ``(i) it results in an allocation of income or gain to the 
     tax-indifferent party in excess of such party's economic 
     income or gain, or
       ``(ii) it results in a basis adjustment or shifting of 
     basis on account of overstating the income or gain of the 
     tax-indifferent party.
       ``(3) Definitions and special rules.--For purposes of this 
     subsection--
       ``(A) Economic substance doctrine.--The term `economic 
     substance doctrine' means the common law doctrine under which 
     tax benefits under subtitle A with respect to a transaction 
     are not allowable if the transaction does not have economic 
     substance or lacks a business purpose.
       ``(B) Tax-indifferent party.--The term `tax-indifferent 
     party' means any person or entity not subject to tax imposed 
     by subtitle A. A person shall be treated as a tax-indifferent 
     party with respect to a transaction if the items taken into 
     account with respect to the transaction have no substantial 
     impact on such person's liability under subtitle A.
       ``(C) Exception for personal transactions of individuals.--
     In the case of an individual, this subsection shall apply 
     only to transactions entered into in connection with a trade 
     or business or an activity engaged in for the production of 
     income.
       ``(D) Treatment of lessors.--In applying subclause (I) of 
     paragraph (1)(B)(ii) to the lessor of tangible property 
     subject to a lease--
       ``(i) the expected net tax benefits with respect to the 
     leased property shall not include the benefits of--

       ``(I) depreciation,
       ``(II) any tax credit, or
       ``(III) any other deduction as provided in guidance by the 
     Secretary, and

       ``(ii) 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 the date of 
     the enactment of this Act.

     SEC. 302. ACCURACY-RELATED PENALTY FOR LISTED TRANSACTIONS 
                   AND OTHER POTENTIALLY ABUSIVE TAX SHELTERS 
                   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 POTENTIALLY 
                   ABUSIVE TAX SHELTER.

       ``(a) Imposition of Penalty.--If a taxpayer has a 
     potentially abusive tax shelter 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) Potentially Abusive Tax Shelter Understatement.--For 
     purposes of this section--
       ``(1) In general.--The term `potentially abusive tax 
     shelter 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 potentially abusive tax shelter (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 potentially abusive tax shelter 
     understatement with respect to which the requirement of 
     section 6664(d)(2)(A) is not met.
       ``(2) Rules applicable to assertion and compromise of 
     penalty.--
       ``(A) In general.--Only upon the approval by the Chief 
     Counsel for the Internal Revenue Service or the Chief 
     Counsel's delegate at the national office of the Internal 
     Revenue Service may a penalty to which paragraph (1) applies 
     be included in a 1st letter of proposed deficiency which 
     allows the taxpayer an opportunity for administrative review 
     in the Internal Revenue Service Office of Appeals. If such a 
     letter is provided to the taxpayer, only the Commissioner of 
     Internal Revenue may compromise all or any portion of such 
     penalty.
       ``(B) Applicable rules.--The rules of paragraphs (2), (3), 
     (4), and (5) of section 6707A(d) shall apply for purposes of 
     subparagraph (A).
       ``(d) Definitions of Potentially Abusive Tax Shelter and 
     Listed Transaction.--For purposes of this section, the terms 
     `potentially abusive tax shelter' 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 potentially abusive tax shelter 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 potentially abusive tax 
     shelter 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 potentially abusive tax shelter 
     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 potentially 
     abusive tax shelter understatement or noneconomic substance 
     transaction understatement if the amendment or supplement is 
     filed after the earlier of the date the taxpayer is first 
     contacted by the Secretary regarding the examination of the 
     return or such other date as is specified by the Secretary.
       ``(4) Noneconomic substance transaction understatement.--
     For purposes of this subsection, the term `noneconomic 
     substance transaction understatement' has the meaning given 
     such term by section 6662B(c).
       ``(5) Cross reference.--

  ``For reporting of section 6662A(c) penalty to the Securities and 
Exchange Commission, see section 6707A(e).''.
       (b) Determination of Other Understatements.--Subparagraph 
     (A) of section 6662(d)(2) is amended by adding at the end the 
     following flush sentence:

     ``The excess under the preceding sentence shall be determined 
     without regard to items to which section 6662A applies and 
     without regard to items with respect to which a penalty is 
     imposed by section 6662B.''.
       (c) Reasonable Cause Exception.--
       (1) In general.--Section 6664 is amended by adding at the 
     end the following new subsection:
       ``(d) Reasonable Cause Exception for Potentially Abusive 
     Tax Shelter Understatements.--
       ``(1) In general.--No penalty shall be imposed under 
     section 6662A with respect to any portion of a potentially 
     abusive tax shelter 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 
     potentially abusive tax shelter 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

[[Page S2789]]

     (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 disqualifying 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 potentially abusive tax shelter.''.

       (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. 303. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO 
                   TRANSACTIONS LACKING ECONOMIC SUBSTANCE, ETC.

       (a) In General.--Subchapter A of chapter 68, as amended by 
     section 302, 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 a 
     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 information affecting the tax treatment 
     of the item is 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 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 attributable to a noneconomic substance 
     transaction 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 
     attributable to a noneconomic substance transaction (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) Noneconomic substance transaction.--The term 
     `noneconomic substance transaction' means any transaction 
     if--
       ``(A) there is a lack of economic substance (within the 
     meaning of section 7701(n)(1)) for the transaction giving 
     rise to the claimed benefit or the transaction was not 
     respected under section 7701(n)(2), or
       ``(B) the transaction fails to meet the requirements of any 
     similar rule of law.
       ``(d) Rules Applicable To Compromise of Penalty.--
       ``(1) In general.--If the 1st letter of proposed deficiency 
     which allows the taxpayer an opportunity for administrative 
     review in the Internal Revenue Service Office of Appeals has 
     been sent with respect to a penalty to which this section 
     applies, only the Commissioner of Internal Revenue may 
     compromise all or any portion of such penalty.
       ``(2) 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 is required to pay a penalty under this section 
     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) applies.
       ``(f) 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 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 noneconomic substance 
     transaction understatements.

[[Page S2790]]

       ``(2) Coordination with other penalties.--
       ``(A) In general.--Except as otherwise provided in 
     subparagraph (C), the penalty imposed by this section shall 
     be in addition to any other penalty imposed by this title.
       ``(B) Application of fraud penalty.--References to an 
     underpayment in section 6663 shall be treated as including 
     references to a noneconomic substance transaction 
     understatement.
       ``(C) No double penalty.--This section shall not apply to 
     any portion of an understatement on which a penalty is 
     imposed under section 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 noneconomic 
     substance transaction understatement if the amendment or 
     supplement is filed after the earlier of the date the 
     taxpayer is first contacted by the Secretary regarding the 
     examination of the return or such other date as is specified 
     by the Secretary.''.
       (b) Clerical Amendment.--The table of sections for part II 
     of subchapter A of chapter 68, as amended by section 302, is 
     amended by inserting after the item relating to section 6662 
     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 after the date of the 
     enactment of this Act.

     SEC. 304. DENIAL OF DEDUCTION FOR INTEREST ON UNDERPAYMENTS 
                   ATTRIBUTABLE TO 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 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 any 
     noneconomic substance transaction understatement (as defined 
     in section 6662A(c)(1)).''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to transactions in taxable years beginning after 
     the date of the enactment of this Act.

              TITLE IV--DETERRING UNCOOPERATIVE TAX HAVENS

     SEC. 401. DISCLOSING PAYMENTS TO PERSONS IN UNCOOPERATIVE TAX 
                   HAVENS.

       (a) In General.--Subpart A of part III of subchapter A of 
     chapter 61 is amended by inserting after section 6038C the 
     following new section:

     ``SEC. 6038D. DETERRING UNCOOPERATIVE TAX HAVENS THROUGH 
                   LISTING AND REPORTING REQUIREMENTS.

       ``(a) In General.--Each United States person who transfers 
     money or other property directly or indirectly to any 
     uncooperative tax haven, to any financial institution 
     licensed by or operating in any uncooperative tax haven, or 
     to any person who is a resident of any uncooperative tax 
     haven shall furnish to the Secretary, at such time and in 
     such manner as the Secretary shall by regulation prescribe, 
     such information with respect to such transfer as the 
     Secretary may require.
       ``(b) Exceptions.--Subsection (a) shall not apply to a 
     transfer by a United States person if the amount of money 
     (and the fair market value of property) transferred is less 
     than $10,000. Related transfers shall be treated as 1 
     transfer for purposes of this subsection.
       ``(c) Uncooperative Tax Haven.--For purposes of this 
     section--
       ``(1) In general.--The term `uncooperative tax haven' means 
     any foreign jurisdiction which is identified on a list 
     maintained by the Secretary under paragraph (2) as being a 
     jurisdiction--
       ``(A) which imposes no or nominal taxation either generally 
     or on specified classes of income, and
       ``(B) has corporate, business, bank, or tax secrecy or 
     confidentiality rules and practices, or has ineffective 
     information exchange practices which, in the judgment of the 
     Secretary, effectively limit or restrict the ability of the 
     United States to obtain information relevant to the 
     enforcement of this title.
       ``(2) Maintenance of list.--Not later than November 1 of 
     each calendar year, the Secretary shall issue a list of 
     foreign jurisdictions which the Secretary determines qualify 
     as uncooperative tax havens under paragraph (1).
       ``(3) Ineffective information exchange practices.--For 
     purposes of paragraph (1), a jurisdiction shall be deemed to 
     have ineffective information exchange practices if the 
     Secretary determines that during any taxable year ending in 
     the 12-month period preceding the issuance of the list under 
     paragraph (2)--
       ``(A) the exchange of information between the United States 
     and such jurisdiction was inadequate to prevent evasion or 
     avoidance of United States income tax by United States 
     persons or to enable the United States effectively to enforce 
     this title, or
       ``(B) such jurisdiction was identified by an 
     intergovernmental group or organization of which the United 
     States is a member as uncooperative with international tax 
     enforcement or information exchange and the United States 
     concurs in the determination.
       ``(d) Penalty for Failure To File Information.--If a United 
     States person fails to furnish the information required by 
     subsection (a) with respect to any transfer within the time 
     prescribed therefor (including extensions), such United 
     States person shall pay (upon notice and demand by the 
     Secretary and in the same manner as tax) an amount equal to 
     20 percent of the amount of such transfer.
       ``(e) Simplified Reporting.--The Secretary may by 
     regulations provide for simplified reporting under this 
     section for United States persons making large volumes of 
     similar payments.
       ``(f) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this section.''.
       (b) Clerical Amendment.--The table of sections for such 
     subpart A is amended by inserting after the item relating to 
     section 6038C the following new item:

``Sec. 6038D. Deterring uncooperative tax havens through listing and 
              reporting requirements.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to transfers after the date which is 180 days 
     after the date of the enactment of this Act.

     SEC. 402. DETERRING UNCOOPERATIVE TAX HAVENS BY RESTRICTING 
                   ALLOWABLE TAX BENEFITS.

       (a) Limitation on Deferral.--
       (1) In general.--Subsection (a) of section 952 (defining 
     subpart F income) is amended by striking ``and'' at the end 
     of paragraph (4), by striking the period at the end of 
     paragraph (5) and inserting ``, and'', and by inserting after 
     paragraph (5) the following new paragraph:
       ``(6) an amount equal to the applicable fraction (as 
     defined in subsection (e)) of the income of such corporation 
     other than income which--
       ``(A) is attributable to earnings and profits of the 
     foreign corporation included in the gross income of a United 
     States person under section 951 (other than by reason of this 
     paragraph or paragraph (3)(A)(i)), or
       ``(B) is described in subsection (b).''.
       (2) Applicable fraction.--Section 952 is amended by adding 
     at the end the following new subsection:
       ``(e) Identified Tax Haven Income Which is Subpart F 
     Income.--
       ``(1) In general.--For purposes of subsection (a)(6), the 
     term `applicable fraction' means the fraction--
       ``(A) the numerator of which is the aggregate identified 
     tax haven income for the taxable year, and
       ``(B) the denominator of which is the aggregate income for 
     the taxable year which is from sources outside the United 
     States.
       ``(2) Identified tax haven income.--For purposes of 
     paragraph (1), the term `identified tax haven income' means 
     income for the taxable year which is attributable to a 
     foreign jurisdiction for any period during which such 
     jurisdiction has been identified as an uncooperative tax 
     haven under section 6038D(c).
       ``(3) Regulations.--The Secretary shall prescribe 
     regulations similar to the regulations issued under section 
     999(c) to carry out the purposes of this subsection.''.
       (b) Denial of Foreign Tax Credit.--Section 901 (relating to 
     taxes of foreign countries and of possessions of United 
     States) is amended by redesignating subsection (l) as 
     subsection (m) and by inserting after subsection (k) the 
     following new subsection:
       ``(l) Reduction of Foreign Tax Credit, Etc., for Identified 
     Tax Haven Income.--
       ``(1) In general.--Notwithstanding any other provision of 
     this part--
       ``(A) no credit shall be allowed under subsection (a) for 
     any income, war profits, or excess profits taxes paid or 
     accrued (or deemed paid under section 902 or 960) to any 
     foreign jurisdiction if such taxes are with respect to income 
     attributable to a period during which such jurisdiction has 
     been identified as an uncooperative tax haven under section 
     6038D(c), and
       ``(B) subsections (a), (b), (c), and (d) of section 904 and 
     sections 902 and 960 shall be applied separately with respect 
     to all income of a taxpayer attributable to periods described 
     in subparagraph (A) with respect to all such jurisdictions.
       ``(2) Taxes allowed as a deduction, etc.--Sections 275 and 
     78 shall not apply to any tax which is not allowable as a 
     credit under subsection (a) by reason of this subsection.
       ``(3) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this subsection, including regulations which 
     treat income paid through 1 or more entities as derived from 
     a foreign jurisdiction to which this subsection applies if 
     such income was, without regard to such entities, derived 
     from such jurisdiction.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.
                                 ______
                                 
      By Ms. COLLINS (for herself, Mr. Bayh, Mrs. Dole, and Mr. Graham 
        of South Carolina):
  S. 2212. A bill to amend title VII of the Tariff Act of 1930 to 
provide that the provisions relating to countervailing duties apply to 
nonmarket economy countries; to the Committee on Finance.

