[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
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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.
[[Page S2802]]
(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.
____________________