[Congressional Record Volume 150, Number 37 (Tuesday, March 23, 2004)]
[Senate]
[Pages S3004-S3045]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                           TEXT OF AMENDMENTS

                                 ______
                                 
  SA 2891. Mr. BREAUX (for himself and Mrs. Feinstein) submitted an 
amendment intended to be proposed by him to the bill S. 1637, to amend 
the Internal Revenue Code of 1986 to comply with the World Trade 
Organization rulings on the FSC/ETI benefit in a manner that preserves 
jobs and production activities in the United States, to reform and 
simplify the international taxation rules of the United States, and for 
other purposes; which was ordered to lie on the table; as follows:

       On page 137, between lines 8 and 9, insert:
       ``(4) Dollar limitation.--
       ``(A) In general.--Notwithstanding paragraph (1), the 
     excess qualified foreign distribution amount shall not exceed 
     the lesser of--
       ``(i) the amount shown on the applicable financial 
     statement as earnings permanently reinvested outside the 
     United States, or
       ``(ii) the excess (if any) of--

       ``(I) the estimated aggregate qualified expenditures of the 
     corporation for taxable years ending in 2005, 2006, and 2007, 
     over
       ``(II) the aggregate qualified expenditures of the 
     corporation for taxable years ending in 2001, 2002, and 2003.

       ``(B) Earnings permanently reinvested outside the united 
     states.--
       ``(i) In general.--If an amount on an applicable financial 
     statement is shown as Federal income taxes not required to be 
     reserved by reason of the permanent reinvestment of earnings 
     outside the United States, subparagraph (A)(i) shall be 
     applied by reference to the earnings to which such taxes 
     relate.
       ``(ii) No statement or stated amount.--If there is no 
     applicable financial statement or such a statement fails to 
     show a specific amount described in subparagraph (A)(i) or 
     clause (i), such amount shall be treated as being zero.
       ``(iii) Applicable financial statement.--For purposes of 
     this paragraph, the term `applicable financial statement' 
     means the most recently audited financial statement 
     (including notes and other documents which accompany such 
     statement)--

       ``(I) which is certified on or before March 31, 2003, as 
     being prepared in accordance with generally accepted 
     accounting principles, and
       ``(II) which is used for the purposes of a statement or 
     report to creditors, to shareholders, or for any other 
     substantial nontax purpose.

     In the case of a corporation required to file a financial 
     statement with the Securities and Exchange Commission, such 
     term means the most recent such statement filed on or before 
     March 31, 2003.
       ``(C) Qualified expenditures.--For purposes of this 
     paragraph, the term `qualified expenditures' means--
       ``(i) wages (as defined in section 3121(a)),
       ``(ii) additions to capital accounts for property located 
     within the United States (including any amount which would be 
     so added but for a provision of this title providing for the 
     expensing of such amount),
       ``(iii) qualified research expenses (as defined in section 
     41(b)) and basic research payments (as defined in section 
     41(e)(2)), and
       ``(iv) irrevocable contributions to a qualified employer 
     plan (as defined in section 72(p)(4)) but only if no 
     deduction is allowed under this chapter with respect to such 
     contributions.
       ``(D) Recapture.--If the taxpayer's estimate of qualified 
     expenditures under subparagraph (A)(ii)(I) is greater than 
     the actual expenditures, then the tax imposed by this chapter 
     for the taxpayer's last taxable year ending in 2007 shall be 
     increased by the sum of--
       ``(i) the increase (if any) in tax which would have 
     resulted in the taxable year for which the deduction under 
     this section was allowed if the actual expenditures were used 
     in lieu of the estimated expenditures, plus
       ``(ii) interest at the underpayment rate, determined as if 
     the increase in tax described in clause (i) were an 
     underpayment for the taxable year of the deduction.
       ``(5) Limitation on controlled foreign corporations in 
     possessions.--In computing the excess qualified foreign 
     distribution amount under paragraph (1) and the base dividend 
     amount under paragraph (2), there shall not be taken into 
     account dividends received from any controlled foreign 
     corporation created or organized under the laws of any 
     possession of the United States.
                                 ______
                                 
  SA 2892. Mr. BREAUX (for himself and Mr. Hatch) submitted an 
amendment intended to be proposed by him to the bill S. 1637, to amend 
the Internal Revenue Code of 1986 to comply with the World Trade 
Organization rulings on the FSC/ETI benefit in a manner that preserves 
jobs and production activities in the United States, to reform and 
simplify the international taxation rules of the United States, and for 
other purposes; which was ordered to lie on the table; as follows:

       On page 179, after line 25, add the following:

     SEC. __. REPEAL OF 10 YEAR RULE FOR QUALIFIED MORTGAGE BONDS; 
                   HOLIDAY FOR USE OF CERTAIN REPAYMENTS.

       (a) Repeal.--Subparagraph (A) of section 143(a)(2) 
     (relating to qualified mortgage issue defined) is amended by 
     striking the last sentence thereof.
       (b) Holiday for Prepayments.--Subparagraph (A) of section 
     143(a)(2) is amended by adding at the end the following flush 
     sentence: ``Clause (iv) shall not apply to amounts received 
     during 2004, 2005, and 2006.''.
       (c) Effective Dates.--
       (1) Subsection (a).--The amendment made by subsection (a) 
     shall apply to bonds issued after the date of the enactment 
     of this Act.
       (2) Subsection (b).--The amendment made by subsection (b) 
     shall apply to amounts received after December 31, 2003.

     SEC. __. MODIFICATION OF PURCHASE PRICE LIMITATION UNDER 
                   MORTGAGE SUBSIDY BOND RULES BASED ON MEDIAN 
                   FAMILY INCOME.

       (a) In General.--Paragraph (1) of section 143(e) (relating 
     to purchase price requirement) is amended to read as follows:
       ``(1) In general.--An issue meets the requirements of this 
     subsection only if the acquisition cost of each residence the 
     owner-financing of which is provided under the issue does not 
     exceed the greater of--
       ``(A) 90 percent of the average area purchase price 
     applicable to the residence, or
       ``(B) 3.5 times the applicable median family income (as 
     defined in subsection (f)).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to financing provided, and mortgage credit 
     certificates issued, after the date of the enactment of this 
     Act.

     SEC. __. DETERMINATION OF AREA MEDIAN GROSS INCOME FOR LOW-
                   INCOME HOUSING CREDIT PROJECTS.

       (a) In General.--Paragraph (4) of section 42(g) (relating 
     to certain rules made applicable) is amended by striking the 
     period at the end and inserting ``and in areas designated by 
     the housing credit agency as requiring higher income limits 
     to support development costs and project feasibility, the 
     term `area median gross income' means the amount equal to the 
     greater of--
       ``(A) the area median gross income determined under section 
     142(d)(2)(B), or
       ``(B) the statewide median gross income for the State in 
     which the project is located.''.

[[Page S3005]]

       (b) Conforming Amendment.--Subparagraph (B) of section 
     142(d)(2) (relating to income of individuals; area median 
     gross income) is amended--
       (1) by striking ``.--The income'' and inserting ``.--
       ``(i) In general.--Except as provided in clause (ii), the 
     income'', and
       (2) by adding at the end the following new clause:
       ``(ii) Area median gross income for low-income housing 
     credit projects.--In the case of any building which receives 
     a low-income housing credit allocation under section 42 in 
     areas designated by the housing credit agency (as defined in 
     section 42(h)(8)) as requiring higher income limits to 
     support development costs and project feasibility, the term 
     `area median gross income' means the amount equal to the 
     greater of--

       ``(I) the area median gross income determined under clause 
     (i), or
       ``(II) the statewide median gross income for the State in 
     which the project is located.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to--
       (1) housing credit dollar amounts allocated after the date 
     of the enactment of this Act, and
       (2) buildings placed in service after such date to the 
     extent paragraph (1) of section 42(h) of the Internal Revenue 
     Code of 1986 does not apply to any building by reason of 
     paragraph (4) thereof.
                                 ______
                                 
  SA 2893. Mr. REID (for himself and Mr. Dayton) submitted an amendment 
intended to be proposed by him to the bill S. 1637, to amend the 
Internal Revenue Code of 1986 to comply with the World Trade 
Organization rulings on the FSC/ETI benefit in a manner that preserves 
jobs and production activities in the United States, to reform and 
simplify the international taxation rules of the United States, and for 
other purposes; which was ordered to lie on the table; as follows:

       Beginning on page 179, after line 25, add the following:

     SEC. __. EXTENSION AND EXPANSION OF CREDIT FOR ELECTRICITY 
                   PRODUCED FROM CERTAIN RENEWABLE RESOURCES.

       (a) Expansion of Qualified Energy Resources.--Subsection 
     (c) of section 45 (relating to electricity produced from 
     certain renewable resources), as amended by section 514 of 
     this Act (as added by amendment no. 2687, as agreed to) is 
     amended to read as follows:
       ``(c) Qualified Energy Resources.--For purposes of this 
     section--
       ``(1) In general.--The term `qualified energy resources' 
     means--
       ``(A) wind,
       ``(B) closed-loop biomass,
       ``(C) biomass (other than closed-loop biomass),
       ``(D) geothermal energy,
       ``(E) solar energy,
       ``(F) small irrigation power,
       ``(G) biosolids and sludge, and
       ``(H) municipal solid waste.''.
       ``(2) Closed-loop biomass.--The term `closed-loop biomass' 
     means any organic material from a plant which is planted 
     exclusively for purposes of being used at a qualified 
     facility to produce electricity.
       ``(3) Biomass.--
       ``(A) In general.--The term `biomass' means--
       ``(i) any agricultural livestock waste nutrients, or
       ``(ii) any solid, nonhazardous, cellulosic waste material 
     which is segregated from other waste materials and which is 
     derived from--

       ``(I) any of the following forest-related resources: mill 
     and harvesting residues, precommercial thinnings, slash, and 
     brush,
       ``(II) solid wood waste materials, including waste pallets, 
     crates, dunnage, manufacturing and construction wood wastes 
     (other than pressure-treated, chemically-treated, or painted 
     wood wastes), and landscape or right-of-way tree trimmings, 
     but not including municipal solid waste, gas derived from the 
     biodegradation of solid waste, or paper which is commonly 
     recycled, or
       ``(III) agriculture sources, including orchard tree crops, 
     vineyard, grain, legumes, sugar, and other crop by-products 
     or residues.

       ``(B) Agricultural livestock waste nutrients.--
       ``(i) In general.--The term `agricultural livestock waste 
     nutrients' means agricultural livestock manure and litter, 
     including wood shavings, straw, rice hulls, and other bedding 
     material for the disposition of manure.
       ``(ii) Agricultural livestock.--The term `agricultural 
     livestock' includes bovine, swine, poultry, and sheep.
       ``(4) Geothermal energy.--The term `geothermal energy' 
     means energy derived from a geothermal deposit (within the 
     meaning of section 613(e)(2)).
       ``(5) Small irrigation power.--The term `small irrigation 
     power' means power--
       ``(A) generated without any dam or impoundment of water 
     through an irrigation system canal or ditch, and
       ``(B) the installed capacity of which is less than 5 
     megawatts.
       ``(6) Biosolids and sludge.--The term `biosolids and 
     sludge' means the residue or solids removed in the treatment 
     of commercial, industrial, or municipal wastewater.
       ``(7) Municipal solid waste.--The term `municipal solid 
     waste' has the meaning given the term `solid waste' under 
     section 2(27) of the Solid Waste Disposal Act (42 U.S.C. 
     6903).''.
       (b) Extension and Expansion of Qualified Facilities.--
       (1) In general.--Section 45 is amended by redesignating 
     subsection (d) as subsection (e) and by inserting after 
     subsection (c) the following new subsection:
       ``(d) Qualified Facilities.--For purposes of this section--
       ``(1) Wind facility.--In the case of a facility using wind 
     to produce electricity, the term `qualified facility' means 
     any facility owned by the taxpayer which is originally placed 
     in service after December 31, 1993, and before January 1, 
     2007.
       ``(2) Closed-loop biomass facility.--
       ``(A) In general.--In the case of a facility using closed-
     loop biomass to produce electricity, the term `qualified 
     facility' means any facility--
       ``(i) owned by the taxpayer which is originally placed in 
     service after December 31, 1992, and before January 1, 2007, 
     or
       ``(ii) owned by the taxpayer which before January 1, 2007, 
     is originally placed in service and modified to use closed-
     loop biomass to co-fire with coal, with other biomass, or 
     with both, but only if the modification is approved under the 
     Biomass Power for Rural Development Programs or is part of a 
     pilot project of the Commodity Credit Corporation as 
     described in 65 Fed. Reg. 63052.
       ``(B) Special rules.--In the case of a qualified facility 
     described in subparagraph (A)(ii)--
       ``(i) the 10-year period referred to in subsection (a) 
     shall be treated as beginning no earlier than October 1, 
     2004,
       ``(ii) the amount of the credit determined under subsection 
     (a) with respect to the facility shall be an amount equal to 
     the amount determined without regard to this clause 
     multiplied by the ratio of the thermal content of the closed-
     loop biomass used in such facility to the thermal content of 
     all fuels used in such facility, and
       ``(iii) if the owner of such facility is not the producer 
     of the electricity, the person eligible for the credit 
     allowable under subsection (a) shall be the lessee or the 
     operator of such facility.
       ``(3) Biomass facility.--
       ``(A) In general.--In the case of a facility using biomass 
     (other than closed-loop biomass) to produce electricity, the 
     term `qualified facility' means any facility owned by the 
     taxpayer which--
       ``(i) in the case of a facility using agricultural 
     livestock waste nutrients, is originally placed in service 
     after September 30, 2004 and before January 1, 2007, and
       ``(ii) in the case of any other facility, is originally 
     placed in service before January 1, 2005.
       ``(B) Special rules for preeffective date facilities.--In 
     the case of any facility described in subparagraph (A)(ii) 
     which is placed in service before October 1, 2004--
       ``(i) subsection (a)(1) shall be applied by substituting 
     `1.2 cents' for `1.5 cents', and
       ``(ii) the 5-year period beginning on October 1, 2004, 
     shall be substituted for the 10-year period in subsection 
     (a)(2)(A)(ii).
       ``(C) Credit eligibility.--In the case of any facility 
     described in subparagraph (A), if the owner of such facility 
     is not the producer of the electricity, the person eligible 
     for the credit allowable under subsection (a) shall be the 
     lessee or the operator of such facility.
       ``(4) Geothermal or solar energy facility.--
       ``(A) In general.--In the case of a facility using 
     geothermal or solar energy to produce electricity, the term 
     `qualified facility' means any facility owned by the taxpayer 
     which is originally placed in service after September 30, 
     2004, and before January 1, 2007.
       ``(B) Special rule.--In the case of any facility described 
     in subparagraph (A), the 5-year period beginning on the date 
     the facility was originally placed in service shall be 
     substituted for the 10-year period in subsection 
     (a)(2)(A)(ii).
       ``(5) Small irrigation power facility.--In the case of a 
     facility using small irrigation power to produce electricity, 
     the term `qualified facility' means any facility owned by the 
     taxpayer which is originally placed in service after 
     September 30, 2004, and before January 1, 2007.
       ``(6) Biosolids and sludge facility.--In the case of a 
     facility using waste heat from the incineration of biosolids 
     and sludge to produce electricity, the term `qualified 
     facility' means any facility owned by the taxpayer which is 
     originally placed in service after September 30, 2004, and 
     before January 1, 2007. Such term shall not include any 
     property described in section 48(a)(6) the basis of which is 
     taken into account for purposes of the energy credit under 
     section 46.
       ``(7) Municipal solid waste facility.--
       ``(A) In general.--In the case of a facility or unit 
     incinerating municipal solid waste to produce electricity, 
     the term `qualified facility' means any facility or unit 
     owned by the taxpayer which is originally placed in service 
     after September 30, 2004, and before January 1, 2007.
       ``(B) Special rule.--In the case of any facility or unit 
     described in subparagraph (A), the 5-year period beginning on 
     the date the facility or unit was originally placed in 
     service shall be substituted for the 10-year period in 
     subsection (a)(2)(A)(ii).

[[Page S3006]]

       ``(C) Credit eligibility.--In the case of any qualified 
     facility described in subparagraph (A), if the owner of such 
     facility is not the producer of the electricity, the person 
     eligible for the credit allowable under subsection (a) shall 
     be the lessee or the operator of such facility.''.
       (2) No credit for certain production.--Section 45(e) 
     (relating to definitions and special rules), as redesignated 
     by paragraph (1), is amended by striking paragraph (6) and 
     inserting the following new paragraph:
       ``(6) Operations inconsistent with solid waste disposal 
     act.--In the case of a qualified facility described in 
     subsection (d)(6)(A), subsection (a) shall not apply to 
     electricity produced at such facility during any taxable year 
     if, during a portion of such year, there is a certification 
     in effect by the Administrator of the Environmental 
     Protection Agency that such facility was permitted to operate 
     in a manner inconsistent with section 4003(d) of the Solid 
     Waste Disposal Act (42 U.S.C. 6943(d)).''.
       (3) Conforming amendment.--Section 45(e), as so 
     redesignated, is amended by striking ``subsection (c)(3)(A)'' 
     in paragraph (7)(A)(i) and inserting ``subsection (d)(1)''.
       (c) Credit Rate for Electricity Produced From New 
     Facilities.--Section 45(a) is amended by adding at the end 
     the following new flush sentence:
     ``In the case of electricity produced after September 30, 
     2004, at any qualified facility originally placed in service 
     after such date, paragraph (1) shall be applied by 
     substituting `1.8 cents' for `1.5 cents'.''.
       (d) Elimination of Certain Credit Reductions.--Section 
     45(b)(3)(A) (relating to credit reduced for grants, tax-
     exempt bonds, subsidized energy financing, and other credits) 
     is amended--
       (1) by striking clause (ii),
       (2) by redesignating clauses (iii) and (iv) as clauses (ii) 
     and (iii),
       (3) by inserting ``(other than proceeds of an issue of 
     State or local government obligations the interest on which 
     is exempt from tax under section 103, or any loan, debt, or 
     other obligation incurred under subchapter I of chapter 31 of 
     title 7 of the Rural Electrification Act of 1936 (7 U.S.C. 
     901 et seq.), as in effect on the date of the enactment of 
     the Energy Tax Incentives Act)'' after ``project'' in clause 
     (ii) (as so redesignated),
       (4) by adding at the end the following new sentence: ``This 
     paragraph shall not apply with respect to any facility 
     described in subsection (d)(2)(A)(ii).'', and
       (5) by striking ``tax-exempt bonds,'' in the heading and 
     inserting ``certain''.
       (e) Treatment of Persons Not Able To Use Entire Credit.--
     Section 45(e) (relating to definitions and special rules), as 
     redesignated by subsection (b)(1), is amended by adding at 
     the end the following new paragraph:
       ``(8) Treatment of persons not able to use entire credit.--
       ``(A) Allowance of credit.--
       ``(i) In general.--Except as otherwise provided in this 
     subsection--

       ``(I) any credit allowable under subsection (a) with 
     respect to a qualified facility owned by a person described 
     in clause (ii) may be transferred or used as provided in this 
     paragraph, and
       ``(II) the determination as to whether the credit is 
     allowable shall be made without regard to the tax-exempt 
     status of the person.

       ``(ii) Persons described.--A person is described in this 
     clause if the person is--

       ``(I) an organization described in section 501(c)(12)(C) 
     and exempt from tax under section 501(a),
       ``(II) an organization described in section 1381(a)(2)(C),
       ``(III) a public utility (as defined in section 
     136(c)(2)(B)), which is exempt from income tax under this 
     subtitle,
       ``(IV) any State or political subdivision thereof, the 
     District of Columbia, any possession of the United States, or 
     any agency or instrumentality of any of the foregoing, or

       ``(V) any Indian tribal government (within the meaning of 
     section 7871) or any agency or instrumentality thereof.

       ``(B) Transfer of credit.--
       ``(i) In general.--A person described in subparagraph 
     (A)(ii) may transfer any credit to which subparagraph (A)(i) 
     applies through an assignment to any other person not 
     described in subparagraph (A)(ii). Such transfer may be 
     revoked only with the consent of the Secretary.
       ``(ii) Regulations.--The Secretary shall prescribe such 
     regulations as necessary to ensure that any credit described 
     in clause (i) is assigned once and not reassigned by such 
     other person.
       ``(iii) Transfer proceeds treated as arising from essential 
     government function.--Any proceeds derived by a person 
     described in subclause (III), (IV), or (V) of subparagraph 
     (A)(ii) from the transfer of any credit under clause (i) 
     shall be treated as arising from the exercise of an essential 
     government function.
       ``(C) Use of credit as an offset.--Notwithstanding any 
     other provision of law, in the case of a person described in 
     subclause (I), (II), or (V) of subparagraph (A)(ii), any 
     credit to which subparagraph (A)(i) applies may be applied by 
     such person, to the extent provided by the Secretary of 
     Agriculture, as a prepayment of any loan, debt, or other 
     obligation the entity has incurred under subchapter I of 
     chapter 31 of title 7 of the Rural Electrification Act of 
     1936 (7 U.S.C. 901 et seq.), as in effect on the date of the 
     enactment of the Energy Tax Incentives Act.
       ``(D) Credit not income.--Any transfer under subparagraph 
     (B) or use under subparagraph (C) of any credit to which 
     subparagraph (A)(i) applies shall not be treated as income 
     for purposes of section 501(c)(12).
       ``(E) Treatment of unrelated persons.--For purposes of 
     subsection (a)(2)(B), sales of electricity among and between 
     persons described in subparagraph (A)(ii) shall be treated as 
     sales between unrelated parties.''.
       (f) Credit Allowed Against Regular and Minimum Tax.--
       (1) In general.--Subsection (c) of section 38 (relating to 
     limitation based on amount of tax) is amended by 
     redesignating paragraph (4) as paragraph (5) and by inserting 
     after paragraph (3) the following new paragraph:
       ``(4) Special rules for section 45 credit.--
       ``(A) In general.--In the case of any section 45 credit--
       ``(i) this section and section 39 shall be applied 
     separately with respect to such credit, and
       ``(ii) in applying paragraph (1) to such credit--

       ``(I) the tentative minimum tax shall be treated as being 
     zero, and
       ``(II) the limitation under paragraph (1) (as modified by 
     subclause (I)) shall be reduced by the credit allowed under 
     subsection (a) for the taxable year (other than the section 
     45 credit).

       ``(B) Section 45 credit.--For purposes of this subsection, 
     the term `section 45 credit' means the credit determined 
     under section 45 to the extent that such credit is 
     attributable to electricity produced--
       ``(i) at a facility which is originally placed in service 
     after the date of the enactment of this paragraph, and
       ``(ii) during the 4-year period beginning on the date that 
     such facility was originally placed in service.''.
       (2) Conforming amendments.--
       (A) Paragraph (2)(A)(ii)(II) of section 38(c) of such Code 
     is amended by striking ``or'' and inserting a comma and by 
     inserting ``, and the section 45 credit'' after ``employee 
     credit''.
       (B) Paragraph (3)(A)(ii)(II) of section 38(c) of such Code 
     is amended by inserting ``and the section 45 credit'' after 
     ``employee credit''.
       (g) Effective Dates.--
       (1) In general.--Except as otherwise provided in this 
     subsection, the amendments made by this section shall apply 
     to electricity produced and sold--
       (A) with respect to facilities described in paragraphs (1) 
     and (2)(A)(i) of section 45(d), as amended by this section, 
     after December 31, 2003, in taxable years ending after such 
     date, and
       (B) with respect to all other facilities described in 
     section 45(d), as amended by this section, after September 
     30, 2004, in taxable years ending after such date.
       (2) Certain biomass facilities.--With respect to any 
     facility described in section 45(d)(3)(A)(ii) of the Internal 
     Revenue Code of 1986, as added by subsection (b)(1), which is 
     placed in service before the date of the enactment of this 
     Act, the amendments made by this section shall apply to 
     electricity produced and sold after September 30, 2004, in 
     taxable years ending after such date.
       (3) Credit rate for new facilities.--The amendments made by 
     subsection (c) shall apply to electricity produced and sold 
     after September 30, 2004, in taxable years ending after such 
     date.
       (4) Nonapplication of amendments to preeffective date 
     poultry waste facilities.--The amendments made by this 
     section shall not apply with respect to any poultry waste 
     facility (within the meaning of section 45(c)(3)(C), as in 
     effect on September 30, 2004) placed in service on or before 
     such date.
                                 ______
                                 
  SA 2894. Mr. KYL (for himself and Mr. Nickles) submitted an amendment 
intended to be proposed to amendment SA 2886 submitted by Mr. McConnell 
(for Mr. Frist) to the bill S. 1637, to amend the Internal Revenue Code 
of 1986 to comply with the World Trade Organization rulings on the FSC/
ETI benefit in a manner that preserves jobs and production activities 
in the United States, to reform and simplify the international taxation 
rules of the United States, and for other purposes; which was ordered 
to lie on the table; as follows:

       In lieu of the amendment contained in the instructions 
     insert the following:

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

       (a) Short Title.--This Act may be cited as the ``Jumpstart 
     Our Business Strength (JOBS) 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.--

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

        TITLE I--PROVISIONS RELATING TO REPEAL OF EXCLUSION FOR 
                        EXTRATERRITORIAL INCOME

Sec. 101. Repeal of exclusion for extraterritorial income.

[[Page S3007]]

             TITLE II--REDUCTION OF TOP CORPORATE TAX RATE

Sec. 201. Reduction in corporate income tax rate.

               TITLE III--ALTERNATIVE MINIMUM TAX RELIEF

Sec. 301. Reduction in corporate AMT rate.
Sec. 302. Increase in exemption from AMT for small corporations.
Sec. 303. Foreign tax credit under alternative minimum tax.

                    TITLE IV--ADDITIONAL PROVISIONS

        Subtitle A--Provisions Designed To Curtail Tax Shelters

Sec. 401. Clarification of economic substance doctrine.
Sec. 402. Penalty for failing to disclose reportable transaction.
Sec. 403. Accuracy-related penalty for listed transactions and other 
              reportable transactions having a significant tax 
              avoidance purpose.
Sec. 404. Penalty for understatements attributable to transactions 
              lacking economic substance, etc.
Sec. 405. Modifications of substantial understatement penalty for 
              nonreportable transactions.
Sec. 406. Tax shelter exception to confidentiality privileges relating 
              to taxpayer communications.
Sec. 407. Disclosure of reportable transactions.
Sec. 408. Modifications to penalty for failure to register tax 
              shelters.
Sec. 409. Modification of penalty for failure to maintain lists of 
              investors.
Sec. 410. Modification of actions to enjoin certain conduct related to 
              tax shelters and reportable transactions.
Sec. 411. Understatement of taxpayer's liability by income tax return 
              preparer.
Sec. 412. Penalty on failure to report interests in foreign financial 
              accounts.
Sec. 413. Frivolous tax submissions.
Sec. 414. Regulation of individuals practicing before the Department of 
              Treasury.
Sec. 415. Penalty on promoters of tax shelters.
Sec. 416. Statute of limitations for taxable years for which required 
              listed transactions not reported.
Sec. 417. Denial of deduction for interest on underpayments 
              attributable to nondisclosed reportable and noneconomic 
              substance transactions.
Sec. 418. Authorization of appropriations for tax law enforcement.

           Subtitle B--Other Corporate Governance Provisions

Sec. 421. Affirmation of consolidated return regulation authority.
Sec. 422. Increase in criminal monetary penalty limitation for the 
              underpayment or overpayment of tax due to fraud.

            Subtitle C--Enron-Related Tax Shelter Provisions

Sec. 431. Limitation on transfer or importation of built-in losses.
Sec. 432. No reduction of basis under section 734 in stock held by 
              partnership in corporate partner.
Sec. 433. Repeal of special rules for FASITs.
Sec. 434. Expanded disallowance of deduction for interest on 
              convertible debt.
Sec. 435. Expanded authority to disallow tax benefits under section 
              269.
Sec. 436. Modification of interaction between subpart F and passive 
              foreign investment company rules.

           Subtitle D--Provisions to Discourage Expatriation

Sec. 441. Tax treatment of inverted corporate entities.
Sec. 442. Imposition of mark-to-market tax on individuals who 
              expatriate.
Sec. 443. Excise tax on stock compensation of insiders in inverted 
              corporations.
Sec. 444. Reinsurance of United States risks in foreign jurisdictions.
Sec. 445. Reporting of taxable mergers and acquisitions.

                     Subtitle E--International Tax

Sec. 451. Clarification of banking business for purposes of determining 
              investment of earnings in United States property.
Sec. 452. Prohibition on nonrecognition of gain through complete 
              liquidation of holding company.
Sec. 453. Prevention of mismatching of interest and original issue 
              discount deductions and income inclusions in transactions 
              with related foreign persons.
Sec. 454. Effectively connected income to include certain foreign 
              source income.
Sec. 455. Recapture of overall foreign losses on sale of controlled 
              foreign corporation.
Sec. 456. Minimum holding period for foreign tax credit on withholding 
              taxes on income other than dividends.

                  Subtitle F--Other Revenue Provisions

                     Part I--Financial Instruments

Sec. 461. Treatment of stripped interests in bond and preferred stock 
              funds, etc.
Sec. 462. Application of earnings stripping rules to partnerships and S 
              corporations.
Sec. 463. Recognition of cancellation of indebtedness income realized 
              on satisfaction of debt with partnership interest.
Sec. 464. Modification of straddle rules.
Sec. 465. Denial of installment sale treatment for all readily 
              tradeable debt.

                 Part II--Corporations and Partnerships

Sec. 466. Modification of treatment of transfers to creditors in 
              divisive reorganizations.
Sec. 467. Clarification of definition of nonqualified preferred stock.
Sec. 468. Modification of definition of controlled group of 
              corporations.
Sec. 469. Mandatory basis adjustments in connection with partnership 
              distributions and transfers of partnership interests.

                Part III--Depreciation and Amortization

Sec. 471. Extension of amortization of intangibles to sports 
              franchises.
Sec. 472. Class lives for utility grading costs.
Sec. 473. Expansion of limitation on depreciation of certain passenger 
              automobiles.
Sec. 474. Consistent amortization of periods for intangibles.
Sec. 475. Reform of tax treatment of leasing operations.
Sec. 476. Limitation on deductions allocable to property used by 
              governments or other tax-exempt entities. 

                   Part IV--Administrative Provisions

Sec. 481. Clarification of rules for payment of estimated tax for 
              certain deemed asset sales.
Sec. 482. Extension of IRS user fees.
Sec. 483. Doubling of certain penalties, fines, and interest on 
              underpayments related to certain offshore financial 
              arrangement.
Sec. 484. Partial payment of tax liability in installment agreements.
Sec. 485. Extension of customs user fees.
Sec. 486. Deposits made to suspend running of interest on potential 
              underpayments.
Sec. 487. Qualified tax collection contracts.

                    Part V--Miscellaneous Provisions

Sec. 491. Addition of vaccines against hepatitis A to list of taxable 
              vaccines.
Sec. 492. Recognition of gain from the sale of a principal residence 
              acquired in a like-kind exchange within 5 years of sale.
Sec. 493. Clarification of exemption from tax for small property and 
              casualty insurance companies.
Sec. 494. Definition of insurance company for section 831.
Sec. 495. Limitations on deduction for charitable contributions of 
              patents and similar property.
Sec. 496. Repeal of 10-percent rehabilitation tax credit.
Sec. 497. Increase in age of minor children whose unearned income is 
              taxed as if parent's income.

        TITLE I--PROVISIONS RELATING TO REPEAL OF EXCLUSION FOR 
                        EXTRATERRITORIAL INCOME

     SEC. 101. REPEAL OF EXCLUSION FOR EXTRATERRITORIAL INCOME.

       (a) In General.--Section 114 is hereby repealed.
       (b) Conforming Amendments.--
       (1)(A) Subpart E of part III of subchapter N of chapter 1 
     (relating to qualifying foreign trade income) is hereby 
     repealed.
       (B) The table of subparts for such part III is amended by 
     striking the item relating to subpart E.
       (2) The table of sections for part III of subchapter B of 
     chapter 1 is amended by striking the item relating to section 
     114.
       (3) The second sentence of section 56(g)(4)(B)(i) is 
     amended by striking ``114 or''.
       (4) Section 275(a) is amended--
       (A) by inserting ``or'' at the end of paragraph (4)(A), by 
     striking ``or'' at the end of paragraph (4)(B) and inserting 
     a period, and by striking subparagraph (C), and
       (B) by striking the last sentence.
       (5) Paragraph (3) of section 864(e) is amended--
       (A) by striking:
       ``(3) Tax-exempt assets not taken into account.--
       ``(A) In general.--For purposes of''; and inserting:
       ``(3) Tax-exempt assets not taken into account.--For 
     purposes of'', and
       (B) by striking subparagraph (B).
       (6) Section 903 is amended by striking ``114, 164(a),'' and 
     inserting ``164(a)''.
       (7) Section 999(c)(1) is amended by striking 
     ``941(a)(5),''.
       (c) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to transactions occurring after the date of the 
     enactment of this Act.
       (2) Binding contracts.--The amendments made by this section 
     shall not apply to any transaction in the ordinary course of 
     a trade or business which occurs pursuant to a binding 
     contract--
       (A) which is between the taxpayer and a person who is not a 
     related person (as defined in section 943(b)(3) of such Code, 
     as in effect on the day before the date of the enactment of 
     this Act), and
       (B) which is in effect on September 17, 2003, and at all 
     times thereafter.

[[Page S3008]]

       (d) Revocation of Section 943(e) Elections.--
       (1) In general.--In the case of a corporation that elected 
     to be treated as a domestic corporation under section 943(e) 
     of the Internal Revenue Code of 1986 (as in effect on the day 
     before the date of the enactment of this Act)--
       (A) the corporation may, during the 1-year period beginning 
     on the date of the enactment of this Act, revoke such 
     election, effective as of such date of enactment, and
       (B) if the corporation does revoke such election--
       (i) such corporation shall be treated as a domestic 
     corporation transferring (as of such date of enactment) all 
     of its property to a foreign corporation in connection with 
     an exchange described in section 354 of such Code, and
       (ii) no gain or loss shall be recognized on such transfer.
       (2) Exception.--Subparagraph (B)(ii) of paragraph (1) shall 
     not apply to gain on any asset held by the revoking 
     corporation if--
       (A) the basis of such asset is determined in whole or in 
     part by reference to the basis of such asset in the hands of 
     the person from whom the revoking corporation acquired such 
     asset,
       (B) the asset was acquired by transfer (not as a result of 
     the election under section 943(e) of such Code) occurring on 
     or after the 1st day on which its election under section 
     943(e) of such Code was effective, and
       (C) a principal purpose of the acquisition was the 
     reduction or avoidance of tax (other than a reduction in tax 
     under section 114 of such Code, as in effect on the day 
     before the date of the enactment of this Act).
       (e) General Transition.--
       (1) In general.--In the case of a taxable year ending after 
     the date of the enactment of this Act and beginning before 
     January 1, 2007, for purposes of chapter 1 of such Code, a 
     current FSC/ETI beneficiary shall be allowed a deduction 
     equal to the transition amount determined under this 
     subsection with respect to such beneficiary for such year.
       (2) Current fsc/eti beneficiary.--The term ``current FSC/
     ETI beneficiary'' means any corporation which entered into 
     one or more transactions during its taxable year beginning in 
     calendar year 2002 with respect to which FSC/ETI benefits 
     were allowable.
       (3) Transition amount.--For purposes of this subsection--
       (A) In general.--The transition amount applicable to any 
     current FSC/ETI beneficiary for any taxable year is the 
     phaseout percentage of the base period amount.
       (B) Phaseout percentage.--
       (i) In general.--In the case of a taxpayer using the 
     calendar year as its taxable year, the phaseout percentage 
     shall be determined under the following table:

      The phaseout
      percentage is:
         80 ...........................................................
         80 ...........................................................
         60............................................................
       (ii) Special rule for 2004.--The phaseout percentage for 
     2004 shall be the amount that bears the same ratio to 100 
     percent as the number of days after the date of the enactment 
     of this Act bears to 365.
       (iii) Special rule for fiscal year taxpayers.--In the case 
     of a taxpayer not using the calendar year as its taxable 
     year, the phaseout percentage is the weighted average of the 
     phaseout percentages determined under the preceding 
     provisions of this paragraph with respect to calendar years 
     any portion of which is included in the taxpayer's taxable 
     year. The weighted average shall be determined on the basis 
     of the respective portions of the taxable year in each 
     calendar year.
       (C) Short taxable year.--The Secretary shall prescribe 
     guidance for the computation of the transition amount in the 
     case of a short taxable year.
       (4) Base period amount.--For purposes of this subsection, 
     the base period amount is the FSC/ETI benefit for the 
     taxpayer's taxable year beginning in calendar year 2002.
       (5) FSC/ETI benefit.--For purposes of this subsection, the 
     term ``FSC/ETI benefit'' means--
       (A) amounts excludable from gross income under section 114 
     of such Code, and
       (B) the exempt foreign trade income of related foreign 
     sales corporations from property acquired from the taxpayer 
     (determined without regard to section 923(a)(5) of such Code 
     (relating to special rule for military property), as in 
     effect on the day before the date of the enactment of the FSC 
     Repeal and Extraterritorial Income Exclusion Act of 2000).

     In determining the FSC/ETI benefit there shall be excluded 
     any amount attributable to a transaction with respect to 
     which the taxpayer is the lessor unless the leased property 
     was manufactured or produced in whole or in significant part 
     by the taxpayer.
       (6) Special rule for agricultural and horticultural 
     cooperatives.--Determinations under this subsection with 
     respect to an organization described in section 943(g)(1) of 
     such Code, as in effect on the day before the date of the 
     enactment of this Act, shall be made at the cooperative level 
     and the purposes of this subsection shall be carried out in a 
     manner similar to section 199(h)(2) of such Code, as added by 
     this Act. Such determinations shall be in accordance with 
     such requirements and procedures as the Secretary may 
     prescribe.
       (7) Certain rules to apply.--Rules similar to the rules of 
     section 41(f) of such Code shall apply for purposes of this 
     subsection.
       (8) Coordination with binding contract rule.--The deduction 
     determined under paragraph (1) for any taxable year shall be 
     reduced by the phaseout percentage of any FSC/ETI benefit 
     realized for the taxable year by reason of subsection (c)(2) 
     or section 5(c)(1)(B) of the FSC Repeal and Extraterritorial 
     Income Exclusion Act of 2000, except that for purposes of 
     this paragraph the phaseout percentage for 2004 shall be 
     treated as being equal to 100 percent.
       (9) Special rule for taxable year which includes date of 
     enactment.--In the case of a taxable year which includes the 
     date of the enactment of this Act, the deduction allowed 
     under this subsection to any current FSC/ETI beneficiary 
     shall in no event exceed--
       (A) 100 percent of such beneficiary's base period amount 
     for calendar year 2004, reduced by
       (B) the FSC/ETI benefit of such beneficiary with respect to 
     transactions occurring during the portion of the taxable year 
     ending on the date of the enactment of this Act.

             TITLE II--REDUCTION OF TOP CORPORATE TAX RATE

     SEC. 201. REDUCTION IN CORPORATE INCOME TAX RATE.

       (a) In General.--Subsection (b) of section 11 (relating to 
     tax imposed on corporations) is amended by redesignating 
     paragraph (2) as paragraph (6) and by striking paragraph (1) 
     and inserting the following new paragraphs:
       ``(1) For taxable years beginning after 2009.--In the case 
     of taxable years beginning after 2009, the amount of the tax 
     imposed by subsection (a) shall be determined in accordance 
     with the following table:

The tax is:e income is:
15% of taxable income..................................................
$7,500, plus 25% of the excess over $50,000............................
$13,750, plus 33% of the excess over $75,000...........................
       ``(2) For taxable years beginning in 2006, 2007, 2008, or 
     2009.--In the case of taxable years beginning in 2006, 2007, 
     2008, or 2009, the amount of the tax imposed by subsection 
     (a) shall be determined in accordance with the following 
     table:

The tax is:e income is:
15% of taxable income..................................................
$7,500, plus 25% of the excess over $50,000............................
$13,750, plus 33.5% of the excess over $75,000.........................
       ``(3) For taxable years beginning in 2005.--In the case of 
     taxable years beginning in 2005, the amount of the tax 
     imposed by subsection (a) shall be determined in accordance 
     with the following table:

The tax is:e income is:
15% of taxable income..................................................
$7,500, plus 25% of the excess over $50,000............................
$13,750, plus 34% of the excess over $75,000...........................
       ``(4) For taxable years beginning in 2004.--In the case of 
     taxable years beginning in 2004, the amount of the tax 
     imposed by subsection (a) shall be determined in accordance 
     with the following table:

The tax is:e income is:
15% of taxable income..................................................
$7,500, plus 25% of the excess over $50,000............................
$13,750, plus 34% of the excess over $75,000...........................
$3,388,250, plus 34.5% of the excess over $10,000,000..................
       ``(5) Phaseout of lower rates for certain taxpayers.--
       ``(A) General rule.--In the case of a corporation which has 
     taxable income in excess of $100,000 for any taxable year, 
     the amount of tax determined under paragraph (1), (2), (3) or 
     (4) for such taxable year shall be increased by the lesser of 
     (i) 5 percent of such excess, or (ii) $11,000 ($11,750 in the 
     case of taxable years beginning before 2006 and $11,375 in 
     the case of taxable years beginning after 2005 and before 
     2010).
       ``(B) Higher income corporations.--In the case of a 
     corporation which has taxable income in excess of $15,000,000 
     for taxable years beginning in 2004, the amount of the tax 
     determined under the foregoing provisions of this subsection 
     shall be increased by an additional amount equal to the 
     lesser of (i) 3 percent of such excess, or (ii) $50,000.''.
       (b) Conforming Amendments.--
       (1) Section 904(b)(3)(D)(ii) is amended to read as follows:
       ``(ii) in the case of a corporation, section 1201(a) 
     applies to such taxable year.''.
       (2) Section 1201(a) is amended by striking ``the last 2 
     sentences of section 11(b)(1)'' and inserting ``section 
     11(b)(5)''.
       (3) Section 1561(a) is amended--
       (A) by striking ``the last 2 sentences of section 
     11(b)(1)'' and inserting ``section 11(b)(5)'', and
       (B) by striking ``such last 2 sentences'' and inserting 
     ``section 11(b)(5)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

               TITLE III--ALTERNATIVE MINIMUM TAX RELIEF

     SEC. 301. REDUCTION IN CORPORATE AMT RATE.

       (a) In General.--Section 55(b)(1)(B)(i) (relating to amount 
     of tentative tax for corporations) is amended by striking 
     ``20 percent'' and inserting ``19 percent (19.5 percent for 
     taxable years beginning in 2004 or 2005)''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

[[Page S3009]]

     SEC. 302. INCREASE IN EXEMPTION FROM AMT FOR SMALL 
                   CORPORATIONS.

       (a) In General.--Paragraph (1) of section 55(e) (relating 
     to exemption for small corporations) is amended--
       (1) by striking ``$7,500,000'' in the heading and the text 
     of subparagraph (A) and inserting ``$15,000,000'',
       (2) by striking subparagraph (B), and
       (3) by redesignating subparagraphs (C) and (D) as 
     subparagraphs (B) and (C), respectively.
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 303. FOREIGN TAX CREDIT UNDER ALTERNATIVE MINIMUM TAX.

       (a) In General.--
       (1) Subsection (a) of section 59 is amended by striking 
     paragraph (2) and by redesignating paragraphs (3) and (4) as 
     paragraphs (2) and (3), respectively.
       (2) Section 53(d)(1)(B)(i)(II) is amended by striking ``and 
     if section 59(a)(2) did not apply''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2004.

                    TITLE IV--ADDITIONAL PROVISIONS

        Subtitle A--Provisions Designed To Curtail Tax Shelters

     SEC. 401. CLARIFICATION OF ECONOMIC SUBSTANCE DOCTRINE.