[[Page S2791]]

  Ms. COLLINS. Mr. President, Our Nation's manufacturers can compete 
against the best in the world, but they cannot compete against nations 
that provide huge subsidies and other unfair advantages to their 
producers. I hear from manufacturers in my State time and time again 
whose efforts to compete successfully in the global economy simply 
cannot overcome the practices of illegal pricing and subsidies of 
nations such as China. The results of these unfair practices are lost 
jobs, shuttered factories, and decimated communities.
  Our Nation's trade remedy laws are intended to give American 
industries and their employees relief from the effects of illegal trade 
practices. Yet, while U.S. anti-dumping laws can be currently applied 
to non-market economies, countervailing duty laws cannot. It is time 
that this was changed.
  This is why I am introducing the ``Stopping Overseas Subsidies Act.'' 
This bill revises current trade remedy laws to ensure that U.S. 
countervailing duty laws apply to imports from non-market economies. It 
is simply not fair to prevent U.S. industries from seeking redress from 
these unfair trade practices because our trade remedy laws are 
outdated.
  Over the past two decades, there have been significant economic 
changes in many of the countries classified as non-market economies. 
This is particularly true in China, one of our largest trading partners 
and the country with which the United States currently runs its largest 
trade deficit.
  At the time our Nation's countervailing duty laws were approved in 
1979, it was impracticable to apply these laws to China. In 1979, 
China's economy was still centrally planned, and most of its economic 
output was directed and controlled by the state, which set production 
goals, controlled prices, and allocated the country's resources. When 
an entire economy is controlled by the government, it is difficult, if 
not impossible, to determine what defines a government subsidy that 
causes harm to U.S. industries.
  But beginning in the early 1980's and continuing today, China has 
undertaken major economic reforms. Today, China's economy is a far cry 
from being completely state-controlled. Government price controls on a 
wide range of products have been eliminated. Many enterprises and even 
entire industries have been allowed to operate and compete in an 
economic system that has elements of a free market. Many coastal 
regions and coastal cities in China have been designated as so-called 
``open'' cities and development zones, where there is a free market and 
tax and trade incentives are offered to attract foreign investment. 
And, of course, china has taken steps toward fully integrating into the 
global trading system by joining to the World Trade Organization and by 
working toward the establishment of a modern commercial, financial, 
legal, and regulatory infrastructure.
  The problem is not China's economic liberalization and modernization. 
The problem is this: now that China has the capacity to be a key 
international economic player, the country has repeatedly refused to 
comply with standard international trading rules and practices. And 
these violations include the use of subsidies and other economic 
incentives that are designed to give its producers an unfair 
competitive advantage.
  The most glaringly obvious subsidy comes in the form of currency 
manipulation. By keeping the Chinese yuan pegged to the U.S. dollar at 
artificially low levels, the Chinese undervalue the prices of their 
exports. Not only does this practice provide their producers with a 
price advantage, but also it violates the International Monetary Fund 
and WTO rules. The Chinese government also reimburses many enterprises 
for their operating losses and provides loans to uncreditworthy 
companies.
  Currently, U.S. industries have no direct recourse to combat these 
unfair practices. They instead must rely upon government-to-government 
negotiations or the dispute settlement processes of international 
organizations such as the WTO. While these channels might eventually 
lead to relief, it usually takes years to see results--and by that 
time, that industry could already be decimated.
  Mr. President, unfair market conditions cannot continue to cause our 
manufacturers to hemorrhage jobs. No State understands this more than 
my home State of Maine. According to a study by the National 
Association of Manufacturers, on a percentage basis, Maine has lost 
more manufacturing jobs in the past three years than any other State.
  There are many reasons for manufacturing job losses, including heavy 
tax and regulatory burdens. This is why I recently introduced a bill 
that would provide a variety of tax incentives for our Nation's 
manufacturers. However, without a level international playing field, 
tax reductions will not be enough to stop the flight of U.S. 
manufacturing jobs.
  Industries across Maine that produce products ranging from paper to 
footwear to furniture are being harmed by unfair trade practices, and 
it is time that we put a stop to it. I ask you to join me in supporting 
the SOS bill to ensure that all countries are held accountable for 
their trade practices.
                                 ______
                                 
      By Mr. ROCKEFELLER:
  S. 2213. A bill to amend part A of title IV of the Social Security 
Act to require the Secretary of Health and Human Services to conduct 
research on indicators of child well-being; to the Committee on 
Finance.
  Mr. ROCKEFELLER. Mr. President, I am pleased to introduce legislation 
today designed to enhance child well-being in every State by collecting 
data on a State-by-State basis to provide information to advocates and 
policy makers about the well-being of children. My hope is that this 
legislation could be incorporated into a welfare reform reauthorization 
package. I believe that the Senate should reauthorize our welfare 
program, known as Temporary Assistance to Needy Families (TANF), and we 
should do it soon. But when we reauthorize TANF we must significantly 
invest in child care which is essential for parents to move from 
welfare to work, and to be successful on the job once they leave the 
official welfare rolls.
  In 1996 this body took a bold step forward in reforming welfare. The 
driving force behind this reform was to promote work and self-
sufficiency for families and to provide flexibility to States to 
achieve these goals.
  States have used this flexibility to design different programs that 
work better for families who rely on them. Because of vast variation 
among State programs, there is an obvious need for research on child 
well-being for each State. We currently use the Survey of Income and 
Program Participation (SIPP) to evaluate the progress of welfare. It is 
an important national longitudinal study designed to provide rich, 
detailed data; the kinds of data most useful to academic researchers. 
It does not, however, provide States with good, timely data to help 
them more effectively accomplish the goals set forth in welfare reform.
  This bill, the State Child Well Being Research Act of 2004, is 
intended to fill this information gap by collecting timely, State-
specific data that can be used by policy-makers, researchers, and child 
advocates to assess the well being of children. It would require that a 
survey examine the physical and emotional health of children, 
adequately represent the experiences of families in individual States, 
be consistent across States, be collected annually, articulate results 
in easy to understand terms, and focus on low-income children and 
families.
  The proposed legislation will provide data for all States, including 
small rural States like West Virginia. Further, this bill avoids some 
of the other problems that plague the current system by making data 
files easier to use and more readily available. As a result, the 
information will be more useful for policy-makers managing welfare 
reform and programs for children and families. When we reauthorize 
welfare reform, it will be essential for us to make a modest investment 
in research for every State.
  Several private charitable foundations, including the Annie E. Casey, 
John D. and Catherine T. MacArthur, and McKnight foundations have 
written Chairman Grassley and Senator Baucus in support of such 
research. These foundations have offered to form a partnership to 
provide outreach and support and to guarantee that the data

[[Page S2792]]

collected would be broadly disseminated. This type of public-private 
partnership helps to leverage additional resources for children and 
families and increases the study's impact.
  One of the most important ways that Congress can demonstrate its 
commitment to welfare reform and attempt to help States reach the goals 
outlined in 1996 is to incorporate a strong research component in the 
welfare reform reauthorization bill. Since each State has used its 
flexibility to creative innovative welfare reform programs, and many 
are quite different, we need State-by-State data on basic aspects of 
child well-being. I hope that my colleagues will support this bill so 
that we can give States the information they need to monitor and 
improve child well-being.
                                 ______
                                 
      By Mr. BURNS:
  S. 2214. A bill to designate the facility of the United States Postal 
Service located at 3150 Great Northern Avenue in Missoula, Montana, as 
the ``Mike Mansfield Post Office''; to the Committee on Governmental 
Affairs.
  Mr. BURNS. Mr. President, it is my honor to present this bill to 
designate the United States Postal Service facility at 3150 Great 
Northern Avenue in Missoula, MT as the ``Mike Mansfield Post Office.''
  I rise today not just as a Republican honoring a Democrat, but rather 
as a Montanan recognizing the most beloved political figure of our 
history. Mr. Mansfield holds a special place in the hearts of all 
Montanans, a man whose wisdom, humility, and decency have been sorely 
missed.
  Michael Joseph Mansfield was born in New York City on March 16, 1903. 
Following the death of his mother at age 7, Mike was sent to Great 
Falls, MT to live with an aunt and uncle.
  As World War I developed, the 14-year-old Mansfield saw an 
opportunity to serve his country, and lied about his age in order to 
join the U.S. Navy. He eventually enlisted in the Army and Marine Corps 
as well. During this service he was stationed in the Philippines and 
China, a time that marked the beginning of a lifelong love for the 
continent, its people, and their culture.
  After being honorably discharged from the Marines, Mike Mansfield 
returned to Montana as a 19-year-old lacking a high school education. 
He found a job in the Butte mines, shoveling rock as a `mucker.' It was 
during his time in Butte that Mr. Mansfield met his lifetime partner 
and companion, Maureen Hayes. It was Maureen who saw in Mike his 
enormous potential and convinced him to go to college. With her 
financial support, Mansfield obtained his high school equivalency, 
B.A., and M.A. from the Montana State University, now the University of 
Montana. Mr. Mansfield taught Latin American and East Asian history for 
8 years at the University, retaining lifelong tenure as Professor of 
History.
  Mr. Mansfield began his extraordinary public service career in 1942 
when he was elected to the U.S. House of Representatives. He served 
four more terms before being elected to the Senate in 1952. Within 4 
years, he was elected majority whip and in 1961 he was chosen as the 
Senate Majority Leader. Mike would go on to hold this position for 17 
years, longer than any other man in the history of this great body.
  As Senate Majority Leader, Mr. Mansfield is remembered as a truly 
unique figure, a pragmatist whose sensibility, practicality, and 
unrelenting pursuit of results almost always transcended ideological 
concerns. More Senate leader than Majority Leader, Mansfield preferred 
not to draw a metaphorical line in the sand. Instead, he sought to 
guide the body as a whole to a fair and agreeable determination.
  In 1977, upon his retirement from the Senate, Mr. Mansfield was 
appointed Ambassador to Japan by President Carter; a post he held 
through 1989. This position offered Mike a chance to utilize his vast 
experience in Asian affairs, in a region that he truly loved. In the 
spirit of this admiration, the Maureen and Mike Mansfield Foundation 
continues to encourage dialogue and cooperation between the United 
States and Asia.
  Ladies and gentlemen of the Senate, this dedication of a postal 
facility is but a small token of gratitude for the many years of 
exceptional service given to this body, this Nation, and Montana by 
this wonderful man. The ever modest and humble Mansfield would have 
shied at such a tribute; we might even expect him to offer the names of 
people more deserving of the honor than he. In truth, I can think of no 
one more deserving of praise than Mike Mansfield, a true hero of the 
Senate.
                                 ______
                                 
      By Mr. REED (for himself, Mr. DeWine, Mrs. Clinton, and Mr. 
        Smith):
  S. 2215. A bill to amend the Higher Education Act of 1965 to provide 
funds for campus mental and behavioral health service centers; to the 
Committee on Health, Education, Labor, and Pensions.
  Mr. REED. Mr. President, I rise today to introduce the Campus Care 
and Counseling Act along with my colleague from Ohio, Senator DeWine, 
my colleague from Oregon, Senator Smith and my colleague from New York, 
Senator Clinton. The recent rash of suicides on college campuses has 
highlighted a mental health crisis. Just this past week, Diana Chien, a 
19 year old student at New York University ended her life by jumping 
off a building. Our own colleagues, the Senator from Oregon, suffered a 
tragic loss when his son, Garret, took his life last September. 
Suicides take the lives of over 4,000 children and young adults 
annually. It is now the third leading cause of death among 10-24 year 
olds. The rate of suicide has tripled from 1952 to 1995. How many more 
of our children will be lost before we take action to prevent their 
untimely demise? When will we start to say to them that there is an 
answer; that suicide is not the way out; that we can help them feel 
better; that they can live happier and healthier lives?
  College is a time of great intellectual development--and it is also a 
time of exponential personal and interpersonal growth and change. When 
children go off to college, we need to be sure that they are going to a 
place that will help them reach their boundless potential. We also need 
to make sure that it will also support them through the transition to 
adulthood and during their greatest hour of need. Additionally, many 
more adults are going to college, and they too face challenges, 
particularly in balancing school, work, and family responsibilities. We 
can and should do more to address the significant lack in this area.
  A Chronicle of Higher Education survey found that rates for 
depression in college freshmen have nearly doubled from 8.2 percent to 
16.3 percent. Without treatment, the Chronicle reports that ``depressed 
adolescents are at risk for school failure, social isolation, 
promiscuity, self-medication with drugs and alcohol, and suicide.'' A 
2003 Gallagher's Survey of Counseling Center Directors found that 85 
percent of college counseling centers are reporting an increase in the 
number of students in need of services, 81 percent were concerned about 
increasing numbers of students with severe psychological problems, 67 
percent reported a need for more psychiatric services, and 6.3 percent 
reported problems with growing demand for services without an 
appropriate increase in resources. Clearly, many students with serious 
needs do not have access to psychiatric or other mental and behavioral 
health services.
  This is an issue that my office has been working on with the American 
Psychological Association since 2002. In light of the forthcoming 
debate on the Higher Education Act Reauthorization and the recent spate 
of college campus suicides, I am introducing the ``Campus Care and 
Counseling Act.'' This bill amends the Higher Education Act to 
authorize $10 million in peer-reviewed competitive grants to 
institutions of higher education to increase access and enhance mental 
and behavioral health services for our college students. Grants may be 
used for the prevention, screening, early intervention, assessment, 
treatment, management, and education activities related to mental and 
behavioral health problems. Taking into consideration that education 
creates awareness, these funds may also be used to educate parents, to 
hire staff, and to expand training. To address the stigma of mental 
illness, programs funded through this grant will need to focus their 
efforts on developing outreach strategies to reach those students most 
in need of services.

