[Congressional Record (Bound Edition), Volume 149 (2003), Part 16]
[House]
[Pages 22215-22272]
[From the U.S. Government Publishing Office, www.gpo.gov]




                     CHARITABLE GIVING ACT OF 2003

  Mr. LINDER. Mr. Speaker, by direction of the Committee on Rules, I 
call up House Resolution 370 and ask for its immediate consideration.
  The Clerk read the resolution, as follows:

                              H. Res. 370

       Resolved, That upon the adoption of this resolution it 
     shall be in order without intervention of any point of order 
     to consider in the House the bill (H.R. 7) to amend the 
     Internal Revenue Code of 1986 to provide incentives for 
     charitable contributions by individuals and businesses, and 
     for other purposes. The bill shall be considered as read for 
     amendment. The amendment in the nature of a substitute 
     recommended by the Committee on Ways and Means now printed in 
     the bill, modified by the amendment printed in part A of the 
     report of the Committee on Rules accompanying this 
     resolution, shall be considered as adopted. The previous 
     question shall be considered as ordered on the bill, as 
     amended, and on any further amendment thereto to final 
     passage without intervening motion except: (1) one hour of 
     debate on the bill, as amended, equally divided and 
     controlled by the chairman and ranking minority member of the 
     Committee on Ways and Means; (2) the amendment printed in 
     part B of the report of the Committee on Rules, if offered by 
     Representative Cardin of Maryland or his designee, which 
     shall be in order without intervention of any point of order, 
     shall be considered as read, and shall be separately 
     debatable for one hour equally divided and controlled by the 
     proponent and an opponent; and (3) one motion to recommit 
     with or without instructions.

  The SPEAKER pro tempore. The gentleman from Georgia (Mr. Linder) is 
recognized for 1 hour.
  Mr. LINDER. Mr. Speaker, for the purpose of debate only, I yield the 
customary 30 minutes to the gentlewoman from New York (Ms. Slaughter), 
pending which I yield myself such time as I may consume. During 
consideration of this resolution, all time yielded is for the purpose 
of debate only.
  Mr. Speaker, H. Res. 370 is a modified, closed rule that provides one 
hour

[[Page 22216]]