       (a) In General.--Section 7701 is amended by redesignating 
     subsection (n) as subsection (o) and by inserting after 
     subsection (m) the following new subsection:
       ``(n) Clarification of Economic Substance Doctrine; Etc.--
       ``(1) General rules.--
       ``(A) In general.--In any case in which a court determines 
     that the economic substance doctrine is relevant for purposes 
     of this title to a transaction (or series of transactions), 
     such transaction (or series of transactions) shall have 
     economic substance only if the requirements of this paragraph 
     are met.
       ``(B) Definition of economic substance.--For purposes of 
     subparagraph (A)--
       ``(i) In general.--A transaction has economic substance 
     only if--

       ``(I) the transaction changes in a meaningful way (apart 
     from Federal tax effects) the taxpayer's economic position, 
     and
       ``(II) the taxpayer has a substantial nontax purpose for 
     entering into such transaction and the transaction is a 
     reasonable means of accomplishing such purpose.

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

       ``(I) the present value of the reasonably expected pre-tax 
     profit from the transaction is substantial in relation to the 
     present value of the expected net tax benefits that would be 
     allowed if the transaction were respected, and
       ``(II) the reasonably expected pre-tax profit from the 
     transaction exceeds a risk-free rate of return.

       ``(C) Treatment of fees and foreign taxes.--Fees and other 
     transaction expenses and foreign taxes shall be taken into 
     account as expenses in determining pre-tax profit under 
     subparagraph (B)(ii).
       ``(2) Special rules for transactions with tax-indifferent 
     parties.--
       ``(A) Special rules for financing transactions.--The form 
     of a transaction which is in substance the borrowing of money 
     or the acquisition of financial capital directly or 
     indirectly from a tax-indifferent party shall not be 
     respected if the present value of the deductions to be 
     claimed with respect to the transaction is substantially in 
     excess of the present value of the anticipated economic 
     returns of the person lending the money or providing the 
     financial capital. A public offering shall be treated as a 
     borrowing, or an acquisition of financial capital, from a 
     tax-indifferent party if it is reasonably expected that at 
     least 50 percent of the offering will be placed with tax-
     indifferent parties.
       ``(B) Artificial income shifting and basis adjustments.--
     The form of a transaction with a tax-indifferent party shall 
     not be respected if--
       ``(i) it results in an allocation of income or gain to the 
     tax-indifferent party in excess of such party's economic 
     income or gain, or
       ``(ii) it results in a basis adjustment or shifting of 
     basis on account of overstating the income or gain of the 
     tax-indifferent party.
       ``(3) Definitions and special rules.--For purposes of this 
     subsection--
       ``(A) Economic substance doctrine.--The term `economic 
     substance doctrine' means the common law doctrine under which 
     tax benefits under subtitle A with respect to a transaction 
     are not allowable if the transaction does not have economic 
     substance or lacks a business purpose.
       ``(B) Tax-indifferent party.--The term `tax-indifferent 
     party' means any person or entity not subject to tax imposed 
     by subtitle A. A person shall be treated as a tax-indifferent 
     party with respect to a transaction if the items taken into 
     account with respect to the transaction have no substantial 
     impact on such person's liability under subtitle A.
       ``(C) Exception for personal transactions of individuals.--
     In the case of an individual, this subsection shall apply 
     only to transactions entered into in connection with a trade 
     or business or an activity engaged in for the production of 
     income.
       ``(D) Treatment of lessors.--In applying 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. 402. PENALTY FOR FAILING TO DISCLOSE REPORTABLE 
                   TRANSACTION.

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

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

       ``(a) Imposition of Penalty.--Any person who fails to 
     include on any return or statement any information with 
     respect to a reportable transaction which is required under 
     section 6011 to be included with such return or statement 
     shall pay a penalty in the amount determined under subsection 
     (b).
       ``(b) Amount of Penalty.--
       ``(1) In general.--Except as provided in paragraphs (2) and 
     (3), the amount of the penalty under subsection (a) shall be 
     $50,000.
       ``(2) Listed transaction.--The amount of the penalty under 
     subsection (a) with respect to a listed transaction shall be 
     $100,000.
       ``(3) Increase in penalty for large entities and high net 
     worth individuals.--
       ``(A) In general.--In the case of a failure under 
     subsection (a) by--
       ``(i) a large entity, or
       ``(ii) a high net worth individual,
     the penalty under paragraph (1) or (2) shall be twice the 
     amount determined without regard to this paragraph.
       ``(B) Large entity.--For purposes of subparagraph (A), the 
     term `large entity' means, with respect to any taxable year, 
     a person (other than a natural person) with gross receipts in 
     excess of $10,000,000 for the taxable year in which the 
     reportable transaction occurs or the preceding taxable year. 
     Rules similar to the rules of paragraph (2) and subparagraphs 
     (B), (C), and (D) of paragraph (3) of section 448(c) shall 
     apply for purposes of this subparagraph.
       ``(C) High net worth individual.--For purposes of 
     subparagraph (A), the term `high net worth individual' means, 
     with respect to a reportable transaction, a natural person 
     whose net worth exceeds $2,000,000 immediately before the 
     transaction.
       ``(c) Definitions.--For purposes of this section--
       ``(1) Reportable transaction.--The term `reportable 
     transaction' means any transaction with respect to which 
     information is required to be included with a return or 
     statement because, as determined under regulations prescribed 
     under section 6011, such transaction is of a type which the 
     Secretary determines as having a potential for tax avoidance 
     or evasion.
       ``(2) Listed transaction.--Except as provided in 
     regulations, the term `listed transaction' means a reportable 
     transaction which is the same as, or substantially similar 
     to, a transaction specifically identified by the Secretary as 
     a tax avoidance transaction for purposes of section 6011.
       ``(d) Authority To Rescind Penalty.--
       ``(1) In general.--The Commissioner of Internal Revenue may 
     rescind all or any portion of any penalty imposed by this 
     section with respect to any violation if--
       ``(A) the violation is with respect to a reportable 
     transaction other than a listed transaction,
       ``(B) the person on whom the penalty is imposed has a 
     history of complying with the requirements of this title,
       ``(C) it is shown that the violation is due to an 
     unintentional mistake of fact;
       ``(D) imposing the penalty would be against equity and good 
     conscience, and
       ``(E) rescinding the penalty would promote compliance with 
     the requirements of this title and effective tax 
     administration.
       ``(2) Discretion.--The exercise of authority under 
     paragraph (1) shall be at the sole discretion of the 
     Commissioner and may be delegated only to the head of the 
     Office of Tax Shelter Analysis. The Commissioner, in the 
     Commissioner's sole discretion, may establish a procedure to 
     determine if a penalty should be referred to the Commissioner 
     or

[[Page S3010]]

     the head of such Office for a determination under paragraph 
     (1).
       ``(3) No appeal.--Notwithstanding any other provision of 
     law, any determination under this subsection may not be 
     reviewed in any administrative or judicial proceeding.
       ``(4) Records.--If a penalty is rescinded under paragraph 
     (1), the Commissioner shall place in the file in the Office 
     of the Commissioner the opinion of the Commissioner or the 
     head of the Office of Tax Shelter Analysis with respect to 
     the determination, including--
       ``(A) the facts and circumstances of the transaction,
       ``(B) the reasons for the rescission, and
       ``(C) the amount of the penalty rescinded.
       ``(5) Report.--The Commissioner shall each year report to 
     the Committee on Ways and Means of the House of 
     Representatives and the Committee on Finance of the Senate--
       ``(A) a summary of the total number and aggregate amount of 
     penalties imposed, and rescinded, under this section, and
       ``(B) a description of each penalty rescinded under this 
     subsection and the reasons therefor.
       ``(e) Penalty Reported to SEC.--In the case of a person--
       ``(1) which is required to file periodic reports under 
     section 13 or 15(d) of the Securities Exchange Act of 1934 or 
     is required to be consolidated with another person for 
     purposes of such reports, and
       ``(2) which--
       ``(A) is required to pay a penalty under this section with 
     respect to a listed transaction,
       ``(B) is required to pay a penalty under section 6662A with 
     respect to any reportable transaction at a rate prescribed 
     under section 6662A(c), or
       ``(C) is required to pay a penalty under section 6662B with 
     respect to any noneconomic substance transaction,

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

``Sec. 6707A. Penalty for failure to include reportable transaction 
              information with return or statement.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to returns and statements the due date for which 
     is after the date of the enactment of this Act.

     SEC. 403. ACCURACY-RELATED PENALTY FOR LISTED TRANSACTIONS 
                   AND OTHER REPORTABLE TRANSACTIONS HAVING A 
                   SIGNIFICANT TAX AVOIDANCE PURPOSE.

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

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

       ``(a) Imposition of Penalty.--If a taxpayer has a 
     reportable transaction understatement for any taxable year, 
     there shall be added to the tax an amount equal to 20 percent 
     of the amount of such understatement.
       ``(b) Reportable Transaction Understatement.--For purposes 
     of this section--
       ``(1) In general.--The term `reportable transaction 
     understatement' means the sum of--
       ``(A) the product of--
       ``(i) the amount of the increase (if any) in taxable income 
     which results from a difference between the proper tax 
     treatment of an item to which this section applies and the 
     taxpayer's treatment of such item (as shown on the taxpayer's 
     return of tax), and
       ``(ii) the highest rate of tax imposed by section 1 
     (section 11 in the case of a taxpayer which is a 
     corporation), and
       ``(B) the amount of the decrease (if any) in the aggregate 
     amount of credits determined under subtitle A which results 
     from a difference between the taxpayer's treatment of an item 
     to which this section applies (as shown on the taxpayer's 
     return of tax) and the proper tax treatment of such item.
     For purposes of subparagraph (A), any reduction of the excess 
     of deductions allowed for the taxable year over gross income 
     for such year, and any reduction in the amount of capital 
     losses which would (without regard to section 1211) be 
     allowed for such year, shall be treated as an increase in 
     taxable income.
       ``(2) Items to which section applies.--This section shall 
     apply to any item which is attributable to--
       ``(A) any listed transaction, and
       ``(B) any reportable transaction (other than a listed 
     transaction) if a significant purpose of such transaction is 
     the avoidance or evasion of Federal income tax.
       ``(c) Higher Penalty for Nondisclosed Listed and Other 
     Avoidance Transactions.--
       ``(1) In general.--Subsection (a) shall be applied by 
     substituting `30 percent' for `20 percent' with respect to 
     the portion of any reportable transaction understatement with 
     respect to which the requirement of section 6664(d)(2)(A) is 
     not met.
       ``(2) Rules applicable to 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 Reportable and Listed Transactions.--
     For purposes of this section, the terms `reportable 
     transaction' and `listed transaction' have the respective 
     meanings given to such terms by section 6707A(c).
       ``(e) Special Rules.--
       ``(1) Coordination with penalties, etc., on other 
     understatements.--In the case of an understatement (as 
     defined in section 6662(d)(2))--
       ``(A) the amount of such understatement (determined without 
     regard to this paragraph) shall be increased by the aggregate 
     amount of reportable transaction understatements and 
     noneconomic substance transaction understatements for 
     purposes of determining whether such understatement is a 
     substantial understatement under section 6662(d)(1), and
       ``(B) the addition to tax under section 6662(a) shall apply 
     only to the excess of the amount of the substantial 
     understatement (if any) after the application of subparagraph 
     (A) over the aggregate amount of reportable transaction 
     understatements and noneconomic substance transaction 
     understatements.
       ``(2) Coordination with other penalties.--
       ``(A) Application of fraud penalty.--References to an 
     underpayment in section 6663 shall be treated as including 
     references to a reportable transaction understatement and a 
     noneconomic substance transaction understatement.
       ``(B) No double penalty.--This section shall not apply to 
     any portion of an understatement on which a penalty is 
     imposed under section 6662B or 6663.
       ``(3) Special rule for amended returns.--Except as provided 
     in regulations, in no event shall any tax treatment included 
     with an amendment or supplement to a return of tax be taken 
     into account in determining the amount of any reportable 
     transaction understatement or noneconomic substance 
     transaction understatement if the amendment or supplement is 
     filed after the earlier of the date the taxpayer is first 
     contacted by the Secretary regarding the examination of the 
     return or such other date as is specified by the Secretary.
       ``(4) Noneconomic substance transaction understatement.--
     For purposes of this subsection, the term `noneconomic 
     substance transaction understatement' has the meaning given 
     such term by section 6662B(c).
       ``(5) Cross reference.--

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

     ``The excess under the preceding sentence shall be determined 
     without regard to items to which section 6662A applies and 
     without regard to items with respect to which a penalty is 
     imposed by section 6662B.''.
       (c) Reasonable Cause Exception.--
       (1) In general.--Section 6664 is amended by adding at the 
     end the following new subsection:
       ``(d) Reasonable Cause Exception for Reportable Transaction 
     Understatements.--
       ``(1) In general.--No penalty shall be imposed under 
     section 6662A with respect to any portion of a reportable 
     transaction understatement if it is shown that there was a 
     reasonable cause for such portion and that the taxpayer acted 
     in good faith with respect to such portion.
       ``(2) Special rules.--Paragraph (1) shall not apply to any 
     reportable transaction understatement unless--
       ``(A) the relevant facts affecting the tax treatment of the 
     item are adequately disclosed in accordance with the 
     regulations prescribed under section 6011,
       ``(B) there is or was substantial authority for such 
     treatment, and
       ``(C) the taxpayer reasonably believed that such treatment 
     was more likely than not the proper treatment.
     A taxpayer failing to adequately disclose in accordance with 
     section 6011 shall be treated as meeting the requirements of 
     subparagraph (A) if the penalty for such failure was 
     rescinded under section 6707A(d).
       ``(3) Rules relating to reasonable belief.--For purposes of 
     paragraph (2)(C)--
       ``(A) In general.--A taxpayer shall be treated as having a 
     reasonable belief with respect to the tax treatment of an 
     item only if such belief--
       ``(i) is based on the facts and law that exist at the time 
     the return of tax which includes such tax treatment is filed, 
     and
       ``(ii) relates solely to the taxpayer's chances of success 
     on the merits of such treatment and does not take into 
     account

[[Page S3011]]

     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 reportable transactions.''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending after the date of the 
     enactment of this Act.

     SEC. 404. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO 
                   TRANSACTIONS LACKING ECONOMIC SUBSTANCE, ETC.

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

     ``SEC. 6662B. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO 
                   TRANSACTIONS LACKING ECONOMIC SUBSTANCE, ETC.

       ``(a) Imposition of Penalty.--If a taxpayer has an 
     noneconomic substance transaction understatement for any 
     taxable year, there shall be added to the tax an amount equal 
     to 40 percent of the amount of such understatement.
       ``(b) Reduction of Penalty for Disclosed Transactions.--
     Subsection (a) shall be applied by substituting `20 percent' 
     for `40 percent' with respect to the portion of any 
     noneconomic substance transaction understatement with respect 
     to which the relevant facts affecting the tax treatment of 
     the item are adequately disclosed in the return or a 
     statement attached to the return.
       ``(c) Noneconomic Substance Transaction Understatement.--
     For purposes of this section--
       ``(1) In general.--The term `noneconomic substance 
     transaction understatement' means any amount which would be 
     an understatement under section 6662A(b)(1) if section 6662A 
     were applied by taking into account items attributable to 
     noneconomic substance transactions rather than items to which 
     section 6662A would apply without regard to this paragraph.
       ``(2) Noneconomic substance transaction.--The term 
     `noneconomic substance transaction' means any transaction 
     if--
       ``(A) there is a lack of economic substance (within the 
     meaning of section 7701(n)(1)) for the transaction giving 
     rise to the claimed benefit or the transaction was not 
     respected under section 7701(n)(2), or
       ``(B) the transaction fails to meet the requirements of any 
     similar rule of law.
       ``(d) Rules Applicable To Compromise of Penalty.--
       ``(1) In general.--If the 1st letter of proposed deficiency 
     which allows the taxpayer an opportunity for administrative 
     review in the Internal Revenue Service Office of Appeals has 
     been sent with respect to a penalty to which this section 
     applies, only the Commissioner of Internal Revenue may 
     compromise all or any portion of such penalty.
       ``(2) Applicable rules.--The rules of paragraphs (2), (3), 
     (4), and (5) of section 6707A(d) shall apply for purposes of 
     paragraph (1).
       ``(e) Coordination With Other Penalties.--Except as 
     otherwise provided in this part, the penalty imposed by this 
     section shall be in addition to any other penalty imposed by 
     this title.
       ``(f) Cross References.--

  ``(1) For coordination of penalty with understatements under section 
6662 and other special rules, see section 6662A(e).
  ``(2) For reporting of penalty imposed under this section to the 
Securities and Exchange Commission, see section 6707A(e).''.
       (b) Clerical Amendment.--The table of sections for part II 
     of subchapter A of chapter 68 is amended by inserting after 
     the item relating to section 6662A the following new item:

``Sec. 6662B. Penalty for understatements attributable to transactions 
              lacking economic substance, etc.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to transactions entered into after the date of 
     the enactment of this Act.

     SEC. 405. MODIFICATIONS OF SUBSTANTIAL UNDERSTATEMENT PENALTY 
                   FOR NONREPORTABLE TRANSACTIONS.

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

     SEC. 406. TAX SHELTER EXCEPTION TO CONFIDENTIALITY PRIVILEGES 
                   RELATING TO TAXPAYER COMMUNICATIONS.

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

     SEC. 407. DISCLOSURE OF REPORTABLE TRANSACTIONS.

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

     ``SEC. 6111. DISCLOSURE OF REPORTABLE TRANSACTIONS.

       ``(a) In General.--Each material advisor with respect to 
     any reportable transaction shall make a return (in such form 
     as the Secretary may prescribe) setting forth--

[[Page S3012]]

       ``(1) information identifying and describing the 
     transaction,
       ``(2) information describing any potential tax benefits 
     expected to result from the transaction, and
       ``(3) such other information as the Secretary may 
     prescribe.

     Such return shall be filed not later than the date specified 
     by the Secretary.
       ``(b) Definitions.--For purposes of this section--
       ``(1) Material advisor.--
       ``(A) In general.--The term `material advisor' means any 
     person--
       ``(i) who provides any material aid, assistance, or advice 
     with respect to organizing, managing, promoting, selling, 
     implementing, or carrying out any reportable transaction, and
       ``(ii) who directly or indirectly derives gross income in 
     excess of the threshold amount for such aid, assistance, or 
     advice.
       ``(B) Threshold amount.--For purposes of subparagraph (A), 
     the threshold amount is--
       ``(i) $50,000 in the case of a reportable transaction 
     substantially all of the tax benefits from which are provided 
     to natural persons, and
       ``(ii) $250,000 in any other case.
       ``(2) Reportable transaction.--The term `reportable 
     transaction' has the meaning given to such term by section 
     6707A(c).
       ``(c) Regulations.--The Secretary may prescribe regulations 
     which provide--
       ``(1) that only 1 person shall be required to meet the 
     requirements of subsection (a) in cases in which 2 or more 
     persons would otherwise be required to meet such 
     requirements,
       ``(2) exemptions from the requirements of this section, and
       ``(3) such rules as may be necessary or appropriate to 
     carry out the purposes of this section.''.
       (b) Conforming Amendments.--
       (1) The item relating to section 6111 in the table of 
     sections for subchapter B of chapter 61 is amended to read as 
     follows:

``Sec. 6111. Disclosure of reportable transactions.''.
       (2)(A) So much of section 6112 as precedes subsection (c) 
     thereof is amended to read as follows:

     ``SEC. 6112. MATERIAL ADVISORS OF REPORTABLE TRANSACTIONS 
                   MUST KEEP LISTS OF ADVISEES.

       ``(a) In General.--Each material advisor (as defined in 
     section 6111) with respect to any reportable transaction (as 
     defined in section 6707A(c)) shall maintain, in such manner 
     as the Secretary may by regulations prescribe, a list--
       ``(1) identifying each person with respect to whom such 
     advisor acted as such a material advisor with respect to such 
     transaction, and
       ``(2) containing such other information as the Secretary 
     may by regulations require.
     This section shall apply without regard to whether a material 
     advisor is required to file a return under section 6111 with 
     respect to such transaction.''.
       (B) Section 6112 is amended by redesignating subsection (c) 
     as subsection (b).
       (C) Section 6112(b), as redesignated by subparagraph (B), 
     is amended--
       (i) by inserting ``written'' before ``request'' in 
     paragraph (1)(A), and
       (ii) by striking ``shall prescribe'' in paragraph (2) and 
     inserting ``may prescribe''.
       (D) The item relating to section 6112 in the table of 
     sections for subchapter B of chapter 61 is amended to read as 
     follows:

``Sec. 6112. Material advisors of reportable transactions must keep 
              lists of advisees.''.
       (3)(A) The heading for section 6708 is amended to read as 
     follows:

     ``SEC. 6708. FAILURE TO MAINTAIN LISTS OF ADVISEES WITH 
                   RESPECT TO REPORTABLE TRANSACTIONS.''.

       (B) The item relating to section 6708 in the table of 
     sections for part I of subchapter B of chapter 68 is amended 
     to read as follows:

``Sec. 6708. Failure to maintain lists of advisees with respect to 
              reportable transactions.''.
       (c) Required Disclosure Not Subject to Claim of 
     Confidentiality.--Subparagraph (A) of 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. 408. MODIFICATIONS TO PENALTY FOR FAILURE TO REGISTER 
                   TAX SHELTERS.

       (a) In General.--Section 6707 (relating to failure to 
     furnish information regarding tax shelters) is amended to 
     read as follows:

     ``SEC. 6707. FAILURE TO FURNISH INFORMATION REGARDING 
                   REPORTABLE TRANSACTIONS.

       ``(a) In General.--If a person who is required to file a 
     return under section 6111(a) with respect to any reportable 
     transaction--
       ``(1) fails to file such return on or before the date 
     prescribed therefor, or
       ``(2) files false or incomplete information with the 
     Secretary with respect to such transaction,

     such person shall pay a penalty with respect to such return 
     in the amount determined under subsection (b).
       ``(b) Amount of Penalty.--
       ``(1) In general.--Except as provided in paragraph (2), the 
     penalty imposed under subsection (a) with respect to any 
     failure shall be $50,000.
       ``(2) Listed transactions.--The penalty imposed under 
     subsection (a) with respect to any listed transaction shall 
     be an amount equal to the greater of--
       ``(A) $200,000, or
       ``(B) 50 percent of the gross income derived by such person 
     with respect to aid, assistance, or advice which is provided 
     with respect to the listed transaction before the date the 
     return including the transaction is filed under section 6111.
     Subparagraph (B) shall be applied by substituting `75 
     percent' for `50 percent' in the case of an intentional 
     failure or act described in subsection (a).
       ``(c) Certain Rules To Apply.--The provisions of section 
     6707A(d) shall apply to any penalty imposed under this 
     section.
       ``(d) Reportable and Listed Transactions.--The terms 
     `reportable transaction' and `listed transaction' have the 
     respective meanings given to such terms by section 
     6707A(c).''.
       (b) Clerical Amendment.--The item relating to section 6707 
     in the table of sections for part I of subchapter B of 
     chapter 68 is amended by striking ``tax shelters'' and 
     inserting ``reportable transactions''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to returns the due date for which is after the 
     date of the enactment of this Act.

     SEC. 409. MODIFICATION OF PENALTY FOR FAILURE TO MAINTAIN 
                   LISTS OF INVESTORS.

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

     SEC. 410. MODIFICATION OF ACTIONS TO ENJOIN CERTAIN CONDUCT 
                   RELATED TO TAX SHELTERS AND REPORTABLE 
                   TRANSACTIONS.

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

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

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

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

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

     SEC. 411. UNDERSTATEMENT OF TAXPAYER'S LIABILITY BY INCOME 
                   TAX RETURN PREPARER.

       (a) Standards Conformed to Taxpayer Standards.--Section 
     6694(a) (relating to understatements due to unrealistic 
     positions) is amended--
       (1) by striking ``realistic possibility of being sustained 
     on its merits'' in paragraph (1) and inserting ``reasonable 
     belief that the

[[Page S3013]]

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

     SEC. 412. PENALTY ON FAILURE TO REPORT INTERESTS IN FOREIGN 
                   FINANCIAL ACCOUNTS.

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

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

       ``(C) Willful violations.--In the case of any person 
     willfully violating, or willfully causing any violation of, 
     any provision of section 5314--
       ``(i) the maximum penalty under subparagraph (B)(i) shall 
     be increased to the greater of--

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

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

     SEC. 413. FRIVOLOUS TAX SUBMISSIONS.

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

     ``SEC. 6702. FRIVOLOUS TAX SUBMISSIONS.

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

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

       ``(ii) an application under--

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

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

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

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

     SEC. 414. REGULATION OF INDIVIDUALS PRACTICING BEFORE THE 
                   DEPARTMENT OF TREASURY.

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

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

[[Page S3014]]

     SEC. 415. PENALTY ON PROMOTERS OF TAX SHELTERS.

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

     SEC. 416. STATUTE OF LIMITATIONS FOR TAXABLE YEARS FOR WHICH 
                   REQUIRED LISTED TRANSACTIONS NOT REPORTED.

       (a) In General.--Section 6501(c) (relating to exceptions) 
     is amended by adding at the end the following new paragraph:
       ``(10) Listed transactions.--If a taxpayer fails to include 
     on any return or statement for any taxable year any 
     information with respect to a listed transaction (as defined 
     in section 6707A(c)(2)) which is required under section 6011 
     to be included with such return or statement, the time for 
     assessment of any tax imposed by this title with respect to 
     such transaction shall not expire before the date which is 1 
     year 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. 417. DENIAL OF DEDUCTION FOR INTEREST ON UNDERPAYMENTS 
                   ATTRIBUTABLE TO NONDISCLOSED REPORTABLE AND 
                   NONECONOMIC SUBSTANCE TRANSACTIONS.

       (a) In General.--Section 163 (relating to deduction for 
     interest) is amended by redesignating subsection (m) as 
     subsection (n) and by inserting after subsection (l) the 
     following new subsection:
       ``(m) Interest on Unpaid Taxes Attributable To Nondisclosed 
     Reportable Transactions and Noneconomic Substance 
     Transactions.--No deduction shall be allowed under this 
     chapter for any interest paid or accrued under section 6601 
     on any underpayment of tax which is attributable to--
       ``(1) the portion of any reportable transaction 
     understatement (as defined in section 6662A(b)) with respect 
     to which the requirement of section 6664(d)(2)(A) is not met, 
     or
       ``(2) any noneconomic substance transaction understatement 
     (as defined in section 6662B(c)).''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to transactions in taxable years beginning after 
     the date of the enactment of this Act.

     SEC. 418. AUTHORIZATION OF APPROPRIATIONS FOR TAX LAW 
                   ENFORCEMENT.

       There is authorized to be appropriated $300,000,000 for 
     each fiscal year beginning after September 30, 2003, for the 
     purpose of carrying out tax law enforcement to combat tax 
     avoidance transactions and other tax shelters, including the 
     use of offshore financial accounts to conceal taxable income.

           Subtitle B--Other Corporate Governance Provisions

     SEC. 421. AFFIRMATION OF CONSOLIDATED RETURN REGULATION 
                   AUTHORITY.

       (a) In General.--Section 1502 (relating to consolidated 
     return regulations) is amended by adding at the end the 
     following new sentence: ``In prescribing such regulations, 
     the Secretary may prescribe rules applicable to corporations 
     filing consolidated returns under section 1501 that are 
     different from other provisions of this title that would 
     apply if such corporations filed separate returns.''.
       (b) Result Not Overturned.--Notwithstanding subsection (a), 
     the Internal Revenue Code of 1986 shall be construed by 
     treating Treasury regulation Sec. 1.1502-20(c)(1)(iii) (as in 
     effect on January 1, 2001) as being inapplicable to the type 
     of factual situation in 255 F.3d 1357 (Fed. Cir. 2001).
       (c) Effective Date.--The provisions of this section shall 
     apply to taxable years beginning before, on, or after the 
     date of the enactment of this Act.

     SEC. 422. INCREASE IN CRIMINAL MONETARY PENALTY LIMITATION 
                   FOR THE UNDERPAYMENT OR OVERPAYMENT OF TAX DUE 
                   TO FRAUD.

       (a) In General.--Section 7206 (relating to fraud and false 
     statements) is amended--
       (1) by striking ``Any person who--'' and inserting ``(a) In 
     General.--Any person who--'', and
       (2) by adding at the end the following new subsection:
       ``(b) Increase in Monetary Limitation for Underpayment or 
     Overpayment of Tax Due to Fraud.--If any portion of any 
     underpayment (as defined in section 6664(a)) or overpayment 
     (as defined in section 6401(a)) of tax required to be shown 
     on a return is attributable to fraudulent action described in 
     subsection (a), the applicable dollar amount under subsection 
     (a) shall in no event be less than an amount equal to such 
     portion. A rule similar to the rule under section 6663(b) 
     shall apply for purposes of determining the portion so 
     attributable.''.
       (b) Increase in Penalties.--
       (1) Attempt to evade or defeat tax.--Section 7201 is 
     amended--
       (A) by striking ``$100,000'' and inserting ``$250,000'',
       (B) by striking ``$500,000'' and inserting ``$1,000,000'', 
     and
       (C) by striking ``5 years'' and inserting ``10 years''.
       (2) Willful failure to file return, supply information, or 
     pay tax.--Section 7203 is amended--
       (A) in the first sentence--
       (i) by striking ``misdemeanor'' and inserting ``felony'', 
     and
       (ii) by striking ``1 year'' and inserting ``10 years'', and
       (B) by striking the third sentence.
       (3) Fraud and false statements.--Section 7206(a) (as 
     redesignated by subsection (a)) is amended--
       (A) by striking ``$100,000'' and inserting ``$250,000'',
       (B) by striking ``$500,000'' and inserting ``$1,000,000'', 
     and
       (C) by striking ``3 years'' and inserting ``5 years''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to underpayments and overpayments attributable to 
     actions occurring after the date of the enactment of this 
     Act.

            Subtitle C--Enron-Related Tax Shelter Provisions

     SEC. 431. LIMITATION ON TRANSFER OR IMPORTATION OF BUILT-IN 
                   LOSSES.

       (a) In General.--Section 362 (relating to basis to 
     corporations) is amended by adding at the end the following 
     new subsection:
       ``(e) Limitations on Built-In Losses.--
       ``(1) Limitation on importation of built-in losses.--
       ``(A) In general.--If in any transaction described in 
     subsection (a) or (b) there would (but for this subsection) 
     be an importation of a net built-in loss, the basis of each 
     property described in subparagraph (B) which is acquired in 
     such transaction shall (notwithstanding subsections (a) and 
     (b)) be its fair market value immediately after such 
     transaction.
       ``(B) Property described.--For purposes of subparagraph 
     (A), property is described in this subparagraph if--
       ``(i) gain or loss with respect to such property is not 
     subject to tax under this subtitle in the hands of the 
     transferor immediately before the transfer, and
       ``(ii) gain or loss with respect to such property is 
     subject to such tax in the hands of the transferee 
     immediately after such transfer.
     In any case in which the transferor is a partnership, the 
     preceding sentence shall be applied by treating each partner 
     in such partnership as holding such partner's proportionate 
     share of the property of such partnership.
       ``(C) Importation of net built-in loss.--For purposes of 
     subparagraph (A), there is an importation of a net built-in 
     loss in a transaction if the transferee's aggregate adjusted 
     bases of property described in subparagraph (B) which is 
     transferred in such transaction would (but for this 
     paragraph) exceed the fair market value of such property 
     immediately after such transaction.
       ``(2) Limitation on transfer of built-in losses in section 
     351 transactions.--
       ``(A) In general.--If--
       ``(i) property is transferred by a transferor in any 
     transaction which is described in subsection (a) and which is 
     not described in paragraph (1) of this subsection, and
       ``(ii) the transferee's aggregate adjusted bases of such 
     property so transferred would (but for this paragraph) exceed 
     the fair market value of such property immediately after such 
     transaction,
     then, notwithstanding subsection (a), the transferee's 
     aggregate adjusted bases of the property so transferred shall 
     not exceed the fair market value of such property immediately 
     after such transaction.
       ``(B) Allocation of basis reduction.--The aggregate 
     reduction in basis by reason of subparagraph (A) shall be 
     allocated among the property so transferred in proportion to 
     their respective built-in losses immediately before the 
     transaction.
       ``(C) Exception for transfers within affiliated group.--
     Subparagraph (A) shall not apply to any transaction if the 
     transferor owns stock in the transferee meeting the 
     requirements of section 1504(a)(2). In the case of property 
     to which subparagraph (A) does not apply by reason of the 
     preceding sentence, the transferor's basis in the stock 
     received for such property shall not exceed its fair market 
     value immediately after the transfer.''.
       (b) Comparable Treatment Where Liquidation.--Paragraph (1) 
     of section 334(b) (relating to liquidation of subsidiary) is 
     amended to read as follows:
       ``(1) In general.--If property is received by a corporate 
     distributee in a distribution in a complete liquidation to 
     which section 332 applies (or in a transfer described in 
     section 337(b)(1)), the basis of such property in the hands 
     of such distributee shall be the same as it would be in the 
     hands of the transferor; except that the basis of such 
     property in the hands of such distributee shall be the fair 
     market value of the property at the time of the 
     distribution--
       ``(A) in any case in which gain or loss is recognized by 
     the liquidating corporation with respect to such property, or
       ``(B) in any case in which the liquidating corporation is a 
     foreign corporation, the corporate distributee is a domestic 
     corporation,

[[Page S3015]]

     and the corporate distributee's aggregate adjusted bases of 
     property described in section 362(e)(1)(B) which is 
     distributed in such liquidation would (but for this 
     subparagraph) exceed the fair market value of such property 
     immediately after such liquidation.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to transactions after February 13, 2003.

     SEC. 432. NO REDUCTION OF BASIS UNDER SECTION 734 IN STOCK 
                   HELD BY PARTNERSHIP IN CORPORATE PARTNER.

       (a) In General.--Section 755 is amended by adding at the 
     end the following new subsection:
       ``(c) No Allocation of Basis Decrease to Stock of Corporate 
     Partner.--In making an allocation under subsection (a) of any 
     decrease in the adjusted basis of partnership property under 
     section 734(b)--
       ``(1) no allocation may be made to stock in a corporation 
     (or any person which is related (within the meaning of 
     section 267(b) or 707(b)(1)) to such corporation) which is a 
     partner in the partnership, and
       ``(2) any amount not allocable to stock by reason of 
     paragraph (1) shall be allocated under subsection (a) to 
     other partnership property in such manner as the Secretary 
     may prescribe.
     Gain shall be recognized to the partnership to the extent 
     that the amount required to be allocated under paragraph (2) 
     to other partnership property exceeds the aggregate adjusted 
     basis of such other property immediately before the 
     allocation required by paragraph (2).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to distributions after February 13, 2003.

     SEC. 433. REPEAL OF SPECIAL RULES FOR FASITS.

       (a) In General.--Part V of subchapter M of chapter 1 
     (relating to financial asset securitization investment 
     trusts) is hereby repealed.
       (b) Conforming Amendments.--
       (1) Paragraph (6) of section 56(g) is amended by striking 
     ``REMIC, or FASIT'' and inserting ``or REMIC''.
       (2) Clause (ii) of section 382(l)(4)(B) is amended by 
     striking ``a REMIC to which part IV of subchapter M applies, 
     or a FASIT to which part V of subchapter M applies,'' and 
     inserting ``or a REMIC to which part IV of subchapter M 
     applies,''.
       (3) Paragraph (1) of section 582(c) is amended by striking 
     ``, and any regular interest in a FASIT,''.
       (4) Subparagraph (E) of section 856(c)(5) is amended by 
     striking the last sentence.
       (5)(A) Section 860G(a)(1) is amended by adding at the end 
     the following new sentence: ``An interest shall not fail to 
     qualify as a regular interest solely because the specified 
     principal amount of the regular interest (or the amount of 
     interest accrued on the regular interest) can be reduced as a 
     result of the nonoccurrence of 1 or more contingent payments 
     with respect to any reverse mortgage loan held by the REMIC 
     if, on the startup day for the REMIC, the sponsor reasonably 
     believes that all principal and interest due under the 
     regular interest will be paid at or prior to the liquidation 
     of the REMIC.''.
       (B) The last sentence of section 860G(a)(3) is amended by 
     inserting ``, and any reverse mortgage loan (and each balance 
     increase on such loan meeting the requirements of 
     subparagraph (A)(iii)) shall be treated as an obligation 
     secured by an interest in real property'' before the period 
     at the end.
       (6) Paragraph (3) of section 860G(a) is amended by adding 
     ``and'' at the end of subparagraph (B), by striking ``, and'' 
     at the end of subparagraph (C) and inserting a period, and by 
     striking subparagraph (D).
       (7) Section 860G(a)(3), as amended by paragraph (6), is 
     amended by adding at the end the following new sentence: 
     ``For purposes of subparagraph (A), if more than 50 percent 
     of the obligations transferred to, or purchased by, the REMIC 
     are originated by the United States or any State (or any 
     political subdivision, agency, or instrumentality of the 
     United States or any State) and are principally secured by an 
     interest in real property, then each obligation transferred 
     to, or purchased by, the REMIC shall be treated as secured by 
     an interest in real property.''.
       (8)(A) Section 860G(a)(3)(A) is amended by striking ``or'' 
     at the end of clause (i), by inserting ``or'' at the end of 
     clause (ii), and by inserting after clause (ii) the following 
     new clause:
       ``(iii) represents an increase in the principal amount 
     under the original terms of an obligation described in clause 
     (i) or (ii) if such increase--

       ``(I) is attributable to an advance made to the obligor 
     pursuant to the original terms of the obligation,
       ``(II) occurs after the startup day, and
       ``(III) is purchased by the REMIC pursuant to a fixed price 
     contract in effect on the startup day.''.

       (B) Section 860G(a)(7)(B) is amended to read as follows:
       ``(B) Qualified reserve fund.--For purposes of subparagraph 
     (A), the term `qualified reserve fund' means any reasonably 
     required reserve to--
       ``(i) provide for full payment of expenses of the REMIC or 
     amounts due on regular interests in the event of defaults on 
     qualified mortgages or lower than expected returns on cash 
     flow investments, or
       ``(ii) provide a source of funds for the purchase of 
     obligations described in clause (ii) or (iii) of paragraph 
     (3)(A).
     The aggregate fair market value of the assets held in any 
     such reserve shall not exceed 50 percent of the aggregate 
     fair market value of all of the assets of the REMIC on the 
     startup day, and the amount of any such reserve shall be 
     promptly and appropriately reduced to the extent the amount 
     held in such reserve is no longer reasonably required for 
     purposes specified in clause (i) or (ii) of paragraph 
     (3)(A).''.
       (9) Subparagraph (C) of section 1202(e)(4) is amended by 
     striking ``REMIC, or FASIT'' and inserting ``or REMIC''.
       (10) Clause (xi) of section 7701(a)(19)(C) is amended--
       (A) by striking ``and any regular interest in a FASIT,'', 
     and
       (B) by striking ``or FASIT'' each place it appears.
       (11) Subparagraph (A) of section 7701(i)(2) is amended by 
     striking ``or a FASIT''.
       (12) The table of parts for subchapter M of chapter 1 is 
     amended by striking the item relating to part V.
       (c) Effective Date.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall take effect on February 
     14, 2003.
       (2) Exception for existing fasits.--Paragraph (1) shall not 
     apply to any FASIT in existence on the date of the enactment 
     of this Act to the extent that regular interests issued by 
     the FASIT before such date continue to remain outstanding in 
     accordance with the original terms of issuance.

     SEC. 434. EXPANDED DISALLOWANCE OF DEDUCTION FOR INTEREST ON 
                   CONVERTIBLE DEBT.

       (a) In General.--Paragraph (2) of section 163(l) is amended 
     by inserting ``or equity held by the issuer (or any related 
     party) in any other person'' after ``or a related party''.
       (b) Capitalization Allowed With Respect to Equity of 
     Persons Other Than Issuer and Related Parties.--Section 
     163(l) is amended by redesignating paragraphs (4) and (5) as 
     paragraphs (5) and (6) and by inserting after paragraph (3) 
     the following new paragraph:
       ``(4) Capitalization allowed with respect to equity of 
     persons other than issuer and related parties.--If the 
     disqualified debt instrument of a corporation is payable in 
     equity held by the issuer (or any related party) in any other 
     person (other than a related party), the basis of such equity 
     shall be increased by the amount not allowed as a deduction 
     by reason of paragraph (1) with respect to the instrument.''.
       (c) Exception for Certain Instruments Issued by Dealers in 
     Securities.--Section 163(l), as amended by subsection (b), is 
     amended by redesignating paragraphs (5) and (6) as paragraphs 
     (6) and (7) and by inserting after paragraph (4) the 
     following new paragraph:
       ``(5) Exception for certain instruments issued by dealers 
     in securities.--For purposes of this subsection, the term 
     `disqualified debt instrument' does not include indebtedness 
     issued by a dealer in securities (or a related party) which 
     is payable in, or by reference to, equity (other than equity 
     of the issuer or a related party) held by such dealer in its 
     capacity as a dealer in securities. For purposes of this 
     paragraph, the term `dealer in securities' has the meaning 
     given such term by section 475.''.
       (c) Conforming Amendments.--Paragraph (3) of section 163(l) 
     is amended--
       (1) by striking ``or a related party'' in the material 
     preceding subparagraph (A) and inserting ``or any other 
     person'', and
       (2) by striking ``or interest'' each place it appears.
       (d) Effective Date.--The amendments made by this section 
     shall apply to debt instruments issued after February 13, 
     2003.

     SEC. 435. EXPANDED AUTHORITY TO DISALLOW TAX BENEFITS UNDER 
                   SECTION 269.

       (a) In General.--Subsection (a) of section 269 (relating to 
     acquisitions made to evade or avoid income tax) is amended to 
     read as follows:
       ``(a) In General.--If--
       ``(1)(A) any person or persons acquire, directly or 
     indirectly, control of a corporation, or
       ``(B) any corporation acquires, directly or indirectly, 
     property of another corporation and the basis of such 
     property, in the hands of the acquiring corporation, is 
     determined by reference to the basis in the hands of the 
     transferor corporation, and
       ``(2) the principal purpose for which such acquisition was 
     made is evasion or avoidance of Federal income tax,
     then the Secretary may disallow such deduction, credit, or 
     other allowance. For purposes of paragraph (1)(A), control 
     means the ownership of stock possessing at least 50 percent 
     of the total combined voting power of all classes of stock 
     entitled to vote or at least 50 percent of the total value of 
     all shares of all classes of stock of the corporation.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to stock and property acquired after February 13, 
     2003.

     SEC. 436. MODIFICATION OF INTERACTION BETWEEN SUBPART F AND 
                   PASSIVE FOREIGN INVESTMENT COMPANY RULES.

       (a) Limitation on Exception From PFIC Rules for United 
     States Shareholders of Controlled Foreign Corporations.--
     Paragraph (2) of section 1297(e) (relating to passive foreign 
     investment company) is amended by adding at the end the 
     following flush sentence:
     ``Such term shall not include any period if the earning of 
     subpart F income by such corporation during such period would 
     result in only a remote likelihood of an inclusion in gross 
     income under section 951(a)(1)(A)(i).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable

[[Page S3016]]

     years of controlled foreign corporations beginning after 
     February 13, 2003, and to taxable years of United States 
     shareholders with or within which such taxable years of 
     controlled foreign corporations end.

           Subtitle D--Provisions to Discourage Expatriation

     SEC. 441. TAX TREATMENT OF INVERTED CORPORATE ENTITIES.