[[Page S2793]]

  My colleagues in the Senate, this is an important bipartisan measure 
which will help to ensure that our nation's college students will have 
access to quality mental and behavioral health care so that they 
receive the help needed to not only survive through their difficult 
times in college, but also to excel and accomplish all that is within 
their reach. I want to also thank the American Psychiatric Association 
and other organizations for their assistance in shaping this 
legislation. I urge my colleagues to join myself and Senators DeWine 
and Smith in enacting this important legislation.
  Mr. President, I ask unanimous consent that the text of this 
legislation be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2215

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Campus Care and Counseling 
     Act''.

     SEC. 2. FINDINGS.

       Congress finds the following:
       (1) In a recent report, a startling 85 percent of college 
     counseling centers revealed an increase in the number of 
     students they see with psychological problems. Furthermore, 
     the American College Health Association found that 61 percent 
     of college students reported feeling hopeless, 45 percent 
     said they felt so depressed they could barely function, and 9 
     percent felt suicidal.
       (2) There is clear evidence of an increased incidence of 
     depression among college students. According to a survey 
     described in the Chronicle of Higher Education (February 1, 
     2002), depression among freshmen has nearly doubled (from 8.2 
     percent to 16.3 percent). Without treatment, researchers 
     recently noted that ``depressed adolescents are at risk for 
     school failure, social isolation, promiscuity, self 
     medication with drugs and alcohol, and suicide--now the third 
     leading cause of death among 10-24 year olds.''.
       (3) Researchers who conducted the study ``Changes in 
     Counseling Center Client Problems Across 13 Years'' (1989-
     2001) at Kansas State University stated that ``students are 
     experiencing more stress, more anxiety, more depression than 
     they were a decade ago.'' (The Chronicle of Higher Education, 
     February 14, 2003).
       (4) According to the 2001 National Household Survey on Drug 
     Abuse, 20 percent of full-time undergraduate college students 
     use illicit drugs.
       (5) The 2001 National Household Survey on Drug Abuse also 
     reported that 18.4 percent of adults aged 18 to 24 are 
     dependent on or abusing illicit drugs or alcohol. In 
     addition, the study found that ``serious mental illness is 
     highly correlated with substance dependence or abuse. Among 
     adults with serious mental illness in 2001, 20.3 percent were 
     dependent on or abused alcohol or illicit drugs, while the 
     rate among adults without serious mental illness was only 6.3 
     percent.''.
       (6) A 2003 Gallagher's Survey of Counseling Center 
     Directors found that 81 percent were concerned about the 
     increasing number of students with more serious psychological 
     problems, 67 percent reported a need for more psychiatric 
     services, and 63 percent reported problems with growing 
     demand for services without an appropriate increase in 
     resources.
       (7) The International Association of Counseling Services 
     accreditation standards recommend 1 counselor per 1,000 to 
     1,500 students. According to the 2003 Gallagher's Survey of 
     Counseling Center Directors, the ratio of counselors to 
     students is as high as 1 counselor per 2,400 students at 
     institutions of higher education with more than 15,000 
     students.

     SEC. 3. MENTAL AND BEHAVIORAL HEALTH SERVICES ON CAMPUS.

       Part B of title I of the Higher Education Act of 1965 (20 
     U.S.C. 1011 et seq.) is amended by inserting after section 
     120 the following:

     ``SEC. 120A. MENTAL AND BEHAVIORAL HEALTH SERVICES ON CAMPUS.

       ``(a) Purpose.--It is the purpose of this section to 
     increase access to, and enhance the range of, mental and 
     behavioral health services for students so as to ensure that 
     college students have the support necessary to successfully 
     complete their studies.
       ``(b) Program Authorized.--From funds appropriated under 
     subsection (j), the Secretary shall award competitive grants 
     to institutions of higher education to create or expand 
     mental and behavioral health services to students at such 
     institutions, to provide such services, and to develop best 
     practices for the delivery of such services. Such grants 
     shall, subject to the availability of such appropriations, be 
     for a period of 3 years.
       ``(c) Eligible Grant Recipients.--Any institution of higher 
     education that seeks to provide, or provides, mental and 
     behavioral health services to students is eligible to apply, 
     on behalf of such institution's treatment provider, for a 
     grant under this section. Treatment providers may include 
     entities such as--
       ``(1) college counseling centers;
       ``(2) college and university psychological service centers;
       ``(3) mental health centers;
       ``(4) psychology training clinics;
       ``(5) institution of higher education supported, evidence-
     based, mental health and substance abuse screening programs; 
     and
       ``(6) any other entity that provides mental and behavioral 
     health services to students at an institution of higher 
     education.
       ``(d) Applications.--Each institution of higher education 
     seeking to obtain a grant under this section shall submit an 
     application to the Secretary. Each such application shall 
     include--
       ``(1) a description of identified mental and behavioral 
     health needs of students at the institution of higher 
     education;
       ``(2) a description of currently available Federal, State, 
     local, private, and institutional resources to address the 
     needs described in paragraph (1) at the institution of higher 
     education;
       ``(3) an outline of program objectives and anticipated 
     program outcomes, including an explanation of how the 
     treatment provider at the institution of higher education 
     will coordinate activities under this section with existing 
     programs and services;
       ``(4) the anticipated impact of funds provided under this 
     section in improving the mental and behavioral health of 
     students attending the institution of higher education;
       ``(5) outreach strategies, including ways in which the 
     treatment provider at the institution of higher education 
     proposes to reach students, promote access to services, and 
     address the range of needs of students;
       ``(6) a proposed plan for reaching those students most in 
     need of services;
       ``(7) a plan to evaluate program outcomes and assess the 
     services provided with funds under this section; and
       ``(8) such additional information as is required by the 
     Secretary.
       ``(e) Peer Review of Applications.--
       ``(1) Panel.--The Secretary shall provide the applications 
     submitted under this section to a peer review panel for 
     evaluation. With respect to each application, the peer review 
     panel shall recommend the application for funding or for 
     disapproval.
       ``(2) Composition of Panel.--
       ``(A) In general.--The peer review panel shall be composed 
     of--
       ``(i) experts who are competent, by virtue of their 
     training, expertise, or experience, to evaluate applications 
     for grants under this section; and
       ``(ii) mental and behavioral health professionals and 
     higher education professionals.
       ``(B) Non-federal government employees.--A majority of the 
     members of the peer review panel shall be individuals who are 
     not employees of the Federal Government.
       ``(3) Evaluation and Priority.--The peer review panel 
     shall--
       ``(A) evaluate the applicant's proposal to improve current 
     and future mental and behavioral health at the institution of 
     higher education; and
       ``(B) give priority in recommending applications for 
     funding to proposals that--
       ``(i) provide direct service to students, as described in 
     subsection (f)(1);
       ``(ii) improve the mental and behavioral health of students 
     at institutions of higher education with a counselor to 
     student ratio greater than 1 to 1,500; or
       ``(iii) will best serve students based on the projected 
     impact of the proposal on mental and behavioral health at the 
     institution of higher education as well as the level of 
     coordination of other resources to aid in the improvement of 
     mental and behavioral health.
       ``(f) Use of Funds.--Funds provided by a grant under this 
     section may be used for 1 or more of the following 
     activities:
       ``(1) Prevention, screening, early intervention, 
     assessment, treatment, management, and education of mental 
     and behavioral health problems of students enrolled at the 
     institution of higher education.
       ``(2) Education of families to increase awareness of 
     potential mental and behavioral health issues of students 
     enrolled at the institution of higher education.
       ``(3) Hiring appropriately trained staff, including 
     administrative staff.
       ``(4) Strengthening and expanding mental and behavioral 
     health training opportunities in internship and residency 
     programs, such as psychology doctoral and post-doctoral 
     training.
       ``(5) Supporting the use of evidence-based and emerging 
     best practices.
       ``(6) Evaluating and disseminating outcomes of mental and 
     behavioral health services so as to provide information and 
     training to other mental and behavioral health entities 
     around the Nation that serve students enrolled in 
     institutions of higher education.
       ``(g) Additional Required Elements.--Each institution of 
     higher education that receives a grant under this section 
     shall--
       ``(1) provide annual reports to the Secretary describing 
     the use of funds, the program's objectives, and how the 
     objectives were met, including a description of program 
     outcomes;
       ``(2) perform such additional evaluation as the Secretary 
     may require, which may include measures such as--
       ``(A) increase in range of services provided;
       ``(B) increase in the quality of services provided;
       ``(C) increase in access to services;
       ``(D) college continuation rates;
       ``(E) decrease in college dropout rates; and
       ``(F) increase in college graduation rates; and

[[Page S2794]]

       ``(3) coordinate such institution's program under this 
     section with other related efforts on campus by entities 
     concerned with the mental, health, and behavioral health 
     needs of students.
       ``(h) Supplement not Supplant.--Grant funds provided under 
     this section shall be used to supplement, and not supplant, 
     Federal and non-Federal funds available for carrying out the 
     activities described in this section.
       ``(i) Limitations.--
       ``(1) Percentage limitations.--Not more than--
       ``(A) 5 percent of grant funds received under this section 
     shall be used for administrative costs; and
       ``(B) 20 percent of grant funds received under this section 
     shall be used for training costs.
       ``(2) Prohibition on use for construction or renovation.--
     Grant funds received under this section shall not be used for 
     construction or renovation of facilities or buildings.
       ``(j) Authorization of Appropriations.--There are 
     authorized to be appropriated for grants under this section 
     $10,000,000 for fiscal year 2005 and such sums as may be 
     necessary for each of the 4 succeeding fiscal years.''.
                                 ______
                                 
      By Mr. FRIST:
  S. 2217. A bill to improve the health of health disparity 
populations; to the Committee on Finance.
  Mr. FRIST: Mr. President, today I am introducing additional 
legislation to address health disparities.
  On February 12th I joined with Senator Landrieu, Senator Cochran, 
Senator DeWine, Senator Bond and Senator Talent to introduce the 
``Closing the Health Care Gap Act of 2004.'' Today I am introducing 
similar legislation to that introduced several weeks ago with one 
significant addition. This additional provision directly addresses the 
problem of access to health insurance for low income Americans.
  We know that millions of Americans still experience disparities in 
health outcomes as a result of ethnicity, race, gender, or limited 
access to quality health care. For example, disparity populations 
exhibit poorer health outcomes and have higher rates of HIV/AIDS, 
diabetes, infant mortality, cancer, heart disease, and other illnesses. 
African Americans and Native Americans die younger than any other 
racial or ethnic group. African Americans and Native American babies 
die at significantly higher rates than the rest of the population. 
African Americans, Hispanic Americans and Native Americans are at least 
twice as likely to suffer from diabetes and experience serious 
complications from diabetes.
  These gaps are simply unacceptable. Every American deserves the best 
quality of health care possible, regardless of their race, ethnicity, 
gender, or where they live.
  There is a growing awareness on the national level of the existence 
and importance of the serious disparities in the quality of health care 
that many minority and underserved Americans receive. And this presents 
us with an important opportunity to move forward.
  The legislation we introduced on February 12th and the legislation I 
introduce today does this by focusing on these 5 key areas: expanding 
access to quality health care; strengthening national efforts and 
coordination; helping increase the diversity of health professionals; 
promoting more aggressive health professional education intended to 
reduce barriers to care; and enhancing research to identify sources of 
racial, ethnic, and geographic disparities and assess promising 
intervention strategies.
  However, the legislation I am introducing today goes farther. This 
legislation includes a provision based on President Bush's proposal to 
provide refundable health insurance tax credits to lower income 
Americans. I believe that the improved access to affordable medical 
care fostered by this tax credit will be yet one more critical 
component to the overall effort to reduce disparities in health care 
for America's vulnerable populations.
  My intention is to continue to build awareness of these health care 
disparities and thereby provide the basis for bipartisan efforts to 
fight and reduce them. I think today's bill introduction represents yet 
another key step in this process. It is my hope that, working together, 
members of this body can make substantial progress in reducing and 
eliminating disparities.
  Iask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2217

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Closing 
     the Health Care Gap Act of 2004''.
       (b) Table of contents.--The table of contents of this Act 
     is as follows:

Sec. 1. Short title; table of contents.
Sec. 2. Findings.

TITLE I--IMPROVED HEALTH CARE QUALITY AND EFFECTIVE DATA COLLECTION AND 
                                ANALYSIS

Sec. 101. Standardized measures of quality health care.
Sec. 102. Data collection.

            TITLE II--EXPANDED ACCESS TO QUALITY HEALTH CARE

              Subtitle A--Access, Awareness, and Outreach

Sec. 201. Access and awareness grants.
Sec. 202. Innovative outreach programs.

             Subtitle B--Refundable Health Insurance Credit

Sec. 211. Refundable health insurance costs credit.
Sec. 212. Advance payment of credit to issuers of qualified health 
              insurance.

  TITLE III--STRONG NATIONAL LEADERSHIP, COOPERATION, AND COORDINATION

Sec. 301. Office of Minority Health and Health Disparities.

       TITLE IV--PROFESSIONAL EDUCATION, AWARENESS, AND TRAINING

Sec. 401. Workforce diversity and training.
Sec. 402. Higher education technical amendments.
Sec. 403. Model cultural competency curriculum development.
Sec. 404. Internet cultural competency clearinghouse.

                       TITLE V--ENHANCED RESEARCH

Sec. 501. Agency for Healthcare Research and Quality.
Sec. 502. National Institutes of Health.