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

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

       ``(a) Inverted Corporations Treated as Domestic 
     Corporations.--
       ``(1) In general.--If a foreign incorporated entity is 
     treated as an inverted domestic corporation, then, 
     notwithstanding section 7701(a)(4), such entity shall be 
     treated for purposes of this title as a domestic corporation.
       ``(2) Inverted domestic corporation.--For purposes of this 
     section, a foreign incorporated entity shall be treated as an 
     inverted domestic corporation if, pursuant to a plan (or a 
     series of related transactions)--
       ``(A) the entity completes after March 20, 2002, the direct 
     or indirect acquisition of substantially all of the 
     properties held directly or indirectly by a domestic 
     corporation or substantially all of the properties 
     constituting a trade or business of a domestic partnership,
       ``(B) after the acquisition at least 80 percent of the 
     stock (by vote or value) of the entity is held--
       ``(i) in the case of an acquisition with respect to a 
     domestic corporation, by former shareholders of the domestic 
     corporation by reason of holding stock in the domestic 
     corporation, or
       ``(ii) in the case of an acquisition with respect to a 
     domestic partnership, by former partners of the domestic 
     partnership by reason of holding a capital or profits 
     interest in the domestic partnership, and
       ``(C) the expanded affiliated group which after the 
     acquisition includes the entity does not have substantial 
     business activities in the foreign country in which or under 
     the law of which the entity is created or organized when 
     compared to the total business activities of such expanded 
     affiliated group.
     Except as provided in regulations, an acquisition of 
     properties of a domestic corporation shall not be treated as 
     described in subparagraph (A) if none of the corporation's 
     stock was readily tradeable on an established securities 
     market at any time during the 4-year period ending on the 
     date of the acquisition.
       ``(b) Preservation of Domestic Tax Base in Certain 
     Inversion Transactions to Which Subsection (a) Does Not 
     Apply.--
       ``(1) In general.--If a foreign incorporated entity would 
     be treated as an inverted domestic corporation with respect 
     to an acquired entity if either--
       ``(A) subsection (a)(2)(A) were applied by substituting 
     `after December 31, 1996, and on or before March 20, 2002' 
     for `after March 20, 2002' and subsection (a)(2)(B) were 
     applied by substituting `more than 50 percent' for `at least 
     80 percent', or
       ``(B) subsection (a)(2)(B) were applied by substituting 
     `more than 50 percent' for `at least 80 percent',
     then the rules of subsection (c) shall apply to any inversion 
     gain of the acquired entity during the applicable period and 
     the rules of subsection (d) shall apply to any related party 
     transaction of the acquired entity during the applicable 
     period. This subsection shall not apply for any taxable year 
     if subsection (a) applies to such foreign incorporated entity 
     for such taxable year.
       ``(2) Acquired entity.--For purposes of this section--
       ``(A) In general.--The term `acquired entity' means the 
     domestic corporation or partnership substantially all of the 
     properties of which are directly or indirectly acquired in an 
     acquisition described in subsection (a)(2)(A) to which this 
     subsection applies.
       ``(B) Aggregation rules.--Any domestic person bearing a 
     relationship described in section 267(b) or 707(b) to an 
     acquired entity shall be treated as an acquired entity with 
     respect to the acquisition described in subparagraph (A).
       ``(3) Applicable period.--For purposes of this section--
       ``(A) In general.--The term `applicable period' means the 
     period--
       ``(i) beginning on the first date properties are acquired 
     as part of the acquisition described in subsection (a)(2)(A) 
     to which this subsection applies, and
       ``(ii) ending on the date which is 10 years after the last 
     date properties are acquired as part of such acquisition.
       ``(B) Special rule for inversions occurring before march 
     21, 2002.--In the case of any acquired entity to which 
     paragraph (1)(A) applies, the applicable period shall be the 
     10-year period beginning on January 1, 2003.
       ``(c) Tax on Inversion Gains May Not Be Offset.--If 
     subsection (b) applies--
       ``(1) In general.--The taxable income of an acquired entity 
     (or any expanded affiliated group which includes such entity) 
     for any taxable year which includes any portion of the 
     applicable period shall in no event be less than the 
     inversion gain of the entity for the taxable year.
       ``(2) Credits not allowed against tax on inversion gain.--
     Credits shall be allowed against the tax imposed by this 
     chapter on an acquired entity for any taxable year described 
     in paragraph (1) only to the extent such tax exceeds the 
     product of--
       ``(A) the amount of the inversion gain for the taxable 
     year, and
       ``(B) the highest rate of tax specified in section 
     11(b)(1).
     For purposes of determining the credit allowed by section 901 
     inversion gain shall be treated as from sources within the 
     United States.
       ``(3) Special rules for partnerships.--In the case of an 
     acquired entity which is a partnership--
       ``(A) the limitations of this subsection shall apply at the 
     partner rather than the partnership level,
       ``(B) the inversion gain of any partner for any taxable 
     year shall be equal to the sum of--
       ``(i) the partner's distributive share of inversion gain of 
     the partnership for such taxable year, plus
       ``(ii) income or gain required to be recognized for the 
     taxable year by the partner under section 367(a), 741, or 
     1001, or under any other provision of chapter 1, by reason of 
     the transfer during the applicable period of any partnership 
     interest of the partner in such partnership to the foreign 
     incorporated entity, and
       ``(C) the highest rate of tax specified in the rate 
     schedule applicable to the partner under chapter 1 shall be 
     substituted for the rate of tax under paragraph (2)(B).
       ``(4) Inversion gain.--For purposes of this section, the 
     term `inversion gain' means any income or gain required to be 
     recognized under section 304, 311(b), 367, 1001, or 1248, or 
     under any other provision of chapter 1, by reason of the 
     transfer during the applicable period of stock or other 
     properties by an acquired entity--
       ``(A) as part of the acquisition described in subsection 
     (a)(2)(A) to which subsection (b) applies, or
       ``(B) after such acquisition to a foreign related person.
     The Secretary may provide that income or gain from the sale 
     of inventories or other transactions in the ordinary course 
     of a trade or business shall not be treated as inversion gain 
     under subparagraph (B) to the extent the Secretary determines 
     such treatment would not be inconsistent with the purposes of 
     this section.
       ``(5) Coordination with section 172 and minimum tax.--Rules 
     similar to the rules of paragraphs (3) and (4) of section 
     860E(a) shall apply for purposes of this section.
       ``(6) Statute of limitations.--
       ``(A) In general.--The statutory period for the assessment 
     of any deficiency attributable to the inversion gain of any 
     taxpayer for any pre-inversion year shall not expire before 
     the expiration of 3 years from the date the Secretary is 
     notified by the taxpayer (in such manner as the Secretary may 
     prescribe) of the acquisition described in subsection 
     (a)(2)(A) to which such gain relates and such deficiency may 
     be assessed before the expiration of such 3-year period 
     notwithstanding the provisions of any other law or rule of 
     law which would otherwise prevent such assessment.
       ``(B) Pre-inversion year.--For purposes of subparagraph 
     (A), the term `pre-inversion year' means any taxable year 
     if--
       ``(i) any portion of the applicable period is included in 
     such taxable year, and
       ``(ii) such year ends before the taxable year in which the 
     acquisition described in subsection (a)(2)(A) is completed.
       ``(d) Special Rules Applicable to Acquired Entities to 
     Which Subsection (b) Applies.--
       ``(1) Increases in accuracy-related penalties.--In the case 
     of any underpayment of tax of an acquired entity to which 
     subsection (b) applies--
       ``(A) section 6662(a) shall be applied with respect to such 
     underpayment by substituting `30 percent' for `20 percent', 
     and
       ``(B) if such underpayment is attributable to one or more 
     gross valuation understatements, the increase in the rate of 
     penalty under section 6662(h) shall be to 50 percent rather 
     than 40 percent.
       ``(2) Modifications of limitation on interest deduction.--
     In the case of an acquired entity to which subsection (b) 
     applies, section 163(j) shall be applied--
       ``(A) without regard to paragraph (2)(A)(ii) thereof, and
       ``(B) by substituting `25 percent' for `50 percent' each 
     place it appears in paragraph (2)(B) thereof.
       ``(e) Other Definitions and Special Rules.--For purposes of 
     this section--
       ``(1) Rules for application of subsection (a)(2).--In 
     applying subsection (a)(2) for purposes of subsections (a) 
     and (b), the following rules shall apply:
       ``(A) Certain stock disregarded.--There shall not be taken 
     into account in determining ownership for purposes of 
     subsection (a)(2)(B)--
       ``(i) stock held by members of the expanded affiliated 
     group which includes the foreign incorporated entity, or
       ``(ii) stock of such entity which is sold in a public 
     offering or private placement related to the acquisition 
     described in subsection (a)(2)(A).
       ``(B) Plan deemed in certain cases.--If a foreign 
     incorporated entity acquires directly or indirectly 
     substantially all of the properties of a domestic corporation 
     or partnership during the 4-year period beginning on the date 
     which is 2 years before the ownership requirements of 
     subsection (a)(2)(B) are

[[Page S3017]]

     met with respect to such domestic corporation or partnership, 
     such actions shall be treated as pursuant to a plan.
       ``(C) Certain transfers disregarded.--The transfer of 
     properties or liabilities (including by contribution or 
     distribution) shall be disregarded if such transfers are part 
     of a plan a principal purpose of which is to avoid the 
     purposes of this section.
       ``(D) Special rule for related partnerships.--For purposes 
     of applying subsection (a)(2) to the acquisition of a 
     domestic partnership, except as provided in regulations, all 
     partnerships which are under common control (within the 
     meaning of section 482) shall be treated as 1 partnership.
       ``(E) Treatment of certain rights.--The Secretary shall 
     prescribe such regulations as may be necessary--
       ``(i) to treat warrants, options, contracts to acquire 
     stock, convertible debt instruments, and other similar 
     interests as stock, and
       ``(ii) to treat stock as not stock.
       ``(2) Expanded affiliated group.--The term `expanded 
     affiliated group' means an affiliated group as defined in 
     section 1504(a) but without regard to section 1504(b)(3), 
     except that section 1504(a) shall be applied by substituting 
     `more than 50 percent' for `at least 80 percent' each place 
     it appears.
       ``(3) Foreign incorporated entity.--The term `foreign 
     incorporated entity' means any entity which is, or but for 
     subsection (a)(1) would be, treated as a foreign corporation 
     for purposes of this title.
       ``(4) Foreign related person.--The term `foreign related 
     person' means, with respect to any acquired entity, a foreign 
     person which--
       ``(A) bears a relationship to such entity described in 
     section 267(b) or 707(b), or
       ``(B) is under the same common control (within the meaning 
     of section 482) as such entity.
       ``(5) Subsequent acquisitions by unrelated domestic 
     corporations.--
       ``(A) In general.--Subject to such conditions, limitations, 
     and exceptions as the Secretary may prescribe, if, after an 
     acquisition described in subsection (a)(2)(A) to which 
     subsection (b) applies, a domestic corporation stock of which 
     is traded on an established securities market acquires 
     directly or indirectly any properties of one or more acquired 
     entities in a transaction with respect to which the 
     requirements of subparagraph (B) are met, this section shall 
     cease to apply to any such acquired entity with respect to 
     which such requirements are met.
       ``(B) Requirements.--The requirements of the subparagraph 
     are met with respect to a transaction involving any 
     acquisition described in subparagraph (A) if--
       ``(i) before such transaction the domestic corporation did 
     not have a relationship described in section 267(b) or 
     707(b), and was not under common control (within the meaning 
     of section 482), with the acquired entity, or any member of 
     an expanded affiliated group including such entity, and
       ``(ii) after such transaction, such acquired entity--

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

       ``(f) Regulations.--The Secretary shall provide such 
     regulations as are necessary to carry out this section, 
     including regulations providing for such adjustments to the 
     application of this section as are necessary to prevent the 
     avoidance of the purposes of this section, including the 
     avoidance of such purposes through--
       ``(1) the use of related persons, pass-thru or other 
     noncorporate entities, or other intermediaries, or
       ``(2) transactions designed to have persons cease to be (or 
     not become) members of expanded affiliated groups or related 
     persons.''.
       (b) Information Reporting.--The Secretary of the Treasury 
     shall exercise the Secretary's authority under the Internal 
     Revenue Code of 1986 to require entities involved in 
     transactions to which section 7874 of such Code (as added by 
     subsection (a)) applies to report to the Secretary, 
     shareholders, partners, and such other persons as the 
     Secretary may prescribe such information as is necessary to 
     ensure the proper tax treatment of such transactions.
       (c) Conforming Amendment.--The table of sections for 
     subchapter C of chapter 80 is amended by adding at the end 
     the following new item:

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

     SEC. 442. IMPOSITION OF MARK-TO-MARKET TAX ON INDIVIDUALS WHO 
                   EXPATRIATE.

       (a) In General.--Subpart A of part II of subchapter N of 
     chapter 1 is amended by inserting after section 877 the 
     following new section:

     ``SEC. 877A. TAX RESPONSIBILITIES OF EXPATRIATION.

       ``(a) General Rules.--For purposes of this subtitle--
       ``(1) Mark to market.--Except as provided in subsections 
     (d) and (f), all property of a covered expatriate to whom 
     this section applies shall be treated as sold on the day 
     before the expatriation date for its fair market value.
       ``(2) Recognition of gain or loss.--In the case of any sale 
     under paragraph (1)--
       ``(A) notwithstanding any other provision of this title, 
     any gain arising from such sale shall be taken into account 
     for the taxable year of the sale, and
       ``(B) any loss arising from such sale shall be taken into 
     account for the taxable year of the sale to the extent 
     otherwise provided by this title, except that section 1091 
     shall not apply to any such loss.
     Proper adjustment shall be made in the amount of any gain or 
     loss subsequently realized for gain or loss taken into 
     account under the preceding sentence.
       ``(3) Exclusion for certain gain.--
       ``(A) In general.--The amount which, but for this 
     paragraph, would be includible in the gross income of any 
     individual by reason of this section shall be reduced (but 
     not below zero) by $600,000. For purposes of this paragraph, 
     allocable expatriation gain taken into account under 
     subsection (f)(2) shall be treated in the same manner as an 
     amount required to be includible in gross income.
       ``(B) Cost-of-living adjustment.--
       ``(i) In general.--In the case of an expatriation date 
     occurring in any calendar year after 2004, the $600,000 
     amount under subparagraph (A) shall be increased by an amount 
     equal to--

       ``(I) such dollar amount, multiplied by
       ``(II) the cost-of-living adjustment determined under 
     section 1(f)(3) for such calendar year, determined by 
     substituting `calendar year 2003' for `calendar year 1992' in 
     subparagraph (B) thereof.

       ``(ii) Rounding rules.--If any amount after adjustment 
     under clause (i) is not a multiple of $1,000, such amount 
     shall be rounded to the next lower multiple of $1,000.
       ``(4) Election to continue to be taxed as united states 
     citizen.--
       ``(A) In general.--If a covered expatriate elects the 
     application of this paragraph--
       ``(i) this section (other than this paragraph and 
     subsection (i)) shall not apply to the expatriate, but
       ``(ii) in the case of property to which this section would 
     apply but for such election, the expatriate shall be subject 
     to tax under this title in the same manner as if the 
     individual were a United States citizen.
       ``(B) Requirements.--Subparagraph (A) shall not apply to an 
     individual unless the individual--
       ``(i) provides security for payment of tax in such form and 
     manner, and in such amount, as the Secretary may require,
       ``(ii) consents to the waiver of any right of the 
     individual under any treaty of the United States which would 
     preclude assessment or collection of any tax which may be 
     imposed by reason of this paragraph, and
       ``(iii) complies with such other requirements as the 
     Secretary may prescribe.
       ``(C) Election.--An election under subparagraph (A) shall 
     apply to all property to which this section would apply but 
     for the election and, once made, shall be irrevocable. Such 
     election shall also apply to property the basis of which is 
     determined in whole or in part by reference to the property 
     with respect to which the election was made.
       ``(b) Election To Defer Tax.--
       ``(1) In general.--If the taxpayer elects the application 
     of this subsection with respect to any property treated as 
     sold by reason of subsection (a), the payment of the 
     additional tax attributable to such property shall be 
     postponed until the due date of the return for the taxable 
     year in which such property is disposed of (or, in the case 
     of property disposed of in a transaction in which gain is not 
     recognized in whole or in part, until such other date as the 
     Secretary may prescribe).
       ``(2) Determination of tax with respect to property.--For 
     purposes of paragraph (1), the additional tax attributable to 
     any property is an amount which bears the same ratio to the 
     additional tax imposed by this chapter for the taxable year 
     solely by reason of subsection (a) as the gain taken into 
     account under subsection (a) with respect to such property 
     bears to the total gain taken into account under subsection 
     (a) with respect to all property to which subsection (a) 
     applies.
       ``(3) Termination of postponement.--No tax may be postponed 
     under this subsection later than the due date for the return 
     of tax imposed by this chapter for the taxable year which 
     includes the date of death of the expatriate (or, if earlier, 
     the time that the security provided with respect to the 
     property fails to meet the requirements of paragraph (4), 
     unless the taxpayer corrects such failure within the time 
     specified by the Secretary).
       ``(4) Security.--
       ``(A) In general.--No election may be made under paragraph 
     (1) with respect to any property unless adequate security is 
     provided to the Secretary with respect to such property.
       ``(B) Adequate security.--For purposes of subparagraph (A), 
     security with respect to any property shall be treated as 
     adequate security if--

[[Page S3018]]

       ``(i) it is a bond in an amount equal to the deferred tax 
     amount under paragraph (2) for the property, or
       ``(ii) the taxpayer otherwise establishes to the 
     satisfaction of the Secretary that the security is adequate.
       ``(5) Waiver of certain rights.--No election may be made 
     under paragraph (1) unless the taxpayer consents to the 
     waiver of any right under any treaty of the United States 
     which would preclude assessment or collection of any tax 
     imposed by reason of this section.
       ``(6) Elections.--An election under paragraph (1) shall 
     only apply to property described in the election and, once 
     made, is irrevocable. An election may be made under paragraph 
     (1) with respect to an interest in a trust with respect to 
     which gain is required to be recognized under subsection 
     (f)(1).
       ``(7) Interest.--For purposes of section 6601--
       ``(A) the last date for the payment of tax shall be 
     determined without regard to the election under this 
     subsection, and
       ``(B) section 6621(a)(2) shall be applied by substituting 
     `5 percentage points' for `3 percentage points' in 
     subparagraph (B) thereof.
       ``(c) Covered Expatriate.--For purposes of this section--
       ``(1) In general.--Except as provided in paragraph (2), the 
     term `covered expatriate' means an expatriate.
       ``(2) Exceptions.--An individual shall not be treated as a 
     covered expatriate if--
       ``(A) the individual--
       ``(i) became at birth a citizen of the United States and a 
     citizen of another country and, as of the expatriation date, 
     continues to be a citizen of, and is taxed as a resident of, 
     such other country, and
       ``(ii) has not been a resident of the United States (as 
     defined in section 7701(b)(1)(A)(ii)) during the 5 taxable 
     years ending with the taxable year during which the 
     expatriation date occurs, or
       ``(B)(i) the individual's relinquishment of United States 
     citizenship occurs before such individual attains age 18\1/
     2\, and
       ``(ii) the individual has been a resident of the United 
     States (as so defined) for not more than 5 taxable years 
     before the date of relinquishment.
       ``(d) Exempt Property; Special Rules for Pension Plans.--
       ``(1) Exempt property.--This section shall not apply to the 
     following:
       ``(A) United states real property interests.--Any United 
     States real property interest (as defined in section 
     897(c)(1)), other than stock of a United States real property 
     holding corporation which does not, on the day before the 
     expatriation date, meet the requirements of section 
     897(c)(2).
       ``(B) Specified property.--Any property or interest in 
     property not described in subparagraph (A) which the 
     Secretary specifies in regulations.
       ``(2) Special rules for certain retirement plans.--
       ``(A) In general.--If a covered expatriate holds on the day 
     before the expatriation date any interest in a retirement 
     plan to which this paragraph applies--
       ``(i) such interest shall not be treated as sold for 
     purposes of subsection (a)(1), but
       ``(ii) an amount equal to the present value of the 
     expatriate's nonforfeitable accrued benefit shall be treated 
     as having been received by such individual on such date as a 
     distribution under the plan.
       ``(B) Treatment of subsequent distributions.--In the case 
     of any distribution on or after the expatriation date to or 
     on behalf of the covered expatriate from a plan from which 
     the expatriate was treated as receiving a distribution under 
     subparagraph (A), the amount otherwise includible in gross 
     income by reason of the subsequent distribution shall be 
     reduced by the excess of the amount includible in gross 
     income under subparagraph (A) over any portion of such amount 
     to which this subparagraph previously applied.
       ``(C) Treatment of subsequent distributions by plan.--For 
     purposes of this title, a retirement plan to which this 
     paragraph applies, and any person acting on the plan's 
     behalf, shall treat any subsequent distribution described in 
     subparagraph (B) in the same manner as such distribution 
     would be treated without regard to this paragraph.
       ``(D) Applicable plans.--This paragraph shall apply to--
       ``(i) any qualified retirement plan (as defined in section 
     4974(c)),
       ``(ii) an eligible deferred compensation plan (as defined 
     in section 457(b)) of an eligible employer described in 
     section 457(e)(1)(A), and
       ``(iii) to the extent provided in regulations, any foreign 
     pension plan or similar retirement arrangements or programs.
       ``(e) Definitions.--For purposes of this section--
       ``(1) Expatriate.--The term `expatriate' means--
       ``(A) any United States citizen who relinquishes 
     citizenship, and
       ``(B) any long-term resident of the United States who--
       ``(i) ceases to be a lawful permanent resident of the 
     United States (within the meaning of section 7701(b)(6)), or
       ``(ii) commences to be treated as a resident of a foreign 
     country under the provisions of a tax treaty between the 
     United States and the foreign country and who does not waive 
     the benefits of such treaty applicable to residents of the 
     foreign country.
       ``(2) Expatriation date.--The term `expatriation date' 
     means--
       ``(A) the date an individual relinquishes United States 
     citizenship, or
       ``(B) in the case of a long-term resident of the United 
     States, the date of the event described in clause (i) or (ii) 
     of paragraph (1)(B).
       ``(3) Relinquishment of citizenship.--A citizen shall be 
     treated as relinquishing United States citizenship on the 
     earliest of--
       ``(A) the date the individual renounces such individual's 
     United States nationality before a diplomatic or consular 
     officer of the United States pursuant to paragraph (5) of 
     section 349(a) of the Immigration and Nationality Act (8 
     U.S.C. 1481(a)(5)),
       ``(B) the date the individual furnishes to the United 
     States Department of State a signed statement of voluntary 
     relinquishment of United States nationality confirming the 
     performance of an act of expatriation specified in paragraph 
     (1), (2), (3), or (4) of section 349(a) of the Immigration 
     and Nationality Act (8 U.S.C. 1481(a)(1)-(4)),
       ``(C) the date the United States Department of State issues 
     to the individual a certificate of loss of nationality, or
       ``(D) the date a court of the United States cancels a 
     naturalized citizen's certificate of naturalization.
     Subparagraph (A) or (B) shall not apply to any individual 
     unless the renunciation or voluntary relinquishment is 
     subsequently approved by the issuance to the individual of a 
     certificate of loss of nationality by the United States 
     Department of State.
       ``(4) Long-term resident.--The term `long-term resident' 
     has the meaning given to such term by section 877(e)(2).
       ``(f) Special Rules Applicable to Beneficiaries' Interests 
     in Trust.--
       ``(1) In general.--Except as provided in paragraph (2), if 
     an individual is determined under paragraph (3) to hold an 
     interest in a trust on the day before the expatriation date--
       ``(A) the individual shall not be treated as having sold 
     such interest,
       ``(B) such interest shall be treated as a separate share in 
     the trust, and
       ``(C)(i) such separate share shall be treated as a separate 
     trust consisting of the assets allocable to such share,
       ``(ii) the separate trust shall be treated as having sold 
     its assets on the day before the expatriation date for their 
     fair market value and as having distributed all of its assets 
     to the individual as of such time, and
       ``(iii) the individual shall be treated as having 
     recontributed the assets to the separate trust.

     Subsection (a)(2) shall apply to any income, gain, or loss of 
     the individual arising from a distribution described in 
     subparagraph (C)(ii). In determining the amount of such 
     distribution, proper adjustments shall be made for 
     liabilities of the trust allocable to an individual's share 
     in the trust.
       ``(2) Special rules for interests in qualified trusts.--
       ``(A) In general.--If the trust interest described in 
     paragraph (1) is an interest in a qualified trust--
       ``(i) paragraph (1) and subsection (a) shall not apply, and
       ``(ii) in addition to any other tax imposed by this title, 
     there is hereby imposed on each distribution with respect to 
     such interest a tax in the amount determined under 
     subparagraph (B).
       ``(B) Amount of tax.--The amount of tax under subparagraph 
     (A)(ii) shall be equal to the lesser of--
       ``(i) the highest rate of tax imposed by section 1(e) for 
     the taxable year which includes the day before the 
     expatriation date, multiplied by the amount of the 
     distribution, or
       ``(ii) the balance in the deferred tax account immediately 
     before the distribution determined without regard to any 
     increases under subparagraph (C)(ii) after the 30th day 
     preceding the distribution.
       ``(C) Deferred tax account.--For purposes of subparagraph 
     (B)(ii)--
       ``(i) Opening balance.--The opening balance in a deferred 
     tax account with respect to any trust interest is an amount 
     equal to the tax which would have been imposed on the 
     allocable expatriation gain with respect to the trust 
     interest if such gain had been included in gross income under 
     subsection (a).
       ``(ii) Increase for interest.--The balance in the deferred 
     tax account shall be increased by the amount of interest 
     determined (on the balance in the account at the time the 
     interest accrues), for periods after the 90th day after the 
     expatriation date, by using the rates and method applicable 
     under section 6621 for underpayments of tax for such periods, 
     except that section 6621(a)(2) shall be applied by 
     substituting `5 percentage points' for `3 percentage points' 
     in subparagraph (B) thereof.
       ``(iii) Decrease for taxes previously paid.--The balance in 
     the tax deferred account shall be reduced--

       ``(I) by the amount of taxes imposed by subparagraph (A) on 
     any distribution to the person holding the trust interest, 
     and
       ``(II) in the case of a person holding a nonvested 
     interest, to the extent provided in regulations, by the 
     amount of taxes imposed by subparagraph (A) on distributions 
     from the trust with respect to nonvested interests not held 
     by such person.

       ``(D) Allocable expatriation gain.--For purposes of this 
     paragraph, the allocable expatriation gain with respect to 
     any beneficiary's interest in a trust is the amount of gain 
     which would be allocable to such beneficiary's vested and 
     nonvested interests in

[[Page S3019]]

     the trust if the beneficiary held directly all assets 
     allocable to such interests.
       ``(E) Tax deducted and withheld.--
       ``(i) In general.--The tax imposed by subparagraph (A)(ii) 
     shall be deducted and withheld by the trustees from the 
     distribution to which it relates.
       ``(ii) Exception where failure to waive treaty rights.--If 
     an amount may not be deducted and withheld under clause (i) 
     by reason of the distributee failing to waive any treaty 
     right with respect to such distribution--

       ``(I) the tax imposed by subparagraph (A)(ii) shall be 
     imposed on the trust and each trustee shall be personally 
     liable for the amount of such tax, and
       ``(II) any other beneficiary of the trust shall be entitled 
     to recover from the distributee the amount of such tax 
     imposed on the other beneficiary.

       ``(F) Disposition.--If a trust ceases to be a qualified 
     trust at any time, a covered expatriate disposes of an 
     interest in a qualified trust, or a covered expatriate 
     holding an interest in a qualified trust dies, then, in lieu 
     of the tax imposed by subparagraph (A)(ii), there is hereby 
     imposed a tax equal to the lesser of--
       ``(i) the tax determined under paragraph (1) as if the day 
     before the expatriation date were the date of such cessation, 
     disposition, or death, whichever is applicable, or
       ``(ii) the balance in the tax deferred account immediately 
     before such date.
     Such tax shall be imposed on the trust and each trustee shall 
     be personally liable for the amount of such tax and any other 
     beneficiary of the trust shall be entitled to recover from 
     the covered expatriate or the estate the amount of such tax 
     imposed on the other beneficiary.
       ``(G) Definitions and special rules.--For purposes of this 
     paragraph--
       ``(i) Qualified trust.--The term `qualified trust' means a 
     trust which is described in section 7701(a)(30)(E).
       ``(ii) Vested interest.--The term `vested interest' means 
     any interest which, as of the day before the expatriation 
     date, is vested in the beneficiary.
       ``(iii) Nonvested interest.--The term `nonvested interest' 
     means, with respect to any beneficiary, any interest in a 
     trust which is not a vested interest. Such interest shall be 
     determined by assuming the maximum exercise of discretion in 
     favor of the beneficiary and the occurrence of all 
     contingencies in favor of the beneficiary.
       ``(iv) Adjustments.--The Secretary may provide for such 
     adjustments to the bases of assets in a trust or a deferred 
     tax account, and the timing of such adjustments, in order to 
     ensure that gain is taxed only once.
       ``(v) Coordination with retirement plan rules.--This 
     subsection shall not apply to an interest in a trust which is 
     part of a retirement plan to which subsection (d)(2) applies.
       ``(3) Determination of beneficiaries' interest in trust.--
       ``(A) Determinations under paragraph (1).--For purposes of 
     paragraph (1), a beneficiary's interest in a trust shall be 
     based upon all relevant facts and circumstances, including 
     the terms of the trust instrument and any letter of wishes or 
     similar document, historical patterns of trust distributions, 
     and the existence of and functions performed by a trust 
     protector or any similar adviser.
       ``(B) Other determinations.--For purposes of this section--
       ``(i) Constructive ownership.--If a beneficiary of a trust 
     is a corporation, partnership, trust, or estate, the 
     shareholders, partners, or beneficiaries shall be deemed to 
     be the trust beneficiaries for purposes of this section.
       ``(ii) Taxpayer return position.--A taxpayer shall clearly 
     indicate on its income tax return--

       ``(I) the methodology used to determine that taxpayer's 
     trust interest under this section, and
       ``(II) if the taxpayer knows (or has reason to know) that 
     any other beneficiary of such trust is using a different 
     methodology to determine such beneficiary's trust interest 
     under this section.

       ``(g) Termination of Deferrals, etc.--In the case of any 
     covered expatriate, notwithstanding any other provision of 
     this title--
       ``(1) any period during which recognition of income or gain 
     is deferred shall terminate on the day before the 
     expatriation date, and
       ``(2) any extension of time for payment of tax shall cease 
     to apply on the day before the expatriation date and the 
     unpaid portion of such tax shall be due and payable at the 
     time and in the manner prescribed by the Secretary.
       ``(h) Imposition of Tentative Tax.--
       ``(1) In general.--If an individual is required to include 
     any amount in gross income under subsection (a) for any 
     taxable year, there is hereby imposed, immediately before the 
     expatriation date, a tax in an amount equal to the amount of 
     tax which would be imposed if the taxable year were a short 
     taxable year ending on the expatriation date.
       ``(2) Due date.--The due date for any tax imposed by 
     paragraph (1) shall be the 90th day after the expatriation 
     date.
       ``(3) Treatment of tax.--Any tax paid under paragraph (1) 
     shall be treated as a payment of the tax imposed by this 
     chapter for the taxable year to which subsection (a) applies.
       ``(4) Deferral of tax.--The provisions of subsection (b) 
     shall apply to the tax imposed by this subsection to the 
     extent attributable to gain includible in gross income by 
     reason of this section.
       ``(i) Special Liens for Deferred Tax Amounts.--
       ``(1) Imposition of lien.--
       ``(A) In general.--If a covered expatriate makes an 
     election under subsection (a)(4) or (b) which results in the 
     deferral of any tax imposed by reason of subsection (a), the 
     deferred amount (including any interest, additional amount, 
     addition to tax, assessable penalty, and costs attributable 
     to the deferred amount) shall be a lien in favor of the 
     United States on all property of the expatriate located in 
     the United States (without regard to whether this section 
     applies to the property).
       ``(B) Deferred amount.--For purposes of this subsection, 
     the deferred amount is the amount of the increase in the 
     covered expatriate's income tax which, but for the election 
     under subsection (a)(4) or (b), would have occurred by reason 
     of this section for the taxable year including the 
     expatriation date.
       ``(2) Period of lien.--The lien imposed by this subsection 
     shall arise on the expatriation date and continue until--
       ``(A) the liability for tax by reason of this section is 
     satisfied or has become unenforceable by reason of lapse of 
     time, or
       ``(B) it is established to the satisfaction of the 
     Secretary that no further tax liability may arise by reason 
     of this section.
       ``(3) Certain rules apply.--The rules set forth in 
     paragraphs (1), (3), and (4) of section 6324A(d) shall apply 
     with respect to the lien imposed by this subsection as if it 
     were a lien imposed by section 6324A.
       ``(j) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this section.''.
       (b) Inclusion in Income of Gifts and Bequests Received by 
     United States Citizens and Residents From Expatriates.--
     Section 102 (relating to gifts, etc. not included in gross 
     income) is amended by adding at the end the following new 
     subsection:
       ``(d) Gifts and Inheritances From Covered Expatriates.--
       ``(1) In general.--Subsection (a) shall not exclude from 
     gross income the value of any property acquired by gift, 
     bequest, devise, or inheritance from a covered expatriate 
     after the expatriation date. For purposes of this subsection, 
     any term used in this subsection which is also used in 
     section 877A shall have the same meaning as when used in 
     section 877A.
       ``(2) Exceptions for transfers otherwise subject to estate 
     or gift tax.--Paragraph (1) shall not apply to any property 
     if either--
       ``(A) the gift, bequest, devise, or inheritance is--
       ``(i) shown on a timely filed return of tax imposed by 
     chapter 12 as a taxable gift by the covered expatriate, or
       ``(ii) included in the gross estate of the covered 
     expatriate for purposes of chapter 11 and shown on a timely 
     filed return of tax imposed by chapter 11 of the estate of 
     the covered expatriate, or
       ``(B) no such return was timely filed but no such return 
     would have been required to be filed even if the covered 
     expatriate were a citizen or long-term resident of the United 
     States.''.
       (c) Definition of Termination of United States 
     Citizenship.--Section 7701(a) is amended by adding at the end 
     the following new paragraph:
       ``(48) Termination of united states citizenship.--
       ``(A) In general.--An individual shall not cease to be 
     treated as a United States citizen before the date on which 
     the individual's citizenship is treated as relinquished under 
     section 877A(e)(3).
       ``(B) Dual citizens.--Under regulations prescribed by the 
     Secretary, subparagraph (A) shall not apply to an individual 
     who became at birth a citizen of the United States and a 
     citizen of another country.''.
       (d) Ineligibility for Visa or Admission to United States.--
       (1) In general.--Section 212(a)(10)(E) of the Immigration 
     and Nationality Act (8 U.S.C. 1182(a)(10)(E)) is amended to 
     read as follows:
       ``(E) Former citizens not in compliance with expatriation 
     revenue provisions.--Any alien who is a former citizen of the 
     United States who relinquishes United States citizenship 
     (within the meaning of section 877A(e)(3) of the Internal 
     Revenue Code of 1986) and who is not in compliance with 
     section 877A of such Code (relating to expatriation).''.
       (2) Availability of information.--
       (A) In general.--Section 6103(l) (relating to disclosure of 
     returns and return information for purposes other than tax 
     administration) is amended by adding at the end the following 
     new paragraph:
       ``(19) Disclosure to deny visa or admission to certain 
     expatriates.--Upon written request of the Attorney General or 
     the Attorney General's delegate, the Secretary shall disclose 
     whether an individual is in compliance with section 877A (and 
     if not in compliance, any items of noncompliance) to officers 
     and employees of the Federal agency responsible for 
     administering section 212(a)(10)(E) of the Immigration and 
     Nationality Act solely for the purpose of, and to the extent 
     necessary in, administering such section 212(a)(10)(E).''.
       (B) Safeguards.--

[[Page S3020]]

       (i) Technical amendments.--Paragraph (4) of section 6103(p) 
     of the Internal Revenue Code of 1986, as amended by section 
     202(b)(2)(B) of the Trade Act of 2002 (Public Law 107-210; 
     116 Stat. 961), is amended by striking ``or (17)'' after 
     ``any other person described in subsection (l)(16)'' each 
     place it appears and inserting ``or (18)''.
       (ii) Conforming amendments.--Section 6103(p)(4) (relating 
     to safeguards), as amended by clause (i), is amended by 
     striking ``or (18)'' after ``any other person described in 
     subsection (l)(16)'' each place it appears and inserting 
     ``(18), or (19)''.
       (3) Effective dates.--
       (A) In general.--Except as provided in subparagraph (B), 
     the amendments made by this subsection shall apply to 
     individuals who relinquish United States citizenship on or 
     after the date of the enactment of this Act.
       (B) Technical amendments.--The amendments made by paragraph 
     (2)(B)(i) shall take effect as if included in the amendments 
     made by section 202(b)(2)(B) of the Trade Act of 2002 (Public 
     Law 107-210; 116 Stat. 961).
       (e) Conforming Amendments.--
       (1) Section 877 is amended by adding at the end the 
     following new subsection:
       ``(g) Application.--This section shall not apply to an 
     expatriate (as defined in section 877A(e)) whose expatriation 
     date (as so defined) occurs on or after January 1, 2004.''.
       (2) Section 2107 is amended by adding at the end the 
     following new subsection:
       ``(f) Application.--This section shall not apply to any 
     expatriate subject to section 877A.''.
       (3) Section 2501(a)(3) is amended by adding at the end the 
     following new subparagraph:
       ``(F) Application.--This paragraph shall not apply to any 
     expatriate subject to section 877A.''.
       (4)(A) Paragraph (1) of section 6039G(d) is amended by 
     inserting ``or 877A'' after ``section 877''.
       (B) The second sentence of section 6039G(e) is amended by 
     inserting ``or who relinquishes United States citizenship 
     (within the meaning of section 877A(e)(3))'' after 
     ``877(a))''.
       (C) Section 6039G(f) is amended by inserting ``or 
     877A(e)(2)(B)'' after ``877(e)(1)''.
       (f) Clerical Amendment.--The table of sections for subpart 
     A of part II of subchapter N of chapter 1 is amended by 
     inserting after the item relating to section 877 the 
     following new item:

``Sec. 877A. Tax responsibilities of expatriation.''.

       (g) Effective Date.--
       (1) In general.--Except as provided in this subsection, the 
     amendments made by this section shall apply to expatriates 
     (within the meaning of section 877A(e) of the Internal 
     Revenue Code of 1986, as added by this section) whose 
     expatriation date (as so defined) occurs on or after January 
     1, 2004.
       (2) Gifts and bequests.--Section 102(d) of the Internal 
     Revenue Code of 1986 (as added by subsection (b)) shall apply 
     to gifts and bequests received on or after January 1, 2004, 
     from an individual or the estate of an individual whose 
     expatriation date (as so defined) occurs after such date.
       (3) Due date for tentative tax.--The due date under section 
     877A(h)(2) of the Internal Revenue Code of 1986, as added by 
     this section, shall in no event occur before the 90th day 
     after the date of the enactment of this Act.

     SEC. 443. EXCISE TAX ON STOCK COMPENSATION OF INSIDERS IN 
                   INVERTED CORPORATIONS.

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

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

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

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

       ``(a) Imposition of Tax.--In the case of an individual who 
     is a disqualified individual with respect to any inverted 
     corporation, there is hereby imposed on such person a tax 
     equal to 20 percent of the value (determined under subsection 
     (b)) of the specified stock compensation held (directly or 
     indirectly) by or for the benefit of such individual or a 
     member of such individual's family (as defined in section 
     267) at any time during the 12-month period beginning on the 
     date which is 6 months before the inversion date.
       ``(b) Value.--For purposes of subsection (a)--
       ``(1) In general.--The value of specified stock 
     compensation shall be--
       ``(A) in the case of a stock option (or other similar 
     right) or any stock appreciation right, the fair value of 
     such option or right, and
       ``(B) in any other case, the fair market value of such 
     compensation.
       ``(2) Date for determining value.--The determination of 
     value shall be made--
       ``(A) in the case of specified stock compensation held on 
     the inversion date, on such date,
       ``(B) in the case of such compensation which is canceled 
     during the 6 months before the inversion date, on the day 
     before such cancellation, and
       ``(C) in the case of such compensation which is granted 
     after the inversion date, on the date such compensation is 
     granted.
       ``(c) Tax To Apply Only if Shareholder Gain Recognized.--
     Subsection (a) shall apply to any disqualified individual 
     with respect to an inverted corporation only if gain (if any) 
     on any stock in such corporation is recognized in whole or 
     part by any shareholder by reason of the acquisition referred 
     to in section 7874(a)(2)(A) (determined by substituting `July 
     10, 2002' for `March 20, 2002') with respect to such 
     corporation.
       ``(d) Exception Where Gain Recognized on Compensation.--
     Subsection (a) shall not apply to--
       ``(1) any stock option which is exercised on the inversion 
     date or during the 6-month period before such date and to the 
     stock acquired in such exercise, if income is recognized 
     under section 83 on or before the inversion date with respect 
     to the stock acquired pursuant to such exercise, and
       ``(2) any specified stock compensation which is exercised, 
     sold, exchanged, distributed, cashed out, or otherwise paid 
     during such period in a transaction in which gain or loss is 
     recognized in full.
       ``(e) Definitions.--For purposes of this section--
       ``(1) Disqualified individual.--The term `disqualified 
     individual' means, with respect to a corporation, any 
     individual who, at any time during the 12-month period 
     beginning on the date which is 6 months before the inversion 
     date--
       ``(A) is subject to the requirements of section 16(a) of 
     the Securities Exchange Act of 1934 with respect to such 
     corporation, or
       ``(B) would be subject to such requirements if such 
     corporation were an issuer of equity securities referred to 
     in such section.
       ``(2) Inverted corporation; inversion date.--
       ``(A) Inverted corporation.--The term `inverted 
     corporation' means any corporation to which subsection (a) or 
     (b) of section 7874 applies determined--
       ``(i) by substituting `July 10, 2002' for `March 20, 2002' 
     in section 7874(a)(2)(A), and
       ``(ii) without regard to subsection (b)(1)(A).
     Such term includes any predecessor or successor of such a 
     corporation.
       ``(B) Inversion date.--The term `inversion date' means, 
     with respect to a corporation, the date on which the 
     corporation first becomes an inverted corporation.
       ``(3) Specified stock compensation.--
       ``(A) In general.--The term `specified stock compensation' 
     means payment (or right to payment) granted by the inverted 
     corporation (or by any member of the expanded affiliated 
     group which includes such corporation) to any person in 
     connection with the performance of services by a disqualified 
     individual for such corporation or member if the value of 
     such payment or right is based on (or determined by reference 
     to) the value (or change in value) of stock in such 
     corporation (or any such member).
       ``(B) Exceptions.--Such term shall not include--
       ``(i) any option to which part II of subchapter D of 
     chapter 1 applies, or
       ``(ii) any payment or right to payment from a plan referred 
     to in section 280G(b)(6).
       ``(4) Expanded affiliated group.--The term `expanded 
     affiliated group' means an affiliated group (as defined in 
     section 1504(a) without regard to section 1504(b)(3)); except 
     that section 1504(a) shall be applied by substituting `more 
     than 50 percent' for `at least 80 percent' each place it 
     appears.
       ``(f) Special Rules.--For purposes of this section--
       ``(1) Cancellation of restriction.--The cancellation of a 
     restriction which by its terms will never lapse shall be 
     treated as a grant.
       ``(2) Payment or reimbursement of tax by corporation 
     treated as specified stock compensation.--Any payment of the 
     tax imposed by this section directly or indirectly by the 
     inverted corporation or by any member of the expanded 
     affiliated group which includes such corporation--
       ``(A) shall be treated as specified stock compensation, and
       ``(B) shall not be allowed as a deduction under any 
     provision of chapter 1.
       ``(3) Certain restrictions ignored.--Whether there is 
     specified stock compensation, and the value thereof, shall be 
     determined without regard to any restriction other than a 
     restriction which by its terms will never lapse.
       ``(4) Property transfers.--Any transfer of property shall 
     be treated as a payment and any right to a transfer of 
     property shall be treated as a right to a payment.
       ``(5) Other administrative provisions.--For purposes of 
     subtitle F, any tax imposed by this section shall be treated 
     as a tax imposed by subtitle A.
       ``(g) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this section.''.
       (b) Denial of Deduction.--
       (1) In general.--Paragraph (6) of section 275(a) is amended 
     by inserting ``48,'' after ``46,''.
       (2) $1,000,000 limit on deductible compensation reduced by 
     payment of excise tax on specified stock compensation.--
     Paragraph (4) of section 162(m) is amended by adding at the 
     end the following new subparagraph:
       ``(G) Coordination with excise tax on specified stock 
     compensation.--The dollar limitation contained in paragraph 
     (1) with respect to any covered employee shall be reduced 
     (but not below zero) by the amount of any payment (with 
     respect to such employee) of the tax imposed by section 5000A 
     directly or indirectly by the inverted corporation (as 
     defined in such section) or by any member of the expanded 
     affiliated group

[[Page S3021]]

     (as defined in such section) which includes such 
     corporation.''.
       (c) Conforming Amendments.--
       (1) The last sentence of section 3121(v)(2)(A) is amended 
     by inserting before the period ``or to any specified stock 
     compensation (as defined in section 5000A) on which tax is 
     imposed by section 5000A''.
       (2) The table of chapters for subtitle D is amended by 
     adding at the end the following new item:

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

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

     SEC. 444. REINSURANCE OF UNITED STATES RISKS IN FOREIGN 
                   JURISDICTIONS.