                   TITLE VI--MISCELLANEOUS PROVISIONS

Sec. 601. Definitions.

     SEC. 2. FINDINGS.

       Congress makes the following findings:
       (1) The overall health of Americans has dramatically 
     improved over the last century, and Americans are justifiably 
     proud of the great strides that have been made in the health 
     and medical sciences.
       (2) As medical science and technology have advanced at a 
     rapid pace, however, the health care delivery system has not 
     been able to provide consistently high quality care to all 
     Americans.
       (3) In particular, people of lower socioeconomic status, 
     racial and ethnic minorities, and medically underserved 
     populations have experienced poor health and challenges in 
     accessing high quality health care.
       (4) Recent studies have raised significant questions 
     regarding differences in clinical care provided to racial and 
     ethnic minorities and other health disparity populations. 
     These differences are often grouped together under the broad 
     heading of ``health disparities''.
       (5) Studies indicate that a gap exists between ideal health 
     care and the actual health care that some Americans receive.
       (6) Data collection, analysis, and reporting by race, 
     ethnicity, and primary language across federally supported 
     health programs are essential for identifying, understanding 
     the causes of, monitoring, and eventually eliminating health 
     disparities.
       (7) Current health related data collection and reporting 
     activities largely reflect the efforts of the Department of 
     Health and Human Services. Despite considerable efforts by 
     the Department, data collection efforts governing racial, 
     ethnic, and health disparity populations remain inconsistent 
     and inadequate. They often quantify disparities but shed 
     little light on their causes.
       (8) Many Americans, and particularly racial and ethnic 
     minorities and other health disparity populations, miss 
     opportunities for preventive medical care. Similarly, 
     management of chronic illnesses in these populations presents 
     unique challenges to the nation's health care system.
       (9) The largest numbers of the medically underserved are 
     white individuals, and many of them have the same health care 
     access problems as do members of minority groups. Nearly 
     22,000,000 white individuals live below the poverty line with 
     many living in nonmetropolitan, rural areas such as 
     Appalachia, where the high percentage of countries designated 
     as health professional shortage areas (47 percent) and the 
     high rate of poverty contribute to disparity outcomes. 
     However, there is a higher proportion of racial and ethnic 
     minorities in the United States represented among the 
     medically underserved.
       (10) While much research examines the question of racial 
     and ethnic differences in health care, less is known about 
     the magnitude and extent of differences in the quality of 
     health care related to nonsocioeconomic factors. Only 
     recently have scientists and quality improvement experts 
     begun to address the issue of how best to measure, track, and 
     improve quality of health care in diverse populations. 
     Additional research in order to understand the

[[Page S2795]]

     causes of disparities and develop effective approaches to 
     eliminate these gaps in health care quality will be 
     necessary.
       (11) There is a need to ensure appropriate representation 
     of racial and ethnic minorities, and other health disparity 
     populations, in the health care professions and in the fields 
     of biomedical, clinical, behavioral, and health services 
     research.
       (12) Preventable disparities in access to and quality of 
     health care are unacceptable. Health care delivered in the 
     United States should be care that is as safe, effective, 
     patient-centered, timely, efficient and equitable as 
     possible.

TITLE I--IMPROVED HEALTH CARE QUALITY AND EFFECTIVE DATA COLLECTION AND 
                                ANALYSIS

     SEC. 101. STANDARDIZED MEASURES OF QUALITY HEALTH CARE.

       (a) In General.--
       (1) Collaboration.--The Secretary of Health and Human 
     Services, the Secretary of Defense, the Secretary of Veterans 
     Affairs, the Director of the Indian Health Service, and the 
     Director of the Office of Personnel Management (referred to 
     in this section as the ``Secretaries'') shall work 
     collaboratively to establish uniform, standardized health 
     care quality measures across all Federal Government health 
     programs. Such measures shall be designed to assess quality 
     improvement efforts with regard to the safety, timeliness, 
     effectiveness, patient-centeredness, and efficiency of health 
     care delivered across all federally supported health care 
     delivery programs including those in which health care 
     services are delivered to health disparity populations.
       (2) Development of measures.--Relying on earlier work by 
     the Secretary of Health and Human Services or others 
     (including work such as the Healthy People 2010 or the IOM 
     Quality Chasm reports) and with an emphasis on health 
     conditions disproportionately affecting health disparity 
     populations and taking into account health literacy and 
     primary language and cultural factors, the Secretaries shall 
     develop standardized sets of quality measures for--
       (A) 5 common health conditions by not later than January 1, 
     2006; and
       (B) an additional 10 common health conditions by not later 
     than January 1, 2007.
       (3) Pilot testing.--Each federally administered health care 
     program may conduct a pilot test of the quality measures 
     developed under paragraph (2) that shall include a collection 
     of patient-level data and a public release of comparative 
     performance reports.
       (b) Public Reporting Requirements.--The Secretaries shall 
     work collaboratively to establish standardized public 
     reporting requirements for clinicians, institutional 
     providers, and health plans in each of the health programs 
     described in subsection (a).
       (c) Full Implementation.--The Secretaries shall work 
     collaboratively to prepare for the full implementation of all 
     standardized sets of quality measures and reporting systems 
     developed under subsections (a) and (b) by not later than 
     January 1, 2009.
       (d) Progress Report.--The Secretary of Health and Human 
     Services shall prepare an annual progress report that details 
     the collaborative efforts carried out under subsection (a).
       (e) Comparative Quality Reports.--Beginning on January 1, 
     2008, in order to make comparative quality information 
     available to health care consumers, including members of 
     health disparity populations, health professionals, public 
     health officials, researchers, and other appropriate 
     individuals and entities, the Secretaries shall provide for 
     the pooling and analysis of quality measures collected under 
     this section. Nothing in this section shall be construed as 
     modifying the privacy standards under the Health Insurance 
     Portability and Accountability Act of 1996 (Public Law 104-
     191).
       (f) Ongoing Evaluation of Use.--The Secretary of Health and 
     Human Services shall ensure the ongoing evaluation of the use 
     of the health care quality measures established under this 
     section.
       (g) Existing Activities.--Notwithstanding any other 
     provision of law, the standardized measures and reporting 
     activities described in this section shall replace, to the 
     extent practicable and appropriate, any existing measurement 
     and reporting activities currently utilized by federally 
     supported health care delivery programs.
       (h) Evaluation.--
       (1) Institute of Medicine.--
       (A) In general.--The Secretary of Health and Human Services 
     shall request the Institute of Medicine to conduct an 
     evaluation of the collaborative efforts of the Secretaries to 
     establish uniform, standardized health care quality measures 
     and reporting requirements for federally supported health 
     care delivery programs as required under this section.
       (B) Report.--Not later than 2 years after the date of 
     enactment of this Act, the Institute of Medicine shall submit 
     a report concerning the results of the evaluation under 
     subparagraph (A) to the Secretary.
       (2) Regulations.--
       (A) Proposed.--Not later than 18 months after the date on 
     which the report is submitted under paragraph (1)(B), the 
     Secretary shall publish proposed regulations regarding the 
     uniform, standardized health care quality measures and 
     reporting requirements described in this section.
       (B) Final regulations.--Not later than 3 years after the 
     date on which the report is submitted under paragraph (1)(B), 
     the Secretary shall publish final regulations regarding the 
     uniform, standardized health care quality measures and 
     reporting requirements described in this section.

     SEC. 102. DATA COLLECTION.

       (a) In General.--The Secretary of Health and Human Services 
     (referred to in this section as the ``Secretary'') shall--
       (1) ensure that data collected under the medicare program 
     under title XVIII of the Social Security Act (42 U.S.C. 1395 
     et seq.) are accurate by race, ethnicity, and primary 
     language and available for inclusion in the National Health 
     Disparities Report;
       (2) enforce State data collection and reporting by race, 
     ethnicity, and primary language for enrollees in the medicaid 
     program under title XIX of the Social Security Act (42 U.S.C. 
     1396 et seq.) and the State Children's Health Insurance 
     Program under title XXI of such Act (42 U.S.C. 1397aa et 
     seq.) and ensure that such data are available for inclusion 
     in the National Health Disparities Report;
       (3) ensure that ongoing and any new program initiatives--
       (A) collect and report data by race, ethnicity, and primary 
     language and provide technical assistance to promote 
     compliance;
       (B) address technological difficulties;
       (C) ensure privacy and confidentiality of data collected; 
     and
       (D) implement effective educational strategies;
       (4) expand educational programs to inform insurers, 
     providers, agencies and the public of the importance of data 
     collection by race, ethnicity, and primary language to 
     improving health care access and quality;
       (5) raise awareness that these data are critical for 
     achieving Healthy People 2010 goals and essential to the 
     nondiscrimination requirements of title VI of the Civil 
     Rights Act (42 U.S.C. 2000d et seq.); and
       (6) support research on existing best practices for data 
     collection.
       (b) Grants for Data Collection by Health Plans, Health 
     Centers, and Hospitals.--
       (1) In general.--The Secretary, acting through the Director 
     of the Agency for Healthcare Research and Quality, may 
     support or conduct not to exceed 20 demonstration programs to 
     enhance the collection, analysis, and reporting of the data 
     required under this section.
       (2) Eligibility.--To be eligible to receive a grant under 
     this section an entity shall--
       (A) be a health plan, federally qualified health center or 
     health center network, or hospital; and
       (B) prepare and submit to the Secretary an application at 
     such time, in such manner, and containing such as information 
     as the Secretary may require.
       (3) Use of funds.--A grantee shall use amounts received 
     under a grant under this subsection to--
       (A) collect, analyze, and report data by race, ethnicity, 
     or other health disparity category for patients served by the 
     grantee, including--
       (i) in the case of a hospital, emergency room patients and 
     patients served on an inpatient or outpatient basis;
       (ii) in the case of a health plan, data for enrollees; and
       (iii) in the case of a federally qualified health center or 
     health center network, primary care, specialty care, and 
     referrals;
       (B) provide analyses of racial, ethnic and other 
     disparities in health and health care, including specific 
     disease conditions, diagnostic and therapeutic procedures, or 
     outcomes;
       (C) improve health data collection and analysis for 
     additional population groups beyond the Office of Management 
     and Budget categories if such groups can be aggregated into 
     the minimum race and ethnicity categories;
       (D) develop mechanisms for sharing collected data, subject 
     to applicable privacy and confidentiality regulations;
       (E) develop educational programs to inform health insurance 
     issuers, health plans, health providers, health-related 
     agencies, patients, enrollees, and the general public that 
     data collection, analysis, and reporting by race, ethnicity, 
     and preferred language are legal and essential for 
     eliminating disparities in health and health care; and
       (F) ensure the evaluation of activities conducted under 
     this section.

            TITLE II--EXPANDED ACCESS TO QUALITY HEALTH CARE

              Subtitle A--Access, Awareness, and Outreach

     SEC. 201. ACCESS AND AWARENESS GRANTS.

       (a) Demonstration Projects.--The Secretary of Health and 
     Human Services (in this section referred to as the 
     ``Secretary'') may award contracts or competitive grants to 
     eligible entities to support demonstration projects designed 
     to improve the health and health care of health disparity 
     populations through improved access to health care, health 
     care navigation assistance, and health literacy education.
       (b) Eligible Entity Defined.--In this section the term 
     ``eligible entity'' means--
       (1) a hospital;
       (2) an academic institution;
       (3) a State health agency;
       (4) an Indian Health Service hospital or clinic, Indian 
     tribal health facility, or urban Indian facility;
       (5) a nonprofit organization including a faith-based 
     organization or consortia, to the extent that a grant awarded 
     to such an entity is consistent with the requirements of 
     section 1955 of the Public Health Service Act

[[Page S2796]]

     (42 U.S.C. 300x-65) relating to grant award to 
     nongovernmental entities;
       (6) a primary care practice-based research network as 
     defined by the Director of the Agency for Healthcare Research 
     and Quality;
       (7) a Federally qualified health center (as defined in 
     section 1905(l)(2)(B) of the Social Security Act (42 U.S.C. 
     1396d(l)(2)(B))); or
       (9) any other entity determined to be appropriate by the 
     Secretary.
       (c) Application.--An eligible entity seeking a grant under 
     this section shall submit an application to the Secretary at 
     such time, in such manner, and containing such information as 
     the Secretary may require, including assurances that the 
     eligible entity will--
       (1) target patient populations that are members of racial 
     and ethnic minority groups or health disparity populations 
     through specific outreach activities;
       (2) coordinate with appropriate community organizations and 
     include appropriate community participation in planning and 
     implementation of activities;
       (3) coordinate culturally competent and appropriate care;
       (4) include a plan to ensure that the entity will become 
     self-sustaining when funding under the grant terminates; and
       (5) include quality and outcomes performance measures to 
     evaluate the effectiveness of activities funded under this 
     section to ensure that the activities are meeting their 
     goals, and disseminate findings from such evaluations.
       (d) Priorities.--In awarding contracts and grants under 
     this section, the Secretary shall give priority to applicants 
     that intend to use amounts received under this section to 
     carry out all programs specified under subsection (e).
       (e) Use of Funds.--An eligible entity shall use amounts 
     received under this section to carry out programs that 
     involve at least 2 of the following:
       (1) Providing resources and guidance to individuals 
     regarding sources of health insurance coverage, as well as 
     information on how to obtain health coverage in the private 
     insurance market, through Federal and State programs, and 
     through other available coverage options.
       (2) Providing patient navigator services to help 
     individuals better utilize their health coverage by working 
     through the health system to obtain appropriate quality care, 
     including programs in which--
       (A) trained individuals (such as representatives from the 
     community, nurses, social workers, physicians, or patient 
     advocates) are assigned to act as contacts--
       (i) within the community; or
       (ii) within the health care system, to facilitate access to 
     health care services;
       (B) partnerships are created with community organizations 
     (which may include hospitals, federally qualified health 
     centers or health center networks, faith-based organizations, 
     primary care providers, home care, nonprofit organizations, 
     health plans, or other health providers determined 
     appropriate by the Secretary) to help facilitate access or to 
     improve the quality of care;
       (C) activities are conducted to coordinate care and 
     preventive services and referrals;
       (D) services are provided for translation, interpretation, 
     and other such linguistic services for patients with limited 
     English proficiency; or
       (E) an entity receiving a grant under this section 
     negotiates on behalf of the patient with relevant entities, 
     or provides referrals and guides the patient through the 
     mediation or arbitration process, to resolve issues that 
     impede access to care.
       (3) Promoting broad health awareness and prevention 
     efforts, including patient education and health literacy 
     programs to help increase a patient's knowledge of how to 
     best participate in such patient's and such patient's 
     children's treatment decisions.
       (4) Enhancing preventive services and coordinated, 
     multidisciplinary disease management of chronic conditions, 
     such as diabetes mellitus, HIV/AIDS, asthma, cancer, 
     cardiovascular disease, and obesity.
       (f) Report.--Not later than 3 years after the date an 
     entity receives a grant under this section and annually 
     thereafter, the entity shall provide to the Secretary a 
     report containing the results of any evaluation conducted 
     pursuant to subsection (c)(5).
       (g) Authorization of Appropriations.--There are authorized 
     to be appropriated to carry out this section such sums as may 
     be necessary for each of fiscal years 2005 through 2009.