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

     SEC. 445. REPORTING OF TAXABLE MERGERS AND ACQUISITIONS.

       (a) In General.--Subpart B of part III of subchapter A of 
     chapter 61 is amended by inserting after section 6043 the 
     following new section:

     ``SEC. 6043A. TAXABLE MERGERS AND ACQUISITIONS.

       ``(a) In General.--The acquiring corporation in any taxable 
     acquisition shall make a return (according to the forms or 
     regulations prescribed by the Secretary) setting forth--
       ``(1) a description of the acquisition,
       ``(2) the name and address of each shareholder of the 
     acquired corporation who is required to recognize gain (if 
     any) as a result of the acquisition,
       ``(3) the amount of money and the fair market value of 
     other property transferred to each such shareholder as part 
     of such acquisition, and
       ``(4) such other information as the Secretary may 
     prescribe.

     To the extent provided by the Secretary, the requirements of 
     this section applicable to the acquiring corporation shall be 
     applicable to the acquired corporation and not to the 
     acquiring corporation.
       ``(b) Nominee Reporting.--Any person who holds stock as a 
     nominee for another person shall furnish in the manner 
     prescribed by the Secretary to such other person the 
     information provided by the corporation under subsection (d).
       ``(c) Taxable Acquisition.--For purposes of this section, 
     the term `taxable acquisition' means any acquisition by a 
     corporation of stock in or property of another corporation if 
     any shareholder of the acquired corporation is required to 
     recognize gain (if any) as a result of such acquisition.
       ``(d) Statements To Be Furnished to Shareholders.--Every 
     person required to make a return under subsection (a) shall 
     furnish to each shareholder whose name is required to be set 
     forth in such return a written statement showing--
       ``(1) the name, address, and phone number of the 
     information contact of the person required to make such 
     return,
       ``(2) the information required to be shown on such return 
     with respect to such shareholder, and
       ``(3) such other information as the Secretary may 
     prescribe.

     The written statement required under the preceding sentence 
     shall be furnished to the shareholder on or before January 31 
     of the year following the calendar year during which the 
     taxable acquisition occurred.''.
       (b) Assessable Penalties.--
       (1) Subparagraph (B) of section 6724(d)(1) (relating to 
     definitions) is amended by redesignating clauses (ii) through 
     (xvii) as clauses (iii) through (xviii), respectively, and by 
     inserting after clause (i) the following new clause:
       ``(ii) section 6043A(a) (relating to returns relating to 
     taxable mergers and acquisitions),''.
       (2) Paragraph (2) of section 6724(d) is amended by 
     redesignating subparagraphs (F) through (AA) as subparagraphs 
     (G) through (BB), respectively, and by inserting after 
     subparagraph (E) the following new subparagraph:
       ``(F) subsections (b) and (d) of section 6043A (relating to 
     returns relating to taxable mergers and acquisitions).''.
       (c) Clerical Amendment.--The table of sections for subpart 
     B of part III of subchapter A of chapter 61 is amended by 
     inserting after the item relating to section 6043 the 
     following new item:

``Sec. 6043A. Returns relating to taxable mergers and acquisitions.''.

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

                     Subtitle E--International Tax

     SEC. 451. CLARIFICATION OF BANKING BUSINESS FOR PURPOSES OF 
                   DETERMINING INVESTMENT OF EARNINGS IN UNITED 
                   STATES PROPERTY.

       (a) In General.--Subparagraph (A) of section 956(c)(2) is 
     amended to read as follows:
       ``(A) obligations of the United States, money, or deposits 
     with--
       ``(i) any bank (as defined by section 2(c) of the Bank 
     Holding Company Act of 1956 (12 U.S.C. 1841(c)), without 
     regard to subparagraphs (C) and (G) of paragraph (2) of such 
     section), or
       ``(ii) any corporation not described in clause (i) with 
     respect to which a bank holding company (as defined by 
     section 2(a) of such Act) or financial holding company (as 
     defined by section 2(p) of such Act) owns directly or 
     indirectly more than 80 percent by vote or value of the stock 
     of such corporation;''.
       (b) Effective Date.--The amendment made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 452. PROHIBITION ON NONRECOGNITION OF GAIN THROUGH 
                   COMPLETE LIQUIDATION OF HOLDING COMPANY.

       (a) In General.--Section 332 is amended by adding at the 
     end the following new subsection:
       ``(d) Recognition of Gain on Liquidation of Certain Holding 
     Companies.--
       ``(1) In general.--In the case of any distribution to a 
     foreign corporation in complete liquidation of an applicable 
     holding company--
       ``(A) subsection (a) and section 331 shall not apply to 
     such distribution, and
       ``(B) such distribution shall be treated as a distribution 
     to which section 301 applies.
       ``(2) Applicable holding company.--For purposes of this 
     subsection--
       ``(A) In general.--The term `applicable holding company' 
     means any domestic corporation--
       ``(i) which is a common parent of an affiliated group,
       ``(ii) stock of which is directly owned by the distributee 
     foreign corporation,
       ``(iii) substantially all of the assets of which consist of 
     stock in other members of such affiliated group, and
       ``(iv) which has not been in existence at all times during 
     the 5 years immediately preceding the date of the 
     liquidation.
       ``(B) Affiliated group.--For purposes of this subsection, 
     the term `affiliated group' has the meaning given such term 
     by section 1504(a) (without regard to paragraphs (2) and (4) 
     of section 1504(b)).
       ``(3) Coordination with subpart f.--If the distributee of a 
     distribution described in paragraph (1) is a controlled 
     foreign corporation (as defined in section 957), then 
     notwithstanding paragraph (1) or subsection (a), such 
     distribution shall be treated as a distribution to which 
     section 331 applies.
       ``(4) Regulations.--The Secretary shall provide such 
     regulations as appropriate to prevent the abuse of this 
     subsection, including regulations which provide, for the 
     purposes of clause (iv) of paragraph (2)(A), that a 
     corporation is not in existence for any period unless it is 
     engaged in the active conduct of a trade or business or owns 
     a significant ownership interest in another corporation so 
     engaged.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to distributions in complete liquidation 
     occurring on or after the date of the enactment of this Act.

     SEC. 453. PREVENTION OF MISMATCHING OF INTEREST AND ORIGINAL 
                   ISSUE DISCOUNT DEDUCTIONS AND INCOME INCLUSIONS 
                   IN TRANSACTIONS WITH RELATED FOREIGN PERSONS.

       (a) Original Issue Discount.--Section 163(e)(3) (relating 
     to special rule for original issue discount on obligation 
     held by related foreign person) is amended by redesignating 
     subparagraph (B) as subparagraph (C) and by inserting after 
     subparagraph (A) the following new subparagraph:
       ``(B) Special rule for certain foreign entities.--
       ``(i) In general.--In the case of any debt instrument 
     having original issue discount which is held by a related 
     foreign person which is a foreign personal holding company 
     (as defined in section 552), a controlled foreign corporation 
     (as defined in section 957), or a passive foreign investment 
     company (as defined in section 1297), a deduction shall be 
     allowable to the issuer with respect to such original issue 
     discount for any taxable year before the taxable year in 
     which paid only to the extent such original issue discount is 
     included during such prior taxable year in the gross income 
     of a United States person who owns (within the meaning of 
     section 958(a)) stock in such corporation.
       ``(ii) Secretarial authority.--The Secretary may by 
     regulation exempt transactions from the application of clause 
     (i), including any transaction which is entered into by a 
     payor in the ordinary course of a trade or business in which 
     the payor is predominantly engaged.''.
       (b) Interest and Other Deductible Amounts.--Section 
     267(a)(3) is amended--
       (1) by striking ``The Secretary'' and inserting:
       ``(A) In general.--The Secretary'', and
       (2) by adding at the end the following new subparagraph:
       ``(B) Special rule for certain foreign entities.--
       ``(i) In general.--Notwithstanding subparagraph (A), in the 
     case of any amount payable to a foreign personal holding 
     company (as defined in section 552), a controlled foreign 
     corporation (as defined in section 957), or a passive foreign 
     investment company (as defined in section 1297), a deduction 
     shall be allowable to the payor with respect to such amount 
     for any taxable year before the taxable year in which paid 
     only to the extent such amount is included during such prior 
     taxable year in the gross income of a United States person 
     who owns (within the

[[Page S3022]]

     meaning of section 958(a)) stock in such corporation.
       ``(ii) Secretarial authority.--The Secretary may by 
     regulation exempt transactions from the application of clause 
     (i), including any transaction which is entered into by a 
     payor in the ordinary course of a trade or business in which 
     the payor is predominantly engaged and in which the payment 
     of the accrued amounts occurs within 8\1/2\ months after 
     accrual or within such other period as the Secretary may 
     prescribe.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to payments accrued on or after the date of the 
     enactment of this Act.

     SEC. 454. EFFECTIVELY CONNECTED INCOME TO INCLUDE CERTAIN 
                   FOREIGN SOURCE INCOME.

       (a) In General.--Section 864(c)(4)(B) (relating to 
     treatment of income from sources without the United States as 
     effectively connected income) is amended by adding at the end 
     the following new flush sentence:

     ``Any income or gain which is equivalent to any item of 
     income or gain described in clause (i), (ii), or (iii) shall 
     be treated in the same manner as such item for purposes of 
     this subparagraph.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.

     SEC. 455. RECAPTURE OF OVERALL FOREIGN LOSSES ON SALE OF 
                   CONTROLLED FOREIGN CORPORATION.

       (a) In General.--Section 904(f)(3) (relating to 
     dispositions) is amending by adding at the end the following 
     new subparagraph:
       ``(D) Application to dispositions of stock in controlled 
     foreign corporations.--In the case of any disposition by a 
     taxpayer of any share of stock in a controlled foreign 
     corporation (as defined in section 957), this paragraph shall 
     apply to such disposition in the same manner as if it were a 
     disposition of property described in subparagraph (A), except 
     that the exception contained in subparagraph (C)(i) shall not 
     apply.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to dispositions after the date of the enactment 
     of this Act.

     SEC. 456. MINIMUM HOLDING PERIOD FOR FOREIGN TAX CREDIT ON 
                   WITHHOLDING TAXES ON INCOME OTHER THAN 
                   DIVIDENDS.

       (a) In General.--Section 901 is amended by redesignating 
     subsection (l) as subsection (m) and by inserting after 
     subsection (k) the following new subsection:
       ``(l) Minimum Holding Period for Withholding Taxes on Gain 
     and Income Other Than Dividends etc.--
       ``(1) In general.--In no event shall a credit be allowed 
     under subsection (a) for any withholding tax (as defined in 
     subsection (k)) on any item of income or gain with respect to 
     any property if--
       ``(A) such property is held by the recipient of the item 
     for 15 days or less during the 30-day period beginning on the 
     date which is 15 days before the date on which the right to 
     receive payment of such item arises, or
       ``(B) to the extent that the recipient of the item is under 
     an obligation (whether pursuant to a short sale or otherwise) 
     to make related payments with respect to positions in 
     substantially similar or related property.

     This paragraph shall not apply to any dividend to which 
     subsection (k) applies.
       ``(2) Exception for taxes paid by dealers.--
       ``(A) In general.--Paragraph (1) shall not apply to any 
     qualified tax with respect to any property held in the active 
     conduct in a foreign country of a business as a dealer in 
     such property.
       ``(B) Qualified tax.--For purposes of subparagraph (A), the 
     term `qualified tax' means a tax paid to a foreign country 
     (other than the foreign country referred to in subparagraph 
     (A)) if--
       ``(i) the item to which such tax is attributable is subject 
     to taxation on a net basis by the country referred to in 
     subparagraph (A), and
       ``(ii) such country allows a credit against its net basis 
     tax for the full amount of the tax paid to such other foreign 
     country.
       ``(C) Dealer.--For purposes of subparagraph (A), the term 
     `dealer' means--
       ``(i) with respect to a security, any person to whom 
     paragraphs (1) and (2) of subsection (k) would not apply by 
     reason of paragraph (4) thereof if such security were stock, 
     and
       ``(ii) with respect to any other property, any person with 
     respect to whom such property is described in section 
     1221(a)(1).
       ``(D) Regulations.--The Secretary may prescribe such 
     regulations as may be appropriate to carry out this 
     paragraph, including regulations to prevent the abuse of the 
     exception provided by this paragraph and to treat other taxes 
     as qualified taxes.
       ``(3) Exceptions.--The Secretary may by regulation provide 
     that paragraph (1) shall not apply to property where the 
     Secretary determines that the application of paragraph (1) to 
     such property is not necessary to carry out the purposes of 
     this subsection.
       ``(4) Certain rules to apply.--Rules similar to the rules 
     of paragraphs (5), (6), and (7) of subsection (k) shall apply 
     for purposes of this subsection.
       ``(5) Determination of holding period.--Holding periods 
     shall be determined for purposes of this subsection without 
     regard to section 1235 or any similar rule.''.
       (b) Conforming Amendment.--The heading of subsection (k) of 
     section 901 is amended by inserting ``on Dividends'' after 
     ``Taxes''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to amounts paid or accrued more than 30 days 
     after the date of the enactment of this Act.

                  Subtitle F--Other Revenue Provisions

                     PART I--FINANCIAL INSTRUMENTS

     SEC. 461. TREATMENT OF STRIPPED INTERESTS IN BOND AND 
                   PREFERRED STOCK FUNDS, ETC.

       (a) In General.--Section 1286 (relating to tax treatment of 
     stripped bonds) is amended by redesignating subsection (f) as 
     subsection (g) and by inserting after subsection (e) the 
     following new subsection:
       ``(f) Treatment of Stripped Interests in Bond and Preferred 
     Stock Funds, etc.--In the case of an account or entity 
     substantially all of the assets of which consist of bonds, 
     preferred stock, or a combination thereof, the Secretary may 
     by regulations provide that rules similar to the rules of 
     this section and 305(e), as appropriate, shall apply to 
     interests in such account or entity to which (but for this 
     subsection) this section or section 305(e), as the case may 
     be, would not apply.''.
       (b) Cross Reference.--Subsection (e) of section 305 is 
     amended by adding at the end the following new paragraph:
       ``(7) Cross reference.--

  ``For treatment of stripped interests in certain accounts or entities 
holding preferred stock, see section 1286(f).''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to purchases and dispositions after the date of 
     the enactment of this Act.

     SEC. 462. APPLICATION OF EARNINGS STRIPPING RULES TO 
                   PARTNERSHIPS AND S CORPORATIONS.

       (a) In General.--Section 168(j) (relating to limitation on 
     deduction for interest on certain indebtedness) is amended by 
     redesignating paragraph (8) as paragraph (9) and by inserting 
     after paragraph (7) the following new paragraph:
       ``(8) Application to partnerships and s corporations.--
       ``(A) In general.--This subsection shall apply to 
     partnerships and S corporations in the same manner as it 
     applies to C corporations.
       ``(B) Allocations to certain corporate partners.--If a C 
     corporation is a partner in a partnership--
       ``(i) the corporation's allocable share of indebtedness and 
     interest income of the partnership shall be taken into 
     account in applying this subsection to the corporation, and
       ``(ii) if a deduction is not disallowed under this 
     subsection with respect to any interest expense of the 
     partnership, this subsection shall be applied separately in 
     determining whether a deduction is allowable to the 
     corporation with respect to the corporation's allocable share 
     of such interest expense.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.

     SEC. 463. RECOGNITION OF CANCELLATION OF INDEBTEDNESS INCOME 
                   REALIZED ON SATISFACTION OF DEBT WITH 
                   PARTNERSHIP INTEREST.

       (a) In General.--Paragraph (8) of section 108(e) (relating 
     to general rules for discharge of indebtedness (including 
     discharges not in title 11 cases or insolvency)) is amended 
     to read as follows:
       ``(8) Indebtedness satisfied by corporate stock or 
     partnership interest.--For purposes of determining income of 
     a debtor from discharge of indebtedness, if--
       ``(A) a debtor corporation transfers stock, or
       ``(B) a debtor partnership transfers a capital or profits 
     interest in such partnership,
     to a creditor in satisfaction of its recourse or nonrecourse 
     indebtedness, such corporation or partnership shall be 
     treated as having satisfied the indebtedness with an amount 
     of money equal to the fair market value of the stock or 
     interest. In the case of any partnership, any discharge of 
     indebtedness income recognized under this paragraph shall be 
     included in the distributive shares of taxpayers which were 
     the partners in the partnership immediately before such 
     discharge.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply with respect to cancellations of indebtedness 
     occurring on or after the date of the enactment of this Act.

     SEC. 464. MODIFICATION OF STRADDLE RULES.

       (a) Rules Relating to Identified Straddles.--
       (1) In general.--Subparagraph (A) of section 1092(a)(2) 
     (relating to special rule for identified straddles) is 
     amended to read as follows:
       ``(A) In general.--In the case of any straddle which is an 
     identified straddle--
       ``(i) paragraph (1) shall not apply with respect to 
     identified positions comprising the identified straddle,
       ``(ii) if there is any loss with respect to any identified 
     position of the identified straddle, the basis of each of the 
     identified offsetting positions in the identified straddle 
     shall be increased by an amount which bears the same ratio to 
     the loss as the unrecognized gain with respect to such 
     offsetting position bears to the aggregate unrecognized gain 
     with respect to all such offsetting positions, and
       ``(iii) any loss described in clause (ii) shall not 
     otherwise be taken into account for purposes of this 
     title.''.
       (2) Identified straddle.--Section 1092(a)(2)(B) (defining 
     identified straddle) is amended--

[[Page S3023]]

       (A) by striking clause (ii) and inserting the following:
       ``(ii) to the extent provided by regulations, the value of 
     each position of which (in the hands of the taxpayer 
     immediately before the creation of the straddle) is not less 
     than the basis of such position in the hands of the taxpayer 
     at the time the straddle is created, and'', and
       (B) by adding at the end the following new flush sentence:

     ``The Secretary shall prescribe regulations which specify the 
     proper methods for clearly identifying a straddle as an 
     identified straddle (and the positions comprising such 
     straddle), which specify the rules for the application of 
     this section for a taxpayer which fails to properly identify 
     the positions of an identified straddle, and which specify 
     the ordering rules in cases where a taxpayer disposes of less 
     than an entire position which is part of an identified 
     straddle.''.
       (3) Unrecognized gain.--Section 1092(a)(3) (defining 
     unrecognized gain) is amended by redesignating subparagraph 
     (B) as subparagraph (C) and by inserting after subparagraph 
     (A) the following new subparagraph:
       ``(B) Special rule for identified straddles.--For purposes 
     of paragraph (2)(A)(ii), the unrecognized gain with respect 
     to any identified offsetting position shall be the excess of 
     the fair market value of the position at the time of the 
     determination over the fair market value of the position at 
     the time the taxpayer identified the position as a position 
     in an identified straddle.''.
       (4) Conforming amendment.--Section 1092(c)(2) is amended by 
     striking subparagraph (B) and by redesignating subparagraph 
     (C) as subparagraph (B).
       (b) Physically Settled Positions.--Section 1092(d) 
     (relating to definitions and special rules) is amended by 
     adding at the end the following new paragraph:
       ``(8) Special rules for physically settled positions.--For 
     purposes of subsection (a), if a taxpayer settles a position 
     which is part of a straddle by delivering property to which 
     the position relates (and such position, if terminated, would 
     result in a realization of a loss), then such taxpayer shall 
     be treated as if such taxpayer--
       ``(A) terminated the position for its fair market value 
     immediately before the settlement, and
       ``(B) sold the property so delivered by the taxpayer at its 
     fair market value.''.
       (c) Repeal of Stock Exception.--
       (1) In general.--Paragraph (3) of section 1092(d) (relating 
     to definitions and special rules) is amended to read as 
     follows:
       ``(3) Special rules for stock.--For purposes of paragraph 
     (1)--
       ``(A) In general.--The term `personal property' includes--
       ``(i) any stock which is a part of a straddle at least 1 of 
     the offsetting positions of which is a position with respect 
     to such stock or substantially similar or related property, 
     or
       ``(ii) any stock of a corporation formed or availed of to 
     take positions in personal property which offset positions 
     taken by any shareholder.
       ``(B) Rule for application.--For purposes of determining 
     whether subsection (e) applies to any transaction with 
     respect to stock described in subparagraph (A)(ii), all 
     includible corporations of an affiliated group (within the 
     meaning of section 1504(a)) shall be treated as 1 
     taxpayer.''.
       (2) Conforming amendment.--Section 1258(d)(1) is amended by 
     striking ``; except that the term `personal property' shall 
     include stock''.
       (d) Repeal of Qualified Covered Call Exception.--Section 
     1092(c)(4) is amended by adding at the end the following new 
     subparagraph:
       ``(I) Termination.--This paragraph shall not apply to any 
     position established on or after the date of the enactment of 
     this subparagraph.''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to positions established on or after the date of 
     the enactment of this Act.

     SEC. 465. DENIAL OF INSTALLMENT SALE TREATMENT FOR ALL 
                   READILY TRADEABLE DEBT.

       (a) In General.--Section 453(f)(4)(B) (relating to 
     purchaser evidences of indebtedness payable on demand or 
     readily tradeable) is amended by striking ``is issued by a 
     corporation or a government or political subdivision thereof 
     and''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to sales occurring on or after the date of the 
     enactment of this Act.

                 PART II--CORPORATIONS AND PARTNERSHIPS

     SEC. 466. MODIFICATION OF TREATMENT OF TRANSFERS TO CREDITORS 
                   IN DIVISIVE REORGANIZATIONS.

       (a) In General.--Section 361(b)(3) (relating to treatment 
     of transfers to creditors) is amended by adding at the end 
     the following new sentence: ``In the case of a reorganization 
     described in section 368(a)(1)(D) with respect to which stock 
     or securities of the corporation to which the assets are 
     transferred are distributed in a transaction which qualifies 
     under section 355, this paragraph shall apply only to the 
     extent that the sum of the money and the fair market value of 
     other property transferred to such creditors does not exceed 
     the adjusted bases of such assets transferred.''.
       (b) Liabilities in Excess of Basis.--Section 357(c)(1)(B) 
     is amended by inserting ``with respect to which stock or 
     securities of the corporation to which the assets are 
     transferred are distributed in a transaction which qualifies 
     under section 355'' after ``section 368(a)(1)(D)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to transfers of money or other property, or 
     liabilities assumed, in connection with a reorganization 
     occurring on or after the date of the enactment of this Act.

     SEC. 467. CLARIFICATION OF DEFINITION OF NONQUALIFIED 
                   PREFERRED STOCK.

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

     SEC. 468. MODIFICATION OF DEFINITION OF CONTROLLED GROUP OF 
                   CORPORATIONS.

       (a) In General.--Section 1563(a)(2) (relating to brother-
     sister controlled group) is amended by striking 
     ``possessing--'' and all that follows through ``(B)'' and 
     inserting ``possessing''.
       (b) Application of Existing Rules to Other Code 
     Provisions.--Section 1563(f) (relating to other definitions 
     and rules) is amended by adding at the end the following new 
     paragraph:
       ``(5) Brother-sister controlled group definition for 
     provisions other than this part.--
       ``(A) In general.--Except as specifically provided in an 
     applicable provision, subsection (a)(2) shall be applied to 
     an applicable provision as if it read as follows:
       `(2) Brother-sister controlled group.--Two or more 
     corporations if 5 or fewer persons who are individuals, 
     estates, or trusts own (within the meaning of subsection 
     (d)(2) stock possessing--
       `(A) at least 80 percent of the total combined voting power 
     of all classes of stock entitled to vote, or at least 80 
     percent of the total value of shares of all classes of stock, 
     of each corporation, and
       `(B) more than 50 percent of the total combined voting 
     power of all classes of stock entitled to vote or more than 
     50 percent of the total value of shares of all classes of 
     stock of each corporation, taking into account the stock 
     ownership of each such person only to the extent such stock 
     ownership is identical with respect to each such 
     corporation.'
       ``(B) Applicable provision.--For purposes of this 
     paragraph, an applicable provision is any provision of law 
     (other than this part) which incorporates the definition of 
     controlled group of corporations under subsection (a).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.

     SEC. 469. MANDATORY BASIS ADJUSTMENTS IN CONNECTION WITH 
                   PARTNERSHIP DISTRIBUTIONS AND TRANSFERS OF 
                   PARTNERSHIP INTERESTS.

       (a) In General.--Section 754 is repealed.
       (b) Adjustment to Basis of Undistributed Partnership 
     Property.--Section 734 is amended--
       (1) by striking ``, with respect to which the election 
     provided in section 754 is in effect,'' in the matter 
     preceding paragraph (1) of subsection (b),
       (2) by striking ``(as adjusted by section 732(d))'' both 
     places it appears in subsection (b),
       (3) by striking the last sentence of subsection (b),
       (4) by striking subsection (a) and by redesignating 
     subsections (b) and (c) as subsections (a) and (b), 
     respectively, and
       (5) by striking ``optional'' in the heading.
       (c) Adjustment to Basis of Partnership Property.--Section 
     743 is amended--
       (1) by striking ``with respect to which the election 
     provided in section 754 is in effect'' in the matter 
     preceding paragraph (1) of subsection (b),
       (2) by striking subsection (a) and by redesignating 
     subsections (b) and (c) as subsections (a) and (b), 
     respectively,
       (3) by adding at the end the following new subsection:
       ``(c) Election To Adjust Basis for Transfers Upon Death of 
     Partner.--Subsection (a) shall not apply and no adjustments 
     shall be made in the case of any transfer of an interest in a 
     partnership upon the death of a partner unless an election to 
     do so is made by the partnership. Such an election shall 
     apply with respect to all such transfers of interests in the 
     partnership. Any election under section 754 in effect on the 
     date of the enactment of this subsection shall constitute an 
     election made under this subsection. Such election may be 
     revoked by the partnership, subject to such limitations as 
     may be provided by regulations prescribed by the 
     Secretary.'', and
       (4) by striking ``optional'' in the heading.
       (d) Conforming Amendments.--
       (1) Subsection (d) of section 732 is repealed.
       (2) Section 755(a) is amended--
       (A) by striking ``section 734(b) (relating to the optional 
     adjustment'' and inserting ``section 734(a) (relating to the 
     adjustment'', and
       (B) by striking ``section 743(b) (relating to the optional 
     adjustment'' and inserting ``section 743(a) (relating to the 
     adjustment''.
       (3) Section 755(c), as added by this Act, is amended by 
     striking ``section 734(b)'' and inserting ``section 734(a)''.
       (4) Section 761(e)(2) is amended by striking ``optional''.

[[Page S3024]]

       (5) Section 774(a) is amended by striking ``743(b)'' both 
     places it appears and inserting ``743(a)''.
       (6) The item relating to section 734 in the table of 
     sections for subpart B of part II of subchapter K of chapter 
     1 is amended by striking ``Optional''.
       (7) The item relating to section 743 in the table of 
     sections for subpart C of part II of subchapter K of chapter 
     1 is amended by striking ``Optional''.
       (e) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to transfers and 
     distributions made after the date of the enactment of this 
     Act.
       (2) Repeal of section 732(d).--The amendments made by 
     subsections (b)(2) and (d)(1) shall apply to--
       (A) except as provided in subparagraph (B), transfers made 
     after the date of the enactment of this Act, and
       (B) in the case of any transfer made on or before such date 
     to which section 732(d) applies, distributions made after the 
     date which is 2 years after such date of enactment.

                PART III--DEPRECIATION AND AMORTIZATION

     SEC. 471. EXTENSION OF AMORTIZATION OF INTANGIBLES TO SPORTS 
                   FRANCHISES.

       (a) In General.--Section 197(e) (relating to exceptions to 
     definition of section 197 intangible) is amended by striking 
     paragraph (6) and by redesignating paragraphs (7) and (8) as 
     paragraphs (6) and (7), respectively.
       (b) Conforming Amendments.--
       (1)(A) Section 1056 (relating to basis limitation for 
     player contracts transferred in connection with the sale of a 
     franchise) is repealed.
       (B) The table of sections for part IV of subchapter O of 
     chapter 1 is amended by striking the item relating to section 
     1056.
       (2) Section 1245(a) (relating to gain from disposition of 
     certain depreciable property) is amended by striking 
     paragraph (4).
       (3) Section 1253 (relating to transfers of franchises, 
     trademarks, and trade names) is amended by striking 
     subsection (e).
       (c) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to property 
     acquired after the date of the enactment of this Act.
       (2) Section 1245.--The amendment made by subsection (b)(2) 
     shall apply to franchises acquired after the date of the 
     enactment of this Act.

     SEC. 472. CLASS LIVES FOR UTILITY GRADING COSTS.

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

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

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

     SEC. 473. EXPANSION OF LIMITATION ON DEPRECIATION OF CERTAIN 
                   PASSENGER AUTOMOBILES.

       (a) In General.--Section 179(b) (relating to limitations) 
     is amended by adding at the end the following new paragraph:
       ``(6) Limitation on cost taken into account for certain 
     passenger vehicles.--
       ``(A) In general.--The cost of any sport utility vehicle 
     for any taxable year which may be taken into account under 
     this section shall not exceed $25,000.
       ``(B) Sport utility vehicle.--For purposes of subparagraph 
     (A)--
       ``(i) In general.--The term `sport utility vehicle' means 
     any 4-wheeled vehicle which--

       ``(I) is manufactured primarily for use on public streets, 
     roads, and highways,

       ``(II) is not subject to section 280F, and
       ``(III) is rated at not more than 14,000 pounds gross 
     vehicle weight.

       ``(ii) Certain vehicles excluded.--Such term does not 
     include any vehicle which--

       ``(I) does not have the primary load carrying device or 
     container attached,
       ``(II) has a seating capacity of more than 12 individuals,
       ``(III) is designed for more than 9 individuals in seating 
     rearward of the driver's seat,
       ``(IV) is equipped with an open cargo area, or a covered 
     box not readily accessible from the passenger compartment, of 
     at least 72.0 inches in interior length, or
       ``(V) has an integral enclosure, fully enclosing the driver 
     compartment and load carrying device, does not have seating 
     rearward of the driver's seat, and has no body section 
     protruding more than 30 inches ahead of the leading edge of 
     the windshield.''.

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

     SEC. 474. CONSISTENT AMORTIZATION OF PERIODS FOR INTANGIBLES.

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

     SEC. 475. REFORM OF TAX TREATMENT OF LEASING OPERATIONS.

       (a) Clarification of Recovery Period for Tax-Exempt Use 
     Property Subject to Lease.--Subparagraph (A) of section 
     168(g)(3) (relating to special rules for determining class 
     life) is amended by inserting ``(notwithstanding any other 
     subparagraph of this paragraph)'' after ``shall''.
       (b) Limitation on Depreciation Period for Software Leased 
     to Tax-Exempt Entity.--Paragraph (1) of section 167(f) is 
     amended by adding at the end the following new subparagraph:
       ``(C) Tax-exempt use property subject to lease.--In the 
     case of computer software which would be tax-exempt use 
     property as defined in subsection (h) of section 168 if such 
     section applied to computer software, the useful life under 
     subparagraph (A) shall not be less than 125 percent of the 
     lease term (within the meaning of section 168(i)(3)).''
       (c) Lease Term To Include Related Service Contracts.--
     Subparagraph (A) of section 168(i)(3) (relating to lease 
     term) is amended by striking ``and'' at the end of clause 
     (i), by redesignating clause (ii) as clause (iii), and by 
     inserting after clause (i) the following new clause:
       ``(ii) the term of a lease shall include the term of any 
     service contract or similar arrangement (whether or not 
     treated as a lease under section 7701(e))--

[[Page S3025]]

       ``(I) which is part of the same transaction (or series of 
     related transactions) which includes the lease, and
       ``(II) which is with respect to the property subject to the 
     lease or substantially similar property, and''.

       (d) Effective Date.--The amendments made by this section 
     shall apply to leases entered into after December 31, 2003.

     SEC. 476. LIMITATION ON DEDUCTIONS ALLOCABLE TO PROPERTY USED 
                   BY GOVERNMENTS OR OTHER TAX-EXEMPT ENTITIES.

       (a) In General.--Subpart C of part II of subchapter E of 
     chapter 1 (relating to taxable year for which deductions 
     taken) is amended by adding at the end the following new 
     section:

     ``SEC. 470. LIMITATIONS ON LOSSES FROM TAX-EXEMPT USE 
                   PROPERTY.

       ``(a) Limitation on Losses.--Except as otherwise provided 
     in this section, a tax-exempt use loss for any taxable year 
     shall not be allowed.
       ``(b) Disallowed Loss Carried to Next Year.--Any tax-exempt 
     use loss with respect to any tax-exempt use property which is 
     disallowed under subsection (a) for any taxable year shall be 
     treated as a deduction with respect to such property in the 
     next taxable year.
       ``(c) Definitions.--For purposes of this section--
       ``(1) Tax-exempt use loss.--The term `tax-exempt use loss' 
     means, with respect to any taxable year, the amount (if any) 
     by which--
       ``(A) the sum of--
       ``(i) the aggregate deductions (other than interest) 
     directly allocable to a tax-exempt use property, plus
       ``(ii) the aggregate deductions for interest properly 
     allocable to such property, exceed
       ``(B) the aggregate income from such property.
       ``(2) Tax-exempt use property.--The term `tax-exempt use 
     property' has the meaning given to such term by section 
     168(h) (without regard to paragraph (1)(C) or (3)(C) thereof 
     and determined as if property described in section 
     167(f)(1)(B) were tangible property).
       ``(d) Exception for Certain Leases.--This section shall not 
     apply to any lease of property which meets the requirements 
     of all of the following paragraphs:
       ``(1) Property not financed with tax-exempt bonds.--A lease 
     of property meets the requirements of this paragraph if no 
     part of the property was financed (directly or indirectly) 
     from the proceeds of an obligation the interest on which is 
     exempt from tax under section 103(a) and which (or any 
     refunding bond of which) is outstanding when the lease is 
     entered into. The Secretary may by regulations provide for a 
     de minimis exception from this paragraph.
       ``(2) Availability of funds.--
       ``(A) In general.--A lease of property meets the 
     requirements of this paragraph if (at any time during the 
     lease term) not more than an allowable amount of funds are--
       ``(i) subject to any arrangement referred to in 
     subparagraph (B), or
       ``(ii) otherwise reasonably expected to remain available,

     to or for the benefit of the lessor or any lender, or to or 
     for the benefit of the lessee to satisfy the lessee's 
     obligations or options under the lease.
       ``(B) Arrangements.--The arrangements referred to in this 
     subparagraph are--
       ``(i) a defeasance arrangement, a loan by the lessee to the 
     lessor or any lender, a deposit arrangement, a letter of 
     credit collateralized with cash or cash equivalents, a 
     payment undertaking agreement, a lease prepayment, a sinking 
     fund arrangement, or any similar arrangement (whether or not 
     such arrangement provides credit support), and
       ``(ii) any other arrangement identified by the Secretary in 
     regulations.
       ``(C) Allowable amount.--
       ``(i) In general.--Except as otherwise provided in this 
     subparagraph, the term `allowable amount' means an amount 
     equal to 20 percent of the lessor's adjusted basis in the 
     property at the time the lease is entered into.
       ``(ii) Higher amount permitted in certain cases.--To the 
     extent provided in regulations, a higher percentage shall be 
     permitted under clause (i) where necessary because of the 
     credit-worthiness of the lessee. In no event may such 
     regulations permit a percentage of more than 50 percent.
       ``(iii) Option to purchase.--If under the lease the lessee 
     has the option to purchase the property for other than the 
     fair market value of the property (determined at the time of 
     exercise), the allowable amount at the time such option may 
     be exercised may not exceed 50 percent of the price at which 
     such option may be exercised.
       ``(3) Lessor must make substantial equity investment.--A 
     lease of property meets the requirements of this paragraph 
     if--
       ``(A) the lessor--
       ``(i) has at the time the lease is entered into an 
     unconditional at-risk equity investment (as determined by the 
     Secretary) in the property of at least 20 percent of the 
     lessor's adjusted basis in the property as of that time, and
       ``(ii) maintains such investment throughout the term of the 
     lease, and
       ``(B) the fair market value of the property at the end of 
     the lease term is reasonably expected to be equal to at least 
     20 percent of such basis.
       ``(4) Lessee may not bear more than minimal risk of loss.--
       ``(A) In general.--A lease of property meets the 
     requirements of this paragraph if there is no arrangement 
     under which more than a minimal risk of loss (as determined 
     under regulations) in the value of the property is borne by 
     the lessee.
       ``(B) Certain arrangements fail requirement.--In no event 
     will the requirements of this paragraph be met if there is 
     any arrangement under which the lessee bears--
       ``(i) any portion of the loss that would occur if the fair 
     market value of the leased property at the time the lease is 
     terminated were 25 percent less than its projected fair 
     market value at the end of the lease term, or
       ``(ii) more than 50 percent of the loss that would occur if 
     the fair market value of the leased property at the time the 
     lease is terminated were zero.
       ``(5) Regulatory requirements.--A lease of property meets 
     the requirements of this paragraph if such lease of property 
     meets such requirements as the Secretary may prescribe by 
     regulations.
       ``(e) Special Rules.--
       ``(1) Treatment of former tax-exempt use property.--
       ``(A) In general.--In the case of any former tax-exempt use 
     property--
       ``(i) any deduction allowable under subsection (b) with 
     respect to such property for any taxable year shall be 
     allowed only to the extent of any net income (without regard 
     to such deduction) from such property for such taxable year, 
     and
       ``(ii) any portion of such unused deduction remaining after 
     application of clause (i) shall be treated as allowable under 
     subsection (b) with respect to such property in the next 
     taxable year.
       ``(B) Former tax-exempt use property.--For purposes of this 
     subsection, the term `former tax-exempt use property' means 
     any property which--
       ``(i) is not tax-exempt use property for the taxable year, 
     but
       ``(ii) was tax-exempt use property for any prior taxable 
     year.
       ``(2) Disposition of entire interest in property.--If 
     during the taxable year a taxpayer disposes of the taxpayer's 
     entire interest in tax-exempt use property (or former tax-
     exempt use property), rules similar to the rules of section 
     469(g) shall apply for purposes of this section.
       ``(3) Coordination with section 469.--This section shall be 
     applied before the application of section 469.
       ``(f) Other Definitions.--For purposes of this section--
       ``(1) Related parties.--The terms `lessor', `lessee', and 
     `lender' include any related party (within the meaning of 
     section 197(f)(9)(C)(i)).
       ``(2) Lease term.--The term `lease term' has the meaning 
     given to such term by section 168(i)(3).
       ``(3) Lender.--The term `lender' means, with respect to any 
     lease, a person that makes a loan to the lessor which is 
     secured (or economically similar to being secured) by the 
     lease or the leased property.
       ``(4) Loan.--The term `loan' includes any similar 
     arrangement.
       ``(g) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the provisions of this section, including regulation which--
       ``(1) allow in appropriate cases the aggregation of 
     property subject to the same lease, and
       ``(2) provide for the determination of the allocation of 
     interest expense for purposes of this section.''
       (b) Conforming Amendment.--The table of sections for 
     subpart C of part II of subchapter E of chapter 1 is amended 
     by adding at the end the following new item:

``Sec. 470. Limitations on losses from tax-exempt use property.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to leases entered into after December 31, 2003.

                   PART IV--ADMINISTRATIVE PROVISIONS

     SEC. 481. CLARIFICATION OF RULES FOR PAYMENT OF ESTIMATED TAX 
                   FOR CERTAIN DEEMED ASSET SALES.

       (a) In General.--Paragraph (13) of section 338(h) (relating 
     to tax on deemed sale not taken into account for estimated 
     tax purposes) is amended by adding at the end the following: 
     ``The preceding sentence shall not apply with respect to a 
     qualified stock purchase for which an election is made under 
     paragraph (10).''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to transactions occurring after the date of the 
     enactment of this Act.

     SEC. 482. EXTENSION OF IRS USER FEES.

       (a) In General.--Section 7528(c) (relating to termination) 
     is amended by striking ``December 31, 2004'' and inserting 
     ``September 30, 2013''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to requests after the date of the enactment of 
     this Act.

     SEC. 483. DOUBLING OF CERTAIN PENALTIES, FINES, AND INTEREST 
                   ON UNDERPAYMENTS RELATED TO CERTAIN OFFSHORE 
                   FINANCIAL ARRANGEMENT.

       (a) General Rule.--If--
       (1) a taxpayer eligible to participate in--
       (A) the Department of the Treasury's Offshore Voluntary 
     Compliance Initiative, or
       (B) the Department of the Treasury's voluntary disclosure 
     initiative which applies to the taxpayer by reason of the 
     taxpayer's underreporting of United States income tax

[[Page S3026]]

     liability through financial arrangements which rely on the 
     use of offshore arrangements which were the subject of the 
     initiative described in subparagraph (A), and
       (2) any interest or applicable penalty is imposed with 
     respect to any arrangement to which any initiative described 
     in paragraph (1) applied or to any underpayment of Federal 
     income tax attributable to items arising in connection with 
     any arrangement described in paragraph (1),

     then, notwithstanding any other provision of law, the amount 
     of such interest or penalty shall be equal to twice that 
     determined without regard to this section.
       (b) Definitions and Rules.--For purposes of this section--
       (1) Applicable penalty.--The term ``applicable penalty'' 
     means any penalty, addition to tax, or fine imposed under 
     chapter 68 of the Internal Revenue Code of 1986.
       (2) Voluntary offshore compliance initiative.--The term 
     ``Voluntary Offshore Compliance Initiative'' means the 
     program established by the Department of the Treasury in 
     January of 2003 under which any taxpayer was eligible to 
     voluntarily disclose previously undisclosed income on assets 
     placed in offshore accounts and accessed through credit card 
     and other financial arrangements.
       (3) Participation.--A taxpayer shall be treated as having 
     participated in the Voluntary Offshore Compliance Initiative 
     if the taxpayer submitted the request in a timely manner and 
     all information requested by the Secretary of the Treasury or 
     his delegate within a reasonable period of time following the 
     request.
       (c) Effective Date.--The provisions of this section shall 
     apply to interest, penalties, additions to tax, and fines 
     with respect to any taxable year if as of the date of the 
     enactment of this Act, the assessment of any tax, penalty, or 
     interest with respect to such taxable year is not prevented 
     by the operation of any law or rule of law.

     SEC. 484. PARTIAL PAYMENT OF TAX LIABILITY IN INSTALLMENT 
                   AGREEMENTS.

       (a) In General.--
       (1) Section 6159(a) (relating to authorization of 
     agreements) is amended--
       (A) by striking ``satisfy liability for payment of'' and 
     inserting ``make payment on'', and
       (B) by inserting ``full or partial'' after ``facilitate''.
       (2) Section 6159(c) (relating to Secretary required to 
     enter into installment agreements in certain cases) is 
     amended in the matter preceding paragraph (1) by inserting 
     ``full'' before ``payment''.
       (b) Requirement To Review Partial Payment Agreements Every 
     Two Years.--Section 6159, as amended by this Act, is amended 
     by redesignating subsections (d), (e), and (f) as subsections 
     (e), (f), and (g), respectively, and inserting after 
     subsection (c) the following new subsection:
       ``(d) Secretary Required To Review Installment Agreements 
     for Partial Collection Every Two Years.--In the case of an 
     agreement entered into by the Secretary under subsection (a) 
     for partial collection of a tax liability, the Secretary 
     shall review the agreement at least once every 2 years.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to agreements entered into on or after the date 
     of the enactment of this Act.

     SEC. 485. EXTENSION OF CUSTOMS USER FEES.

       Section 13031(j)(3) of the Consolidated Omnibus Budget 
     Reconciliation Act of 1985 (19 U.S.C. 58c(j)(3)) is amended 
     by striking ``March 31, 2004'' and inserting ``September 30, 
     2013''.

     SEC. 486. DEPOSITS MADE TO SUSPEND RUNNING OF INTEREST ON 
                   POTENTIAL UNDERPAYMENTS.

       (a) In General.--Subchapter A of chapter 67 (relating to 
     interest on underpayments) is amended by adding at the end 
     the following new section:

     ``SEC. 6603. DEPOSITS MADE TO SUSPEND RUNNING OF INTEREST ON 
                   POTENTIAL UNDERPAYMENTS, ETC.