     SEC. 202. INNOVATIVE OUTREACH PROGRAMS.

       (a) Grants To Promote Innovative Outreach and Enrollment 
     Under Medicaid and SCHIP.--Section 2104(e) of the Social 
     Security Act (42 U.S.C. 1397dd(e)) is amended--
       (1) by striking ``Amounts allotted'' and inserting the 
     following:
       ``(1) In general.--Subject to paragraph (2), amounts 
     allotted''; and
       (2) by adding at the end the following:
       ``(2) Grants to promote innovative outreach and enrollment 
     efforts.--
       ``(A) In general.--Prior to September 30 of each fiscal 
     year, beginning with fiscal year 2004, the Secretary shall 
     reserve from any unexpended allotments made to States under 
     subsection (b) or (c) (including any portion of such 
     allotments that were redistributed under subsection (f) or 
     (g)) for a fiscal year that would revert to the Treasury on 
     October 1 of the succeeding fiscal year but for the 
     application of this paragraph, the lesser of $50,000,000 or 
     the total amount of such unexpended allotments for purposes 
     of awarding grants under this paragraph for such succeeding 
     fiscal year to States or national, local, and community-based 
     public or nonprofit private organizations to conduct 
     innovative outreach and enrollment efforts that are designed 
     to increase the enrollment and participation of eligible 
     children under this title and title XIX.
       ``(B) Priority for grants in certain areas.--In making 
     grants under subparagraph (A)(ii), the Secretary shall give 
     priority to grant applicants that propose to target 
     geographic areas--
       ``(i) with high rates of eligible but unenrolled children, 
     including such children who reside in rural areas;
       ``(ii) with high rates of families for whom English is not 
     their primary language; or
       ``(iii) with high rates of racial and ethnic minorities and 
     health disparity populations.
       ``(C) Application.--An organization that desires to receive 
     a grant under this paragraph shall submit an application to 
     the Secretary in such form and manner, and containing such 
     information, as the Secretary may decide. Such application 
     shall include quality and outcomes performance measures to 
     evaluate the effectiveness of activities funded by a grant 
     under this paragraph to ensure that the activities are 
     meeting their goals, and disseminate findings from such 
     evaluations.''.
       (b) Demonstrations To Reduce Health Disparities.--
       (1) In general.--The Secretary of Health and Human Services 
     shall, through contracts or grants to public and private 
     entities, support demonstration programs for the purpose of 
     conducting interventions among health disparity populations 
     to--
       (A) target, identify, and reduce or prevent behavioral risk 
     factors that contribute to health disparities;
       (B) promote translation, interpretation, and other such 
     linguistic services for patients with limited English 
     speaking proficiency;
       (C) promote preventive services; or
       (D) enhance coordinated, multidisciplinary disease 
     management of chronic conditions, such as diabetes mellitus, 
     HIV/AIDS, asthma, cancer, and obesity.
       (2) Application.--An entity desiring a contract or grant 
     under paragraph (1) shall submit an application to the 
     Secretary of Health and Human Services in such form and 
     manner, and containing such information, as the Secretary may 
     require.
       (3) Authorization of Appropriations.--There are authorized 
     to be appropriated to carry out this subsection such sums as 
     may be necessary for each of fiscal years 2005 through 2009.

             Subtitle B--Refundable Health Insurance Credit

     SEC. 211. REFUNDABLE HEALTH INSURANCE COSTS CREDIT.

       (a) Allowance of Credit.--
       (1) In general.--Subpart C of part IV of subchapter A of 
     chapter 1 of the Internal Revenue Code of 1986 (relating to 
     refundable personal credits) is amended by redesignating 
     section 36 as section 37 and by inserting after section 35 
     the following new section:

     ``SEC. 36. HEALTH INSURANCE COSTS FOR UNINSURED INDIVIDUALS.

       ``(a) Allowance of Credit.--In the case of an individual, 
     there shall be allowed as a credit against the tax imposed by 
     this subtitle for the taxable year an amount equal to the 
     amount paid by the taxpayer during such taxable year for 
     qualified health insurance for the taxpayer and the 
     taxpayer's spouse and dependents.
       ``(b) Limitations.--
       ``(1) In general.--The amount allowed as a credit under 
     subsection (a) to the taxpayer for the taxable year shall not 
     exceed the lesser of--
       ``(A) the sum of the monthly limitations for coverage 
     months during such taxable year for the individuals referred 
     to in subsection (a) for whom the taxpayer paid during the 
     taxable year any amount for coverage under qualified health 
     insurance, or
       ``(B) 90 percent of the sum of the amounts paid by the 
     taxpayer for qualified health insurance for each such 
     individual for coverage months of the individual during the 
     taxable year.
       ``(2) Monthly limitation.--
       ``(A) In general.--The monthly limitation for an individual 
     for each coverage month of such individual during the taxable 
     year is the amount equal to \1/12\ of--
       ``(i) $1,000 if such individual is the taxpayer,
       ``(ii) $1,000 if--

       ``(I) such individual is the spouse of the taxpayer,
       ``(II) the taxpayer and such spouse are married as of the 
     first day of such month, and

       ``(III) the taxpayer files a joint return for the taxable 
     year, and

       ``(iii) $500 if such individual is an individual for whom a 
     deduction under section 151(c) is allowable to the taxpayer 
     for such taxable year.
       ``(B) Limitation to 2 dependents.--Not more than 2 
     individuals may be taken into account by the taxpayer under 
     subparagraph (A)(iii).
       ``(C) Special rule for married individuals.--In the case of 
     a taxpayer--
       ``(i) who is married (within the meaning of section 7703) 
     as of the close of the taxable year but does not file a joint 
     return for such year, and
       ``(ii) who does not live apart from such taxpayer's spouse 
     at all times during the taxable year,


[[Page S2797]]


     the dollar limitation imposed under subparagraph (A)(iii) 
     shall be divided equally between the taxpayer and the 
     taxpayer's spouse unless they agree on a different division.
       ``(3) Income phaseout of credit percentage.--
       ``(A) Phaseout for single coverage.--If a taxpayer with 
     self-only coverage has modified adjusted gross income in 
     excess of $15,000 for a taxable year, the 90 percent under 
     paragraph (1)(B) shall be reduced (but not below zero) by--
       ``(i) 2 percentage points for each $250 of such income in 
     excess of $15,000 but not in excess of $20,000, and
       ``(ii) 1.25 percentage points for each $250 of such income 
     in excess of $20,000.
       ``(B) Amount of reduction for family coverage.--If a 
     taxpayer with family coverage has modified adjusted gross 
     income in excess of $25,000 for a taxable year, the 90 
     percent under paragraph (1)(B) shall be reduced (but not 
     below zero) by--
       ``(i) in the case of family coverage covering only 1 adult, 
     1.5 percentage points for each $250 of such excess, and
       ``(ii) in the case of family coverage covering more than 1 
     adult, 0.643 percentage points for each $250 of such excess.

     Any percentage resulting from a reduction under clause (ii) 
     shall be rounded to the nearest one-tenth of a percent.
       ``(C) Modified adjusted gross income.--The term `modified 
     adjusted gross income' means adjusted gross income 
     determined--
       ``(i) without regard to this section and sections 911, 931, 
     and 933, and
       ``(ii) after application of sections 86, 135, 137, 219, 
     221, and 469.
       ``(c) Coverage Month.--For purposes of this section--
       ``(1) In general.--The term `coverage month' means, with 
     respect to an individual, any month if--
       ``(A) as of the first day of such month such individual is 
     covered by qualified health insurance, and
       ``(B) the premium for coverage under such insurance for 
     such month is paid by the taxpayer.
       ``(2) Employer-subsidized coverage.--
       ``(A) In general.--The term `coverage month' shall not 
     include any month for which such individual is eligible to 
     participate in any subsidized health plan (within the meaning 
     of section 162(l)(2)) maintained by any employer of the 
     taxpayer or of the spouse of the taxpayer. A subsidized 
     health plan shall not include a plan substantially all of the 
     coverage of which is of excepted benefits described in 
     section 9832(c).
       ``(B) Premiums to nonsubsidized plans.--If an employer of 
     the taxpayer or the spouse of the taxpayer maintains a health 
     plan which is not a subsidized health plan (as so defined) 
     and which constitutes qualified health insurance, employee 
     contributions to the plan shall be treated as amounts paid 
     for qualified health insurance.
       ``(3) Cafeteria plan and flexible spending account 
     beneficiaries.--The term `coverage month' shall not include 
     any month during a taxable year if any amount is not 
     includible in the gross income of the taxpayer for such year 
     under section 106 with respect to--
       ``(A) a benefit chosen under a cafeteria plan (as defined 
     in section 125(d)), or
       ``(B) a benefit provided under a flexible spending or 
     similar arrangement.
       ``(4) Medicare, medicaid, and schip.--The term `coverage 
     month' shall not include any month with respect to an 
     individual if, as of the first day of such month, such 
     individual--
       ``(A) is entitled to any benefits under part A of title 
     XVIII of the Social Security Act or is enrolled under part B 
     of such title, or
       ``(B) is enrolled in the program under title XIX or XXI of 
     such Act (other than under section 1928 of such Act).
       ``(5) Certain other coverage.--The term `coverage month' 
     shall not include any month during a taxable year with 
     respect to an individual if, at any time during such year, 
     any benefit is provided to such individual under--
       ``(A) chapter 89 of title 5, United States Code,
       ``(B) chapter 55 of title 10, United States Code,
       ``(C) chapter 17 of title 38, United States Code, or
       ``(D) any medical care program under the Indian Health Care 
     Improvement Act.
       ``(6) Prisoners.--The term `coverage month' shall not 
     include any month with respect to an individual if, as of the 
     first day of such month, such individual is imprisoned under 
     Federal, State, or local authority.
       ``(7) Insufficient presence in united states.--The term 
     `coverage month' shall not include any month during a taxable 
     year with respect to an individual if such individual is 
     present in the United States on fewer than 183 days during 
     such year (determined in accordance with section 7701(b)(7)).
       ``(d) Qualified Health Insurance.--For purposes of this 
     section--
       ``(1) In general.--The term `qualified health insurance' 
     means health insurance coverage (as defined in section 
     9832(b)(1)) which--
       ``(A) is coverage described in paragraph (2), and
       ``(B) meets the requirements of paragraph (3).
       ``(2) Eligible coverage.--Coverage described in this 
     paragraph is the following:
       ``(A) Coverage under individual health insurance.
       ``(B) Coverage under a group health plan (as defined in 
     section 5000 without regard to subsection (d)).
       ``(C) Coverage through a private sector health care 
     coverage purchasing pool.
       ``(D) Coverage under a State high risk pool described in 
     subparagraph (C) of section 35(e)(1).
       ``(E) Continuation coverage described in subparagraph (A) 
     or (B) of section 35(a)(1).
       ``(F) Coverage under an eligible State buyin program.
       ``(3) Requirements.--The requirements of this paragraph are 
     as follows:
       ``(A) Cost limits.--Under the coverage, the sum of the 
     annual deductible and the other annual out-of-pocket expenses 
     required to be paid (other than premiums) for covered 
     benefits does not exceed--
       ``(i) $5,000 for self-only coverage, and
       ``(ii) twice the dollar amount in clause (i) for family 
     coverage, or
       ``(B) Maximum benefits.--Under the coverage, the annual and 
     lifetime maximum benefits are not less than $700,000.
       ``(4) Eligible state buyin program.--For purposes of 
     paragraph (2)(F)--
       ``(A) In general.--The term `eligible State buyin program' 
     means a State program under which an individual not otherwise 
     eligible for assistance under the State medicaid program 
     under title XIX of the Social Security Act or the State 
     children's health insurance program under title XXI of such 
     Act is able to buy health insurance coverage through a 
     purchasing arrangement entered into between the State and a 
     private sector health care purchasing group or health plan 
     for purposes of providing health insurance coverage to 
     recipients of assistance under such program or for purposes 
     of providing such coverage to State employees.
       ``(B) Requirements.--Subparagraph (A) shall only apply to a 
     State program if--
       ``(i) the program uses private sector health care 
     purchasing groups or health plans, and
       ``(ii) the State maintains separate risk pools for 
     participants under the State program.
       ``(e) Archer MSA Contributions; HSA Contributions.--If a 
     deduction would be allowed under section 220 to the taxpayer 
     for a payment for the taxable year to the Archer MSA of an 
     individual or under section 223 to the taxpayer for a payment 
     for the taxable year to the Health Savings Account of such 
     individual, subsection (a) shall not apply to the taxpayer 
     for any month during such taxable year for which the 
     taxpayer, spouse, or dependent is an eligible individual for 
     purposes of either such section.
       ``(f) Inflation Adjustment.--
       ``(1) In general.--In the case of any taxable year 
     beginning after 2004, each dollar amount referred to in 
     subsections (b)(2)(A) and (d)(3) shall be increased by an 
     amount equal to--
       ``(A) such dollar amount, multiplied by
       ``(B) the cost-of-living adjustment determined under 
     section 213(d)(10)(B)(ii) for the calendar year in which the 
     taxable year begins, except that `2003' shall be substituted 
     for `1996' in subclause (II) thereof.
       ``(2) Rounding.--If any amount as adjusted under paragraph 
     (1) is not a multiple of $10, such amount shall be rounded to 
     the next lowest multiple of $10.
       ``(g) Special Rules.--
       ``(1) Coordination with medical expense deduction.--The 
     amount which would (but for this paragraph) be taken into 
     account by the taxpayer under section 213 for the taxable 
     year shall be reduced by the credit (if any) allowed by this 
     section to the taxpayer for such year.
       ``(2) Coordination with deduction for health insurance 
     costs of self-employed individuals.--In the case of a 
     taxpayer who is eligible to deduct any amount under section 
     162(l) for the taxable year, this section shall apply only if 
     the taxpayer elects not to claim any amount as a deduction 
     under such section for such year.
       ``(3) Denial of credit to dependents.--No credit shall be 
     allowed under this section to any individual with respect to 
     whom a deduction under section 151 is allowable to another 
     taxpayer for a taxable year beginning in the calendar year in 
     which such individual's taxable year begins.
       ``(4) Coordination with advance payment.--Rules similar to 
     the rules of section 35(g)(1) shall apply to any credit to 
     which this section applies.
       ``(5) Coordination with section 35.--If a taxpayer is 
     eligible for the credit allowed under this section and 
     section 35 for any taxable year, the taxpayer shall elect 
     which credit is to be allowed.
       ``(h) Expenses Must Be Substantiated.--A payment for 
     insurance to which subsection (a) applies may be taken into 
     account under this section only if the taxpayer substantiates 
     such payment in such form as the Secretary may prescribe.
       ``(i) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary to carry out the purposes of 
     this section.''.
       (b) Information Reporting.--
       (1) In general.--Subpart B of part III of subchapter A of 
     chapter 61 of the Internal Revenue Code of 1986 (relating to 
     information concerning transactions with other persons) is 
     amended by inserting after section 6050T the following:

     ``SEC. 6050U. RETURNS RELATING TO PAYMENTS FOR QUALIFIED 
                   HEALTH INSURANCE.

       ``(a) In General.--Any person who, in connection with a 
     trade or business conducted

[[Page S2798]]

     by such person, receives payments during any calendar year 
     from any individual for coverage of such individual or any 
     other individual under creditable health insurance, shall 
     make the return described in subsection (b) (at such time as 
     the Secretary may by regulations prescribe) with respect to 
     each individual from whom such payments were received.
       ``(b) Form and Manner of Returns.--A return is described in 
     this subsection if such return--
       ``(1) is in such form as the Secretary may prescribe, and
       ``(2) contains--
       ``(A) the name, address, and TIN of the individual from 
     whom payments described in subsection (a) were received,
       ``(B) the name, address, and TIN of each individual who was 
     provided by such person with coverage under creditable health 
     insurance by reason of such payments and the period of such 
     coverage,
       ``(C) the aggregate amount of payments described in 
     subsection (a), and
       ``(D) such other information as the Secretary may 
     reasonably prescribe.
       ``(c) Creditable Health Insurance.--For purposes of this 
     section, the term `creditable health insurance' means 
     qualified health insurance (as defined in section 36(d)).
       ``(d) Statements To Be Furnished to Individuals With 
     Respect to Whom Information Is Required.--Every person 
     required to make a return under subsection (a) shall furnish 
     to each individual whose name is required under subsection 
     (b)(2)(A) to be set forth in such return a written statement 
     showing--
       ``(1) the name and address of the person required to make 
     such return and the phone number of the information contact 
     for such person,
       ``(2) the aggregate amount of payments described in 
     subsection (a) received by the person required to make such 
     return from the individual to whom the statement is required 
     to be furnished, and
       ``(3) the information required under subsection (b)(2)(B) 
     with respect to such payments.

     The written statement required under the preceding sentence 
     shall be furnished on or before January 31 of the year 
     following the calendar year for which the return under 
     subsection (a) is required to be made.
       ``(e) Returns Which Would Be Required To Be Made by 2 or 
     More Persons.--Except to the extent provided in regulations 
     prescribed by the Secretary, in the case of any amount 
     received by any person on behalf of another person, only the 
     person first receiving such amount shall be required to make 
     the return under subsection (a).''.
       (2) Assessable penalties.--
       (A) Subparagraph (B) of section 6724(d)(1) of such Code 
     (relating to definitions) is amended by redesignating clauses 
     (xii) through (xviii) as clauses (xiii) through (xix), 
     respectively, and by inserting after clause (xi) the 
     following:
       ``(xii) section 6050U (relating to returns relating to 
     payments for qualified health insurance),''.
       (B) Paragraph (2) of section 6724(d) of such Code is 
     amended by striking ``or'' at the end of subparagraph (AA), 
     by striking the period at the end of the subparagraph (BB) 
     and inserting ``, or'', and by adding at the end the 
     following:
       ``(CC) section 6050U(d) (relating to returns relating to 
     payments for qualified health insurance).''.
       (3) Clerical amendment.--The table of sections for subpart 
     B of part III of subchapter A of chapter 61 of such Code is 
     amended by inserting after the item relating to section 6050T 
     the following:

``Sec. 6050U. Returns relating to payments for qualified health 
              insurance.''.

       (c) Criminal Penalty for Fraud.--Subchapter B of chapter 75 
     of the Internal Revenue Code of 1986 (relating to other 
     offenses) is amended by adding at the end the following:

     ``SEC. 7276. PENALTIES FOR OFFENSES RELATING TO HEALTH 
                   INSURANCE TAX CREDIT.

       ``Any person who knowingly misuses Department of the 
     Treasury names, symbols, titles, or initials to convey the 
     false impression of association with, or approval or 
     endorsement by, the Department of the Treasury of any 
     insurance products or group health coverage in connection 
     with the credit for health insurance costs under section 36 
     shall on conviction thereof be fined not more than $10,000, 
     or imprisoned not more than 1 year, or both.''.
       (d) Conforming Amendments.--
       (1) Section 162(l) of the Internal Revenue Code of 1986 is 
     amended by adding at the end the following:
       ``(6) Election to have subsection apply.--No deduction 
     shall be allowed under paragraph (1) for a taxable year 
     unless the taxpayer elects to have this subsection apply for 
     such year.''.
       (2) Paragraph (2) of section 1324(b) of title 31, United 
     States Code, is amended by inserting before the period ``, or 
     from section 36 of such Code''.
       (3) The table of sections for subpart C of part IV of 
     subchapter A of chapter 1 of the Internal Revenue Code of 
     1986 is amended by striking the last item and inserting the 
     following:

``Sec. 36. Health insurance costs for uninsured individuals.
``Sec. 37. Overpayments of tax.''

       (4) The table of sections for subchapter B of chapter 75 of 
     such Code is amended by adding at the end the following:

``Sec. 7276. Penalties for offenses relating to health insurance tax 
              credit.''

       (e) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to taxable years 
     beginning after December 31, 2003, without regard to whether 
     final regulations to carry out such amendments have been 
     promulgated by such date.
       (2) Penalties.--The amendments made by subsections (c) and 
     (d)(4) shall take effect on the date of the enactment of this 
     Act.

     SEC. 212. ADVANCE PAYMENT OF CREDIT TO ISSUERS OF QUALIFIED 
                   HEALTH INSURANCE.

       (a) In General.--Chapter 77 of the Internal Revenue Code of 
     1986 (relating to miscellaneous provisions) is amended by 
     adding at the end the following:

     ``SEC. 7529. ADVANCE PAYMENT OF CREDIT FOR HEALTH INSURANCE 
                   COSTS OF ELIGIBLE INDIVIDUALS.

       ``(a) General Rule.--Not later than January 1, 2005, the 
     Secretary shall establish a program for making payments on 
     behalf of certified individuals to providers of qualified 
     health insurance (as defined in section 36(d)) for such 
     individuals.
       ``(b) Program Options.--The program under subsection (a) 
     may--
       ``(1) provide that payments may be made on the basis of 
     modified adjusted gross income of certified individuals for 
     the preceding taxable year, and
       ``(2) provide that, in lieu of payments to providers, the 
     following amounts may be offset:
       ``(A) Amounts required to be deposited by the provider as 
     estimated income tax under section 6654 or 6655.
       ``(B) Amounts required to be deducted and withheld under 
     section 3401 (relating to wage withholding).
       ``(C) Taxes imposed under section 3111(a) or 50 percent of 
     taxes imposed under section 1401(a) (relating to FICA 
     employer taxes).
       ``(D) Amounts required to be deducted under section 3102 
     with respect to taxes imposed under section 3101(a) or 50 
     percent of taxes imposed under section 1401(a) (relating to 
     FICA employee taxes).
       ``(c) Certified Individual.--For purposes of this section, 
     the term `certified individual' means any individual for whom 
     a qualified health insurance credit eligibility certificate 
     is in effect.
       ``(d) Qualified Health Insurance Credit Eligibility 
     Certificate.--For purposes of this section, a qualified 
     health insurance credit eligibility certificate is a 
     statement furnished by an individual to a provider of 
     qualified health insurance which--
       ``(1) certifies that the individual will be eligible to 
     receive the credit provided by section 36 for the taxable 
     year,
       ``(2) estimates the amount of such credit for such taxable 
     year, and
       ``(3) provides such other information as the Secretary may 
     require for purposes of this section.''
       (b) Clerical Amendment.--The table of sections for chapter 
     77 of the Internal Revenue Code of 1986 is amended by adding 
     at the end the following:

``Sec. 7529. Advance payment of health insurance credit for purchasers 
              of qualified health insurance.''

       (c) Effective Date.--The amendments made by this section 
     shall take effect on July 1, 2005, without regard to whether 
     final regulations to carry out such amendments have been 
     promulgated by such date.

  TITLE III--STRONG NATIONAL LEADERSHIP, COOPERATION, AND COORDINATION

     SEC. 301. OFFICE OF MINORITY HEALTH AND HEALTH DISPARITIES.

       (a) In General.--Section 1707 of the Public Health Service 
     Act (42 U.S.C. 300u-6) is amended--
       (1) by striking the section heading and inserting the 
     following:


       ``office of minority health and health disparities''; and

       (2) in subsection (a)--
       (A) by striking ``Office of Minority Health'' each place 
     that such appears and inserting ``Office of Minority Health 
     and Health Disparities''; and
       (B) by striking ``for Minority Health'' and inserting ``for 
     Minority Health and Health Disparities''.
       (b) Duties.--Section 1707(b) of the Public Health Service 
     Act (42 U.S.C. 300u-6(b)) is amended--
       (1) in the matter preceding paragraph (1)--
       (A) by inserting ``and health disparity populations'' after 
     ``groups'' and
       (B) by striking ``for Minority Health'' and inserting ``for 
     Minority Health and Health Disparities'';
       (2) in paragraph (1)--
       (A) by striking ``Establish'' and all that follows through 
     ``coordinate'' and inserting ``Coordinate''; and
       (B) by striking ``such individuals'' and inserting ``health 
     disparities'';
       (4) in paragraph (1)
       (3) in paragraph (5), by inserting ``or health disparity 
     populations'' after ``minority groups'';
       (4) in paragraph (6), by inserting ``or health disparity 
     population'' after ``minority group'';
       (5) by striking paragraphs (7) and (9);

[[Page S2799]]