       ``(a) Authority To Make Deposits Other Than As Payment of 
     Tax.--A taxpayer may make a cash deposit with the Secretary 
     which may be used by the Secretary to pay any tax imposed 
     under subtitle A or B or chapter 41, 42, 43, or 44 which has 
     not been assessed at the time of the deposit. Such a deposit 
     shall be made in such manner as the Secretary shall 
     prescribe.
       ``(b) No Interest Imposed.--To the extent that such deposit 
     is used by the Secretary to pay tax, for purposes of section 
     6601 (relating to interest on underpayments), the tax shall 
     be treated as paid when the deposit is made.
       ``(c) Return of Deposit.--Except in a case where the 
     Secretary determines that collection of tax is in jeopardy, 
     the Secretary shall return to the taxpayer any amount of the 
     deposit (to the extent not used for a payment of tax) which 
     the taxpayer requests in writing.
       ``(d) Payment of Interest.--
       ``(1) In general.--For purposes of section 6611 (relating 
     to interest on overpayments), a deposit which is returned to 
     a taxpayer shall be treated as a payment of tax for any 
     period to the extent (and only to the extent) attributable to 
     a disputable tax for such period. Under regulations 
     prescribed by the Secretary, rules similar to the rules of 
     section 6611(b)(2) shall apply.
       ``(2) Disputable tax.--
       ``(A) In general.--For purposes of this section, the term 
     `disputable tax' means the amount of tax specified at the 
     time of the deposit as the taxpayer's reasonable estimate of 
     the maximum amount of any tax attributable to disputable 
     items.
       ``(B) Safe harbor based on 30-day letter.--In the case of a 
     taxpayer who has been issued a 30-day letter, the maximum 
     amount of tax under subparagraph (A) shall not be less than 
     the amount of the proposed deficiency specified in such 
     letter.
       ``(3) Other definitions.--For purposes of paragraph (2)--
       ``(A) Disputable item.--The term `disputable item' means 
     any item of income, gain, loss, deduction, or credit if the 
     taxpayer--
       ``(i) has a reasonable basis for its treatment of such 
     item, and
       ``(ii) reasonably believes that the Secretary also has a 
     reasonable basis for disallowing the taxpayer's treatment of 
     such item.
       ``(B) 30-day letter.--The term `30-day letter' means the 
     first letter of proposed deficiency which allows the taxpayer 
     an opportunity for administrative review in the Internal 
     Revenue Service Office of Appeals.
       ``(4) Rate of interest.--The rate of interest allowable 
     under this subsection shall be the Federal short-term rate 
     determined under section 6621(b), compounded daily.
       ``(e) Use of Deposits.--
       ``(1) Payment of tax.--Except as otherwise provided by the 
     taxpayer, deposits shall be treated as used for the payment 
     of tax in the order deposited.
       ``(2) Returns of deposits.--Deposits shall be treated as 
     returned to the taxpayer on a last-in, first-out basis.''.
       (b) Clerical Amendment.--The table of sections for 
     subchapter A of chapter 67 is amended by adding at the end 
     the following new item:

``Sec. 6603. Deposits made to suspend running of interest on potential 
              underpayments, etc.''.
       (c) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to deposits made after the date of the enactment of 
     this Act.
       (2) Coordination with deposits made under revenue procedure 
     84-58.--In the case of an amount held by the Secretary of the 
     Treasury or his delegate on the date of the enactment of this 
     Act as a deposit in the nature of a cash bond deposit 
     pursuant to Revenue Procedure 84-58, the date that the 
     taxpayer identifies such amount as a deposit made pursuant to 
     section 6603 of the Internal Revenue Code (as added by this 
     Act) shall be treated as the date such amount is deposited 
     for purposes of such section 6603.

     SEC. 487. QUALIFIED TAX COLLECTION CONTRACTS.

       (a) Contract Requirements.--
       (1) In general.--Subchapter A of chapter 64 (relating to 
     collection) is amended by adding at the end the following new 
     section:

     ``SEC. 6306. QUALIFIED TAX COLLECTION CONTRACTS.

       ``(a) In General.--Nothing in any provision of law shall be 
     construed to prevent the Secretary from entering into a 
     qualified tax collection contract.
       ``(b) Qualified Tax Collection Contract.--For purposes of 
     this section, the term `qualified tax collection contract' 
     means any contract which--
       ``(1) is for the services of any person (other than an 
     officer or employee of the Treasury Department)--
       ``(A) to locate and contact any taxpayer specified by the 
     Secretary,
       ``(B) to request full payment from such taxpayer of an 
     amount of Federal tax specified by the Secretary and, if such 
     request cannot be met by the taxpayer, to offer the taxpayer 
     an installment agreement providing for full payment of such 
     amount during a period not to exceed 3 years, and
       ``(C) to obtain financial information specified by the 
     Secretary with respect to such taxpayer,
       ``(2) prohibits each person providing such services under 
     such contract from committing any act or omission which 
     employees of the Internal Revenue Service are prohibited from 
     committing in the performance of similar services,
       ``(3) prohibits subcontractors from--
       ``(A) having contacts with taxpayers,
       ``(B) providing quality assurance services, and
       ``(C) composing debt collection notices, and
       ``(4) permits subcontractors to perform other services only 
     with the approval of the Secretary.
       ``(c) Fees.--The Secretary may retain and use an amount not 
     in excess of 25 percent of the amount collected under any 
     qualified tax collection contract for the costs of services 
     performed under such contract. The Secretary shall keep 
     adequate records regarding amounts so retained and used. The 
     amount credited as paid by any taxpayer shall be determined 
     without regard to this subsection.
       ``(d) No Federal Liability.--The United States shall not be 
     liable for any act or omission of any person performing 
     services under a qualified tax collection contract.
       ``(e) Application of Fair Debt Collection Practices Act.--
     The provisions of the Fair Debt Collection Practices Act (15 
     U.S.C. 1692 et seq.) shall apply to any qualified tax 
     collection contract, except to the extent superseded by 
     section 6304, section 7602(c), or by any other provision of 
     this title.
       ``(f) Cross References.--
       ``(1) For damages for certain unauthorized collection 
     actions by persons performing services under a qualified tax 
     collection contract, see section 7433A.

[[Page S3027]]

       ``(2) For application of Taxpayer Assistance Orders to 
     persons performing services under a qualified tax collection 
     contract, see section 7811(a)(4).''.
       (2) Conforming amendments.--
       (A) Section 7809(a) is amended by inserting ``6306,'' 
     before ``7651''.
       (B) The table of sections for subchapter A of chapter 64 is 
     amended by adding at the end the following new item:

``Sec. 6306. Qualified Tax Collection Contracts.''.
       (b) Civil Damages for Certain Unauthorized Collection 
     Actions by Persons Performing Services Under Qualified Tax 
     Collection Contracts.--
       (1) In general.--Subchapter B of chapter 76 (relating to 
     proceedings by taxpayers and third parties) is amended by 
     inserting after section 7433 the following new section:

     ``SEC. 7433A. CIVIL DAMAGES FOR CERTAIN UNAUTHORIZED 
                   COLLECTION ACTIONS BY PERSONS PERFORMING 
                   SERVICES UNDER QUALIFIED TAX COLLECTION 
                   CONTRACTS.

       ``(a) In General.--Subject to the modifications provided by 
     subsection (b), section 7433 shall apply to the acts and 
     omissions of any person performing services under a qualified 
     tax collection contract (as defined in section 6306(b)) to 
     the same extent and in the same manner as if such person were 
     an employee of the Internal Revenue Service.
       ``(b) Modifications.--For purposes of subsection (a)--
       ``(1) Any civil action brought under section 7433 by reason 
     of this section shall be brought against the person who 
     entered into the qualified tax collection contract with the 
     Secretary and shall not be brought against the United States.
       ``(2) Such person and not the United States shall be liable 
     for any damages and costs determined in such civil action.
       ``(3) Such civil action shall not be an exclusive remedy 
     with respect to such person.
       ``(4) Subsections (c), (d)(1), and (e) of section 7433 
     shall not apply.''.
       (2) Clerical amendment.--The table of sections for 
     subchapter B of chapter 76 is amended by inserting after the 
     item relating to section 7433 the following new item:

``Sec. 7433A. Civil damages for certain unauthorized collection actions 
              by persons performing services under a qualified tax 
              collection contract.''.
       (c) Application of Taxpayer Assistance Orders to Persons 
     Performing Services Under a Qualified Tax Collection 
     Contract.--Section 7811 (relating to taxpayer assistance 
     orders) is amended by adding at the end the following new 
     subsection:
       ``(g) Application to Persons Performing Services Under a 
     Qualified Tax Collection Contract.--Any order issued or 
     action taken by the National Taxpayer Advocate pursuant to 
     this section shall apply to persons performing services under 
     a qualified tax collection contract (as defined in section 
     6306(b)) to the same extent and in the same manner as such 
     order or action applies to the Secretary.''.
       (d) Ineligibility of Individuals Who Commit Misconduct To 
     Perform Under Contract.--Section 1203 of the Internal Revenue 
     Service Restructuring Act of 1998 (relating to termination of 
     employment for misconduct) is amended by adding at the end 
     the following new subsection:
       ``(e) Individuals Performing Services Under a Qualified Tax 
     Collection Contract.--An individual shall cease to be 
     permitted to perform any services under any qualified tax 
     collection contract (as defined in section 6306(b) of the 
     Internal Revenue Code of 1986) if there is a final 
     determination by the Secretary of the Treasury under such 
     contract that such individual committed any act or omission 
     described under subsection (b) in connection with the 
     performance of such services.''.
       (e) Effective Date.--The amendments made to this section 
     shall take effect on the date of the enactment of this Act.

                    PART V--MISCELLANEOUS PROVISIONS

     SEC. 491. ADDITION OF VACCINES AGAINST HEPATITIS A TO LIST OF 
                   TAXABLE VACCINES.

       (a) In General.--Section 4132(a)(1) (defining taxable 
     vaccine) is amended by redesignating subparagraphs (I), (J), 
     (K), and (L) as subparagraphs (J), (K), (L), and (M), 
     respectively, and by inserting after subparagraph (H) the 
     following new subparagraph:
       ``(I) Any vaccine against hepatitis A.''.
       (b) Conforming Amendment.--Section 9510(c)(1)(A) is amended 
     by striking ``October 18, 2000'' and inserting ``May 8, 
     2003''.
       (c) Effective Date.--
       (1) Sales, etc.--The amendments made by this section shall 
     apply to sales and uses on or after the first day of the 
     first month which begins more than 4 weeks after the date of 
     the enactment of this Act.
       (2) Deliveries.--For purposes of paragraph (1) and section 
     4131 of the Internal Revenue Code of 1986, in the case of 
     sales on or before the effective date described in such 
     paragraph for which delivery is made after such date, the 
     delivery date shall be considered the sale date.

     SEC. 492. RECOGNITION OF GAIN FROM THE SALE OF A PRINCIPAL 
                   RESIDENCE ACQUIRED IN A LIKE-KIND EXCHANGE 
                   WITHIN 5 YEARS OF SALE.

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

     SEC. 493. CLARIFICATION OF EXEMPTION FROM TAX FOR SMALL 
                   PROPERTY AND CASUALTY INSURANCE COMPANIES.

       (a) In General.--Section 501(c)(15)(A) is amended to read 
     as follows:
       ``(A) Insurance companies (as defined in section 816(a)) 
     other than life (including interinsurers and reciprocal 
     underwriters) if--
       ``(i) the gross receipts for the taxable year do not exceed 
     $600,000, and
       ``(ii) more than 50 percent of such gross receipts consist 
     of premiums.''.
       (b) Controlled Group Rule.--Section 501(c)(15)(C) is 
     amended by inserting ``, except that in applying section 1563 
     for purposes of section 831(b)(2)(B)(ii), subparagraphs (B) 
     and (C) of section 1563(b)(2) shall be disregarded'' before 
     the period at the end.
       (c) Conforming Amendment.--Clause (i) of section 
     831(b)(2)(A) is amended by striking ``exceed $350,000 but''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 494. DEFINITION OF INSURANCE COMPANY FOR SECTION 831.

       (a) In General.--Section 831 is amended by redesignating 
     subsection (c) as subsection (d) and by inserting after 
     subsection (b) the following new subsection:
       ``(c) Insurance Company Defined.--For purposes of this 
     section, the term `insurance company' has the meaning given 
     to such term by section 816(a)).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 495. LIMITATIONS ON DEDUCTION FOR CHARITABLE 
                   CONTRIBUTIONS OF PATENTS AND SIMILAR PROPERTY.

       (a) Deduction Allowed Only to the Extent of Basis.--Section 
     170(e)(1)(B) (relating to certain contributions of ordinary 
     income and capital gain property) is amended by striking 
     ``or'' at the end of clause (i), by adding ``or'' at the end 
     of clause (ii), and by inserting after clause (ii) the 
     following new clause:
       ``(iii) of any patent, copyright, trademark, trade name, 
     trade secret, know-how, software, or similar property, or 
     applications or registrations of such property,''.
       (b) Treatment of Contributions Where Donor Receives 
     Interest.--Section 170(e) is amended by adding at the end the 
     following new paragraph:
       ``(7) Special rules for contributions of patents and 
     similar property where donor receives interest.--
       ``(A) Disallowance of deduction.--No deduction shall be 
     allowed under this section with respect to a contribution of 
     property described in paragraph (1)(B)(iii) if the taxpayer 
     after the contribution has any interest in the property other 
     than a qualified interest.
       ``(B) Contributions with qualified interest.--If a taxpayer 
     after a contribution of property described in paragraph 
     (1)(B)(iii) has a qualified interest in the property--
       ``(i) any payment pursuant to the qualified interest shall 
     be treated as ordinary income and shall be includible in 
     gross income of the taxpayer for the taxable year in which 
     the payment is received by the taxpayer, and
       ``(ii) subsection (f)(3) and section 1011(b) shall not 
     apply to the transfer of the property from the taxpayer to 
     the donee.
       ``(C) Qualified interest.--For purposes of this paragraph--
       ``(i) In general.--The term `qualified interest' means, 
     with respect to any taxpayer, a right to receive from the 
     donee a percentage (not greater than 50 percent) of any 
     royalty payment received by the donee with respect to 
     property described in paragraph (1)(B)(iii) (other than 
     copyrights which are described in section 1221(a)(3) or 
     1231(b)(1)(C)) contributed by the taxpayer to the donee.
       ``(ii) Secretarial authority.--

       ``(I) In general.--Except as provided in subclause (II), 
     the Secretary may by regulation or other administrative 
     guidance treat as a qualified interest the right to receive 
     other payments from the donee, but only if the donee does not 
     possess a right to receive any payment (whether royalties or 
     otherwise) from a third party with respect to the contributed 
     property.
       ``(II) Exceptions.--The Secretary may not treat as a 
     qualified interest the right to receive any payment which 
     provides a benefit to the donor which is greater than the 
     benefit retained by the donee or the right to receive any 
     portion of the proceeds from the sale of the property 
     contributed.

       ``(iii) Limitation.--An interest shall be treated as a 
     qualified interest under this subparagraph only if the 
     taxpayer has no right to receive any payment described in 
     clause (i) or (ii)(I) after the earlier of the date on which 
     the legal life of the contributed property expires or the 
     date which is 20 years after the date of the contribution.''.
       (c) Reporting Requirements.--
       (1) In general.--Section 6050L(a) (relating to returns 
     regarding certain dispositions of donated property) is 
     amended--
       (A) by striking ``If'' and inserting:

[[Page S3028]]

       ``(1) Dispositions of donated property.--If'',
       (B) by redesignating paragraphs (1) through (5) as 
     subparagraphs (A) through (E), respectively, and
       (C) by adding at the end the following new paragraph:
       ``(2) Payments of qualified interests.--Each donee of 
     property described in section 170(e)(1)(B)(iii) which makes a 
     payment to a donor pursuant to a qualified interest (as 
     defined in section 170(e)(7)) during any calendar year shall 
     make a return (in accordance with forms and regulations 
     prescribed by the Secretary) showing--
       ``(A) the name, address, and TIN of the payor and the payee 
     with respect to such a payment,
       ``(B) a description, and date of contribution, of the 
     property to which the qualified interest relates,
       ``(C) the dates and amounts of any royalty payments 
     received by the donee with respect to such property,
       ``(D) the date and the amount of the payment pursuant to 
     the qualified interest, and
       ``(E) a description of the terms of the qualified 
     interest.''.
       (2) Conforming amendments.--
       (A) The heading for section 6050L is amended by striking 
     ``certain dispositions of''.
       (B) The item relating to section 6050L in the table of 
     sections for subpart B of part III of subchapter A of chapter 
     61 is amended by striking ``certain dispositions of''.
       (d) Anti-Abuse Rules.--The Secretary of the Treasury may 
     prescribe such regulations or other administrative guidance 
     as may be necessary or appropriate to prevent the avoidance 
     of the purposes of section 170(e)(1)(B)(iii) of the Internal 
     Revenue Code of 1986 (as added by subsection (a)), including 
     preventing--
       (1) the circumvention of the reduction of the charitable 
     deduction by embedding or bundling the patent or similar 
     property as part of a charitable contribution of property 
     that includes the patent or similar property,
       (2) the manipulation of the basis of the property to 
     increase the amount of the charitable deduction through the 
     use of related persons, pass-thru entities, or other 
     intermediaries, or through the use of any provision of law or 
     regulation (including the consolidated return regulations), 
     and
       (3) a donor from changing the form of the patent or similar 
     property to property of a form for which different deduction 
     rules would apply.
       (e) Effective Date.--The amendments made by this section 
     shall apply to contributions made after October 1, 2003.

     SEC. 496. REPEAL OF 10-PERCENT REHABILITATION TAX CREDIT.

       Section 47 is amended by adding at the end the following 
     new subsection:
       ``(e) Termination.--This section shall not apply to 
     expenditures described in subsection (a)(1) incurred in 
     taxable years beginning after December 31, 2003.''.

     SEC. 497. INCREASE IN AGE OF MINOR CHILDREN WHOSE UNEARNED 
                   INCOME IS TAXED AS IF PARENT'S INCOME.

       (a) In General.--Section 1(g)(2)(A) (relating to child to 
     whom subsection applies) is amended by striking ``age 14'' 
     and inserting ``age 18''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.
                                 ______
                                 
  SA 2895. Mr. DASCHLE submitted an amendment intended to be proposed 
by him to the bill S. 1637, to amend the Internal Revenue Code of 1986 
to comply with the World Trade Organization rulings on the FSC/ETI 
benefit in a manner that preserves jobs and production activities in 
the United States, to reform and simplify the international taxation 
rules of the United States, and for other purposes; which was ordered 
to lie on the table; as follows:

       On page 179, after line 25, add the following:

     SEC. __. INCREASE IN HISTORIC REHABILITATION CREDIT FOR 
                   CERTAIN LOW-INCOME HOUSING FOR THE ELDERLY.

       (a) In General.--Section 47 (relating to rehabilitation 
     credit) is amended by adding at the end the following new 
     subsection:
       ``(e) Special Rule Regarding Certain Historic Structures.--
     In the case of any qualified rehabilitation expenditure with 
     respect to any certified historic structure--
       ``(1) which is placed in service after the date of the 
     enactment of this subsection,
       ``(2) which is part of a qualified low-income building with 
     respect to which a credit under section 42 is allowed, and
       ``(3) substantially all of the residential rental units of 
     which are used for tenants who have attained the age of 65,
     subsection (a)(2) shall be applied by substituting `25 
     percent' for `20 percent'.''.
       (b) Application of MACRS.--The Internal Revenue Code of 
     1986 shall be applied and administered as if paragraph (4)(X) 
     of section 251(d) of the Tax Reform Act of 1986 as applied to 
     the amendments made by section 201 of such Act had not been 
     enacted with respect to any property described in such 
     paragraph and placed in service after the date of the 
     enactment of this Act.
       (c) Effective Date.--The amendment made by subsection (a) 
     shall apply to property placed in service after the date of 
     the enactment of this Act.
                                 ______
                                 
  SA 2896. Mr. DASCHLE submitted an amendment intended to be proposed 
by him to the bill S. 1637, to amend the Internal Revenue Code of 1986 
to comply with the World Trade Organization rulings on the FSC/ETI 
benefit in a manner that preserves jobs and production activities in 
the United States, to reform and simplify the international taxation 
rules of the United States, and for other purposes; which was ordered 
to lie on the table; as follows:

       On page 179, after line 25, insert the following:

     SEC. . NEW MARKETS TAX CREDIT FOR NATIVE AMERICAN 
                   RESERVATIONS.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business related credits) is amended 
     by redesignating sections 45E and 45F as sections 45F and 
     45G, respectively, and by inserting after section 45E the 
     following new section:

     ``SEC. 45D. NEW MARKETS TAX CREDIT FOR NATIVE AMERICAN 
                   RESERVATIONS.

       ``(a) Allowance of Credit.--
       ``(1) In general.--For purposes of section 38, in the case 
     of a taxpayer who holds a qualified equity investment on a 
     credit allowance date of such investment which occurs during 
     the taxable year, the Native American new markets tax credit 
     determined under this section for such taxable year is an 
     amount equal to the applicable percentage of the amount paid 
     to the reservation development entity for such investment at 
     its original issue.
       ``(2) Applicable percentage.--For purposes of paragraph 
     (1), the applicable percentage is--
       ``(A) 5 percent with respect to the first 3 credit 
     allowance dates, and
       ``(B) 6 percent with respect to the remainder of the credit 
     allowance dates.
       ``(3) Credit allowance date.--For purposes of paragraph 
     (1), the term `credit allowance date' means, with respect to 
     any qualified equity investment--
       ``(A) the date on which such investment is initially made, 
     and
       ``(B) each of the 6 anniversary dates of such date 
     thereafter.
       ``(b) Qualified Equity Investment.--For purposes of this 
     section--
       ``(1) In general.--The term `qualified equity investment' 
     means any equity investment in a reservation development 
     entity if--
       ``(A) such investment is acquired by the taxpayer at its 
     original issue (directly or through an underwriter) solely in 
     exchange for cash,
       ``(B) substantially all of such cash is used by the 
     reservation development entity to make qualified low-income 
     reservation investments, and
       ``(C) such investment is designated for purposes of this 
     section by the reservation development entity.

     Such term shall not include any equity investment issued by a 
     reservation development entity more than 5 years after the 
     date that such entity receives an allocation under subsection 
     (f ). Any allocation not used within such 5-year period may 
     be reallocated by the Secretary under subsection (f ).
       ``(2) Limitation.--The maximum amount of equity investments 
     issued by a reservation development entity which may be 
     designated under paragraph (1)(C) by such entity shall not 
     exceed the portion of the limitation amount allocated under 
     subsection (f ) to such entity.
       ``(3) Safe harbor for determining use of cash.--The 
     requirement of paragraph (1)(B) shall be treated as met if at 
     least 85 percent of the aggregate gross assets of the 
     reservation development entity are invested in qualified low-
     income reservation investments.
       ``(4) Treatment of subsequent purchasers.--The term 
     `qualified equity investment' includes any equity investment 
     which would (but for paragraph (1)(A)) be a qualified equity 
     investment in the hands of the taxpayer if such investment 
     was a qualified equity investment in the hands of a prior 
     holder.
       ``(5) Redemptions.--A rule similar to the rule of section 
     1202(c)(3) shall apply for purposes of this subsection.
       ``(6) Equity investment.--The term `equity investment' 
     means--
       ``(A) any stock (other than nonqualified preferred stock as 
     defined in section 351(g)(2)) in an entity which is a 
     corporation, and
       ``(B) any capital interest in an entity which is a 
     partnership.
       ``(c) Reservation Development Entity.--For purposes of this 
     section--
       ``(1) In general.--The term `reservation development 
     entity' means any domestic corporation or partnership if--
       ``(A) the primary mission of the entity is serving, or 
     providing investment capital for, low-income reservations,
       ``(B) the entity maintains accountability to residents of 
     low-income reservations through their representation on any 
     governing board of the entity or on any advisory board to the 
     entity, and
       ``(C) the entity is certified by the Secretary for purposes 
     of this section as being a reservation development entity.
       ``(2) Exception.--For purposes of subparagraph (C) of 
     paragraph (1), the Secretary shall not certify an entity as a 
     reservation development entity if such entity is also 
     certified as a qualified community development entity under 
     section 45D(c).

[[Page S3029]]

       ``(d) Qualified Low-Income Reservation Investments.--For 
     purposes of this section--
       ``(1) In general.--The term `qualified low-income 
     reservation investment' means--
       ``(A) any capital or equity investment in, or loan to, any 
     qualified active low-income reservation business,
       ``(B) the purchase from another reservation development 
     entity of any loan made by such entity which is a qualified 
     low-income reservation investment,
       ``(C) financial counseling and other services specified in 
     regulations prescribed by the Secretary to businesses located 
     in, and residents of, low-income reservations, and
       ``(D) any equity investment in, or loan to, any reservation 
     development entity.
       ``(2) Qualified active low-income reservation business.--
       ``(A) In general.--For purposes of paragraph (1), the term 
     `qualified active low-income reservation business' means, 
     with respect to any taxable year, any corporation (including 
     a nonprofit corporation) or partnership if for such year--
       ``(i) at least 50 percent of the total gross income of such 
     entity is derived from the active conduct of a qualified 
     business within any low-income reservation,
       ``(ii) a substantial portion of the use of the tangible 
     property of such entity (whether owned or leased) is within 
     any low-income reservation,
       ``(iii) a substantial portion of the services performed for 
     such entity by its employees are performed in any low-income 
     reservation,
       ``(iv) less than 5 percent of the average of the aggregate 
     unadjusted bases of the property of such entity is 
     attributable to collectibles (as defined in section 
     408(m)(2)) other than collectibles that are held primarily 
     for sale to customers in the ordinary course of such 
     business, and
       ``(v) less than 5 percent of the average of the aggregate 
     unadjusted bases of the property of such entity is 
     attributable to nonqualified financial property (as defined 
     in section 1397C(e)).
       ``(B) Proprietorship.--Such term shall include any business 
     carried on by an individual as a proprietor if such business 
     would meet the requirements of subparagraph (A) were it 
     incorporated.
       ``(C) Portions of business may be qualified active low-
     income reservation business.--The term `qualified active low-
     income reservation business' includes any trades or 
     businesses which would qualify as a qualified active low-
     income reservation business if such trades or businesses were 
     separately incorporated.
       ``(3) Qualified business.--For purposes of this subsection, 
     the term `qualified business' has the meaning given to such 
     term by section 45D(d)(3).
       ``(e) Low-Income Reservation.--For purposes of this 
     section, the term `low-income reservation' means any Indian 
     reservation (as defined in section 168(j)(6)) which has a 
     poverty rate of at least 40 percent.
       ``(f ) National Limitation on Amount of Investments 
     Designated.--
       ``(1) In general.--There is a Native American new markets 
     tax credit limitation of $50,000,000 for each of calendar 
     years 2004 through 2007.
       ``(2) Allocation of limitation.--The limitation under 
     paragraph (1) shall be allocated by the Secretary among 
     reservation development entities selected by the Secretary. 
     In making allocations under the preceding sentence, the 
     Secretary shall give priority to any entity--
       ``(A) with a record of having successfully provided capital 
     or technical assistance to disadvantaged businesses or 
     communities, or
       ``(B) which intends to satisfy the requirement under 
     subsection (b)(1)(B) by making qualified low-income 
     reservation investments in 1 or more businesses in which 
     persons unrelated to such entity (within the meaning of 
     section 267(b) or 707(b)(1)) hold the majority equity 
     interest.
       ``(3) Carryover of unused limitation.--If the Native 
     American new markets tax credit limitation for any calendar 
     year exceeds the aggregate amount allocated under paragraph 
     (2) for such year, such limitation for the succeeding 
     calendar year shall be increased by the amount of such 
     excess. No amount may be carried under the preceding sentence 
     to any calendar year after 2014.
       ``(g) Recapture of Credit in Certain Cases.--
       ``(1) In general.--If, at any time during the 7-year period 
     beginning on the date of the original issue of a qualified 
     equity investment in a reservation development entity, there 
     is a recapture event with respect to such investment, then 
     the tax imposed by this chapter for the taxable year in which 
     such event occurs shall be increased by the credit recapture 
     amount.
       ``(2) Credit recapture amount.--For purposes of paragraph 
     (1), the credit recapture amount is an amount equal to the 
     sum of--
       ``(A) the aggregate decrease in the credits allowed to the 
     taxpayer under section 38 for all prior taxable years which 
     would have resulted if no credit had been determined under 
     this section with respect to such investment, plus
       ``(B) interest at the underpayment rate established under 
     section 6621 on the amount determined under subparagraph (A) 
     for each prior taxable year for the period beginning on the 
     due date for filing the return for the prior taxable year 
     involved.
     No deduction shall be allowed under this chapter for interest 
     described in subparagraph (B).
       ``(3) Recapture event.--For purposes of paragraph (1), 
     there is a recapture event with respect to an equity 
     investment in a reservation development entity if--
       ``(A) such entity ceases to be a reservation development 
     entity,
       ``(B) the proceeds of the investment cease to be used as 
     required of subsection (b)(1)(B), or
       ``(C) such investment is redeemed by such entity.
       ``(4) Special rules.--
       ``(A) Tax benefit rule.--The tax for the taxable year shall 
     be increased under paragraph (1) only with respect to credits 
     allowed by reason of this section which were used to reduce 
     tax liability. In the case of credits not so used to reduce 
     tax liability, the carryforwards and carrybacks under section 
     39 shall be appropriately adjusted.
       ``(B) No credits against tax.--Any increase in tax under 
     this subsection shall not be treated as a tax imposed by this 
     chapter for purposes of determining the amount of any credit 
     under this chapter or for purposes of section 55.
       ``(h) Basis Reduction.--The basis of any qualified equity 
     investment shall be reduced by the amount of any credit 
     determined under this section with respect to such 
     investment. This subsection shall not apply for purposes of 
     sections 1202, 1400B, and 1400F.
       ``(i) Regulations.--The Secretary shall prescribe such 
     regulations as may be appropriate to carry out this section, 
     including regulations--
       ``(1) which limit the credit for investments which are 
     directly or indirectly subsidized by other Federal tax 
     benefits (including the credit under section 42 and the 
     exclusion from gross income under section 103),
       ``(2) which prevent the abuse of the purposes of this 
     section,
       ``(3) which provide rules for determining whether the 
     requirement of subsection (b)(1)(B) is treated as met,
       ``(4) which impose appropriate reporting requirements, and
       ``(5) which apply the provisions of this section to newly 
     formed entities.''.
       (b) Credit Made Part of General Business Credit.--
       (1) In general.--Subsection (b) of section 38 is amended by 
     redesignating paragraphs (14) and (15) as paragraphs (15) and 
     (16), respectively, and by inserting after paragraph (13) the 
     following new paragraph:
       ``(14) the Native American new markets tax credit 
     determined under section 45E(a),''.
       (2) Limitation on carryback.--Subsection (d) of section 39 
     is amended by redesignating paragraph (10) as paragraph (11) 
     and by inserting after paragraph (9) the following new 
     paragraph:
       ``(10) No carryback of native american new markets tax 
     credit before january 1, 2004.--No portion of the unused 
     business credit for any taxable year which is attributable to 
     the credit under section 45E may be carried back to a taxable 
     year ending before January 1, 2004.''.
       (c) Deduction for Unused Credit.--Subsection (c) of section 
     196 is amended by redesignating paragraph (10) as paragraph 
     (11), by striking ``and'' at the end of paragraph (9), and by 
     inserting after paragraph (9) the following new paragraph:
       ``(10) the Native American new markets tax credit 
     determined under section 45E(a), and''.
       (d) Conforming Amendments.--
       (1) Section 38(b)(15), as redesignated by subsection 
     (b)(1), is amended--
       (A) by striking ``45E(c)'' and inserting ``45F(c)'', and
       (B) by striking ``45E(a)'' and inserting ``45F(a)''.
       (2) Section 38(b)(16), as redesignated by subsection 
     (b)(1), is amended by striking ``45F(a)'' and inserting 
     ``45G(a)''.
       (3) Section 39(d)(11), as redesignated by subsection 
     (b)(2), is amended by striking ``section 45E'' and inserting 
     ``section 45F''.
       (4) Section 196(c)(11), as redesignated by subsection (c), 
     is amended by striking ``45E(a)'' and inserting ``45F(a)''.
       (5) Section 1016(a)(28) is amended--
       (A) by striking ``under section 45F'' and inserting ``under 
     section 45G'', and
       (B) by striking ``section 45F(f)(1)'' and inserting 
     ``section 45G(f)(1)''.
       (e) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1 is amended by 
     striking the items relating to sections 45E and 45F and 
     inserting the following:

``Sec. 45E. Native American new markets tax credit.
``Sec. 45F. Small employer pension plan startup costs.
``Sec. 45G. Employer-provided child care credit.''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to investments made after December 31, 2003.
       (f ) Guidance on Allocation of National Limitation.--Not 
     later than 120 days after the date of the enactment of this 
     Act, the Secretary of the Treasury or the Secretary's 
     delegate shall issue guidance which specifies--
       (1) how entities shall apply for an allocation under 
     section 45E(f )(2) of the Internal Revenue Code of 1986, as 
     added by this section;
       (2) the competitive procedure through which such 
     allocations are made; and
       (3) the actions that such Secretary or delegate shall take 
     to ensure that such allocations are properly made to 
     appropriate entities.

[[Page S3030]]

       (g) Audit and Report.--Not later than January 31 of 2007 
     and 2010, the Comptroller General of the United States shall, 
     pursuant to an audit of the Native American new markets tax 
     credit program established under section 45E of the Internal 
     Revenue Code of 1986 (as added by subsection (a)), report to 
     Congress on such program, including all reservation 
     development entities that receive an allocation under the 
     Native American new markets credit under such section.
       (f) Grants in Coordination With Credit.--
       (1) In general.--The Secretary of the Treasury is 
     authorized to award a grant of not more than $1,000,000 to 
     the First Nations Oweesta Corporation.
       (2) Use of funds.--The grant awarded under paragraph (1) 
     may be used--
       (A) to enhance the capacity of people living on low-income 
     reservations (within the meaning of section 45E(e) of the 
     Internal Revenue Code of 1986, as added by this section) to 
     access, apply, control, create, leverage, utilize, and retain 
     the financial benefits to such low-income reservations which 
     are attributable to qualified low-income reservation 
     investments (within the meaning of section 45E(d) of such 
     Code), and
       (B) to provide access to appropriate financial capital for 
     the development of such low-income reservations.
       (3) Authorization of appropriations.--There are authorized 
     to be appropriated $1,000,000 for fiscal years 2004 through 
     2014 to carry out the provisions of this subsection.
                                 ______
                                 
  SA 2897. Mrs. CLINTON submitted an amendment intended to be proposed 
by her to the bill S. 1637, to amend the Internal Revenue Code of 1986 
to comply with the World Trade Organization rulings on the FSC/ETI 
benefit in a manner that preserves jobs and production activities in 
the United States, to reform and simplify the international taxation 
rules of the United States, and for other purposes; which was ordered 
to lie on the table; as follows:

       At the appropriate place, insert the following:

     SEC. __. TRANSMISSION OF PERSONALLY IDENTIFIABLE INFORMATION 
                   TO FOREIGN AFFILIATES OR SUBCONTRACTORS.

       (a) Definitions.--As used in this section, the following 
     definitions shall apply:
       (1) Business enterprise.--The term ``business enterprise'' 
     means any organization, association, or venture established 
     to make a profit.
       (2) Country with adequate privacy protection.--The term 
     ``country with adequate privacy protection'' means a country 
     that has been certified by the Federal Trade Commission as 
     having a legal system that provides adequate privacy 
     protection for such information.
       (3) Health care business.--The term ``health care 
     business'' means any business enterprise that collects or 
     retains personally identifiable information about consumers 
     in relation to medical care, including--
       (A) hospitals;
       (B) health maintenance organizations;
       (C) medical partnerships;
       (D) emergency medical transportation companies;
       (E) medical transcription companies; and
       (F) subcontractors, or potential subcontractors, of the 
     entities described in subparagraphs (A) through (E).
       (4) Personally identifiable information.--The term 
     ``personally identifiable information'' includes--
       (A) name;
       (B) bank account information;
       (C) social security number;
       (D) address;
       (E) telephone number;
       (F) passwords;
       (G) mother's maiden name; and
       (H) age.
       (b) Transmission of Information.--
       (1) In general.--A business enterprise may transmit 
     personally identifiable information regarding a citizen of 
     the United States to any foreign affiliate or subcontractor 
     located in a country that is a country with adequate privacy 
     protection.
       (2) Consent required.--A business enterprise may not 
     transmit personally identifiable information regarding a 
     citizen of the United States to any foreign affiliate or 
     subcontractor located in a country that is not a country with 
     adequate privacy protection, unless--
       (A) the business enterprise obtains consent from the 
     citizen, before a consumer relationship is established or 
     before the effective date of this section, to transmit such 
     information to such foreign affiliate or subcontractor; and
       (B) the consent referred to in subparagraph (A) is renewed 
     by the citizen within 1 year before such information is 
     transmitted.
       (3) Liability.--A business enterprise shall be liable for 
     any damages arising from the improper storage, duplication, 
     sharing, or other misuse of personally identifiable 
     information by the business enterprise or by any of its 
     foreign affiliates or subcontractors that received such 
     information from the business enterprise.
       (4) Rulemaking.--The Chairman of the Federal Trade 
     Commission shall promulgate regulations through which the 
     Chairman may enforce the provisions of this subsection and 
     impose a fine for a violation of this subsection.
       (c) Health Care Information.--
       (1) In general.--A health care business shall be liable for 
     any damages arising from the improper storage, duplication, 
     sharing, or other misuse of personally identifiable 
     information by the business enterprise or by any of its 
     foreign affiliates or subcontractors that received such 
     information from the business enterprise.
       (2) No opt out provision.--A health care business may not 
     terminate an existing relationship with a consumer of health 
     care services to avoid the consent requirement under 
     subsection (b)(2).
       (3) Rulemaking.--The Secretary of Health and Human Services 
     shall promulgate regulations through which the Secretary may 
     enforce the provisions of this subsection and impose a fine 
     for the violation of this subsection.
       (d) Effective Date.--This section shall take effect on the 
     date which is 90 days after the date of enactment of this 
     Act.
                                 ______
                                 
  SA 2898. Mr. GRASSLEY proposed an amendment to amendment SA 2886 
submitted by Mr. McConnell (for Mr. Frist) to the bill S. 1637, to 
amend the Internal Revenue Code of 1986 to comply with the World Trade 
Organization rulings on the FSC/ETI benefit in a manner that preserves 
jobs and production activities in the United States, to reform and 
simplify the international taxation rules of the United States, and for 
other purposes; as follows:

       At the end of the instructions (Amdt. No. 2886) insert the 
     following:
       Sec.   . This act shall become effective one day following 
     enactment of the legislation.
                                 ______
                                 
  SA 2899. Mr. GRASSLEY proposed an amendment to amendment SA 2898 
proposed by Mr. Grassley to the amendment SA 2886 submitted by Mr. 
McConnell (for Mr. Frist) to the bill S. 1637, to amend the Internal 
Revenue Code of 1986 to comply with the World Trade Organization 
rulings on the FSC/ETI benefit in a manner that preserves jobs and 
production activities in the United States, to reform and simplify the 
international taxation rules of the United States, and for other 
purposes; as follows:

       in the pending amendment strike ``one'' and insert ``two''.
                                 ______
                                 
  SA 2900. Mr. THOMAS (for himself and Mr. Daschle) submitted an 
amendment intended to be proposed by him to the bill S. 1637, to amend 
the Internal Revenue Code of 1986 to comply with the World Trade 
Organization rulings on the FSC/ETI benefit in a manner that preserves 
jobs and production activities in the United States, to reform and 
simplify the international taxation rules of the United States, and for 
other purposes; which was ordered to lie on the table; as follows:

       On page 179, after line 25, add the following:

     SEC. __. SPECIAL RULES FOR LIVESTOCK SOLD ON ACCOUNT OF 
                   WEATHER-RELATED CONDITIONS.

       (a) Replacement of Livestock With Other Farm Property.--
     Subsection (f) of section 1033 (relating to involuntary 
     conversions) is amended--
       (1) by inserting ``drought, flood, or other weather-related 
     conditions, or'' after ``because of'',
       (2) by inserting ``in the case of soil contamination or 
     other environmental contamination'' after ``including real 
     property'', and
       (3) by striking ``Where There Has Been Environmental 
     Contamination'' in the heading and inserting ``in Certain 
     Cases''.
       (b) Extension of Replacement Period of Involuntarily 
     Converted Livestock.--Subsection (e) of section 1033 
     (relating to involuntary conversions) is amended--
       (1) by striking ``Conditions.--For purposes'' and inserting 
     ``Conditions.--
       ``(1) In general.--For purposes'', and
       (2) by adding at the end the following new paragraph:
       ``(2) Extension of replacement period.--
       ``(A) In general.--In the case of drought, flood, or other 
     weather-related conditions described in paragraph (1) which 
     result in the area being designated as eligible for 
     assistance by the Federal Government, subsection (a)(2)(B) 
     shall be applied with respect to any converted property by 
     substituting `4 years' for `2 years'.
       ``(B) Further extension by secretary.--The Secretary may 
     extend on a regional basis the period for replacement under 
     this section (after the application of subparagraph (A)) for 
     such additional time as the Secretary determines appropriate 
     if the weather-related conditions which resulted in such 
     application continue for more than 3 years.''.
       (c) Income Inclusion Rules.--Section 451(e) (relating to 
     special rule for proceeds from livestock sold on account of 
     drought, flood, or other weather-related conditions) is 
     amended by adding at the end the following new paragraph:
       ``(3) Special election rules.--If section 1033(e)(2) 
     applies to a sale or exchange of livestock described in 
     paragraph (1), the election under paragraph (1) shall be 
     deemed valid if made during the replacement period described 
     in such section.''.

[[Page S3031]]

       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.
                                 ______
                                 
  SA 2901. Mr. MILLER (for himself, Mr. Allard, Mrs. Clinton, Mr. 
Schumer, and Mr. Chambliss) submitted an amendment intended to be 
proposed by him to the bill S. 1637, to amend the Internal Revenue Code 
of 1986 to comply with the World Trade Organization rulings on the FSC/
ETI benefit in a manner that preserves jobs and production activities 
in the United States, to reform and simplify the international taxation 
rules of the United States, and for other purposes; which was ordered 
to lie on the table; as follows:

       Beginning on page 179, after line 25, add the following:

     SEC. __. BROWNFIELDS DEMONSTRATION PROGRAM FOR QUALIFIED 
                   GREEN BUILDING AND SUSTAINABLE DESIGN PROJECTS.

       (a) Treatment as Exempt Facility Bond.--Subsection (a) of 
     section 142 (relating to the definition of exempt facility 
     bond) is amended by striking ``or'' at the end of paragraph 
     (12), by striking the period at the end of paragraph (13) and 
     inserting ``, or'', and by inserting at the end the following 
     new paragraph:
       ``(14) qualified green building and sustainable design 
     projects.''.
       (b) Qualified Green Building and Sustainable Design 
     Projects.--Section 142 (relating to exempt facility bonds) is 
     amended by adding at the end thereof the following new 
     subsection:
       ``(l) Qualified Green Building and Sustainable Design 
     Projects.--
       ``(1) In general.--For purposes of subsection (a)(14), the 
     term `qualified green building and sustainable design 
     project' means any project which is designated by the 
     Secretary, after consultation with the Administrator of the 
     Environmental Protection Agency, as a qualified green 
     building and sustainable design project and which meets the 
     requirements of clauses (i), (ii), (iii), and (iv) of 
     paragraph (4)(A).
       ``(2) Designations.--
       ``(A) In general.--Within 60 days after the end of the 
     application period described in paragraph (3)(A), the 
     Secretary, after consultation with the Administrator of the 
     Environmental Protection Agency, shall designate qualified 
     green building and sustainable design projects. At least one 
     of the projects designated shall be located in, or within a 
     10-mile radius of, an empowerment zone as designated pursuant 
     to section 1391, and at least one of the projects designated 
     shall be located in a rural State. No more than one project 
     shall be designated in a State. A project shall not be 
     designated if such project includes a stadium or arena for 
     professional sports exhibitions or games.
       ``(B) Minimum conservation and technology innovation 
     objectives.--The Secretary, after consultation with the 
     Administrator of the Environmental Protection Agency, shall 
     ensure that, in the aggregate, the projects designated 
     shall--
       ``(i) reduce electric consumption by more than 150 
     megawatts annually as compared to conventional generation,
       ``(ii) reduce daily sulfur dioxide emissions by at least 10 
     tons compared to coal generation power,
       ``(iii) expand by 75 percent the domestic solar 
     photovoltaic market in the United States (measured in 
     megawatts) as compared to the expansion of that market from 
     2001 to 2002, and
       ``(iv) use at least 25 megawatts of fuel cell energy 
     generation.
       ``(3) Limited designations.--A project may not be 
     designated under this subsection unless--
       ``(A) the project is nominated by a State or local 
     government within 180 days of the enactment of this 
     subsection, and
       ``(B) such State or local government provides written 
     assurances that the project will satisfy the eligibility 
     criteria described in paragraph (4).
       ``(4) Application.--
       ``(A) In general.--A project may not be designated under 
     this subsection unless the application for such designation 
     includes a project proposal which describes the energy 
     efficiency, renewable energy, and sustainable design features 
     of the project and demonstrates that the project satisfies 
     the following eligibility criteria:
       ``(i) Green building and sustainable design.--At least 75 
     percent of the square footage of commercial buildings which 
     are part of the project is registered for United States Green 
     Building Council's LEED certification and is reasonably 
     expected (at the time of the designation) to receive such 
     certification.
       ``(ii) Brownfield redevelopment.--The project includes a 
     brownfield site as defined by section 101(39) of the 
     Comprehensive Environmental Response, Compensation, and 
     Liability Act of 1980 (42 U.S.C. 9601), including a site 
     described in subparagraph (D)(ii)(II)(aa) thereof.
       ``(iii) State and local support.--The project receives 
     specific State or local government resources which will 
     support the project in an amount equal to at least 
     $5,000,000. For purposes of the preceding sentence, the term 
     `resources' includes tax abatement benefits and contributions 
     in kind.
       ``(iv) Size.--The project includes at least one of the 
     following:

       ``(I) At least 1,000,000 square feet of building.
       ``(II) At least 20 acres.

       ``(v) Use of tax benefit.--The project proposal includes a 
     description of the net benefit of the tax-exempt financing 
     provided under this subsection which will be allocated for 
     financing of one or more of the following:

       ``(I) The purchase, construction, integration, or other use 
     of energy efficiency, renewable energy, and sustainable 
     design features of the project.
       ``(II) Compliance with LEED certification standards.
       ``(III) The purchase, remediation, and foundation 
     construction and preparation of the brownfields site.

       ``(vi) Prohibited facilities.--An issue shall not be 
     treated as an issue described in subsection (a)(14) if any 
     proceeds of such issue are used to provide any facility the 
     principal business of which is the sale of food or alcoholic 
     beverages for consumption on the premises.
       ``(vii) Employment.--The project is projected to provide 
     permanent employment of at least 1,500 full time equivalents 
     (150 full time equivalents in rural States) when completed 
     and construction employment of at least 1,000 full time 
     equivalents (100 full time equivalents in rural States).

     The application shall include an independent analysis which 
     describes the project's economic impact, including the amount 
     of projected employment.
       ``(B) Project description.--Each application described in 
     subparagraph (A) shall contain for each project a description 
     of--
       ``(i) the amount of electric consumption reduced as 
     compared to conventional construction,
       ``(ii) the amount of sulfur dioxide daily emissions reduced 
     compared to coal generation,
       ``(iii) the amount of the gross installed capacity of the 
     project's solar photovoltaic capacity measured in megawatts, 
     and
       ``(iv) the amount, in megawatts, of the project's fuel cell 
     energy generation.
       ``(5) Certification of use of tax benefit.--No later than 
     30 days after the completion of the project, each project 
     must certify to the Secretary that the net benefit of the 
     tax-exempt financing was used for the purposes described in 
     paragraph (4).
       ``(6) Definitions.--For purposes of this subsection--
       ``(A) Rural state.--The term `rural State' means any State 
     which has--
       ``(i) a population of less than 4,500,000 according to the 
     2000 census,
       ``(ii) a population density of less than 150 people per 
     square mile according to the 2000 census, and
       ``(iii) increased in population by less than half the rate 
     of the national increase between the 1990 and 2000 censuses.
       ``(B) Local government.--The term `local government' has 
     the meaning given such term by section 1393(a)(5).
       ``(C) Net benefit of tax-exempt financing.--The term `net 
     benefit of tax-exempt financing' means the present value of 
     the interest savings (determined by a calculation established 
     by the Secretary) which result from the tax-exempt status of 
     the bonds.
       ``(7) Aggregate face amount of tax-exempt financing.--
       ``(A) In general.--An issue shall not be treated as an 
     issue described in subsection (a)(14) if the aggregate face 
     amount of bonds issued by the State or local government 
     pursuant thereto for a project (when added to the aggregate 
     face amount of bonds previously so issued for such project) 
     exceeds an amount designated by the Secretary as part of the 
     designation.
       ``(B) Limitation on amount of bonds.--The Secretary may not 
     allocate authority to issue qualified green building and 
     sustainable design project bonds in an aggregate face amount 
     exceeding $2,000,000,000.
       ``(8) Termination.--Subsection (a)(14) shall not apply with 
     respect to any bond issued after September 30, 2009.
       ``(9) Treatment of current refunding bonds.--Paragraphs 
     (7)(B) and (8) shall not apply to any bond (or series of 
     bonds) issued to refund a bond issued under subsection 
     (a)(14) before October 1, 2009, if--
       ``(A) the average maturity date of the issue of which the 
     refunding bond is a part is not later than the average 
     maturity date of the bonds to be refunded by such issue,
       ``(B) the amount of the refunding bond does not exceed the 
     outstanding amount of the refunded bond, and
       ``(C) the net proceeds of the refunding bond are used to 
     redeem the refunded bond not later than 90 days after the 
     date of the issuance of the refunding bond.

     For purposes of subparagraph (A), average maturity shall be 
     determined in accordance with section 147(b)(2)(A).''.
       (c) Exemption From General State Volume Caps.--Paragraph 
     (3) of section 146(g) (relating to exception for certain 
     bonds) is amended--
       (1) by striking ``or (13)'' and inserting ``(13), or 
     (14)'', and
       (2) by striking ``and qualified public educational 
     facilities'' and inserting ``qualified public educational 
     facilities, and qualified green building and sustainable 
     design projects''.
       (d) Accountability.--Each issuer shall maintain, on behalf 
     of each project, an interest bearing reserve account equal to 
     1 percent of the net proceeds of any bond issued

[[Page S3032]]

     under this section for such project. Not later than 5 years 
     after the date of issuance, the Secretary of the Treasury, 
     after consultation with the Administrator of the 
     Environmental Protection Agency, shall determine whether the 
     project financed with such bonds has substantially complied 
     with the terms and conditions described in section 142(l)(4) 
     of the Internal Revenue Code of 1986 (as added by this 
     section). If the Secretary, after such consultation, 
     certifies that the project has substantially complied with 
     such terms and conditions and meets the commitments set forth 
     in the application for such project described in section 
     142(l)(4) of such Code, amounts in the reserve account, 
     including all interest, shall be released to the project. If 
     the Secretary determines that the project has not 
     substantially complied with such terms and conditions, 
     amounts in the reserve account, including all interest, shall 
     be paid to the United States Treasury.
       (e) Effective Date.--The amendments made by this section 
     shall apply to bonds issued after the date of the enactment 
     of this Act.
                                 ______
                                 
  SA 2902. Mr. BOND submitted an amendment intended to be proposed to 
amendment SA 2886 submitted by Mr. McConnell (for Mr. Frist) to the 
bill S. 1637, to amend the Internal Revenue Code 1986 to comply with 
the World Trade Organization rulings on the FSC/ETI benefit in a manner 
that preserves jobs and production activities in the United States, to 
reform and simplify the international taxation rules of the United 
States, and for other purposes; which was ordered to lie on the table; 
as follows:

       On page 218, of Senate amendment no. 2886, strike lines 13 
     through 19, and insert the following:
       (c) Effective Dates.--
       (1) In general.--The amendment made by subsection (a) shall 
     apply to transactions after December 31, 2003.
       (2) Liquidations.--The amendment made by subsection 
     (b)(1)(B) shall apply to liquidations after December 31, 
     2003.
                                 ______
                                 
  SA 2903. Mr. BOND (for himself and Mr. Talent) submitted an amendment 
intended to be proposed to amendment SA 2886 submitted by Mr. McConnell 
(for Mr. Frist) to the bill S. 1637, to amend the Internal Revenue Code 
of 1986 to comply with the World Trade Organization rulings on the FSC/
ETI benefit in a manner that preserves jobs and production activities 
in the United States, to reform and simplify the international taxation 
rules of the United States, and for other purposes; which was ordered 
to lie on the table; as follows:

       At the end of the instructions, add the following:

     SEC. __. EXTENSION OF THE ADDITIONAL TEMPORARY EXTENDED 
                   UNEMPLOYMENT COMPENSATION FOR DISPLACED AIRLINE 
                   RELATED WORKERS.

       (a) In General.--Section 4002(c)(2) of the Emergency 
     Wartime Supplemental Appropriations Act, 2003 (Public Law 
     108-11; 26 U.S.C. 3304 note), in the deemed matter, is 
     amended--
       (1) by striking ``December 29, 2003'' and inserting ``May 
     17, 2004''; and
       (2) by striking ``December 28, 2003'' and inserting ``May 
     16, 2004''.
       Effective Date.--The amendments made by this section shall 
     take effect as if included in the enactment of the Emergency 
     Wartime Supplemental Appropriations Act, 2003 (Public Law 
     108-11; 26 U.S.C. 3304 note).
                                 ______
                                 
  SA 2904. Mr. BOND submitted an amendment intended to be proposed by 
him to the bill S. 1637, to amend the Internal Revenue Code of 1986 to 
comply with the World Trade Organization rulings on the FSC/ETI benefit 
in a manner that preserves jobs and production activities in the United 
States, to reform and simplify the international taxation rules of the 
United States, and for other purposes; which was ordered to lie on the 
table; as follows:

       On page 64, of Senate amendment no. 2645, as agreed to, 
     strike lines 23 through 25, and insert the following:
       (c) Effective Dates.--
       (1) In general.--The amendment made by subsection (a) shall 
     apply to transactions after December 31, 2003.
       (2) Liquidations.--The amendment made by subsection 
     (b)(1)(B) shall apply to liquidations after December 31, 
     2003.
                                 ______
                                 
  SA 2905. Mr. NICKLES (for himself and Mrs. Lincoln) submitted an 
amendment intended to be proposed by him to the bill S. 1637, to amend 
the Internal Revenue Code of 1986 to comply with the World Trade 
Organization rulings on the FSC/ETI benefit in a manner that preserves 
jobs and production activities in the United States, to reform and 
simplify the international taxation rules of the United States, and for 
other purposes; which was ordered to lie on the table; as follows:

       On page 179, after line 25, add the following:

     SEC. __. RECOVERY PERIOD FOR CERTAIN WIRELESS 
                   TELECOMMUNICATIONS EQUIPMENT.

       (a) In General.--Subparagraph (A) of section 168(i)(2) 
     (defining qualified technological equipment) is amended by 
     striking ``and'' at the end of clause (ii), by striking the 
     period at the end of clause (iii) and inserting ``, and'', 
     and by inserting after clause (iii) the following new clause:
       ``(iv) any wireless telecommunications equipment.''.
       (b) Wireless Telecommunications Equipment.--Section 
     168(i)(2) is amended by inserting after subparagraph (C) the 
     following new subparagraph:
       ``(D) Wireless telecommunications equipment.--For purposes 
     of this paragraph--
       ``(i) In general.--The term `wireless telecommunications 
     equipment' means equipment which is used in the transmission, 
     reception, coordination, or switching of wireless 
     telecommunications service.
       ``(ii) Exception.--Such term does not include towers, 
     buildings, T-1 lines, or other cabling which connects cell 
     sites to mobile switching centers.
       ``(iii) Wireless telecommunications service.--For purposes 
     of clause (i), the term `wireless telecommunications service' 
     includes any commercial mobile radio service as defined in 
     title 47 of the Code of Federal Regulations.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after December 31, 
     2004, and before January 1, 2008.
                                 ______
                                 
  SA 2906. Mr. CORNYN submitted an amendment intended to be proposed by 
him to the bill S. 1637, to amend the Internal Revenue Code of 1986 to 
comply with the World Trade Organization rulings on the FSC/ETI benefit 
in a manner that preserves jobs and production activities in the United 
States, to reform and simplify the international taxation rules of the 
United States, and for other purposes; which was ordered to lie on the 
table; as follows:

       At the appropriate place, insert the following:

     SEC.  

       (a) In General.--Paragraph (1) of section 648 Public Law 
     98-369 (the Deficit Reduction Act of 1984) is amended to read 
     as follows:
       ``(1) such securities obligations are held in a fund--
       ``(A) which, except to the extent of the investment 
     earnings on such securities or obligations, cannot be used, 
     under State constitutional or statutory restrictions 
     continuously in effect since October 9, 1969, through the 
     date of issue of the bond issue, to pay debt service on the 
     bond issue or to finance the facilities that are to be 
     financed with the proceeds of the bonds, or
       ``(B) the annual distributions from which cannot exceed 7 
     percent of the average fair market value of the assets held 
     in such fund except to the extent distributions are necessary 
     to pay debt service on the bond issue,''.
       (b) Conforming Amendment.--Paragraph (3) of such section is 
     amended by striking ``the investment earnings of'' and 
     inserting ``distributions from.''
       (c) Effective Date.--The amendments made by this section 
     shall take effect on January 1, 2000.
                                 ______
                                 
  SA 2907. Mr. McCONNELL submitted an amendment intended to be proposed 
by him to the bill S. 1637, to amend the Internal Revenue Code of 1986 
to comply with the World Trade Organization rulings on the FSC/ETI 
benefit in a manner that preserves jobs and production activities in 
the United States, to reform and simplify the international taxation 
rules of the United States, and for other purposes; which was ordered 
to lie on the table; as follows:

       At the end of the amendment, add the following:

        TITLE V--EXTENSION OF NORMAL TRADE RELATIONS TO ARMENIA

     SEC. 501. FINDINGS.

       Congress makes the following findings:
       (1) Armenia has been found to be in full compliance with 
     the freedom of emigration requirements under title IV of the 
     Trade Act of 1974.
       (2) Armenia acceded to the World Trade Organization on 
     February 5, 2003.
       (3) Since declaring its independence from the Soviet Union 
     in 1991, Armenia has made considerable progress in enacting 
     free-market reforms within a stable democratic framework.
       (4) Armenia has demonstrated a strong desire to build a 
     friendly and cooperative relationship with the United States 
     and has concluded many bilateral treaties and agreements with 
     the United States.
       (5) United States-Armenia bilateral trade for 2002 totaled 
     more than $134,200,000.

     SEC. 502. TERMINATION OF APPLICATION OF TITLE IV OF THE TRADE 
                   ACT OF 1974 TO ARMENIA.

       (a) Presidential Determinations and Extensions of 
     Nondiscriminatory Treatment.--Notwithstanding any provision 
     of title IV of the Trade Act of 1974 (19 U.S.C. 2431 et 
     seq.), the President may--
       (1) determine that such title should no longer apply to 
     Armenia; and

[[Page S3033]]

       (2) after making a determination under paragraph (1) with 
     respect to Armenia, proclaim the extension of 
     nondiscriminatory treatment (normal trade relations 
     treatment) to the products of that country.
       (b) Termination of Application of Title IV.--On and after 
     the effective date of the extension under subsection (a)(2) 
     of nondiscriminatory treatment to the products of Armenia, 
     title IV of the Trade Act of 1974 shall cease to apply to 
     that country.
                                 ______
                                 
  SA 2908. Mr. SMITH submitted an amendment intended to be proposed by 
him to the bill S. 1637, to amend the Internal Revenue Code of 1986 to 
comply with the World Trade Organization rulings on the FSC/ETI benefit 
in a manner that preserves jobs and production activities in the United 
States, to reform and simplify the international taxation rules of the 
United States, and for other purposes; which was ordered to lie on the 
table; as follows:

       On page 68, strike lines 17 through 20, and insert:
       (4) Base period amount.--For purposes of this subsection, 
     the base period amount is the average FSC/ETI benefit for the 
     taxpayer's taxable years beginning in calendar years 2000, 
     2001, and 2002.
                                 ______
                                 
  SA 2909. Mr. GRASSLEY submitted an amendment intended to be proposed 
by him to the bill S. 1637, to amend the Internal Revenue Code of 1986 
to comply with the World Trade Organization rulings on the FSC/ETI 
benefit in a manner that preserves jobs and production activities in 
the United States, to reform and simplify the international taxation 
rules of the United States, and for other purposes; which was ordered 
to lie on the table; as follows:

       At the end of the bill, add the following:

                   TITLE V--MISCELLANEOUS PROVISIONS.

     SEC. 501. TEMPORARY WORKER PROVISIONS.

       (a) Attestation Requirements for H-1B Workers.--Section 
     212(n)(1)(E)(ii) of the Immigration and Nationality Act (8 
     U.S.C. 1182(n)(1)(E)(ii)) is amended by striking ``October 1, 
     2003,'' and inserting ``October 1, 2005,''.
       (b) H-1B Employer Petitions.--Section 214(c)(9) of the 
     Immigration and Nationality Act (8 U.S.C. 1184(c)(9)) is 
     amended--
       (1) in subparagraph (A), by striking ``October 1, 2003'' 
     and inserting ``October 1, 2005,''; and
       (2) by striking subparagraphs (B) and (C) and inserting the 
     following:
       ``(B) The amount of the fee shall be $2,000 for each such 
     petition, of which--
       ``(i) $1,000 shall be deposited in the H-1B Nonimmigrant 
     Petitioner Account in accordance with paragraphs (1) through 
     (5) of section 286(s); and
       ``(ii) $1,000 shall be deposited in the H-1B Nonimmigrant 
     Petitioner Account in accordance with paragraph (6) of 
     section 286(s).''.
       (c) H-1B Nonimmigrant Petitioner Account.--Section 286(s) 
     of the Immigration and Nationality Act (8 U.S.C. 1356(s)) is 
     amended by adding at the end the following:
       ``(6) Trade adjustment assistance.--One hundred percent of 
     amounts deposited into the H-1B Nonimmigrant Petitioner 
     Account in accordance with sections 214(c)(9)(B)(ii) and 
     214(c)(2)(F) shall remain available to the Secretary of Labor 
     until expended for trade adjustment assistance programs under 
     chapter 2 of title II of the Trade Act of 1974 (19 U.S.C. 
     2271 et seq.). Such amounts shall be used to supplement and 
     not supplant other Federal, State, and local public funds 
     expended to provide trade adjustment assistance for 
     workers.''.
       (d) L Visa Blanket Petitions.--Section 214(c)(2) of the 
     Immigration and Nationality Act (8 U.S.C. 1184(c)(2)) is 
     amended by adding at the end the following:
       ``(F) The Secretary of Homeland Security shall impose a fee 
     on any employer that files a blanket petition to import 
     aliens as nonimmigrants described in section 101(a)(15)(L) in 
     an amount equal to $1,500 for each blanket petition filed by 
     such employer. The fee shall be deposited in the H-1B 
     Nonimmigrant Petitioner Account in accordance with paragraph 
     (6) of section 286(s).''.
       (e) Technical and Conforming Amendments.--Section 286(s) of 
     the Immigration and Nationality Act (8 U.S.C. 1356(s)) is 
     amended in paragraphs (2) through (5) by inserting ``in 
     accordance with section 214(c)(9)(B)(i)'' after ``H-1B 
     Nonimmigrant Petitioner Account'' each place that term 
     appears.
                                 ______
                                 
  SA 2910. Mr. SPECTER submitted an amendment intended to be proposed 
to amendment SA 2886 submitted by Mr. McConnell (for Mr. Frist) to the 
bill S. 1637, to amend the Internal Revenue Code of 1986 to comply with 
the World Trade Organization rulings on the FSC/ETI benefit in a manner 
that preserves jobs and production activities in the United States, to 
reform and simplify the international taxation rules of the United 
States, and for other purposes; which was ordered to lie on the table; 
as follows:

       At the end of the instructions, add the following:

                   TITLE V--MISCELLANEOUS PROVISIONS

     SEC. 501. TEMPORARY DUTY REDUCTIONS FOR CERTAIN COTTON 
                   SHIRTING FABRIC.

       (a) Certain Cotton Shirting Fabrics.--
       (1) In general.--Subchapter II of chapter 99 is amended by 
     inserting in numerical sequence the following new headings:

``      9902.52.08      Woven fabrics of    Free            No change       No change       On or before 12/
                         cotton, all the                                                     31/2005
                         foregoing
                         certified by the
                         importer as
                         suitable for use
                         in making men's
                         and boys' shirts
                         and as imported
                         by or for the
                         benefit of a
                         manufacturer of
                         men's and boys'
                         shirts, subject
                         to the quantity
                         limitations
                         contained in
                         general note 18
                         of this
                         subchapter
                         (provided for in
                         section
                         204(b)(3)(B)(i)(I
                         II) of the Andean
                         Trade Preference
                         Act (19 U.S.C.
                         3203))...........
        9902.52.09      Woven fabrics of    Free            No change       No change       On or before 12/
                         cotton, all the                                                     31/2005          ''
                         foregoing                                                                             .
                         certified by the
                         importer as
                         containing 100
                         percent pima
                         cotton grown in
                         the United
                         States, as
                         suitable for use
                         in making men's
                         and boys' shirts,
                         and as imported
                         by or for the
                         benefit of a
                         manufacturer of
                         men's and boys'
                         shirts (provided
                         for in section
                         204(b)(3)(B)(i)(I
                         II) of the Andean
                         Trade Preference
                         Act (19 U.S.C.
                         3203))...........
----------------------------------------------------------------------------------------------------------------

       (2) Definitions and limitation on quantity of imports.--The 
     U.S. Notes to chapter 99 are amended by adding at the end the 
     following:
       ``17. For purposes of subheadings 9902.52.08 and 
     9902.52.09, the term `making' means cutting and sewing in the 
     United States, and the term `manufacturer' means a person or 
     entity that cuts and sews in the United States.
       ``18. The aggregate quantity of cotton fabrics entered 
     under subheading 9902.52.08 from January 1 to December 31 of 
     each year, inclusive, by or on behalf of each manufacturer of 
     men's and boys' shirts shall be limited to 85 percent of the 
     total square meter equivalents of all imported cotton woven 
     fabric used by such manufacturer in cutting and sewing men's 
     and boys' cotton shirts in the United States and purchased by 
     such manufacturer during calendar year 2000.''.
       (b) Determination of Tariff-Rate Quotas.--
       (1) Authority to issue licenses and license use.--To 
     implement the limitation on the quantity of imports of cotton 
     woven fabrics under subheading 9902.52.08 of the Harmonized 
     Tariff Schedule of the United States, as required by U.S. 
     Note 18 to subchapter II of chapter 99 of such Schedule, for 
     the entry, or withdrawal from warehouse for consumption, the 
     Secretary of Commerce shall issue licenses designating 
     eligible manufacturers and the annual quantity restrictions 
     under each such license. A licensee may assign the authority 
     (in whole or in part) to import fabric under subheading 
     9902.52.08 of such Schedule.
       (2) Licenses under u.s. note 18.--For purposes of U.S. Note 
     18 to subchapter II of chapter 99 of the Harmonized Tariff 
     Schedule of the United States, as added by subsection (a)(2), 
     a license shall be issued within 60 days of an application 
     containing a notarized affidavit from an officer of the 
     manufacturer that the manufacturer is eligible to receive a 
     license and stating the quantity of imported cotton woven 
     fabric purchased during calendar year 2000 for use in the 
     cutting and sewing men's and boys' shirts in the United 
     States.
       (3) Affidavits.--For purposes of an affidavit described in 
     this subsection, the date of purchase shall be--
       (A) the invoice date if the manufacturer is not the 
     importer of record; and
       (B) the date of entry if the manufacturer is the importer 
     of record.

     SEC. 502. COTTON TRUST FUND.

       (a) In General.--There is established in the Treasury of 
     the United States a trust fund to be known as the ``Pima 
     Cotton Trust Fund'', consisting of $32,000,000 transferred to

[[Page S3034]]

     the Pima Cotton Trust Fund from funds in the general fund of 
     the Treasury.
       (b) Grants.--
       (1) General purpose.--From amounts in the Pima Cotton Trust 
     Fund, the Secretary of Commerce is authorized to provide 
     grants to spinners of United States grown pima cotton, 
     manufacturers of men's and boys' cotton shirting, and a 
     nationally recognized association that promotes the use of 
     pima cotton grown in the United States, to assist such 
     spinners and manufacturers in maximizing United States 
     employment in the production of textile or apparel products 
     and to increase the promotion of the use of United States 
     grown pima cotton respectively.
       (2) Timing for grant awards.--The Secretary of the Treasury 
     shall, not later than 90 days after the date of enactment of 
     this section, establish guidelines for the application and 
     awarding of the grants described in paragraph (1), and shall 
     award such grants to qualified applicants not later than 180 
     days after the date of enactment of this section. Each grant 
     awarded under this section shall be distributed to the 
     qualified applicant in 2 equal annual installments.
       (3) Distribution of funds.--Of the amounts in the Pima 
     Cotton Trust Fund--
       (A) $8,000,000 shall be made available to a nationally 
     recognized association established for the promotion of pima 
     cotton grown in the United States for the use in textile and 
     apparel goods;
       (B) $8,000,000 shall be made available to yarn spinners of 
     pima cotton grown in the United States, and shall be 
     allocated to each spinner based on the percentage of the 
     spinner's production of ring spun cotton yarns, measuring 
     less than 83.33 decitex (exceeding 120 metric number), from 
     pima cotton grown in the United States in single and plied 
     form during calendar year 2002 (as evidenced by an affidavit 
     provided by the spinner), compared to the production of such 
     yarns for all spinners who qualify under this subparagraph; 
     and
       (C) $16,000,000 shall be made available to manufacturers 
     who cut and sew cotton shirts in the United States and that 
     certify that they used imported cotton fabric during the 
     period January 1, 1998, through July 1, 2003, and shall be 
     allocated to each manufacturer on the bases of the dollar 
     value (excluding duty, shipping, and related costs) of 
     imported woven cotton shirting fabric of 80s or higher count 
     and 2-ply in warp purchased by the manufacturer during 
     calendar year 2002 (as evidenced by an affidavit from the 
     manufacturer) used in the manufacturing of men's and boys' 
     cotton shirts, compared to the dollar value (excluding duty, 
     shipping, and related costs) of such fabric for all 
     manufacturers who qualify under this subparagraph.
       (4) Affidavit of shirting manufacturers.--For purposes of 
     paragraph (3)(D), an officer of the manufacturer of men's and 
     boys' shirts shall provide a notarized affidavit affirming--
       (A) that the manufacturer used imported cotton fabric 
     during the period January 1, 1998, through July 1, 2003, to 
     cut and sew men's and boys' woven cotton shirts in the United 
     States;
       (B) the dollar value of imported woven cotton shirting 
     fabric of 80s or higher count and 2-ply in warp purchased 
     during calendar year 2002;
       (C) that the manufacturer maintains invoices along with 
     other supporting documentation (such as price lists and other 
     technical descriptions of the fabric qualities) showing the 
     dollar value of such fabric purchased, the date of purchase, 
     and evidencing the fabric as woven cotton fabric of 80s or 
     higher count and 2-ply in warp; and
       (D) that the fabric was suitable for use in the 
     manufacturing of men's and boys' cotton shirts.
       (5) Date of purchase.--For purposes of the affidavit 
     required by paragraph (4), the date of purchase shall be the 
     invoice date, and the dollar value shall be determined 
     excluding duty, shipping, and related costs.
       (6) Affidavit of yarn spinners.--For purposes of paragraph 
     (3)(B), an officer of a company that produces ringspun yarns 
     shall provide a notarized affidavit affirming--
       (A) that the manufacturer used pima cotton grown in the 
     United States during the period January 1, 2002, through 
     December 31, 2002, to produce ring spun cotton yarns, 
     measuring less than 83.33 decitex (exceeding 120 metric 
     number), in single and plied form during 2002;
       (B) the quantity, measured in pounds, of ring spun cotton 
     yarns, measuring less than 83.33 decitex (exceeding 120 
     metric number), in single and plied form during calendar year 
     2002; and
       (C) that the manufacturer maintains supporting 
     documentation showing the quantity of such yarns produced, 
     and evidencing the yarns as ring spun cotton yarns, measuring 
     less than 83.33 decitex (exceeding 120 metric number), in 
     single and plied form during calendar year 2002.
       (7) No appeal.--Any grant awarded by the Secretary under 
     this section shall be final and not subject to appeal or 
     protest.
       (c) Authorization.--There are authorized to be 
     appropriated, and are appropriated out of the amounts in the 
     general fund of the Treasury not otherwise appropriated, such 
     sums as are necessary to carry out the provisions of this 
     section, including funds necessary for the administration and 
     oversight of the grants provided for in this section.
                                 ______
                                 
  SA 2911. Mr. SPECTER submitted an amendment intended to be proposed 
to amendment SA 2886 submitted by Mr. McConnell (for Mr. Frist) to the 
bill S. 1637, to amend the Internal Revenue Code of 1986 to comply with 
the World Trade Organization rulings on the FSC/ETI benefit in a manner 
that preserves jobs and production activities in the United States, to 
reform and simplify the international taxation rules of the United 
States, and for other purposes; which was ordered to lie on the table; 
as follows:

       At the end of the instructions, add the following:

                   TITLE V--MISCELLANEOUS PROVISIONS

     SEC. 501. TEMPORARY DUTY REDUCTIONS FOR CERTAIN COTTON 
                   SHIRTING FABRIC.

       (a) Certain Cotton Shirting Fabrics.--
       (1) In general.--Subchapter II of chapter 99 is amended by 
     inserting in numerical sequence the following new headings:

``   9902.52.08     Woven fabrics of  Free           No change      No change      On or before 12/31/2005
                     cotton, all the
                     foregoing
                     certified by
                     the importer as
                     suitable for
                     use in making
                     men's and boys'
                     shirts and as
                     imported by or
                     for the benefit
                     of a
                     manufacturer of
                     men's and boys'
                     shirts, subject
                     to the quantity
                     limitations
                     contained in
                     general note 18
                     of this
                     subchapter
                     (provided for
                     in section
                     204(b)(3)(B)(i)
                     (III) of the
                     Andean Trade
                     Preference Act
                     (19 U.S.C.
                     3203)).........
     9902.52.09     Woven fabrics of  Free           No change      No change      On or before 12/31/2005
                     cotton, all the                                                                          ''
                     foregoing                                                                                 .
                     certified by
                     the importer as
                     containing 100
                     percent pima
                     cotton grown in
                     the United
                     States, as
                     suitable for
                     use in making
                     men's and boys'
                     shirts, and as
                     imported by or
                     for the benefit
                     of a
                     manufacturer of
                     men's and boys'
                     shirts
                     (provided for
                     in section
                     204(b)(3)(B)(i)
                     (III) of the
                     Andean Trade
                     Preference Act
                     (19 U.S.C.
                     3203)).........
----------------------------------------------------------------------------------------------------------------

       (2) Definitions and limitation on quantity of imports.--The 
     U.S. Notes to chapter 99 are amended by adding at the end the 
     following:
       ``17. For purposes of subheadings 9902.52.08 and 
     9902.52.09, the term `making' means cutting and sewing in the 
     United States, and the term `manufacturer' means a person or 
     entity that cuts and sews in the United States.
       ``18. The aggregate quantity of cotton fabrics entered 
     under subheading 9902.52.08 from January 1 to December 31 of 
     each year, inclusive, by or on behalf of each manufacturer of 
     men's and boys' shirts shall be limited to 85 percent of the 
     total square meter equivalents of all imported cotton woven 
     fabric used by such manufacturer in cutting and sewing men's 
     and boys' cotton shirts in the United States and purchased by 
     such manufacturer during calendar year 2000.''.
       (b) Determination of Tariff-Rate Quotas.--
       (1) Authority to issue licenses and license use.--To 
     implement the limitation on the quantity of imports of cotton 
     woven fabrics under subheading 9902.52.08 of the Harmonized 
     Tariff Schedule of the United States, as required by U.S. 
     Note 18 to subchapter II of chapter 99 of such Schedule, for 
     the entry, or withdrawal from warehouse for consumption, the 
     Secretary of Commerce shall issue licenses designating 
     eligible manufacturers and the annual quantity restrictions 
     under each such license. A licensee may assign the authority 
     (in whole or in part) to import fabric under subheading 
     9902.52.08 of such Schedule.
       (2) Licenses under u.s. note 18.--For purposes of U.S. Note 
     18 to subchapter II of chapter 99 of the Harmonized Tariff 
     Schedule of the United States, as added by subsection (a)(2), 
     a license shall be issued within 60 days of an application 
     containing a notarized affidavit from an officer of the 
     manufacturer that the manufacturer is eligible to receive a 
     license and stating the quantity of imported cotton woven 
     fabric purchased during calendar year 2000 for use in the 
     cutting and sewing men's and boys' shirts in the United 
     States.
       (3) Affidavits.--For purposes of an affidavit described in 
     this subsection, the date of purchase shall be--
       (A) the invoice date if the manufacturer is not the 
     importer of record; and
       (B) the date of entry if the manufacturer is the importer 
     of record.

     SEC. 502. COTTON TRUST FUND.

       (a) In General.--There is established in the Treasury of 
     the United States a trust

[[Page S3035]]

     fund to be known as the ``Pima Cotton Trust Fund'', 
     consisting of $32,000,000 transferred to the Pima Cotton 
     Trust Fund from funds in the general fund of the Treasury.
       (b) Grants.--
       (1) General purpose.--From amounts in the Pima Cotton Trust 
     Fund, the Secretary of Commerce is authorized to provide 
     grants to spinners of United States grown pima cotton, 
     manufacturers of men's and boys' cotton shirting, and a 
     nationally recognized association that promotes the use of 
     pima cotton grown in the United States, to assist such 
     spinners and manufacturers in maximizing United States 
     employment in the production of textile or apparel products 
     and to increase the promotion of the use of United States 
     grown pima cotton respectively.
       (2) Timing for grant awards.--The Secretary of the Treasury 
     shall, not later than 90 days after the date of enactment of 
     this section, establish guidelines for the application and 
     awarding of the grants described in paragraph (1), and shall 
     award such grants to qualified applicants not later than 180 
     days after the date of enactment of this section. Each grant 
     awarded under this section shall be distributed to the 
     qualified applicant in 2 equal annual installments.
       (3) Distribution of funds.--Of the amounts in the Pima 
     Cotton Trust Fund--
       (A) $8,000,000 shall be made available to a nationally 
     recognized association established for the promotion of pima 
     cotton grown in the United States for the use in textile and 
     apparel goods;
       (B) $8,000,000 shall be made available to yarn spinners of 
     pima cotton grown in the United States, and shall be 
     allocated to each spinner based on the percentage of the 
     spinner's production of ring spun cotton yarns, measuring 
     less than 83.33 decitex (exceeding 120 metric number), from 
     pima cotton grown in the United States in single and plied 
     form during calendar year 2002 (as evidenced by an affidavit 
     provided by the spinner), compared to the production of such 
     yarns for all spinners who qualify under this subparagraph; 
     and
       (C) $16,000,000 shall be made available to manufacturers 
     who cut and sew cotton shirts in the United States and that 
     certify that they used imported cotton fabric during the 
     period January 1, 1998, through July 1, 2003, and shall be 
     allocated to each manufacturer on the bases of the dollar 
     value (excluding duty, shipping, and related costs) of 
     imported woven cotton shirting fabric of 80s or higher count 
     and 2-ply in warp purchased by the manufacturer during 
     calendar year 2002 (as evidenced by an affidavit from the 
     manufacturer) used in the manufacturing of men's and boys' 
     cotton shirts, compared to the dollar value (excluding duty, 
     shipping, and related costs) of such fabric for all 
     manufacturers who qualify under this subparagraph.
       (4) Affidavit of shirting manufacturers.--For purposes of 
     paragraph (3)(D), an officer of the manufacturer of men's and 
     boys' shirts shall provide a notarized affidavit affirming--
       (A) that the manufacturer used imported cotton fabric 
     during the period January 1, 1998, through July 1, 2003, to 
     cut and sew men's and boys' woven cotton shirts in the United 
     States;
       (B) the dollar value of imported woven cotton shirting 
     fabric of 80s or higher count and 2-ply in warp purchased 
     during calendar year 2002;
       (C) that the manufacturer maintains invoices along with 
     other supporting documentation (such as price lists and other 
     technical descriptions of the fabric qualities) showing the 
     dollar value of such fabric purchased, the date of purchase, 
     and evidencing the fabric as woven cotton fabric of 80s or 
     higher count and 2-ply in warp; and
       (D) that the fabric was suitable for use in the 
     manufacturing of men's and boys' cotton shirts.
       (5) Date of purchase.--For purposes of the affidavit 
     required by paragraph (4), the date of purchase shall be the 
     invoice date, and the dollar value shall be determined 
     excluding duty, shipping, and related costs.
       (6) Affidavit of yarn spinners.--For purposes of paragraph 
     (3)(B), an officer of a company that produces ringspun yarns 
     shall provide a notarized affidavit affirming--
       (A) that the manufacturer used pima cotton grown in the 
     United States during the period January 1, 2002, through 
     December 31, 2002, to produce ring spun cotton yarns, 
     measuring less than 83.33 decitex (exceeding 120 metric 
     number), in single and plied form during 2002;
       (B) the quantity, measured in pounds, of ring spun cotton 
     yarns, measuring less than 83.33 decitex (exceeding 120 
     metric number), in single and plied form during calendar year 
     2002; and
       (C) that the manufacturer maintains supporting 
     documentation showing the quantity of such yarns produced, 
     and evidencing the yarns as ring spun cotton yarns, measuring 
     less than 83.33 decitex (exceeding 120 metric number), in 
     single and plied form during calendar year 2002.
       (7) No appeal.--Any grant awarded by the Secretary under 
     this section shall be final and not subject to appeal or 
     protest.
       (c) Authorization.--There are authorized to be 
     appropriated, and are appropriated out of the amounts in the 
     general fund of the Treasury not otherwise appropriated, such 
     sums as are necessary to carry out the provisions of this 
     section, including funds necessary for the administration and 
     oversight of the grants provided for in this section.
                                 ______
                                 
  SA 2912. Mrs. HUTCHISON submitted an amendment intended to be 
proposed to amendment SA 2886 submitted by Mr. McConnell (for Mr. 
Frist) to the bill S. 1637, to amend the Internal Revenue Code of 1986 
to comply with the World Trade Organization rulings on the FSC/ETI 
benefit in a manner that preserves jobs and production activities in 
the United States, to reform and simplify the international taxation 
rules of the United States, and for other purposes; which was ordered 
to lie on the table; as follows:

       On page 22, strike lines 3 through 14 and insert the 
     following:
       ``(e) Domestic Production Gross Receipts.--For purposes of 
     this section--
       ``(1) In general.--
       ``(A) Receipts from qualifying production property.--The 
     term `domestic production gross receipts' means the gross 
     receipts of the taxpayer which are derived from--
       ``(i) any sale, exchange, or other disposition of, or
       ``(ii) any lease, rental, or license of,

     qualifying production property which was manufactured, 
     produced, grown, or extracted in whole or in significant part 
     by the taxpayer within the United States.
       ``(B) Receipts from certain services.--Such term also 
     includes the gross receipts of the taxpayer which are derived 
     from any construction, engineering, or architectural services 
     performed in the United States for construction projects in 
     the United States.
                                 ______
                                 
  SA 2913. Mr. NICKLES (for himself and Mrs. Lincoln) submitted an 
amendment intended to be proposed to amendment SA 2886 submitted by Mr. 
McConnell (for Mr. Frist) to the bill S. 1637, to amend the Internal 
Revenue Code of 1986 to comply with the World Trade Organization 
rulings on the FSC/ETI benefit in a manner that preserves jobs and 
production activities in the United States, to reform and simplify the 
international taxation rules of the United States, and for other 
purposes; which was ordered to lie on the table; as follows:

       At the end of subtitle A of title III of the instructions, 
     add the following:

     SEC. __. RECOVERY PERIOD FOR CERTAIN WIRELESS 
                   TELECOMMUNICATIONS EQUIPMENT.

       (a) In General.--Subparagraph (A) of section 168(i)(2) 
     (defining qualified technological equipment) is amended by 
     striking ``and'' at the end of clause (ii), by striking the 
     period at the end of clause (iii) and inserting ``, and'', 
     and by inserting after clause (iii) the following new clause:
       ``(iv) any wireless telecommunications equipment.''.
       (b) Wireless Telecommunications Equipment.--Section 
     168(i)(2) is amended by inserting after subparagraph (C) the 
     following new subparagraph:
       ``(D) Wireless telecommunications equipment.--For purposes 
     of this paragraph--
       ``(i) In general.--The term `wireless telecommunications 
     equipment' means equipment which is used in the transmission, 
     reception, coordination, or switching of wireless 
     telecommunications service.
       ``(ii) Exception.--Such term does not include towers, 
     buildings, T-1 lines, or other cabling which connects cell 
     sites to mobile switching centers.
       ``(iii) Wireless telecommunications service.--For purposes 
     of clause (i), the term `wireless telecommunications service' 
     includes any commercial mobile radio service as defined in 
     title 47 of the Code of Federal Regulations.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after December 31, 
     2004, and before January 1, 2008.
                                 ______
                                 
  SA 2914. Mr. COLEMAN submitted an amendment intended to be proposed 
to amendment SA 2886 submitted by Mr. McConnell (for Mr. Frist) to the 
bill S. 1637, to amend the Internal Revenue Code of 1968 to comply with 
the World Trade Organization rulings on the FSC/ETI benefit in a manner 
that preserves jobs and production activities in the United States, to 
reform and simplify the international taxation rules of the United 
States, and for other purposes; which was ordered to lie on the table; 
as follows:

       At the end of the instructions, add the following:

                    TITLE V--NON-REVENUE PROVISIONS

     SEC. 501. CUSTOMS SERVICES.

       Section 13031(e)(1) of the Consolidated Omnibus Budget 
     Reconciliation Act of 1985 (19 U.S.C. 58c(e)(1)) is amended--
       (1) by striking ``(1) Notwithstanding section 451 of the 
     Tariff Act of 1930 (19 U.S.C. 1451) or any other provision of 
     law (other than paragraph (2)),'' and inserting:
       ``(1) In general.--
       ``(A) Scheduled flights.--Notwithstanding section 451 of 
     the Tariff Act of 1930 (19 U.S.C. 1451) or any other 
     provision of law (other than subparagraph (B) and paragraph 
     (2)),''; and

[[Page S3036]]

       (2) by adding at the end the following:
       ``(B) Charter flights.--If an air carrier (as defined in 
     section 40102(2) of title 49, United States Code) 
     specifically requests that customs border patrol services for 
     passengers and their baggage be provided for a charter flight 
     arriving after normal operating hours at a customs border 
     patrol serviced airport and overtime funds for those services 
     are not available, the appropriate customs border patrol 
     officer may assign sufficient customs employees (if 
     available) to perform any such services, which could lawfully 
     be performed during regular hours of operation, and any 
     overtime fees incurred in connection with such service shall 
     be paid by the air carrier.''.
                                 ______
                                 
  SA 2915. Mr. COLEMAN submitted an amendment intended to be proposed 
by him to the bill S. 1637, to amend the Internal Revenue Code of 1968 
to comply with the World Trade Organization rulings on the FSC/ETI 
benefit in a manner that preserves jobs and production activities in 
the United States, to reform and simplify the international taxation 
rules of the United States, and for other purposes; which was ordered 
to lie on the table; as follows:

       At the end of the bill, add the following:

                    TITLE V--NON-REVENUE PROVISIONS

     SEC. 501. CUSTOMS SERVICES.