       (6) by redesignating paragraphs (1), (2), (3), (4), (5), 
     (6), (8), and (10) as paragraphs (3), (4), (6), (7), (9), 
     (10), (11), and (12), respectively;
       (7) by inserting before paragraph (3) (as so redesignated) 
     the following:
       ``(1) Establish specific short- and long-term goals and 
     objectives for analyzing the causes of health disparities and 
     addressing them, with a particular focus on the areas of 
     health promotion, disease prevention, chronic care and 
     research.
       ``(2) Work with agencies within the Department of Health 
     and Human Services and with the Surgeon General to establish 
     a strategic plan to analyze and address the causes of health 
     disparities. The plan shall include recommendations to 
     improve the collection, analysis, and reporting of data at 
     the Federal, State, territorial, Tribal, and local levels, 
     including how to--
       ``(A) implement data collection while minimizing the cost 
     and administrative burdens of data collection and reporting;
       ``(B) expand awareness of the importance of such data 
     collection to improving health care quality; and
       ``(C) provide researchers with greater access to racial, 
     ethnic, and other health disparity data.'';
       (8) by inserting after paragraph (4) (as so redesignated), 
     the following:
       ``(5) Increase awareness of disparities in health care 
     among health care providers, health plans, and the public.'';
       (9) in paragraph (6) (as so redesignated)--
       (A) by striking ``Support'' and inserting ``In cooperation 
     with the appropriate agencies, support'';
       (B) by inserting before the period the following: ``for--
       ``(A) expanding health care access;
       ``(B) improving health care quality; and
       ``(C) increasing health care educational opportunity.'';
       (10) by inserting after paragraph (7) (as so redesignated), 
     the following:
       ``(8) Consistent with section 102 of the Closing the Health 
     Care Gap Act of 2004, coordinate the classification and 
     collection of health care data to allow for the ongoing 
     analysis of the causes of disparities and monitoring of 
     progress toward the elimination of disparities.''; and
       (11) by inserting after paragraph (12), as so redesignated, 
     the following:
       ``(13) Work with Federal agencies and departments outside 
     of the Department of Health and Human Services to maximize 
     program resources available to understand why disparities 
     exist, and effective ways to reduce and eliminate 
     disparities.
       ``(14) Support a center for linguistic and cultural 
     competence to carry out the following:
       ``(A) With respect to individuals who lack proficiency in 
     speaking the English language, enter into contracts with 
     public and nonprofit private providers of primary health 
     services for the purpose of increasing the access of such 
     individuals to such services by developing and carrying out 
     programs to provide bilingual or interpretive services.
       ``(B) Carry out programs to improve access to health care 
     services for individuals with limited proficiency in speaking 
     the English language. Activities under this subparagraph 
     shall include developing and evaluating model projects.''.
       (c) Advisory Committee.--Section 1707(c) of the Public 
     Health Service Act (42 U.S.C. 300u-6(c)) is amended--
       (1) in paragraph (1), by inserting ``and Health 
     Disparities'' after ``Minority Health'';
       (2) in paragraph (2), by inserting ``and health disparity 
     populations'' after ``minority group''; and
       (3) in paragraph (4)(B)--
       (A) by inserting ``and health disparities'' after 
     ``minority health''; and
       (B) by inserting ``and health disparity populations'' after 
     ``minority groups''.
       (d) Duty Requirements.--Section 1707(d) of the Public 
     Health Service Act (42 U.S.C. 300u-6(d)) is amended--
       (1) in paragraph (1)(A), by striking ``(b)(9)'' and 
     inserting ``(b)(14);
       (2) in paragraph (1)(B), by striking ``(b)(10)'' and 
     inserting ``(b)(13); and
       (3) in paragraph (3), insert ``take into account the unique 
     cultural or linguistic issues facing such populations and'' 
     after ``subsection (b)''.
       (e) Reports.--Section 1707(f) of the Public Health Service 
     Act (42 U.S.C. 300u-6(f)) is amended--
       (1) in paragraph (1)--
       (A) by striking the subsection heading and inserting 
     ``Report on activities.--'';
       (B) by striking ``1999'' and inserting ``2006'';
       (C) by striking ``Committee on Energy and Commerce of the 
     House of Representatives, and to the Committee on Labor and 
     Human Resources of the Senate'' and inserting ``appropriate 
     committees of Congress''; and
       (D) by inserting ``and health disparity populations'' after 
     ``racial and ethnic minority groups'';
       (2) in paragraph (2)--
       (A) by striking ``1999'' and inserting ``2005''; and
       (B) by inserting ``and health disparity'' after ``minority 
     health'';
       (3) by redesignating paragraph (1) and (2) as paragraphs 
     (2) and (3), respectively; and
       (4) by inserting after the subsection heading, the 
     following:
       ``(1) In general.--Not later than 1 year after the date of 
     enactment of the Closing the Health Care Gap Act of 2004, the 
     Secretary shall submit to the appropriate committees of 
     Congress, a report on the plan developed under subsection 
     (b)(2).''.
       (f) Authorization of Appropriations.--Section 1707(h) of 
     the Public Health Service Act (42 U.S.C. 300u-6(h)) is 
     amended--
       (1) by striking ``Funding.--'' and all that follows through 
     the paragraph designation in paragraph (1); and
       (2) by striking ``$30,000,000'' and all that follows 
     through the period and inserting ``$50,000,000 for fiscal 
     year 2005, such sums as may be necessary for each of fiscal 
     years 2006 through 2009.''.

       TITLE IV--PROFESSIONAL EDUCATION, AWARENESS, AND TRAINING

     SEC. 401. WORKFORCE DIVERSITY AND TRAINING.

       (a) Purpose.--Part B of title VII of the Public Health 
     Service Act (42 U.S.C. 293 et seq.) is amended by inserting 
     before section 736 the following:

     ``SEC. 736A. PURPOSE OF PROGRAM.

       ``It is the purpose of this part to improve health care 
     quality and access in medically underserved communities, to 
     improve the cultural competence of health care providers by 
     increasing minority representation in the health professions, 
     and to strengthen the research and education programs of 
     designated health professions schools that disproportionately 
     serve health disparity populations.''.
       (b) Centers of Excellence.--Section 736 of the Public 
     Health Service Act (42 U.S.C. 293) is amended--
       (1) by striking subsection (a) and inserting the following:
       ``(a) In General.--The Secretary shall make grants to, and 
     enter into contracts with, public and nonprofit private 
     health or educational entities, including designated health 
     professions schools described in subsection (c), for the 
     purpose of assisting the schools in supporting programs of 
     excellence in health professions education for racial or 
     ethnic minority or health disparity populations.'';
       (2) in subsection (b)--
       (A) in paragraph (2), by striking ``under-represented 
     minority'' and inserting ``racial or ethnic minority'';
       (B) in paragraph (3), by striking ``under-represented 
     minority'' and inserting ``racial or ethnic minority'';
       (C) in paragraph (4), by striking ``minority health'' and 
     inserting ``health disparity'';
       (D) in paragraph (5), by striking ``under-represented 
     minority groups'' and inserting ``racial or ethnic minorities 
     and health disparity populations'';
       (E) in paragraph (6)--
       (i) in the matter preceding subparagraph (A), by striking 
     ``under-represented minority'' and inserting ``individuals 
     from racial or ethnic minorities or health disparity 
     populations''; and
       (ii) by striking ``and'' at the end;
       (F) in paragraph (7), by striking the period and inserting 
     ``; and''; and
       (G) by adding at the end the following:
       ``(8) to conduct accountability and other reporting 
     activities, as required by the Secretary.'';
       (3) in subsection (c)--
       (A) in paragraph (1)(B)--
       (i) in clause (i), by striking ``under-represented 
     minority'' and inserting ``individuals from racial or ethnic 
     minorities or health disparity populations'';
       (ii) in clause (ii), by striking ``under-represented 
     minority'' and inserting ``such'';
       (iii) in clause (iii)--

       (I) by striking ``under-represented minority individuals'' 
     the first place that such appears and inserting ``such 
     students'';
       (II) by striking ``such individuals'' and inserting ``such 
     students'';and
       (III) by striking ``under-represented minority'' the second 
     place that such appears and inserting ``such''; and

       (iv) in clause (iv), by striking ``under-represented 
     minority individuals'' and inserting ``individuals from 
     racial or ethnic minorities or health disparity 
     populations''; and
       (B) in paragraph (2)(B)--
       (i) in clause (i), by striking ``under-represented'' and 
     inserting ``racial or''; and
       (C) in paragraph (5)(B)--
       (i) by striking ``under-represented'' and inserting 
     ``racial or''; and
       (ii) by inserting ``or a health disparity population'' 
     after ``minorities'';
       (4) in subsection (d)(1), by striking ``Under-Represented 
     Minority Health'' and inserting ``Minority Health and Health 
     Disparity'';
       (5) in subsection (h)--
       (A) in paragraph (1), by striking ``$26,000,000'' and all 
     that follows and inserting ``$50,000,000 for fiscal year 
     2005, and such sums as may be necessary for each of fiscal 
     years 2006 through 2009''; and
       (B) in paragraph (2)--
       (i) in subparagraph (C)--

       (I) in the matter preceding clause (i), by striking ``are 
     $30,000,000 or more'' and inserting ``exceed $30,000,000 but 
     are less than $40,000,000''; and
       (II) in clause (iv), by striking ``any remaining funds'' 
     and inserting ``any remaining excess amount''; and

       (ii) by adding at the end the following:
       ``(D) Funding in excess of $40,000,000.--If amounts 
     appropriated under paragraph (1) for a fiscal year are 
     $40,000,000 or more, the Secretary shall make available--
       ``(i) not less than $16,000,000 for grants under subsection 
     (a) to health professions schools that meet the conditions 
     described in subsection (c)(2)(A);
       ``(ii) not less than $16,000,000 for grants under 
     subsection (a) to health professions schools that meet the 
     conditions described in

[[Page S2800]]

     paragraph (3) or (4) of subsection (c) (including meeting 
     conditions pursuant to subsection (e));
       ``(iii) not less than $8,000,000 for grants under 
     subsection (a) to health professions schools that meet the 
     conditions described in subsection (c)(5); and
       ``(iv) after grants are made with funds under clauses (i) 
     through (iii), any remaining funds for grants under 
     subsection (a) to health professions schools that meet the 
     conditions described in paragraph (2)(A), (3), (4), or (5) of 
     subsection (c).''; and
       (6) by adding at the end the following:
       ``(i) Evaluation.--
       ``(1) In general.--Not later than 1 year after the date of 
     enactment of the Closing the Health Care Gap Act of 2004, the 
     Secretary shall request that the Institute of Medicine 
     evaluate the effectiveness of the programs under this section 
     in meeting the purpose of this part. The Institute of 
     Medicine shall submit a report on the evaluation to the 
     Secretary.
       ``(2) Working group.--Upon submission of the report under 
     paragraph (1), the Secretary shall convene a working group 
     composed of stakeholders, including designated health 
     professions schools described in subsection (c), to define 
     quality performance measures and reporting requirements of 
     grant recipients that shall be tied to the purpose of this 
     part.
       ``(3) Regulations.--Not later than 18 months after the date 
     the Institute of Medicine submits the report under paragraph 
     (1), the Secretary shall publish proposed regulations 
     regarding the quality performance measures and reporting 
     requirements described in paragraph (2). Not later than 3 
     years after the date the Institute of Medicine submits the 
     report under paragraph (1), the Secretary shall publish final 
     regulations regarding the quality performance measures and 
     reporting requirements described in paragraph (2).''.
       (c) Scholarships for Disadvantaged Students.--Section 737 
     of the Public Health Service Act (42 U.S.C. 293a) is 
     amended--
       (1) in subsection (c), by striking ``under-represented 
     minority'' and inserting ``minority and health disparity''; 
     and
       (2) in subsection (d)(1)(B), by inserting ``or health 
     disparity'' after ``minority''.
       (d) Loan Repayments and Fellowships Regarding Faculty 
     Positions.--Section 738(b) of the Public Health Service Act 
     (42 U.S.C. 293b(b)) is amended--
       (1) in paragraph (1), by striking ``underrepresented'';
       (2) in paragraph (3)(A), by striking ``underrepresented 
     minority individuals'' and inserting ``individuals from 
     racial or ethnic minorities or health disparity 
     populations''; and
       (3) by striking paragraph (5).
       (e) National Health Service Corps.--
       (1) Assignment.--Section 333(a)(3) of the Public Health 
     Service Act (42 U.S.C. 254f(a)(3)) is amended--
       (A) in the second sentence--
       (i) by striking ``shall give preference'' and inserting the 
     following: ``shall--
       ``(A) give preference''; and
       (ii) by striking the period and inserting ``; and''; and
       (B) by adding at the end the following:
       ``(B) give preference to applications from entities 
     described in subparagraph (A) that serve individuals a 
     majority of whom are members of a racial or ethnic minority 
     or other health disparity population with annual incomes at 
     or below twice those set forth in the most recent poverty 
     guidelines issued by the Secretary pursuant to section 402(2) 
     of the Community Services Block Grant Act.''.
       (2) Priorities.--Section 333A(a) of the Public Health 
     Service Act (42 U.S.C. 254f-1(a)) is amended--
       (A) by redesignating paragraphs (1) through (3) as 
     paragraphs (2) through (4), respectively; and
       (B) by inserting before paragraph (2) (as so redesignated), 
     the following:
       ``(1) give preference to applications as described in 
     section 333(a)(3);''.
       (e) Authorization of Appropriations.--Section 740 of the 
     Public Health Service Act (42 U.S.C. 293d) is amended--
       (1) in subsection (a), by striking ``2002'' and inserting 
     ``2009'';
       (2) in subsection (b), by striking ``2002'' and inserting 
     ``2009'';
       (3) in subsection (c), by striking ``2002'' and inserting 
     ``2009''; and
       (4) by striking subsection (d).
       (f) Grants for Health Professions Education.--Section 741 
     of the Public Health Service Act (42 U.S.C. 293e) is 
     amended--
       (1) in subsection (a)(2), in the first sentence by striking 
     ``Unless'' and all that follows through ``the Secretary'' and 
     inserting ``The Secretary''; and
       (2) in subsection (b), by striking ``$3,500,000'' and all 
     that follows through the period and inserting ``such sums as 
     may be necessary for each of fiscal years 2005 through 
     2009.''.
       (g) Health Careers Opportunity Program.--Subpart 2 of part 
     E of title VII of the Public Health Service Act (42 U.S.C. 
     295 et seq.) is amended--
       (1) in section 770 by inserting ``(other than section 
     771)'' after ``this subpart'';
       (2) by redesignating section 770 as section 771;
       (3) by inserting after section 769 the following:

     ``SEC. 770. HEALTH CAREERS OPPORTUNITY PROGRAM.