       Section 13031(e)(1) of the Consolidated Omnibus Budget 
     Reconciliation Act of 1985 (19 U.S.C. 58c(e)(1)) is amended--
       (1) by striking ``(1) Notwithstanding section 451 of the 
     Tariff Act of 1930 (19 U.S.C. 1451) or any other provision of 
     law (other than paragraph (2)),'' and inserting:
       ``(1) In general.--
       ``(A) Scheduled flights.--Notwithstanding section 451 of 
     the Tariff Act of 1930 (19 U.S.C. 1451) or any other 
     provision of law (other than subparagraph (B) and paragraph 
     (2)),''; and
       (2) by adding at the end the following:
       ``(B) Charter flights.--If an air carrier (as defined in 
     section 40102(2) of title 49, United States Code) 
     specifically requests that customs border patrol services for 
     passengers and their baggage be provided for a charter flight 
     arriving after normal operating hours at a customs border 
     patrol serviced airport and overtime funds for those services 
     are not available, the appropriate customs border patrol 
     officer may assign sufficient customs employees (if 
     available) to perform any such services, which could lawfully 
     be performed during regular hours of operation, and any 
     overtime fees incurred in connection with such service shall 
     be paid by the air carrier.''.
                                 ______
                                 
  SA 2916. Mr. WYDEN (for himself and Mr. Coleman) submitted an 
amendment intended to be proposed by him to the bill S. 1637, to amend 
the Internal Revenue Code of 1986 to comply with the World Trade 
Organization rulings on the FSC/ETI benefit in a manner that preserves 
jobs and production activities in the United States, to reform and 
simplify the international taxation rules of the United States, and for 
other purposes; which was ordered to lie on the table; as follows:

       At the end of the bill, add the following:

                  TITLE V--TRADE ADJUSTMENT ASSISTANCE

                      Subtitle A--Service Workers

     SEC. 511. SHORT TITLE.

       This subtitle may be cited as the ``Trade Adjustment 
     Assistance Equity For Service Workers Act of 2004''.

     SEC. 512. EXTENSION OF TRADE ADJUSTMENT ASSISTANCE TO 
                   SERVICES SECTOR.

       (a) Adjustment Assistance for Workers.--Section 
     221(a)(1)(A) of the Trade Act of 1974 (19 U.S.C. 
     2271(a)(1)(A)) is amended by striking ``firm)'' and inserting 
     ``firm, and workers in a service sector firm or subdivision 
     of a service sector firm or public agency)''.
       (b) Group Eligibility Requirements.--Section 222 of the 
     Trade Act of 1974 (19 U.S.C. 2272) is amended--
       (1) in subsection (a)--
       (A) in the matter preceding paragraph (1), by striking 
     ``agricultural firm)'' and inserting ``agricultural firm, and 
     workers in a service sector firm or subdivision of a service 
     sector firm or public agency)'';
       (B) in paragraph (1), by inserting ``or public agency'' 
     after ``of the firm''; and
       (C) in paragraph (2)--
       (i) in subparagraph (A)(ii), by striking ``like or directly 
     competitive with articles produced'' and inserting ``or 
     services like or directly competitive with articles produced 
     or services provided''; and
       (ii) by striking subparagraph (B) and inserting the 
     following:
       ``(B)(i) there has been a shift, by such workers' firm, 
     subdivision, or public agency to a foreign country, of 
     production of articles, or in provision of services, like or 
     directly competitive with articles which are produced, or 
     services which are provided, by such firm, subdivision, or 
     public agency; or
       ``(ii) such workers' firm, subdivision, or public agency 
     has obtained or is likely to obtain such services from a 
     foreign country.'';
       (2) in subsection (b)--
       (A) in the matter preceding paragraph (1), by striking 
     ``agricultural firm)'' and inserting ``agricultural firm, and 
     workers in a service sector firm or subdivision of a service 
     sector firm or public agency)'';
       (B) in paragraph (2), by inserting ``or service'' after 
     ``related to the article''; and
       (C) in paragraph (3)(A), by inserting ``or services'' after 
     ``component parts'';
       (3) in subsection (c)--
       (A) in paragraph (2), by adding at the end the following:
       ``(C) Taconite pellets produced in the United States shall 
     be considered to be an article that is like or directly 
     competitive with imports of semifinished steel slab.''.
       (B) in paragraph (3)--
       (i) by inserting ``or services'' after ``value-added 
     production processes'';
       (ii) by striking ``or finishing'' and inserting ``, 
     finishing, or testing'';
       (iii) by inserting ``or services'' after ``for articles''; 
     and
       (iv) by inserting ``(or subdivision)'' after ``such other 
     firm''; and
       (C) in paragraph (4)--
       (i) by striking ``for articles'' and inserting ``, or 
     services, used in the production of articles or in the 
     provision of services''; and
       (ii) by inserting ``(or subdivision)'' after ``such other 
     firm''; and
       (4) by adding at the end the following new subsection:
       ``(d) Basis for Secretary's Determinations.--
       ``(1) Increased imports.--For purposes of subsection 
     (a)(2)(A)(ii), the Secretary may determine that increased 
     imports of like or directly competitive articles or services 
     exist if the workers' firm or subdivision or customers of the 
     workers' firm or subdivision accounting for not less than 20 
     percent of the sales of the workers' firm or subdivision 
     certify to the Secretary that they are obtaining such 
     articles or services from a foreign country.
       ``(2) Obtaining services abroad.--For purposes of 
     subsection (a)(2)(B)(ii), the Secretary may determine that 
     the workers' firm, subdivision, or public agency has obtained 
     or is likely to obtain like or directly competitive services 
     from a firm in a foreign country based on a certification 
     thereof from the workers' firm, subdivision, or public 
     agency.
       ``(3) Authority of the secretary.--The Secretary may obtain 
     the certifications under paragraphs (1) and (2) through 
     questionnaires or in such other manner as the Secretary 
     determines is appropriate.''.
       (c) Training.--Section 236(a)(2)(A) of the Trade Act of 
     1974 (19 U.S.C. 2296(a)(2)(A)) is amended by striking 
     ``$220,000,000'' and inserting ``$440,000,000''.
       (d) Definitions.--Section 247 of the Trade Act of 1974 (19 
     U.S.C. 2319) is amended--
       (1) in paragraph (1)--
       (A) by inserting ``or public agency'' after ``of a firm''; 
     and
       (B) by inserting ``or public agency'' after ``or 
     subdivision'';
       (2) in paragraph (2)(B), by inserting ``or public agency'' 
     after ``the firm'';
       (3) by redesignating paragraphs (8) through (17) as 
     paragraphs (9) through (18), respectively; and
       (4) by inserting after paragraph (6) the following:
       ``(7) The term `public agency' means a department or agency 
     of a State or local government or of the Federal Government.
       ``(8) The term `service sector firm' means an entity 
     engaged in the business of providing services.''.
       (e) Technical Amendment.--Section 245(a) of the Trade Act 
     of 1974 (19 U.S.C. 2317(a)) is amended by striking ``, other 
     than subchapter D''.

     SEC. 513. TRADE ADJUSTMENT ASSISTANCE FOR FIRMS AND 
                   INDUSTRIES.

       (a) Firms.--
       (1) Assistance.--Section 251 of the Trade Act of 1974 (19 
     U.S.C. 2341) is amended--
       (A) in subsection (a), by inserting ``or service sector 
     firm'' after ``(including any agricultural firm'';
       (B) in subsection (c)(1)--
       (i) in the matter preceding subparagraph (A), by inserting 
     ``or service sector firm'' after ``any agricultural firm'';
       (ii) in subparagraph (B)(ii), by inserting ``or service'' 
     after ``of an article''; and
       (iii) in subparagraph (C), by striking ``articles like or 
     directly competitive with articles which are produced'' and 
     inserting ``articles or services like or directly competitive 
     with articles or services which are produced or provided''; 
     and
       (C) by adding at the end the following:
       ``(e) Basis for Secretary Determination.--
       ``(1) Increased imports.--For purposes of subsection 
     (c)(1)(C), the Secretary may determine that increases of 
     imports of like or directly competitive articles or services 
     exist if customers accounting for not less than 20 percent of 
     the sales of the workers' firm certify to the Secretary that 
     they are obtaining such articles or services from a foreign 
     country.
       ``(2) Authority of the secretary.--The Secretary may obtain 
     the certifications under paragraph (1) through questionnaires 
     or in such other manner as the Secretary determines is 
     appropriate. The Secretary may exercise the authority under 
     section 249 in carrying out this subsection.''.
       (2) Authorization of appropriations.--Section 256(b) of the 
     Trade Act of 1974 (19

[[Page S3037]]

     U.S.C. 2346(b)) is amended by striking ``$16,000,000'' and 
     inserting ``$32,000,000''.
       (3) Definition.--Section 261 of the Trade Act of 1974 (19 
     U.S.C. 2351) is amended--
       (A) by striking ``For purposes of'' and inserting ``(a) 
     Firm.--For purposes of''; and
       (B) by adding at the end the following:
       ``(b) Service Sector Firm.--For purposes of this chapter, 
     the term `service sector firm' means a firm engaged in the 
     business of providing services.''.
       (b) Industries.--Section 265(a) of the Trade Act of 1974 
     (19 U.S.C. 2355(a)) is amended by inserting ``or service'' 
     after ``new product''.

     SEC. 514. MONITORING AND REPORTING.

       Section 282 of the Trade Act of 1974 (19 U.S.C. 2393) is 
     amended--
       (1) in the first sentence--
       (A) by striking ``The Secretary'' and inserting ``(a) 
     Monitoring Programs.--The Secretary'';
       (B) by inserting ``and services'' after ``imports of 
     articles'';
       (C) by inserting ``and domestic provision of services'' 
     after ``domestic production'';
       (D) by inserting ``or providing services'' after 
     ``producing articles''; and
       (E) by inserting ``, or provision of services,'' after 
     ``changes in production''; and
       (2) by adding at the end the following:
       ``(b) Collection of Data and Reports on Services Sector.--
       ``(1) Secretary of labor.--Not later than 3 months after 
     the date of the enactment of the Trade Adjustment Assistance 
     Equity For Service Workers Act of 2004, the Secretary of 
     Labor shall implement a system to collect data on adversely 
     affected service workers that includes the number of workers 
     by State, industry, and cause of dislocation of each worker.
       ``(2) Secretary of commerce.--Not later than 6 months after 
     such date of enactment, the Secretary of Commerce shall, in 
     consultation with the Secretary of Labor, conduct a study and 
     report to the Congress on ways to improve the timeliness and 
     coverage of data on trade in services, including methods to 
     identify increased imports due to the relocation of United 
     States firms to foreign countries, and increased imports due 
     to United States firms obtaining services from firms in 
     foreign countries.''.

     SEC. 515. ALTERNATIVE TRADE ADJUSTMENT ASSISTANCE.

       In General.--Section 246(a)(3) of the Trade Act of 1974 (19 
     U.S.C. 2318(a)(3)) is amended to read as follows:
       ``(3) Eligibility.--A worker in the group that the 
     Secretary has certified as eligible for the alternative trade 
     adjustment assistance program may elect to receive benefits 
     under the alternative trade adjustment assistance program if 
     the worker--
       ``(A) is covered by a certification under subchapter A of 
     this chapter;
       ``(B) obtains reemployment not more than 26 weeks after the 
     date of separation from the adversely affected employment;
       ``(C) is at least 40 years of age;
       ``(D) earns not more than $50,000 a year in wages from 
     reemployment;
       ``(E) is employed on a full-time basis as defined by State 
     law in the State in which the worker is employed; and
       ``(F) does not return to the employment from which the 
     worker was separated.''.
       (b) Conforming Amendments.--(1) Subparagraphs (A) and (B) 
     of section 246(a)(2) of the Trade Act of 1974 (19 U.S.C. 
     2318(a)(2) (A) and (B)) are amended by striking ``paragraph 
     (3)(B)'' and inserting ``paragraph (3)'' each place it 
     appears.
       (2) Section 246(b)(2) of such Act is amended by striking 
     ``subsection (a)(3)(B)'' and inserting ``subsection (a)(3)''.

     SEC. 516. CLARIFICATION OF MARKETING YEAR.

       Section 291(5) of the Trade Act of 1974 (19 U.S.C. 2401(5)) 
     is amended by inserting before the end period the following: 
     ``, or in the case of an agricultural commodity that has no 
     marketing year, in a 12-month period for which the petitioner 
     provides written justification''.

     SEC. 517. EFFECTIVE DATE.

       (a) In General.--Except as provided in subsections (b) and 
     (c), the amendments made by this subtitle shall take effect 
     on October 1, 2004.
       (b) Special Rule for Certain Service Workers.--A group of 
     workers in a service sector firm, or subdivision of a service 
     sector firm, or public agency (as defined in section 247 (7) 
     and (8) of the Trade Act of 1974, as added by section 512(d) 
     of this Act) who--
       (1) would have been certified eligible to apply for 
     adjustment assistance under chapter 2 of title II of the 
     Trade Act of 1974 if the amendments made by this Act had been 
     in effect on November 4, 2002, and
       (2) file a petition pursuant to section 221 of such Act 
     within 6 months after the date of enactment of this Act,

     shall be eligible for certification under section 223 of the 
     Trade Act of 1974 if the workers' last total or partial 
     separation from the firm or subdivision of the firm or public 
     agency occurred on or after November 4, 2002 and before 
     October 1, 2004.
       (c) Special Rule for Taconite.--A group of workers in a 
     firm, or subdivision of a firm, engaged in the production of 
     taconite pellets who--
       (1) would have been certified eligible to apply for 
     adjustment assistance under chapter 2 of title II of the 
     Trade Act of 1974 if the amendments made by this Act had been 
     in effect on November 4, 2002, and
       (2) file a petition pursuant to section 221 of such Act 
     within 6 months after the date of enactment of this Act,
     shall be eligible for certification under section 223 of the 
     Trade Act of 1974 if the workers' last total or partial 
     separation from the firm or subdivision of the firm occurred 
     on or after November 4, 2002 and before October 1, 2004.

                      Subtitle B--Data Collection

     SEC. 521. SHORT TITLE.

       This subtitle may be cited as the ``Trade Adjustment 
     Assistance Accountability Act''.

     SEC. 522. DATA COLLECTION; STUDY; INFORMATION TO WORKERS.

       (a) Data Collection; Evaluations.--Subchapter C of chapter 
     2 of title II of the Trade Act of 1974 is amended by 
     inserting after section 249, the following new section:

     ``SEC. 250. DATA COLLECTION; EVALUATIONS; REPORTS.

       ``(a) Data Collection.--The Secretary shall, pursuant to 
     regulations prescribed by the Secretary, collect any data 
     necessary to meet the requirements of this chapter.
       ``(b) Performance Evaluations.--The Secretary shall 
     establish an effective performance measuring system to 
     evaluate the following:
       ``(1) Program performance.--A comparison of the trade 
     adjustment assistance program before and after the effective 
     date of the Trade Adjustment Assistance Reform Act of 2002 
     with respect to--
       ``(A) the number of workers certified and the number of 
     workers actually participating in the trade adjustment 
     assistance program;
       ``(B) the time for processing petitions;
       ``(C) the number of training waivers granted;
       ``(D) the coordination of programs under this chapter with 
     programs under the Workforce Investment Act of 1998 (29 
     U.S.C. 2801 et seq.);
       ``(E) the effectiveness of individual training providers in 
     providing appropriate information and training;
       ``(F) the extent to which States have designed and 
     implemented health care coverage options under title II of 
     the Trade Act of 2002, including any difficulties States have 
     encountered in carrying out the provisions of title II;
       ``(G) how Federal, State, and local officials are 
     implementing the trade adjustment assistance program to 
     ensure that all eligible individuals receive benefits, 
     including providing outreach, rapid response, and other 
     activities; and
       ``(H) any other data necessary to evaluate how individual 
     States are implementing the requirements of this chapter.
       ``(2) Program participation .--The effectiveness of the 
     program relating to--
       ``(A) the number of workers receiving benefits and the type 
     of benefits being received both before and after the 
     effective date of the Trade Adjustment Assistance Reform Act 
     of 2002;
       ``(B) the number of workers enrolled in, and the duration 
     of, training by major types of training both before and after 
     the effective date of the Trade Adjustment Assistance Reform 
     Act of 2002;
       ``(C) earnings history of workers that reflects wages 
     before separation and wages in any job obtained after 
     receiving benefits under this Act;
       ``(D) reemployment rates and sectors in which dislocated 
     workers have been employed;
       ``(E) the cause of dislocation identified in each petition 
     that resulted in a certification under this chapter; and
       ``(F) the number of petitions filed and workers certified 
     in each congressional district of the United States.
       ``(c) State Participation.--The Secretary shall ensure, to 
     the extent practicable, through oversight and effective 
     internal control measures the following:
       ``(1) State participation.--Participation by each State in 
     the performance measurement system established under 
     subsection (b).
       ``(2) Monitoring.--Monitoring by each State of internal 
     control measures with respect to performance measurement data 
     collected by each State.
       ``(3) Response.--The quality and speed of the rapid 
     response provided by each State under section 134(a)(2)(A) of 
     the Workforce Investment Act of 1998 (29 U.S.C. 
     2864(a)(2)(A)).
       ``(d) Reports.--
       ``(1) Reports by the secretary.--
       ``(A) Initial report.--Not later than 6 months after the 
     date of enactment of the Trade Adjustment Assistance 
     Accountability Act, the Secretary shall submit to the 
     Committee on Finance of the Senate and the Committee on Ways 
     and Means of the House of Representatives a report that--
       ``(i) describes the performance measurement system 
     established under subsection (b);
       ``(ii) includes analysis of data collected through the 
     system established under subsection (b); and
       ``(iii) provides recommendations for program improvements.
       ``(B) Annual report.--Not later than 1 year after the date 
     the report is submitted under subparagraph (A), and annually 
     thereafter, the Secretary shall submit to the Committee on 
     Finance of the Senate and the Committee on Ways and Means of 
     the House of Representatives a report that includes the 
     information collected under clause (ii) of subparagraph (A).
       ``(2) State reports.--Pursuant to regulations prescribed by 
     the Secretary, each State

[[Page S3038]]

     shall submit to the Secretary a report that details its 
     participation in the programs established under this chapter, 
     and that contains the data necessary to allow the Secretary 
     to submit the report required under paragraph (1).
       ``(3) Publication.--The Secretary shall make available to 
     each State, and other public and private organizations as 
     determined by the Secretary, the data gathered and evaluated 
     through the performance measurement system established under 
     subsection (b).''.
       (b) Conforming Amendments.--
       (1) Coordination.--Section 281 of the Trade Act of 1974 (19 
     U.S.C. 2392) is amended by striking ``Departments of Labor 
     and Commerce'' and inserting ``Departments of Labor, 
     Commerce, and Agriculture''.
       (2) Trade monitoring system.--Section 282 of the Trade Act 
     of 1974 (19 U.S.C. 2393) is amended by striking ``The 
     Secretary of Commerce and the Secretary of Labor'' and 
     inserting ``The Secretaries of Commerce, Labor, and 
     Agriculture''.
       (3) Table of contents.--The table of contents for title II 
     of the Trade Act of 1974 is amended by inserting after the 
     item relating to section 249, the following new item:

``Sec. 250. Data collection; evaluations; reports.''.

       (c) Effective Date.--The amendments made by this section 
     shall take effect on October 1, 2004.

        Subtitle C--Trade Adjustment Assistance for Communities

     SEC. 531. SHORT TITLE.

       This subtitle may be cited as the ``Trade Adjustment 
     Assistance for Communities Act of 2004''.

     SEC. 532. PURPOSE.

       The purpose of this subtitle is to assist communities 
     negatively impacted by trade with economic adjustment through 
     the integration of political and economic organizations, the 
     coordination of Federal, State, and local resources, the 
     creation of community-based development strategies, and the 
     provision of economic transition assistance.

     SEC. 533. TRADE ADJUSTMENT ASSISTANCE FOR COMMUNITIES.

       Chapter 4 of title II of the Trade Act of 1974 (19 U.S.C. 
     2371 et seq.) is amended to read as follows:

        ``CHAPTER 4--TRADE ADJUSTMENT ASSISTANCE FOR COMMUNITIES

     ``SEC. 271. DEFINITIONS.

       ``In this chapter:
       ``(1) Affected domestic producer.--The term `affected 
     domestic producer' means any manufacturer, producer, service 
     provider, farmer, rancher, fisherman or worker representative 
     (including associations of such persons) that was affected by 
     a finding under the Antidumping Act of 1921, or by an 
     antidumping or countervailing duty order issued under title 
     VII of the Tariff Act of 1930.
       ``(2) Agricultural commodity producer.--The term 
     `agricultural commodity producer' has the same meaning as the 
     term `person' as prescribed by regulations promulgated under 
     section 1001(5) of the Food Security Act of 1985 (7 U.S.C. 
     1308(5)).
       ``(3) Community.--The term `community' means a city, 
     county, or other political subdivision of a State or a 
     consortium of political subdivisions of a State that the 
     Secretary certifies as being negatively impacted by trade.
       ``(4) Community negatively impacted by trade.--A community 
     negatively impacted by trade means a community with respect 
     to which a determination has been made under section 273.
       ``(5) Eligible community.--The term `eligible community' 
     means a community certified under section 273 for assistance 
     under this chapter.
       ``(6) Fisherman.--
       ``(A) In general.--The term `fisherman' means any person 
     who--
       ``(i) is engaged in commercial fishing; or
       ``(ii) is a United States fish processor.
       ``(B) Commercial fishing, fish, fishery, fishing, fishing 
     vessel, person, and united states fish processor.--The terms 
     `commercial fishing', `fish', `fishery', `fishing', `fishing 
     vessel', `person', and `United States fish processor' have 
     the same meanings as such terms have in the Magnuson-Stevens 
     Fishery Conservation and Management Act (16 U.S.C. 1802).
       ``(7) Job loss.--The term `job loss' means the total or 
     partial separation of an individual, as those terms are 
     defined in section 247.
       ``(8) Secretary.--The term `Secretary' means the Secretary 
     of Commerce.

     ``SEC. 272. COMMUNITY TRADE ADJUSTMENT ASSISTANCE PROGRAM.

       ``(a) Establishment.--Within 6 months after the date of 
     enactment of the Trade Adjustment Assistance for Communities 
     Act of 2004, the Secretary shall establish a Trade Adjustment 
     Assistance for Communities Program at the Department of 
     Commerce.
       ``(b) Personnel.--The Secretary shall designate such staff 
     as may be necessary to carry out the responsibilities 
     described in this chapter.
       ``(c) Coordination of Federal Response.--The Secretary 
     shall--
       ``(1) provide leadership, support, and coordination for a 
     comprehensive management program to address economic 
     dislocation in eligible communities;
       ``(2) coordinate the Federal response to an eligible 
     community--
       ``(A) by identifying all Federal, State, and local 
     resources that are available to assist the eligible community 
     in recovering from economic distress;
       ``(B) by ensuring that all Federal agencies offering 
     assistance to an eligible community do so in a targeted, 
     integrated manner that ensures that an eligible community has 
     access to all available Federal assistance;
       ``(C) by assuring timely consultation and cooperation 
     between Federal, State, and regional officials concerning 
     economic adjustment for an eligible community; and
       ``(D) by identifying and strengthening existing agency 
     mechanisms designed to assist eligible communities in their 
     efforts to achieve economic adjustment and workforce 
     reemployment;
       ``(3) provide comprehensive technical assistance to any 
     eligible community in the efforts of that community to--
       ``(A) identify serious economic problems in the community 
     that are the result of negative impacts from trade;
       ``(B) integrate the major groups and organizations 
     significantly affected by the economic adjustment;
       ``(C) access Federal, State, and local resources designed 
     to assist in economic development and trade adjustment 
     assistance;
       ``(D) diversify and strengthen the community economy; and
       ``(E) develop a community-based strategic plan to address 
     economic development and workforce dislocation, including 
     unemployment among agricultural commodity producers, and 
     fishermen;
       ``(4) establish specific criteria for submission and 
     evaluation of a strategic plan submitted under section 
     274(d);
       ``(5) establish specific criteria for submitting and 
     evaluating applications for grants under section 275;
       ``(6) administer the grant programs established under 
     sections 274 and 275; and
       ``(7) establish an interagency Trade Adjustment Assistance 
     for Communities Working Group, consisting of the 
     representatives of any Federal department or agency with 
     responsibility for economic adjustment assistance, including 
     the Department of Agriculture, the Department of Education, 
     the Department of Labor, the Department of Housing and Urban 
     Development, the Department of Health and Human Services, the 
     Small Business Administration, the Department of the 
     Treasury, the Department of Commerce, and any other Federal, 
     State, or regional department or agency the Secretary 
     determines necessary or appropriate.

     ``SEC. 273. CERTIFICATION AND NOTIFICATION.

       ``(a) Certification.--Not later than 45 days after an event 
     described in subsection (c)(1), the Secretary of Commerce 
     shall determine if a community described in subsection (b)(1) 
     is negatively impacted by trade, and if a positive 
     determination is made, shall certify the community for 
     assistance under this chapter.
       ``(b) Determination That Community Is Eligible.--
       ``(1) Community described.--A community described in this 
     paragraph means a community with respect to which on or after 
     October 1, 2004--
       ``(A) the Secretary of Labor certifies a group of workers 
     (or their authorized representative) in the community as 
     eligible for assistance pursuant to section 223;
       ``(B) the Secretary of Commerce certifies a firm located in 
     the community as eligible for adjustment assistance under 
     section 251;
       ``(C) the Secretary of Agriculture certifies a group of 
     agricultural commodity producers (or their authorized 
     representative) in the community as eligible for adjustment 
     assistance under section 293;
       ``(D) an affected domestic producer is located in the 
     community; or
       ``(E) the Secretary determines that a significant number of 
     fishermen in the community is negatively impacted by trade.
       ``(2) Negatively impacted by trade.--The Secretary shall 
     determine that a community is negatively impacted by trade, 
     after taking into consideration--
       ``(A) the number of jobs affected compared to the size of 
     workforce in the community;
       ``(B) the severity of the rates of unemployment in the 
     community and the duration of the unemployment in the 
     community;
       ``(C) the income levels and the extent of underemployment 
     in the community;
       ``(D) the outmigration of population from the community and 
     the extent to which the outmigration is causing economic 
     injury in the community; and
       ``(E) the unique problems and needs of the community.
       ``(c) Definition and Special Rules.--
       ``(1) Event described.--An event described in this 
     paragraph means one of the following:
       ``(A) A notification described in paragraph (2).
       ``(B) A certification of a firm under section 251.
       ``(C) A finding under the Antidumping Act of 1921, or an 
     antidumping or countervailing duty order issued under title 
     VII of the Tariff Act of 1930.
       ``(D) A determination by the Secretary that a significant 
     number of fishermen in a community have been negatively 
     impacted by trade.
       ``(2) Notification.--The Secretary of Labor, immediately 
     upon making a determination that a group of workers is 
     eligible for trade adjustment assistance under section 223, 
     (or the Secretary of Agriculture, immediately upon making a 
     determination that a group of agricultural commodity 
     producers is eligible for adjustment assistance

[[Page S3039]]

     under section 293, as the case may be) shall notify the 
     Secretary of Commerce of the determination.
       ``(d) Notification to Eligible Communities.--Immediately 
     upon certification by the Secretary of Commerce that a 
     community is eligible for assistance under subsection (b), 
     the Secretary shall notify the community--
       ``(1) of the determination under subsection (b);
       ``(2) of the provisions of this chapter;
       ``(3) how to access the clearinghouse established by the 
     Department of Commerce regarding available economic 
     assistance;
       ``(4) how to obtain technical assistance provided under 
     section 272(c)(3); and
       ``(5) how to obtain grants, tax credits, low income loans, 
     and other appropriate economic assistance.

     ``SEC. 274. STRATEGIC PLANS.

       ``(a) In General.--An eligible community may develop a 
     strategic plan for community economic adjustment and 
     diversification.
       ``(b) Requirements for Strategic Plan.--A strategic plan 
     shall contain, at a minimum, the following:
       ``(1) A description and justification of the capacity for 
     economic adjustment, including the method of financing to be 
     used.
       ``(2) A description of the commitment of the community to 
     the strategic plan over the long term and the participation 
     and input of groups affected by economic dislocation.
       ``(3) A description of the projects to be undertaken by the 
     eligible community.
       ``(4) A description of how the plan and the projects to be 
     undertaken by the eligible community will lead to job 
     creation and job retention in the community.
       ``(5) A description of how the plan will achieve economic 
     adjustment and diversification.
       ``(6) A description of how the plan and the projects will 
     contribute to establishing or maintaining a level of public 
     services necessary to attract and retain economic investment.
       ``(7) A description and justification for the cost and 
     timing of proposed basic and advanced infrastructure 
     improvements in the eligible community.
       ``(8) A description of how the plan will address the 
     occupational and workforce conditions in the eligible 
     community.
       ``(9) A description of the educational programs available 
     for workforce training and future employment needs.
       ``(10) A description of how the plan will adapt to changing 
     markets and business cycles.
       ``(11) A description and justification for the cost and 
     timing of the total funds required by the community for 
     economic assistance.
       ``(12) A graduation strategy through which the eligible 
     community demonstrates that the community will terminate the 
     need for Federal assistance.
       ``(c) Grants To Develop Strategic Plans.--The Secretary, 
     upon receipt of an application from an eligible community, 
     may award a grant to that community to be used to develop the 
     strategic plan.
       ``(d) Submission of Plan.--A strategic plan developed under 
     subsection (a) shall be submitted to the Secretary for 
     evaluation and approval.

     ``SEC. 275. GRANTS FOR ECONOMIC DEVELOPMENT.

       ``(a) In General.--The Secretary, upon approval of a 
     strategic plan from an eligible community, may award a grant 
     to that community to carry out any project or program that is 
     certified by the Secretary to be included in the strategic 
     plan approved under section 274(d), or consistent with that 
     plan.
       ``(b) Additional Grants.--
       ``(1) In general.--Subject to paragraph (2), in order to 
     assist eligible communities to obtain funds under Federal 
     grant programs, other than the grants provided for in section 
     274(c) or subsection (a), the Secretary may, on the 
     application of an eligible community, make a supplemental 
     grant to the community if--
       ``(A) the purpose of the grant program from which the grant 
     is made is to provide technical or other assistance for 
     planning, constructing, or equipping public works facilities 
     or to provide assistance for public service projects; and
       ``(B) the grant is 1 for which the community is eligible 
     except for the community's inability to meet the non-Federal 
     share requirements of the grant program.
       ``(2) Use as non-federal share.--A supplemental grant made 
     under this subsection may be used to provide the non-Federal 
     share of a project, unless the total Federal contribution to 
     the project for which the grant is being made exceeds 80 
     percent and that excess is not permitted by law.
       ``(c) Rural Community Preference.--The Secretary shall 
     develop guidelines to ensure that rural communities receive 
     preference in the allocation of resources.

     ``SEC. 276. GENERAL PROVISIONS.

       ``(a) Regulations.--The Secretary shall prescribe such 
     regulations as are necessary to carry out the provisions of 
     this chapter. Before implementing any regulation or guideline 
     proposed by the Secretary with respect to this chapter, the 
     Secretary shall submit the regulation or guideline to the 
     Committee on Finance of the Senate and the Committee on Ways 
     and Means of the House of Representatives for approval.
       ``(b) Supplement Not Supplant.--Funds appropriated under 
     this chapter shall be used to supplement and not supplant 
     other Federal, State, and local public funds expended to 
     provide economic development assistance for communities.
       ``(c) Authorization of Appropriations.--There are 
     authorized to be appropriated to the Secretary $100,000,000 
     for each of fiscal years 2005 through 2008, to carry out this 
     chapter. Amounts appropriated pursuant to this subsection 
     shall remain available until expended.''.

     SEC. 534. CONFORMING AMENDMENTS.

       (a) Termination.--Section 285(b) of the Trade Act of 1974 
     (19 U.S.C. 2271 note) is amended by adding at the end the 
     following new paragraph:
       ``(3) Assistance for communities.--Technical assistance and 
     other payments may not be provided under chapter 4 after 
     September 30, 2008.''.
       (b) Table of Contents.--The table of contents for title II 
     of the Trade Act of 1974 is amended by striking the items 
     relating to chapter 4 of title II and inserting after the 
     items relating to chapter 3 the following new items:

        ``Chapter 4--Trade Adjustment Assistance for Communities

``Sec. 271. Definitions.
``Sec. 272. Community Trade Adjustment Assistance Program.
``Sec. 273. Certification and notification.
``Sec. 274. Strategic plans.
``Sec. 275. Grants for economic development.
``Sec. 276. General provisions.''.

       (c) Judicial Review.--Section 284(a) of the Trade Act of 
     1974 (19 U.S.C. 2395(a)) is amended by striking ``section 
     271'' and inserting ``section 273''.

     SEC. 535. EFFECTIVE DATE.

       The amendments made by this subtitle shall take effect on 
     October 1, 2004.

           Subtitle D--Office of Trade Adjustment Assistance

     SEC. 541. SHORT TITLE.

       This subtitle may be cited as the ``Trade Adjustment 
     Assistance for Firms Reorganization Act''.

     SEC. 542. OFFICE OF TRADE ADJUSTMENT ASSISTANCE.

       (a) In General.--Chapter 3 of title II of the Trade Act of 
     1974 (19 U.S.C. 2341 et seq.) is amended by inserting after 
     section 255 the following new section:

     ``SEC. 255A. OFFICE OF TRADE ADJUSTMENT ASSISTANCE.

       ``(a) Establishment.--Not later than 90 days after the date 
     of enactment of the Trade Adjustment Assistance for Firms 
     Reorganization Act, there shall be established in the 
     International Trade Administration of the Department of 
     Commerce an Office of Trade Adjustment Assistance.
       ``(b) Personnel.--The Office shall be headed by a Director, 
     and shall have such staff as may be necessary to carry out 
     the responsibilities of the Secretary of Commerce described 
     in this chapter.
       ``(c) Functions.--The Office shall assist the Secretary of 
     Commerce in carrying out the Secretary's responsibilities 
     under this chapter.''.
       (b) Conforming Amendment.--The table of contents for the 
     Trade Act of 1974 is amended by inserting after the item 
     relating to section 255, the following new item:

``Sec. 255A. Office of Trade Adjustment Assistance.''.

     SEC. 543. EFFECTIVE DATE.

       The amendments made by this subtitle shall take effect on 
     the earlier of--
       (1) the date of the enactment of this Act; or
       (2) October 1, 2004.

TITLE VI--IMPROVEMENT OF CREDIT FOR HEALTH INSURANCE COSTS OF ELIGIBLE 
                              INDIVIDUALS

     SEC. 601. CLARIFICATION OF 3-MONTH REQUIREMENT OF EXISTING 
                   COVERAGE.

       (a) In General.--Clause (i) of section 35(e)(2)(B) of the 
     Internal Revenue Code of 1986 (defining qualifying 
     individual) is amended by inserting ``(prior to the 
     employment separation necessary to attain the status of an 
     eligible individual)'' after ``9801(c)''.
       (b) Conforming Amendment.--Section 173(f)(2)(B)(ii)(I) of 
     the Workforce Investment Act of 1998 (29 U.S.C. 
     2918(f)(2)(B)(ii)(I)) is amended by inserting ``(prior to the 
     employment separation necessary to attain the status of an 
     eligible individual)'' after ``1986''.
       (c) Effective Date.--The amendments made by this section 
     take effect on the date of enactment of this Act.

     SEC. 602. DISREGARD OF TAA PRE-CERTIFICATION PERIOD FOR 
                   PURPOSES OF DETERMINING WHETHER THERE IS A 63-
                   DAY LAPSE IN CREDITABLE COVERAGE.

       (a) ERISA Amendment.--Section 701(c)(2) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1181(c)(2)) 
     is amended by adding at the end the following:
       ``(C) TAA-eligible individuals.--
       ``(i) Disregard of pre-certification period.--In the case 
     of a TAA-eligible individual, the period beginning on the 
     date the individual has a TAA-related loss of coverage and 
     ending on the date the individual is certified by the 
     Secretary (or by any person or entity designated by the 
     Secretary) as being eligible for a qualified health insurance 
     costs credit eligibility certificate for purposes of section 
     7527 of the Internal Revenue Code of 1986 shall not be taken 
     into account in determining the continuous period under 
     subparagraph (A).
       ``(ii) Definitions.--The terms `TAA-eligible individual', 
     and `TAA-related loss of coverage' have the meanings given 
     such terms in section 605(b)(4)(C).''.

[[Page S3040]]

       (b) PHSA Amendment.--Section 2701(c)(2) of the Public 
     Health Service Act (42 U.S.C. 300gg(c)(2)) is amended by 
     adding at the end the following:
       ``(C) TAA-eligible individuals.--
       ``(i) Disregard of pre-certification period.--In the case 
     of a TAA-eligible individual, the period beginning on the 
     date the individual has a TAA-related loss of coverage and 
     ending on the date the individual is certified by the 
     Secretary (or by any person or entity designated by the 
     Secretary) as being eligible for a qualified health insurance 
     costs credit eligibility certificate for purposes of section 
     7527 of the Internal Revenue Code of 1986 shall not be taken 
     into account in determining the continuous period under 
     subparagraph (A).
       ``(ii) Definitions.--The terms `TAA-eligible individual', 
     and `TAA-related loss of coverage' have the meanings given 
     such terms in section 2205(b)(4)(C).''.
       (c) IRC Amendment.--Section 9801(c)(2) of the Internal 
     Revenue Code of 1986 (relating to not counting periods before 
     significant breaks in creditable coverage) is amended by 
     adding at the end the following:
       ``(D) TAA-eligible individuals.--
       ``(i) Disregard of pre-certification period.--In the case 
     of a TAA-eligible individual, the period beginning on the 
     date the individual has a TAA-related loss of coverage and 
     ending on the date the individual is certified by the 
     Secretary of Labor (or by any person or entity designated by 
     the Secretary of Labor) as being eligible for a qualified 
     health insurance costs credit eligibility certificate for 
     purposes of section 7527 shall not be taken into account in 
     determining the continuous period under subparagraph (A).
       ``(ii) Definitions.--The terms `TAA-eligible individual', 
     and `TAA-related loss of coverage' have the meanings given 
     such terms in section 4980B(f)(5)(C)(iv).''.
       (d) Effective Date.--The amendments made by this section 
     take effect on the date of enactment of this Act.

     SEC. 603. IMPROVEMENT OF THE AFFORDABILITY OF THE CREDIT.

       (a) In General.--Section 35(a) of the Internal Revenue Code 
     of 1986 (relating to credit for health insurance costs of 
     eligible individuals) is amended by striking ``65'' and 
     inserting ``75''.
       (b) Conforming Amendment.--Section 7527(b) of such Code 
     (relating to advance payment of credit for health insurance 
     costs of eligible individuals) is amended by striking ``65'' 
     and inserting ``75''.
       (c) Effective Date.--The amendments made by this section 
     apply to taxable years beginning after December 31, 2004.

     SEC. 604. EXPEDITED REFUND OF CREDIT FOR PRORATED FIRST 
                   MONTHLY PREMIUM.

       (a) In General.--Section 7527 of the Internal Revenue Code 
     of 1986 (relating to advance payment of credit for health 
     insurance costs of eligible individuals) is amended by adding 
     at the end the following:
       ``(e) Expedited Payment of Prorated First Monthly 
     Premium.--The program established under subsection (a) shall 
     provide for payment to a certified individual of an amount 
     equal to the applicable percentage (as defined in section 
     35(a)(2)) of the prorated first monthly premium for coverage 
     of the taxpayer and qualifying family members under qualified 
     health insurance for eligible coverage months upon receipt by 
     the Secretary of evidence of payment of such premium by the 
     certified individual.''.
       (b) Effective Date.--The amendment made by this section 
     takes effect on the date of enactment of this Act.
                                 ______
                                 
  SA 2917. Mr. FEINGOLD submitted an amendment intended to be proposed 
by him to the bill S. 1637, to amend the Internal Revenue Code of 1986 
to comply with the World Trade Organization rulings on the FSC/ETI 
benefit in a manner that preserves jobs and production activities in 
the United States, to reform and simplify the international taxation 
rules of the United States, and for other purposes; which was ordered 
to lie on the table; as follows:

       At the end of the bill, add the following:

                 TITLE V--BUY AMERICAN ACT IMPROVEMENTS

     SEC. 501. SHORT TITLE.

       This title may be cited as the ``Buy American Improvement 
     Act of 2004''.

     SEC. 502. REQUIREMENTS FOR WAIVERS.

       (a) In General.--Section 2 of the Buy American Act (41 
     U.S.C. 10a) is amended--
       (1) by striking ``Notwithstanding'' and inserting the 
     following:
        ``(a) In General.--Notwithstanding''; and
       (2) by adding at the end the following:
       ``(b) Special Rules.--The following rules shall apply in 
     carrying out the provisions of subsection (a):
       ``(1) Public interest waiver.--A determination that it is 
     not in the public interest to enter into a contract in 
     accordance with this Act may not be made after a notice of 
     solicitation of offers for the contract is published in 
     accordance with section 18 of the Office of Federal 
     Procurement Policy Act (41 U.S.C. 416) and section 8(e) of 
     the Small Business Act (15 U.S.C. 637(e)).
       ``(2) Domestic bidder.--A Federal agency entering into a 
     contract shall give preference to a company submitting an 
     offer on the contract that manufactures in the United States 
     the article, material, or supply for which the offer is 
     solicited, if--
       ``(A) that company's offer is substantially the same as an 
     offer made by a company that does not manufacture the 
     article, material, or supply in the United States; or
       ``(B) that company is the only company that manufactures in 
     the United States the article, material, or supply for which 
     the offer is solicited.
       ``(3) Use outside the united states.--
       ``(A) In general.--Subsection (a) shall apply without 
     regard to whether the articles, materials, or supplies to be 
     acquired are for use outside the United States if the 
     articles, materials, or supplies are not needed on an urgent 
     basis or if they are acquired on a regular basis.
       ``(B) Cost analysis.--In any case where the articles, 
     materials, or supplies are to be acquired for use outside the 
     United States and are not needed on an urgent basis, before 
     entering into a contract an analysis shall be made of the 
     difference in the cost for acquiring the articles, materials, 
     or supplies from a company manufacturing the articles, 
     materials, or supplies in the United States (including the 
     cost of shipping) and the cost for acquiring the articles, 
     materials, or supplies from a company manufacturing the 
     articles, materials, or supplies outside the United States 
     (including the cost of shipping).
       ``(4) Domestic availability.--The head of a Federal agency 
     may not make a determination under subsection (a) that an 
     article, material, or supply is not mined, produced, or 
     manufactured, as the case may be, in the United States in 
     sufficient and reasonably available commercial quantities and 
     of satisfactory quality, unless the head of the agency has 
     conducted a study and, on the basis of such study, determined 
     that--
       ``(A) domestic production cannot be initiated to meet the 
     procurement needs; and
       ``(B) a comparable article, material, or supply is not 
     available from a company in the United States.
       ``(c) Reports.--
       ``(1) In general.--Not later than 60 days after the end of 
     each fiscal year, the head of each Federal agency shall 
     submit to Congress a report on the acquisitions that were 
     made of articles, materials, or supplies by the agency in 
     that fiscal year from entities that manufacture the articles, 
     materials, or supplies outside the United States.
       ``(2) Content of report.--The report for a fiscal year 
     under paragraph (1) shall separately indicate the following 
     information:
       ``(A) The dollar value of any articles, materials, or 
     supplies that were manufactured outside the United States.
       ``(B) An itemized list of all waivers granted with respect 
     to such articles, materials, or supplies under this Act.
       ``(C) A summary of--
       ``(i) the total procurement funds expended on articles, 
     materials, and supplies manufactured inside the United 
     States; and
       ``(ii) the total procurement funds expended on articles, 
     materials, and supplies manufactured outside the United 
     States.
       ``(3) Public availability.--The head of each Federal agency 
     submitting a report under paragraph (1) shall make the report 
     publicly available by posting on an Internet website.''.
       (b) Definitions.--Section 1 of the Buy American Act (41 
     U.S.C. 10c) is amended by striking subsection (c) and 
     inserting the following:
       ``(c) Federal Agency.--The term `Federal agency' means any 
     executive agency (as defined in section 4(1) of the Federal 
     Procurement Policy Act (41 U.S.C. 403(1))) or any 
     establishment in the legislative or judicial branch of the 
     Government.''.
       (c) Conforming Amendments.--
       (1) Section 2 of the Buy American Act (41 U.S.C. 10a) is 
     amended by striking ``department or independent 
     establishment'' and inserting ``Federal agency''.
       (2) Section 3 of such Act (41 U.S.C. 10b) is amended--
       (A) by striking ``department or independent establishment'' 
     in subsection (a), and inserting ``Federal agency''; and
       (B) by striking ``department, bureau, agency, or 
     independent establishment'' in subsection (b) and inserting 
     ``Federal agency''.
       (3) Section 633 of the National Military Establishment 
     Appropriations Act, 1950 (41 U.S.C. 10d) is amended by 
     striking ``department or independent establishment'' and 
     inserting ``Federal agency''.

     SEC. 503. GAO REPORT AND RECOMMENDATIONS.

       (a) Requirement for Report.--
       (1) In general.--Not later than 6 months after the date of 
     enactment of this Act, the Comptroller General of the United 
     States shall report to Congress recommendations for 
     determining, for purposes of applying the waiver provision of 
     section 2(a) of the Buy American Act--
       (A) unreasonable cost; and
       (B) inconsistent with the public interest.
       (2) Report to include recommended definitions.--The report 
     shall include recommendations for a statutory definition of 
     unreasonable cost and standards for determining inconsistency 
     with the public interest.
       (b) Waiver Procedures.--The report described in subsection 
     (a) shall also include recommendations for establishing 
     procedures for applying the waiver provisions of the Buy 
     American Act that can be consistently applied.

     SEC. 504. DUAL-USE TECHNOLOGIES.

       The head of a Federal agency (as defined in section 1(c) of 
     the Buy American Act (as amended by section 502)) may not 
     enter into a contract, nor permit a subcontract under a 
     contract of the Federal agency, with a foreign entity that 
     involves giving the foreign

[[Page S3041]]

     entity plans, manuals, or other information that would 
     facilitate the manufacture of a dual-use item on the Commerce 
     Control List unless approval for providing such plans, 
     manuals, or information has been obtained in accordance with 
     the provisions of the Export Administration Act of 1979 (50 
     U.S.C. App. 2401 et seq.) and the Export Administration 
     Regulations (15 C.F.R. part 730 et seq.).
                                 ______
                                 
  SA 2918. Mrs. CLINTON submitted an amendment intended to be proposed 
by her to the bill S. 1637, to amend the Internal Revenue Code of 1986 
to comply with the World Trade Organization rulings on the FSC/ETI 
benefit in a manner that preserves jobs and production activities in 
the United States, to reform and simplify the international taxation 
rules of the United States, and for other purposes; which was ordered 
to lie on the table; as follows:

       At the appropriate place, insert the following:

     SEC. __. TRANSMISSION OF PERSONALLY IDENTIFIABLE INFORMATION 
                   TO FOREIGN AFFILIATES OR SUBCONTRACTORS.

       (a) Definitions.--As used in this section, the following 
     definitions shall apply:
       (1) Business enterprise.--The term ``business enterprise'' 
     means any organization, association, or venture established 
     to make a profit.
       (2) Country with adequate privacy protection.--The term 
     ``country with adequate privacy protection'' means a country 
     that has been certified by the Federal Trade Commission as 
     having a legal system that provides adequate privacy 
     protection for personally identifiable information.
       (3) Health care business.--The term ``health care 
     business'' means any business enterprise or private, 
     nonprofit organization that collects or retains personally 
     identifiable information about consumers in relation to 
     medical care, including--
       (A) hospitals;
       (B) health maintenance organizations;
       (C) medical partnerships;
       (D) emergency medical transportation companies;
       (E) medical transcription companies; and
       (F) subcontractors, or potential subcontractors, of the 
     entities described in subparagraphs (A) through (E).
       (4) Personally identifiable information.--The term 
     ``personally identifiable information'' includes--
       (A) name;
       (B) bank account information;
       (C) social security number;
       (D) address;
       (E) telephone number;
       (F) passwords;
       (G) mother's maiden name; and
       (H) age.
       (b) Transmission of Information.--
       (1) In general.--A business enterprise may transmit 
     personally identifiable information regarding a citizen of 
     the United States to any foreign affiliate or subcontractor 
     located in a country that is a country with adequate privacy 
     protection.
       (2) Consent required.--A business enterprise may not 
     transmit personally identifiable information regarding a 
     citizen of the United States to any foreign affiliate or 
     subcontractor located outside of the United States unless--
       (A) the business enterprise discloses to the citizen 
     whether the country to which the information will be 
     transmitted has been certified under subsection (d);
       (B) the business enterprise obtains consent from the 
     citizen, before a consumer relationship is established or 
     before the effective date of this section, to transmit such 
     information to such foreign affiliate or subcontractor; and
       (C) the consent referred to in subparagraph (B) is renewed 
     by the citizen within 1 year before such information is 
     transmitted.
       (3) Liability.--A business enterprise shall be liable for 
     any damages arising from the improper storage, duplication, 
     sharing, or other misuse of personally identifiable 
     information by the business enterprise or by any of its 
     foreign affiliates or subcontractors that received such 
     information from the business enterprise.
       (4) Rulemaking.--The Chairman of the Federal Trade 
     Commission shall promulgate regulations through which the 
     Chairman may enforce the provisions of this subsection and 
     impose a fine for a violation of this subsection.
       (c) Health Care Information.--
       (1) In general.--A health care business shall be liable for 
     any damages arising from the improper storage, duplication, 
     sharing, or other misuse of personally identifiable 
     information by the business enterprise or by any of its 
     foreign affiliates or subcontractors that received such 
     information from the business enterprise.
       (2) No opt out provision.--A health care business may not 
     terminate an existing relationship with a consumer of health 
     care services to avoid the consent requirement under 
     subsection (b)(2).
       (3) Rulemaking.--The Secretary of Health and Human Services 
     shall promulgate regulations through which the Secretary may 
     enforce the provisions of this subsection and impose a fine 
     for the violation of this subsection.
       (d) Certification.--Not later than 6 months after the date 
     of enactment of this Act, the Federal Trade Commission 
     shall--
       (1) certify those countries that have legal systems that 
     provide adequate privacy protection for personally 
     identifiable information; and
       (2) make the list of countries certified under paragraph 
     (1) available to the general public.
       (e) Effective Date.--This section shall take effect on the 
     date which is 90 days after the date of enactment of this 
     Act.
                                 ______
                                 
  SA 2919. Mr. DORGAN submitted an amendment intended to be proposed by 
him to the bill S. 1637, to amend the Internal Revenue Code of 1986 to 
comply with the World Trade Organization rulings on the FSC/ETI benefit 
in a manner that preserves jobs and production activities in the United 
States, to reform and simplify the international taxation rules of the 
United States, and for other purposes; which was ordered to lie on the 
table; as follows:

       At the end add the following:

     SEC. __. REFUNDABLE CREDIT FOR ACTIVATED MILITARY RESERVISTS.

       (a) In General.--Subpart C of part IV of subchapter A of 
     chapter 1 is amended by redesignating section 36 as section 
     37 and by inserting after section 35 the following new 
     section:

     ``SEC. 36. WAGE DIFFERENTIAL FOR ACTIVATED RESERVISTS.

       ``(a) In General.--In the case of a qualified reservist, 
     there shall be allowed as a credit against the tax imposed by 
     this subtitle an amount equal to the qualified active duty 
     wage differential of such qualified reservist for the taxable 
     year.
       ``(b) Qualified Active Duty Wage Differential.--For 
     purposes of this section--
       ``(1) In general.--The term `qualified active duty wage 
     differential' means the daily wage differential of the 
     qualified active duty reservist multiplied by the number of 
     days such qualified reservist participates in qualified 
     reserve component duty during the taxable year, including 
     time spent in a travel status.
       ``(2) Daily wage differential.--The daily wage differential 
     is an amount equal to the lesser of--
       ``(A) the excess of--
       ``(i) the qualified reservist's average daily qualified 
     compensation, over
       ``(ii) the qualified reservist's average daily military pay 
     while participating in qualified reserve component duty to 
     the exclusion of the qualified reservist's normal employment 
     duties, or
       ``(B) $54.80.
       ``(3) Average daily qualified compensation.--
       ``(A) In general.--The term `average daily qualified 
     compensation' means--
       ``(i) the qualified compensation of the qualified reservist 
     for the one-year period ending on the day before the date the 
     qualified reservist begins qualified reserve component duty, 
     divided by
       ``(ii) 365.
       ``(B) Qualified compensation.--The term `qualified 
     compensation' means--
       ``(i) compensation which is normally contingent on the 
     qualified reservist's presence for work and which would be 
     includible in gross income, and
       ``(ii) compensation which is not characterized by the 
     qualified reservist's employer as vacation or holiday pay, or 
     as sick leave or pay, or as any other form of pay for a 
     nonspecific leave of absence.
       ``(4) Average daily military pay and allowances.--
       ``(A) In general.--The term `average daily military pay and 
     allowances' means--
       ``(i) the amount paid to the qualified reservist during the 
     taxable year as military pay and allowances on account of the 
     qualified reservist's participation in qualified reserve 
     component duty, determined as of the date the qualified 
     reservists begins qualified reserve component duty, divided 
     by
       ``(ii) the total number of days the qualified reservist 
     participates in qualified reserve component duty during the 
     taxable year, including time spent in travel status.
       ``(B) Military pay and allowances.--The term `military pay' 
     means pay as that term is defined in section 101(21) of title 
     37, United States Code, and the term `allowances' means the 
     allowances payable to a member of the Armed Forces of the 
     United States under chapter 7 of that title.
       ``(5) Qualified reserve component duty.--The term 
     `qualified reserve component duty' means--
       ``(A) active duty performed, as designated in the 
     reservist's military orders, in support of a contingency 
     operation as defined in section 101(a)(13) of title 10, 
     United States Code, or
       ``(B) full-time National Guard duty (as defined in section 
     101(19) of title 32, United States Code) which is ordered 
     pursuant to a request by the President,
     for a period under 1 or more orders described in subparagraph 
     (A) or (B) of more than 90 consecutive days.
       ``(c) Qualified Reservist.--For purposes of this section--
       ``(1) In general.--The term `qualified reservist' means an 
     individual who is engaged in normal employment and is a 
     member of--
       ``(A) the National Guard (as defined by section 101(c)(1) 
     of title 10, United States Code), or
       ``(B) the Ready Reserve (as defined by section 10142 of 
     title 10, United States Code).

[[Page S3042]]

       ``(2) Normal employment.--The term `normal employment 
     duties' includes self-employment.
       ``(d) Disallowance With Respect to Persons Ordered to 
     Active Duty for Training.--No credit shall be allowed under 
     subsection (a) to a qualified reservist who is called or 
     ordered to active duty for any of the following types of 
     duty:
       ``(1) Active duty for training under any provision of title 
     10, United States Code.
       ``(2) Training at encampments, maneuvers, outdoor target 
     practice, or other exercises under chapter 5 of title 32, 
     United States Code.
       ``(3) Full-time National Guard duty, as defined in section 
     101(d)(5) of title 10, United States Code.
       ``(e) Credit Included in Gross Income.--Gross income 
     includes the amount of the credit allowed the taxpayer under 
     this section.''.
       (b) Conforming Amendments.--
       (1) 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''.
       (2) The table of sections for subpart C of part IV of 
     chapter 1 is amended by striking the last item and inserting 
     the following new items:

``Sec. 36. Wage differential for activated reservists.
``Sec. 37. Overpayments of tax.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.
                                 ______
                                 
  SA 2920. Mr. DORGAN submitted an amendment intended to be proposed by 
him to the bill S. 1637, to amend the Internal Revenue Code of 1986 to 
comply with the World Trade Organization rulings on the FSC/ETI benefit 
in a manner that preserves jobs and production activities in the United 
States, to reform and simplify the international taxation rules of the 
United States, and for other purposes; which was ordered to lie on the 
table; as follows:

       At the end add the following:

     SEC. __. ADDITIONAL 2-YEAR EXTENSION OF WIND ENERGY 
                   PRODUCITON CREDIT.

       (a) In General.--Section 45(c)(3)(a) (relating to wind 
     facility), as amended by this Act, is amended by striking 
     ``January 1, 2005'' and inserting ``January 1, 2007''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to electricity sold after December 31, 2003, in 
     taxable years ending after such date.
                                 ______
                                 
  SA 2921. Mr. DORGAN submitted an amendment intended to be proposed by 
him to the bill S. 1637, to amend the Internal Revenue Code of 1986 to 
comply with the World Trade Organization rulings on the FSC/ETI benefit 
in a manner that preserves jobs and production activities in the United 
States, to reform and simplify the international taxation rules of the 
United States, and for other purposes; which was ordered to lie on the 
table; as follows:

         On page 179, after line 25, add the following:

     SEC. __. MODIFICATION OF INCOME REQUIREMENT FOR CENSUS TRACTS 
                   WITHIN HIGH MIGRATION RURAL COUNTIES.

       (a) In general.--Section 45D(e) (relating to low-income 
     community) is amended by adding at the end the following new 
     paragraph:
       ``(4) Modification of income requirement for census tracts 
     within high migration rural counties.--
       ``(A) In general.--In the case of a population census tract 
     located within a high migration rural county, paragraph 
     (1)(B)(i) shall be applied by substituting `85 percent' for 
     `80 percent'.
       ``(B) High migration rural county.--For purposes of this 
     paragraph, the term `high migration rural county' means any 
     county which, during the 20-year period ending on December 
     31, 2000, has a net out-migration of inhabitants from the 
     county of at least 10-percent of the population of the county 
     at the beginning of such period.''.
       (b) Effective Date.--The amendment made by this section 
     shall take effect as if included in the amendment made by 
     section 121(a) of the Community Renewal Tax Relief Act of 
     2000.
                                 ______
                                 
  SA 2922. Mr. DORGAN (for himself, Ms. Mikulski, Mr. Kohl, Mr. 
Kennedy, Mr. Edwards, Mr. Feingold, and Mr. Harkin) submitted an 
amendment intended to be proposed by him to the bill S. 1637, to amend 
the Internal Revenue Code of 1986 to comply with the World Trade 
Organization rulings on the FSC/ETI benefit in a manner that preserves 
jobs and production activities in the United States, to reform and 
simplify the international taxation rules of the United States, and for 
other purposes; which was ordered to lie on the table; as follows:

       On page 330, between lines 6 and 7, insert the following:

     SEC. __. TAXATION OF INCOME OF CONTROLLED FOREIGN 
                   CORPORATIONS ATTRIBUTABLE TO IMPORTED PROPERTY.

       (a) General Rule.--Subsection (a) of section 954 (defining 
     foreign base company 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 adding 
     at the end the following new paragraph:
       ``(6) imported property income for the taxable year 
     (determined under subsection (j) and reduced as provided in 
     subsection (b)(5)).''
       (b) Definition of Imported Property Income.--Section 954 is 
     amended by adding at the end the following new subsection:
       ``(j) Imported Property Income.--
       ``(1) In general.--For purposes of subsection (a)(6), the 
     term `imported property income' means income (whether in the 
     form of profits, commissions, fees, or otherwise) derived in 
     connection with--
       ``(A) manufacturing, producing, growing, or extracting 
     imported property,
       ``(B) the sale, exchange, or other disposition of imported 
     property, or
       ``(C) the lease, rental, or licensing of imported property.

     Such term shall not include any foreign oil and gas 
     extraction income (within the meaning of section 907(c)) or 
     any foreign oil related income (within the meaning of section 
     907(c)).
       ``(2) Imported property.--For purposes of this subsection--
       ``(A) In general.--Except as otherwise provided in this 
     paragraph, the term `imported property' means property which 
     is imported into the United States by the controlled foreign 
     corporation or a related person.
       ``(B) Imported property includes certain property imported 
     by unrelated persons.--The term `imported property' includes 
     any property imported into the United States by an unrelated 
     person if, when such property was sold to the unrelated 
     person by the controlled foreign corporation (or a related 
     person), it was reasonable to expect that--
       ``(i) such property would be imported into the United 
     States, or
       ``(ii) such property would be used as a component in other 
     property which would be imported into the United States.
       ``(C) Exception for property subsequently exported.--The 
     term `imported property' does not include any property which 
     is imported into the United States and which--
       ``(i) before substantial use in the United States, is sold, 
     leased, or rented by the controlled foreign corporation or a 
     related person for direct use, consumption, or disposition 
     outside the United States, or
       ``(ii) is used by the controlled foreign corporation or a 
     related person as a component in other property which is so 
     sold, leased, or rented.
       ``(3) Definitions and special rules.--
       ``(A) Import.--For purposes of this subsection, the term 
     `import' means entering, or withdrawal from warehouse, for 
     consumption or use. Such term includes any grant of the right 
     to use intangible property (as defined in section 
     936(h)(3)(B)) in the United States.
       ``(B) Unrelated person.--For purposes of this subsection, 
     the term `unrelated person' means any person who is not a 
     related person with respect to the controlled foreign 
     corporation.
       ``(C) Coordination with foreign base company sales 
     income.--For purposes of this section, the term `foreign base 
     company sales income' shall not include any imported property 
     income.''
       (c) Separate Application of Limitations on Foreign Tax 
     Credit for Imported Property Income.--
       (1) In general.--Paragraph (1) of section 904(d) (relating 
     to separate application of section with respect to certain 
     categories of income) is amended by striking ``and'' at the 
     end of subparagraph (H), by redesignating subparagraph (I) as 
     subparagraph (J), and by inserting after subparagraph (H) the 
     following new subparagraph:
       ``(I) imported property income, and''.
       (2) Imported property income defined.--Paragraph (2) of 
     section 904(d) is amended by redesignating subparagraphs (H) 
     and (I) as subparagraphs (I) and (J), respectively, and by 
     inserting after subparagraph (G) the following new 
     subparagraph:
       ``(H) Imported property income.--The term `imported 
     property income' means any income received or accrued by any 
     person which is of a kind which would be imported property 
     income (as defined in section 954(j)).''
       (3) Look-thru rules to apply.--Subparagraph (F) of section 
     904(d)(3) is amended by striking ``or (E)'' and inserting 
     ``(E), or (I)''.
       (d) Technical Amendments.--
       (1) Clause (iii) of section 952(c)(1)(B) (relating to 
     certain prior year deficits may be taken into account) is 
     amended--
       (A) by redesignating subclauses (III), (IV), (V), and (VI) 
     as subclauses (IV), (V), (VI), and (VII), and
       (B) by inserting after subclause (II) the following new 
     subclause:
       ``(III) imported property income,''.
       (2) Paragraph (5) of section 954(b) (relating to deductions 
     to be taken into account) is amended by striking ``and the 
     foreign base company oil related income'' and inserting ``the 
     foreign base company oil related income, and the imported 
     property income''.
       (e) Effective Date.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to taxable years 
     of foreign corporations beginning after the date of

[[Page S3043]]

     the enactment of this Act, and to taxable years of United 
     States shareholders within which or with which such taxable 
     years of such foreign corporations end.
       (2) Subsection (c).--The amendments made by subsection (c) 
     shall apply to taxable years beginning after such date of 
     enactment.
       (f) Sense of the Senate.--It is the sense of the Senate 
     that any increase in revenues in the Treasury resulting from 
     the amendments made by this section should be applied to 
     reduce the phasein of the deduction relating to income 
     attributable to domestic production activities under section 
     199 of the Internal Revenue Code of 1986 (as added by section 
     102 of this Act).
                                 ______
                                 
  SA 2923. Mr. DORGAN submitted an amendment intended to be proposed by 
him to the bill S. 1637, to amend the Internal Revenue Code of 1986 to 
comply with the World Trade Organization rulings on the FSC/ETI benefit 
in a manner that preserves jobs and production activities in the United 
States, to reform and simplify the international taxation rules of the 
United States, and for other purposes; which was ordered to lie on the 
table; as follows:

         On page 179, after line 25, add the following:

     SEC. __. TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT 
                   ACCOUNTS FOR CHARITABLE PURPOSES.

       (a) In General.--Subsection (d) of section 408 (relating to 
     individual retirement accounts) is amended by adding at the 
     end the following new paragraph:
       ``(8) Distributions for charitable purposes.--
       ``(A) In general.--No amount shall be includible in gross 
     income by reason of a qualified charitable distribution.
       ``(B) Qualified charitable distribution.--For purposes of 
     this paragraph, the term `qualified charitable distribution' 
     means any distribution from an individual retirement 
     account--
       ``(i) which is made directly by the trustee--

       ``(I) to an organization described in section 170(c), or
       ``(II) to a split-interest entity, and

       ``(ii) which is made on or after--

       ``(I) in the case of any distribution described in clause 
     (i)(I), the date that the individual for whose benefit the 
     account is maintained has attained age 70\1/2\, and
       ``(II) in the case of any distribution described in clause 
     (i)(II), the the date that such individual has attained age 
     59\1/2\.

     A distribution shall be treated as a qualified charitable 
     distribution only to the extent that the distribution would 
     be includible in gross income without regard to subparagraph 
     (A) and, in the case of a distribution to a split-interest 
     entity, only if no person holds an income interest in the 
     amounts in the split-interest entity attributable to such 
     distribution other than one or more of the following: the 
     individual for whose benefit such account is maintained, the 
     spouse of such individual, or any organization described in 
     section 170(c).
       ``(C) Contributions must be otherwise deductible.--For 
     purposes of this paragraph--
       ``(i) Direct contributions.--A distribution to an 
     organization described in section 170(c) shall be treated as 
     a qualified charitable distribution only if a deduction for 
     the entire distribution would be allowable under section 170 
     (determined without regard to subsection (b) thereof and this 
     paragraph).
       ``(ii) Split-interest gifts.--A distribution to a split-
     interest entity shall be treated as a qualified charitable 
     distribution only if a deduction for the entire value of the 
     interest in the distribution for the use of an organization 
     described in section 170(c) would be allowable under section 
     170 (determined without regard to subsection (b) thereof and 
     this paragraph).
       ``(D) Application of section 72.--Notwithstanding section 
     72, in determining the extent to which a distribution is a 
     qualified charitable distribution, the entire amount of the 
     distribution shall be treated as includible in gross income 
     without regard to subparagraph (A) to the extent that such 
     amount does not exceed the aggregate amount which would have 
     been so includible if all amounts were distributed from all 
     individual retirement accounts treated as 1 contract under 
     paragraph (2)(A) for purposes of determining the inclusion on 
     such distribution under section 72. Proper adjustments shall 
     be made in applying section 72 to other distributions in such 
     taxable year and subsequent taxable years.
       ``(E) Special rules for split-interest entities.--
       ``(i) Charitable remainder trusts.--Notwithstanding section 
     664(b), distributions made from a trust described in 
     subparagraph (G)(i) shall be treated as ordinary income in 
     the hands of the beneficiary to whom is paid the annuity 
     described in section 664(d)(1)(A) or the payment described in 
     section 664(d)(2)(A).
       ``(ii) Pooled income funds.--No amount shall be includible 
     in the gross income of a pooled income fund (as defined in 
     subparagraph (G)(ii)) by reason of a qualified charitable 
     distribution to such fund, and all distributions from the 
     fund which are attributable to qualified charitable 
     distributions shall be treated as ordinary income to the 
     beneficiary.
       ``(iii) Charitable gift annuities.--Qualified charitable 
     distributions made for a charitable gift annuity shall not be 
     treated as an investment in the contract.
       ``(F) Denial of deduction.--Qualified charitable 
     distributions shall not be taken into account in determining 
     the deduction under section 170.
       ``(G) Split-interest entity defined.--For purposes of this 
     paragraph, the term `split-interest entity' means--
       ``(i) a charitable remainder annuity trust or a charitable 
     remainder unitrust (as such terms are defined in section 
     664(d)) which must be funded exclusively by qualified 
     charitable distributions,
       ``(ii) a pooled income fund (as defined in section 
     642(c)(5)), but only if the fund accounts separately for 
     amounts attributable to qualified charitable distributions, 
     and
       ``(iii) a charitable gift annuity (as defined in section 
     501(m)(5)).''.
       (b) Modifications Relating to Information Returns by 
     Certain Trusts.--
       (1) Returns.--Section 6034 (relating to returns by trusts 
     described in section 4947(a)(2) or claiming charitable 
     deductions under section 642(c)) is amended to read as 
     follows:

     ``SEC. 6034. RETURNS BY TRUSTS DESCRIBED IN SECTION 
                   4947(A)(2) OR CLAIMING CHARITABLE DEDUCTIONS 
                   UNDER SECTION 642(C).

       ``(a) Trusts Described in Section 4947(a)(2).--Every trust 
     described in section 4947(a)(2) shall furnish such 
     information with respect to the taxable year as the Secretary 
     may by forms or regulations require.
       ``(b) Trusts Claiming a Charitable Deduction Under Section 
     642(c).--
       ``(1) In general.--Every trust not required to file a 
     return under subsection (a) but claiming a deduction under 
     section 642(c) for the taxable year shall furnish such 
     information with respect to such taxable year as the 
     Secretary may by forms or regulations prescribe, including--
       ``(A) the amount of the deduction taken under section 
     642(c) within such year,
       ``(B) the amount paid out within such year which represents 
     amounts for which deductions under section 642(c) have been 
     taken in prior years,
       ``(C) the amount for which such deductions have been taken 
     in prior years but which has not been paid out at the 
     beginning of such year,
       ``(D) the amount paid out of principal in the current and 
     prior years for the purposes described in section 642(c),
       ``(E) the total income of the trust within such year and 
     the expenses attributable thereto, and
       ``(F) a balance sheet showing the assets, liabilities, and 
     net worth of the trust as of the beginning of such year.
       ``(2) Exceptions.--Paragraph (1) shall not apply to a trust 
     for any taxable year if--
       ``(A) all the net income for such year, determined under 
     the applicable principles of the law of trusts, is required 
     to be distributed currently to the beneficiaries, or
       ``(B) the trust is described in section 4947(a)(1).''.
       (2) Increase in penalty relating to filing of information 
     return by split-interest trusts.--Paragraph (2) of section 
     6652(c) (relating to returns by exempt organizations and by 
     certain trusts) is amended by adding at the end the following 
     new subparagraph:
       ``(C) Split-interest trusts.--In the case of a trust which 
     is required to file a return under section 6034(a), 
     subparagraphs (A) and (B) of this paragraph shall not apply 
     and paragraph (1) shall apply in the same manner as if such 
     return were required under section 6033, except that--
       ``(i) the 5 percent limitation in the second sentence of 
     paragraph (1)(A) shall not apply,
       ``(ii) in the case of any trust with gross income in excess 
     of $250,000, the first sentence of paragraph (1)(A) shall be 
     applied by substituting `$100' for `$20', and the second 
     sentence thereof shall be applied by substituting `$50,000' 
     for `$10,000', and
       ``(iii) the third sentence of paragraph (1)(A) shall be 
     disregarded.

     In addition to any penalty imposed on the trust pursuant to 
     this subparagraph, if the person required to file such return 
     knowingly fails to file the return, such penalty shall also 
     be imposed on such person who shall be personally liable for 
     such penalty.''.
       (3) Confidentiality of noncharitable beneficiaries.--
     Subsection (b) of section 6104 (relating to inspection of 
     annual information returns) is amended by adding at the end 
     the following new sentence: ``In the case of a trust which is 
     required to file a return under section 6034(a), this 
     subsection shall not apply to information regarding 
     beneficiaries which are not organizations described in 
     section 170(c).''.
       (c) Effective Dates.--
       (1) Subsection (a).--The amendment made by subsection (a) 
     shall apply to distributions--
       (A) described in section 408(d)(8)(B)(i)(I) of the Internal 
     Revenue Code of 1986, as added by this section, made after 
     the date of the enactment of this Act, and
       (B) described in section 408(d)(8)(B)(i)(II) of such Code, 
     as so added, made after December 31, 2003.
       (2) Subsection (b).--The amendments made by subsection (b) 
     shall apply to returns for taxable years beginning after 
     December 31, 2003.
                                 ______
                                 
  SA 2924. Mr. DORGAN (for himself, Mr. Coleman, Ms. Cantwell, Mrs. 
Murray, Mr. Bingaman, and Mr. Nelson of Nebraska) submitted an 
amendment intended to be proposed by him

[[Page S3044]]

to the bill S. 1637, to amend the Internal Revenue Code of 1986 to 
comply with the World Trade Organization rulings on the FSC/ETI benefit 
in a manner that preserves jobs and production activities in the United 
States, to reform and simplify the international taxation rules of the 
United States, and for other purposes; which was ordered to lie on the 
table; as follows:

       At the end add the following:

     SEC. __. EXTENSION AND EXPANSION OF CREDIT FOR ELECTRICITY 
                   PRODUCED FROM CERTAIN RENEWABLE RESOURCES.

       (a) Expansion of Qualified Energy Resources.--Subsection 
     (c) of section 45 (relating to electricity produced from 
     certain renewable resources) is amended to read as follows:
       ``(c) Qualified Energy Resources.--For purposes of this 
     section--
       ``(1) In general.--The term `qualified energy resources' 
     means--
       ``(A) wind,
       ``(B) closed-loop biomass,
       ``(C) open-loop biomass,
       ``(D) geothermal energy,
       ``(E) solar energy,
       ``(F) small irrigation power, and
       ``(G) municipal solid waste.
       ``(2) Closed-loop biomass.--The term `closed-loop biomass' 
     means any organic material from a plant which is planted 
     exclusively for purposes of being used at a qualified 
     facility to produce electricity.
       ``(3) Open-loop biomass.--
       ``(A) In general.--The term `open-loop biomass' means--
       ``(i) any agricultural livestock waste nutrients, or
       ``(ii) any solid, nonhazardous, cellulosic waste material 
     which is segregated from other waste materials and which is 
     derived from--

       ``(I) any of the following forest-related resources: mill 
     and harvesting residues, precommercial thinnings, slash, and 
     brush,
       ``(II) solid wood waste materials, including waste pallets, 
     crates, dunnage, manufacturing and construction wood wastes 
     (other than pressure-treated, chemically-treated, or painted 
     wood wastes), and landscape or right-of-way tree trimmings, 
     but not including municipal solid waste, gas derived from the 
     biodegradation of solid waste, or paper which is commonly 
     recycled, or
       ``(III) agriculture sources, including orchard tree crops, 
     vineyard, grain, legumes, sugar, and other crop by-products 
     or residues.

     Such term shall not include closed-loop biomass.
       ``(B) Agricultural livestock waste nutrients.--
       ``(i) In general.--The term `agricultural livestock waste 
     nutrients' means agricultural livestock manure and litter, 
     including wood shavings, straw, rice hulls, and other bedding 
     material for the disposition of manure.
       ``(ii) Agricultural livestock.--The term `agricultural 
     livestock' includes bovine, swine, poultry, and sheep.
       ``(4) Geothermal energy.--The term `geothermal energy' 
     means energy derived from a geothermal deposit (within the 
     meaning of section 613(e)(2)).
       ``(5) Small irrigation power.--The term `small irrigation 
     power' means power--
       ``(A) generated without any dam or impoundment of water 
     through an irrigation system canal or ditch, and
       ``(B) the nameplate capacity rating of which is not less 
     than 150 kilowatts but is less than 5 megawatts.
       ``(6) Municipal solid waste.--The term `municipal solid 
     waste' has the meaning given the term `solid waste' under 
     section 2(27) of the Solid Waste Disposal Act (42 U.S.C. 
     6903).''.
       (b) Extension and Expansion of Qualified Facilities.--
       (1) In general.--Section 45 is amended by redesignating 
     subsection (d) as subsection (e) and by inserting after 
     subsection (c) the following new subsection:
       ``(d) Qualified Facilities.--For purposes of this section--
       ``(1) Wind facility.--In the case of a facility using wind 
     to produce electricity, the term `qualified facility' means 
     any facility owned by the taxpayer which is originally placed 
     in service after December 31, 1993, and before January 1, 
     2007.
       ``(2) Closed-loop biomass facility.--
       ``(A) In general.--In the case of a facility using closed-
     loop biomass to produce electricity, the term `qualified 
     facility' means any facility--
       ``(i) owned by the taxpayer which is originally placed in 
     service after December 31, 1992, and before January 1, 2007, 
     or
       ``(ii) owned by the taxpayer which before January 1, 2007, 
     is originally placed in service and modified to use closed-
     loop biomass to co-fire with coal, with other biomass, or 
     with both, but only if the modification is approved under the 
     Biomass Power for Rural Development Programs or is part of a 
     pilot project of the Commodity Credit Corporation as 
     described in 65 Fed. Reg. 63052.
       ``(B) Special rules.--In the case of a qualified facility 
     described in subparagraph (A)(ii)--
       ``(i) the 10-year period referred to in subsection (a) 
     shall be treated as beginning no earlier than January 1, 
     2004,
       ``(ii) the amount of the credit determined under subsection 
     (a) with respect to the facility shall be an amount equal to 
     the amount determined without regard to this clause 
     multiplied by the ratio of the thermal content of the closed-
     loop biomass used in such facility to the thermal content of 
     all fuels used in such facility, and
       ``(iii) if the owner of such facility is not the producer 
     of the electricity, the person eligible for the credit 
     allowable under subsection (a) shall be the lessee or the 
     operator of such facility.
       ``(3) Open-loop biomass facilities.--
       ``(A) In general.--In the case of a facility using open-
     loop biomass to produce electricity, the term `qualified 
     facility' means any facility owned by the taxpayer which--
       ``(i) in the case of a facility using agricultural 
     livestock waste nutrients--

       ``(I) is originally placed in service after December 31, 
     2003, and before January 1, 2007, and
       ``(II) the nameplate capacity rating of which is not less 
     than 150 kilowatts, and

       ``(ii) in the case of any other facility, is originally 
     placed in service before January 1, 2007.
       ``(B) Credit eligibility.--In the case of any facility 
     described in subparagraph (A), if the owner of such facility 
     is not the producer of the electricity, the person eligible 
     for the credit allowable under subsection (a) shall be the 
     lessee or the operator of such facility.
       ``(4) Geothermal or solar energy facility.--In the case of 
     a facility using geothermal or solar energy to produce 
     electricity, the term `qualified facility' means any facility 
     owned by the taxpayer which is originally placed in service 
     after December 31, 2003, and before January 1, 2007. Such 
     term shall not include any property described in section 
     48(a)(3) the basis of which is taken into account by the 
     taxpayer for purposes of determining the energy credit under 
     section 48.
       ``(5) Small irrigation power facility.--In the case of a 
     facility using small irrigation power to produce electricity, 
     the term `qualified facility' means any facility owned by the 
     taxpayer which is originally placed in service after December 
     31, 2003, and before January 1, 2007.
       ``(6) Landfill gas facilities.--In the case of a facility 
     producing electricity from gas derived from the 
     biodegradation of municipal solid waste, the term `qualified 
     facility' means any facility owned by the taxpayer which is 
     originally placed in service after December 31, 2003, and 
     before January 1, 2007.
       ``(7) Trash combustion facilities.--In the case of a 
     facility which burns municipal solid waste to produce 
     electricity, the term `qualified facility' means any facility 
     or unit owned by the taxpayer which is originally placed in 
     service after December 31, 2003, and before January 1, 
     2007.''.
       (2) Conforming amendment.--Section 45(e) of such Code, as 
     so redesignated, is amended by striking ``subsection 
     (c)(3)(A)'' in paragraph (7)(A)(i) and inserting ``subsection 
     (d)(1)''.
       (c) Special Credit Rate and Period for Electricity Produced 
     and Sold After Enactment Date.--Section 45(b) is amended by 
     adding at the end the following new paragraph:
       ``(4) Credit rate and period for electricity produced and 
     sold from certain facilities.--
       ``(A) Credit rate.--In the case of electricity produced and 
     sold after the date of the enactment of this paragraph at any 
     qualified facility described in paragraph (3), (5), (6), or 
     (7) of subsection (d), the amount in effect under subsection 
     (a)(1) for any calendar year beginning with the calendar year 
     in which such date occurs (determined before the application 
     of the last sentence of paragraph (2) of this subsection) 
     shall be reduced by one-third.
       ``(B) Credit period.--
       ``(i) In general.--Except as provided in clause (ii), in 
     the case of any facility described in paragraph (3), (4), 
     (5), (6), or (7) of subsection (d), the 5-year period 
     beginning on the date the facility was originally placed in 
     service shall be substituted for the 10-year period in 
     subsection (a)(2)(A)(ii).
       ``(ii) Certain open-loop biomass facilities.--In the case 
     of any facility described in subsection (d)(3)(A)(ii) placed 
     in service before January 1, 2004, the 5-year period 
     beginning on January 1, 2004, shall be substituted for the 
     10-year period in subsection (a)(2)(A)(ii).''.
       (d) Coordination With Section 48.--Section 48(a)(3) 
     (relating to defining energy property) is amended by adding 
     at the end the following new sentence: ``Such term shall not 
     include any property which is part of a facility the 
     production from which is allowed as a credit under section 45 
     for the taxable year or any prior taxable year.''.
       (e) Credit Allowed Against Regular and Minimum Tax.--
       (1) In general.--Subsection (c) of section 38 (relating to 
     limitation based on amount of tax) is amended by 
     redesignating paragraph (4) as paragraph (5) and by inserting 
     after paragraph (3) the following new paragraph:
       ``(4) Special rules for section 45 credit.--
       ``(A) In general.--In the case of any section 45 credit--
       ``(i) this section and section 39 shall be applied 
     separately with respect to such credit, and
       ``(ii) in applying paragraph (1) to such credit--

       ``(I) the tentative minimum tax shall be treated as being 
     zero, and
       ``(II) the limitation under paragraph (1) (as modified by 
     subclause (I)) shall be reduced by the credit allowed under 
     subsection (a) for

[[Page S3045]]

     the taxable year (other than the section 45 credit).

       ``(B) Section 45 credit.--For purposes of this subsection, 
     the term `section 45 credit' means the credit determined 
     under section 45 to the extent that such credit is 
     attributable to electricity produced--
       ``(i) at a facility which is originally placed in service 
     after the date of the enactment of this paragraph, and
       ``(ii) during the 4-year period beginning on the date that 
     such facility was originally placed in service.''.
       (2) Conforming amendments.--
       (A) Paragraph (2)(A)(ii)(II) of section 38(c) of such Code 
     is amended by striking ``or'' and inserting a comma and by 
     inserting ``, and the section 45 credit'' after ``employee 
     credit''.
       (B) Paragraph (3)(A)(ii)(II) of section 38(c) of such Code 
     is amended by inserting ``and the section 45 credit'' after 
     ``employee credit''.
       (f) Elimination of Certain Credit Reductions.--Section 
     45(b)(3)(A) (relating to credit reduced for grants, tax-
     exempt bonds, subsidized energy financing, and other credits) 
     is amended--
       (1) by striking clause (ii),
       (2) by redesignating clauses (iii) and (iv) as clauses (ii) 
     and (iii),
       (3) by inserting ``(other than proceeds of an issue of 
     State or local government obligations the interest on which 
     is exempt from tax under section 103, or any loan, debt, or 
     other obligation incurred under subchapter I of chapter 31 of 
     title 7 of the Rural Electrification Act of 1936 (7 U.S.C. 
     901 et seq.), as in effect on the date of the enactment of 
     the Energy Tax Incentives Act of 2003)'' after ``project'' in 
     clause (ii) (as so redesignated),
       (4) by adding at the end the following new sentence: ``This 
     paragraph shall not apply with respect to any facility 
     described in subsection (d)(2)(A)(ii).'', and
       (5) by striking ``tax-exempt bonds,'' in the heading and 
     inserting ``certain''.
       (g) Treatment of Persons Not Able To Use Entire Credit.--
     Section 45(e) (relating to definitions and special rules), as 
     redesignated by subsection (b)(1), is amended by adding at 
     the end the following new paragraph:
       ``(8) Treatment of persons not able to use entire credit.--
       ``(A) Allowance of credit.--
       ``(i) In general.--Except as otherwise provided in this 
     subsection--

       ``(I) any credit allowable under subsection (a) with 
     respect to a qualified facility owned by a person described 
     in clause (ii) may be transferred or used as provided in this 
     paragraph, and
       ``(II) the determination as to whether the credit is 
     allowable shall be made without regard to the tax-exempt 
     status of the person.

       ``(ii) Persons described.--A person is described in this 
     clause if the person is--

       ``(I) an organization described in section 501(c)(12)(C) 
     and exempt from tax under section 501(a),
       ``(II) an organization described in section 1381(a)(2)(C),
       ``(III) a public utility (as defined in section 
     136(c)(2)(B)), which is exempt from income tax under this 
     subtitle,
       ``(IV) any State or political subdivision thereof, the 
     District of Columbia, any possession of the United States, or 
     any agency or instrumentality of any of the foregoing, or

       ``(V) any Indian tribal government (within the meaning of 
     section 7871) or any agency or instrumentality thereof.

       ``(B) Transfer of credit.--
       ``(i) In general.--A person described in subparagraph 
     (A)(ii) may transfer any credit to which subparagraph (A)(i) 
     applies through an assignment to any other person not 
     described in subparagraph (A)(ii). Such transfer may be 
     revoked only with the consent of the Secretary.
       ``(ii) Regulations.--The Secretary shall prescribe such 
     regulations as necessary to ensure that any credit described 
     in clause (i) is assigned once and not reassigned by such 
     other person.
       ``(iii) Transfer proceeds treated as arising from essential 
     government function.--Any proceeds derived by a person 
     described in subclause (III), (IV), or (V) of subparagraph 
     (A)(ii) from the transfer of any credit under clause (i) 
     shall be treated as arising from the exercise of an essential 
     government function.
       ``(C) Use of credit as an offset.--Notwithstanding any 
     other provision of law, in the case of a person described in 
     subclause (I), (II), or (V) of subparagraph (A)(ii), any 
     credit to which subparagraph (A)(i) applies may be applied by 
     such person, to the extent provided by the Secretary of 
     Agriculture, as a prepayment of any loan, debt, or other 
     obligation the entity has incurred under subchapter I of 
     chapter 31 of title 7 of the Rural Electrification Act of 
     1936 (7 U.S.C. 901 et seq.), as in effect on the date of the 
     enactment of the Energy Tax Incentives Act.
       ``(D) Credit not income.--Any transfer under subparagraph 
     (B) or use under subparagraph (C) of any credit to which 
     subparagraph (A)(i) applies shall not be treated as income 
     for purposes of section 501(c)(12).
       ``(E) Treatment of unrelated persons.--For purposes of 
     subsection (a)(2)(B), sales of electricity among and between 
     persons described in subparagraph (A)(ii) shall be treated as 
     sales between unrelated parties.''.
       (h) Effective Dates.--
       (1) In general.--Except as otherwise provided in this 
     subsection, the amendments made by this section shall apply 
     to electricity produced and sold after December 31, 2003, in 
     taxable years ending after such date.
       (2) Certain biomass facilities.--With respect to any 
     facility described in section 45(d)(3)(A)(ii) of the Internal 
     Revenue Code of 1986, as added by subsection (b)(1), which is 
     placed in service before January 1, 2004, the amendments made 
     by this section shall apply to electricity produced and sold 
     after December 31, 2003, in taxable years ending after such 
     date.
       (3) Credit rate and period for new facilities.--The 
     amendments made by subsection (c) shall apply to electricity 
     produced and sold after the date of the enactment of this 
     Act, in taxable years ending after such date.
       (4) Nonapplication of amendments to preeffective date 
     poultry waste facilities.--The amendments made by this 
     section shall not apply with respect to any poultry waste 
     facility (within the meaning of section 45(c)(3)(C), as in 
     effect on the day before the date of the enactment of this 
     Act) placed in service before January 1, 2004.
       (5) Credit allowed against regular and minimum tax.--The 
     amendments made by subsection (e) shall apply to taxable 
     years ending after the date of the enactment of this Act.
       (i) GAO Study.--The Comptroller General of the United 
     States shall conduct a study on the market viability of 
     producing electricity from resources with respect to which 
     credit is allowed under section 45 of the Internal Revenue 
     Code of 1986 but without such credit. In the case of open-
     loop biomass and municipal solid waste resources, the study 
     should take into account savings associated with not having 
     to dispose of such resources. In conducting such study, the 
     Comptroller shall estimate the dollar value of the 
     environmental impact of producing electricity from such 
     resources relative to producing electricity from fossil fuels 
     using the latest generation of technology. Not later than 
     June 30, 2006, the Comptroller shall report on such study to 
     the Committee on Ways and Means of the House of 
     Representatives and the Committee on Finance of the Senate.

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