       ``(a) In General.--The Secretary may make grants and enter 
     into cooperative agreements and contracts with eligible 
     entities for any of the following purposes:
       ``(1) Identifying and recruiting students who--
       ``(A) are from disadvantaged backgrounds or health 
     disparity populations; and
       ``(B) are interested in a career in the health professions.
       ``(2) Providing counseling or other services designed to 
     assist such individuals in entering a health professions 
     school and successfully completing their education at such a 
     school.
       ``(3) Providing, for a period prior to the entry of such 
     individuals into the regular course of education of such a 
     school, preliminary education designed to assist the 
     individuals in successfully completing such regular course of 
     education at such a school, or referring such individuals to 
     institutions providing such preliminary education.
       ``(b) Receipt of Award.--
       ``(1) Eligible entities; requirement of consortium.--The 
     Secretary may make an award under subsection (a) only if an 
     eligible entity meets the following conditions:
       ``(A) The eligible entity is a public or private entity, 
     and such entity has established a consortium consisting of 
     private community-based organizations and health professions 
     schools.
       ``(B) The health professions schools in the consortium are 
     schools of medicine or osteopathic medicine, public health, 
     nursing, dentistry, optometry, pharmacy, allied health, or 
     podiatric medicine, or graduate programs in mental health 
     practice (including programs in clinical psychology).
       ``(C)(i) Except as provided in clause (ii), the membership 
     of the consortium includes not less than 1 nonprofit private 
     community-based organization and not less than 3 health 
     professions schools.
       ``(ii) In the case of an eligible entity whose exclusive 
     activity under the award will be carrying out 1 or more 
     programs described in subsection (a)(5), the membership of 
     the consortium includes not less than 1 nonprofit private 
     community-based organization and not less than 1 health 
     professions school.
       ``(D) The members of the consortium have entered into an 
     agreement specifying--
       ``(i) that each of the members will comply with the 
     conditions upon which the award is made; and
       ``(ii) whether and to what extent the award will be 
     allocated among the members.
       ``(2) Requirement of competitive awards.--Awards under 
     subsection (a) shall be made on a competitive basis.
       ``(c) Requirements.--The Secretary may make an award under 
     subsection (a) only if the Secretary determines that, in the 
     case of activities carried out under the award that prove to 
     be effective toward achieving the purposes of the 
     activities--
       ``(1) the members of the consortium involved have or will 
     have the financial capacity to continue the activities, 
     regardless of whether financial assistance under subsection 
     (a) continues to be available; and
       ``(2) the members of the consortium demonstrate to the 
     satisfaction of the Secretary a commitment to continue such 
     activities, regardless of whether such assistance continues 
     to be available.
       ``(d) Objectives Under Awards.--Before making a first award 
     to an eligible entity under subsection (a), the Secretary 
     shall establish objectives regarding the activities to be 
     carried out under the award, which objectives are applicable 
     until the next fiscal year for which such award is made after 
     a competitive process of review. In making an award after 
     such a review, the Secretary shall establish additional 
     objectives for the applicant.
       ``(e) Authorization of Appropriations.--For the purpose of 
     carrying out this section, there are authorized to be 
     appropriated, such sums as may be necessary for each of 
     fiscal years 2005 through 2009.''.

     SEC. 402. HIGHER EDUCATION TECHNICAL AMENDMENTS.

       Section 326(c) of the Higher Education Act of 1965 (20 
     U.S.C. 1063b(c)) is amended--
       (1) in paragraph (2), by inserting before the semicolon, 
     the following: ``, and for the acquisition and development of 
     real property that is adjacent to the campus to improve the 
     academic environment'';
       (2) in paragraph (6), by striking ``and'' at the end;
       (3) in paragraph (7), by striking the period and inserting 
     a semicolon; and
       (4) by adding at the end the following:
       ``(8) Support of faculty exchanges, development, and 
     fellowship to enable attainment of advanced degrees in their 
     field of instruction; and
       ``(9) Tutoring, counseling, and student service programs 
     designed to improve academic success.''.

     SEC. 403. MODEL CULTURAL COMPETENCY CURRICULUM DEVELOPMENT.

       (a) Curricula Development and Model Curricula.--The 
     Secretary of Health and Human Services (in this section 
     referred to as the ``Secretary'') may award grants to 
     eligible entities for curricula development for the training 
     of health care providers and health professions students 
     regarding cultural competency, and for demonstration projects 
     to test new innovations for cultural competence education 
     model curricula for and identify additional barriers to 
     culturally appropriate care.
       (b) Application.--Each eligible entity desiring a grant 
     under subsection (a) shall submit an application to the 
     Secretary at such

[[Page S2801]]

     time, in such manner, and containing such information as the 
     Secretary may require.
       (c) Authorization of Appropriations.--There are authorized 
     to be appropriated to carry out this section such sums as may 
     be necessary for each of fiscal years 2005 through 2009.

     SEC. 404. INTERNET CULTURAL COMPETENCY CLEARINGHOUSE.

       (a) Development.--The Director of the Office of Minority 
     Health and Health Disparities, with assistance from the 
     Administrator of the Agency for Healthcare Research and 
     Quality, shall develop and maintain an Internet clearinghouse 
     to improve health care quality for individuals with specific 
     cultural needs or with limited English proficiency or low 
     functional health literacy and to reduce or eliminate the 
     duplication of effort to translate materials.
       (b) Templates.--In developing the clearinghouse under 
     subsection (a), the Director of the Office of Minority Health 
     and Health Disparities shall develop, test, and make 
     available templates for standard documents that are necessary 
     for patients and consumers to access and make educated 
     decisions about their health care, including--
       (1) administrative and legal documents;
       (2) clinical information such as how to take medications, 
     how to prevent transmission of a contagious disease, and 
     other prevention and treatment instructions; and
       (3) patient education and outreach materials such as 
     immunization notices, health warnings, or screening notices.
       (c) Online Library or Database.--The Director of the Office 
     of Minority Health and Health Disparities shall develop a 
     readily accessible online library or database with searchable 
     clinically relevant cultural information that is important 
     for health care providers to have on hand in the direct 
     provision of medical care to individuals from specific 
     minority, ethnic, or other health disparity groups.

                       TITLE V--ENHANCED RESEARCH

     SEC. 501. AGENCY FOR HEALTHCARE RESEARCH AND QUALITY.

       Part B of title IX of the Public Health Service Act (42 
     U.S.C. 299b) is amended by adding at the end the following:

     ``SEC. 918. ENHANCED RESEARCH WITH RESPECT TO HEALTH 
                   DISPARITIES.

       ``(a) Accelerating the Elimination of Disparities.--
       ``(1) In general.--The Secretary, acting through the 
     Director, may award grants or contracts to eligible entities 
     (as defined in paragraph (4)) for short-term research to 
     analyze the causes of disparities and identify or develop and 
     evaluate effective strategies in closing the health care gap 
     between minority and health disparity populations and 
     nonminority populations or non-health disparity populations.
       ``(2) Prompt use of research.--To ensure that research 
     described in paragraph (1) is effective and is disseminated 
     and applied promptly, the Director shall--
       ``(A) expand practice-based research networks (primary care 
     and larger delivery systems) to include networks of delivery 
     sites serving large numbers of minority and health disparity 
     populations including--
       ``(i) public hospitals;
       ``(ii) health centers; and
       ``(iii) other sites as determined appropriate by the 
     Director;
       ``(B) work with health care providers to identify and 
     develop those interventions for minority and health disparity 
     populations for which effective implementation strategies are 
     not clear; and
       ``(C) develop a broad virtual network of continuous 
     learning among health care providers (including institutions 
     that did not receive a grant or contract under paragraph (1)) 
     so that those participating in research can share findings 
     and experience throughout the duration of such research and 
     to facilitate interest in and prompt adoption of such 
     findings and experience.
       ``(3) Technical assistance.--The Director of the Agency for 
     Healthcare Research and Quality shall provide technical 
     assistance to assist in the implementation of strategies of 
     evidence-based practices that will reduce health care 
     disparities.
       ``(4) Eligible entities.--In paragraph (1), the term 
     `eligible entities' means institutions with researchers who 
     have experience in conducting research relating to minority 
     health and health disparity populations.
       ``(5) Public hospitals.--In this subsection, the term 
     `public hospitals' means a hospital (as defined in section 
     1886(d)(1)(B) of the Social Security Act) that--
       ``(A) is owned or operated by a unit of State or local 
     government, is a public or private non-profit corporation 
     which is formally granted governmental powers by a unit of 
     State or local government, or is a private non-profit 
     hospital that has a contract with a State or local government 
     to provide health care services to low income individuals who 
     are not entitled to benefits under title XVIII of the Social 
     Security Act or eligible for assistance under the State plan 
     under title XIX of the Social Security Act; and
       ``(B) for the most recent cost reporting period that ended 
     before the calendar quarter involved, had a disproportionate 
     share adjustment percentage (as determined under section 
     1886(d)(5)(F) of the Social Security Act) greater than 11.75 
     percent or was described in section 1886(d)(5)F)(i)(II) of 
     such Act.
       ``(b) Realizing the Potential of Disease Management.--
       ``(1) Public-private sector partnership to assess 
     effectiveness of existing data management strategies.--The 
     Director shall establish a public-private partnership to 
     assess the effectiveness of disease management strategies and 
     identify effective interventions and support strategies with 
     respect to minority and health disparity populations.
       ``(2) Effective management of patients with multiple 
     chronic diseases.--
       ``(A) Initiative for disease management strategies.--The 
     Director shall coordinate an initiative to identify those 
     chronic conditions for which disease-specific disease 
     management strategies pose conflicts in preferred clinical 
     interventions.
       ``(B) Research.--The Director, with support from other 
     agencies within the Department of Health and Human Services 
     shall conduct a program of research based in community and 
     primary-care settings to test and evaluate the implications 
     for patient outcomes of alternative approaches for 
     reconciling conflicts from disease-specific disease 
     management initiatives.
       ``(c) Development of Effective Measurement of 
     Disparities.--
       ``(1) In general.--The Director shall conduct a 
     demonstration project to--
       ``(A) assess alternative strategies for identifying 
     population subgroups at highest risk of poor quality and poor 
     health;
       ``(B) improve data collection for health care priority 
     populations (as described in section 901(c)(1)(B));
       ``(C) improve the ability to identify the causes of 
     disparities; and
       ``(D) track progress in reducing health care disparities 
     with a focus on--
       ``(i) the minimum data set necessary to track such 
     progress; and
       ``(ii) the identification of measures for which data 
     currently being collected are insufficient.
       ``(2) Report.--Not later than 3 years after the date the 
     demonstration project described in paragraph (1) receives 
     funding, the Director shall submit to the appropriate 
     committees of Congress a report containing the findings of 
     the demonstration project together with any policy 
     recommendations.
       ``(d) Analysis of Racial, Ethnic, and Other Health 
     Disparity Data.--The Secretary, acting through the Director 
     of the Agency for Healthcare Research and Quality, and in 
     coordination with the Administrator of the Centers for 
     Medicare & Medicaid Services and the Director of the Centers 
     for Disease Control and Prevention, shall provide technical 
     assistance to agencies of the Department of Health and Human 
     Services in meeting Federal standards for race, ethnicity, 
     and other health disparity data collection and analysis of 
     racial, ethnic, and other disparities in health and health 
     care in Federally-administered programs by--
       ``(1) identifying appropriate quality assurance mechanisms 
     to monitor for health disparities;
       ``(2) specifying the clinical, diagnostic, or therapeutic 
     measures which should be monitored;
       ``(3) developing new quality measures relating to racial, 
     ethnic, or other health disparities;
       ``(4) identifying the level at which data analysis should 
     be conducted; and
       ``(5) sharing data with external organizations for research 
     and quality improvement purposes.''.

     SEC. 502. NATIONAL INSTITUTES OF HEALTH.

       The Director of the National Institutes of Health, in 
     consultation with the Director of the National Center on 
     Minority Health and Health Disparities, shall expand and 
     intensify research at the National Institutes of Health 
     relating to the sources of health and health care 
     disparities, and increase efforts to recruit minority 
     scientists and research professionals into the field of 
     health disparity research.

                   TITLE VI--MISCELLANEOUS PROVISIONS

     SEC. 601. DEFINITIONS.

       (a) In General.--In this Act, including the amendments made 
     by this Act:
       (1) Culturally competent.--
       (A) In general.--The term ``culturally competent'', with 
     respect to the manner in which health-related services, 
     education, and training are provided, means providing the 
     services, education, and training in the language and 
     cultural context that is most appropriate for the individuals 
     for whom the services, education, and training are intended, 
     including as necessary the provision of bilingual services.
       (B) Modification.--The definition established in 
     subparagraph (A) may be modified as needed at the discretion 
     of the Secretary after providing a 30-day notice to Congress.
       (2) Minority health conditions.--The term ``minority health 
     conditions'', with respect to individuals who are members of 
     minority groups, means all diseases, disorders, and 
     conditions (including with respect to mental health and 
     substance abuse)--
       (A) unique to, more serious, or more prevalent in such 
     groups;
       (B) for which the factors of medical risk or types of 
     medical intervention may be different for such groups, or for 
     which it is unknown whether such factors or types are 
     different for such individuals; or
       (C) with respect to which there has been insufficient 
     research involving such individual members of such groups as 
     subjects or insufficient data on such individuals.

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       (3) Minority health disparities research.--The term 
     ``minority health disparities research'' means basic, 
     clinical, behavioral and health services research on minority 
     health conditions (as defined in paragraph (2)), including 
     research to prevent, diagnose, and treat such conditions.
       (4) Minority.--The terms ``minority'' and ``minorities'' 
     refer to individuals from a minority group.
       (5) Minority group.--The term ``minority group'' has the 
     meaning given the term ``racial and ethnic minority group'' 
     in section 1707 of the Public Health Service Act (42 U.S.C. 
     300u-6).
       (b) Health Disparity Populations.--In this Act, including 
     the amendments made by this Act:
       (1) Health disparity population.--The term ``health 
     disparity population'' has the meaning given such term in 
     section 903(d)(1) of the Public Health Service Act (42 U.S.C. 
     299a-1(d)(1)).
       (2) Health disparities research.--The term ``health 
     disparities research'' shall include basic, clinical, 
     behavioral, and health services research on health disparity 
     populations (including individual members and communities of 
     such populations) that relates to health disparities as 
     defined under paragraph (1), including the causes of such 
     disparities and methods to prevent, diagnose, and treat such 
     disparities.

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