of debate in the House, equally divided and controlled by the chairman 
and ranking minority member of the Committee on Ways and Means. H. Res. 
370 waives all points of order against consideration of the bill. It 
provides that the amendment in the nature of a substitute recommended 
by the Committee on Ways and Means, as modified by the amendment 
printed in Part A of the Committee on Rules report accompanying the 
resolution, shall be considered as adopted.
  The rule also provides for the consideration of the amendment in the 
nature of a substitute printed in Part B of the Committee on Rules 
report, if offered by the gentleman from Maryland (Mr. Cardin) or his 
designee, which shall be considered as read, shall be debatable for one 
hour equally divided and controlled by the proponent and an opponent. 
The rule waives all points of order against the amendment printed in 
Part B of the report.
  Finally, H. Res. 370 provides one motion to recommit, with or without 
instructions.
  Mr. Speaker, I urge my colleagues to join me in approving this fair 
and balanced rule, so that the full House can proceed to consider the 
underlying bipartisan charitable giving legislation.
  The basic thrust of H.R. 7 is to make a number of changes to the Tax 
Code in order to provide incentives for individuals and businesses to 
make charitable contributions. I suspect that we would all agree that 
the Tax Code should not discourage taxpayers or businesses from seeking 
to help others. H.R. 7 is designed to ensure that charitable 
contributions of many different kinds can flourish by providing a 
variety of tax incentives for people and employers to help those in 
need. I applaud the hard work and leadership of my friend and 
colleague, the majority whip, the gentleman from Missouri (Mr. Blunt), 
and his principal Democrat cosponsor, the gentleman from Tennessee (Mr. 
Ford), in bringing this legislation to the House floor today.
  I urge my colleagues on both sides of the aisle to join me in voting 
for this rule so that we can move on to consideration of the underlying 
legislation.
  Mr. Speaker, I reserve the balance of my time.
  Ms. SLAUGHTER. Mr. Speaker, I thank the gentleman from Georgia (Mr. 
Linder) for yielding me the customary 30 minutes, and I yield myself 
such time as I may consume.
  Mr. Speaker, I am pleased the body is considering legislation to 
increase tax incentives for charitable donations. Charitable 
organizations across the country are responsible for improving the 
lives of individuals and entire communities. These dedicated, hard-
working groups provide shelter to those without homes, provide food and 
clothing to families in need, and care for the sick and the dying. They 
work with our children, providing opportunities for them to develop 
through art and music programs, teaching them to read, and so much 
more.
  In east Buffalo, the tenacity and leadership of Sister Mary Johnice 
and others created the Response to Love Center. This community outreach 
center is a family center. The thrift shop clothes the needy. The 
kitchen feeds the hungry. The food pantry stretches families' thin 
budgets. The food stamp worker helps those in need to fill out the 
applications. The visiting nurse takes blood pressures and addresses 
health care issues with a client. It is right and good that this body 
seeks to support these great works by increasing the donations of 
individuals and community-minded companies.
  I am also gratified that the bill before us today is without 
provisions allowing religious organizations that receive Federal funds 
to discriminate. Discrimination is not charitable. Discrimination 
should neither be allowed nor encouraged, particularly by the Federal 
Government. The invidious evil of discrimination erodes groups' 
charitable mission.
  During these bad economic times, when millions of jobs have been lost 
and millions of people suffer unemployment, the demand for the 
charitable work rises.
  It is my hope that this legislation will provide additional 
assistance to meet the additional demand. The women and men who lost 
jobs at local manufacturing plants are not the only ones suffering. The 
Federal Government's fiscal house is in complete disorder. The enormous 
tax giveaways to millionaires and the mounting costs of rebuilding Iraq 
are draining the Federal coffers, and the ailing economy has yet to 
generate enough revenue. In fact, the budget deficit for this fiscal 
year is going to be over $400 billion, and the deficit for next year 
should be around $500 billion, one-half trillion. The predicted $5.6 
billion surplus has become an anticipated $2.3 trillion deficit.
  So how are we going to pay for the $12.7 billion cost of this bill? 
H.R. 7 does not address this issue, but the Democrat substitute does, 
fortunately. The substitute amendment would add revenue offsets by 
closing tax loopholes and curtailing abusive tax shelters. It would 
even increase funding for community programs that, among other things, 
prevent child abuse and provide child care to low-income families. This 
is a fiscally responsible approach for encouraging charitable giving 
and providing assistance to vulnerable families during these 
particularly difficult times.
  Mr. Speaker, I want to express my personal displeasure and sorrow 
that the Committee on Rules did not make in order the amendment by my 
colleague, the gentlewoman from New York (Mrs. Maloney) that would have 
forgiven the one-time tax on the CDBG grants for the businesses in 
Lower Manhattan who suffered so much on 9/11.
  Mr. Speaker, I reserve the balance of my time.
  Mr. LINDER. Mr. Speaker, I reserve the balance of my time.
  Ms. SLAUGHTER. Mr. Speaker, I yield 6 minutes to the gentlewoman from 
New York (Mrs. Maloney).
  Mrs. MALONEY. Mr. Speaker, I thank the gentlewoman for yielding me 
this time and for her leadership on so many important issues before 
this body.
  I rise in strong support of the underlying bill, but in opposition to 
this closed rule, a rule that does not allow a straight up-or-down vote 
on an amendment that the New York delegation supported that would not 
have taxed grants to individuals and businesses that suffered because 
of 9/11. It is really beyond me to understand why the majority 
continues to block efforts to correct what is an injustice and why they 
continue to unfairly tax the victims of 9/11. We have heard many 
discussions before this body on taxes, taxes that they want to 
eliminate and make permanent, on estate taxes, on this, that, and the 
other. Well, now the majority has found a tax that they do like, and 
that is taxing the people who took a hit for the country, the victims 
of 9/11.
  I want to share with my colleagues that this is the latest in a 
series of actions by the New York delegation. The New York delegation 
has written the IRS and the Secretary of the Treasury. We have written 
the President. We have written to the Speaker of the House, the 
gentleman from Illinois (Mr. Hastert), and the leadership of the other 
body. We have introduced bipartisan legislation. The Committee on Ways 
and Means is aware of the challenge, and the Congressional Research 
Service has issued a memo on this unfair tax.
  We went in front of the Committee on Rules before and tried to add it 
as an amendment to H.R. 1308, the increased child tax credit bill. And 
just last week, the gentleman from New York (Mr. Nadler) and myself 
tried to add this amendment to the Transportation-Treasury bill, and it 
was ruled not germane. But in the Committee on Rules last night, when 
they discussed it, the Parliamentarian had made a statement that it was 
entirely germane and could have been taken up by this body.

                              {time}  1145

  So the end results continue to remain that the victims of 9/11 are 
still being taxed, and it is just unfair for these cash-strapped 
individuals and businesses to take another financial hit from this 
disaster, a financial hit

[[Page 22217]]

that the Joint Committee on Taxation estimated to be over $268 million.
  The IRS is taking back $268 million in Federal aid that the President 
pledged to New York City and Congress appropriated. We should be 
sending aid to victims, not taking it away.
  The IRS decision has also had a ripple effect on other Federal 
benefits that survivors of 9/11 may receive. Since many agencies rely 
on the IRS's definition of gross income, some recipients' eligibility 
for programs like Medicare, Medicaid and Social Security, these 
programs likewise may be in jeopardy and taxed.
  I would like to bring it down to what it means to an individual life 
with my constituents. I would like to take the example of Olga Diaz. 
She was the owner of a hair salon in the World Trade Center. She 
estimates that she lost $300,000 in the attacks and received a Federal 
grant of $37,000, a fraction of her loss. She now owes over $10,000. 
She owes a third of her grant of $37,000 back to the Federal 
Government. And she states that she learned about the taxation of the 
grant ``after I invested it in rebuilding my business and I am now 
struggling to find ways to pay.''
  Mr. STARK. Mr. Speaker, will the gentlewoman yield?
  Mrs. MALONEY. I yield to the gentleman from California.
  Mr. STARK. Mr. Speaker, I would ask, how much was the New York 
delegation asking, does the gentlewoman recall, for the help of the 9/
11 victims?
  Mrs. MALONEY. We, as a body, as the gentleman knows, appropriated and 
approved with the President $21.4 billion.
  My office issued a report along with the Speaker of the City Council 
last week that 7 billion of those dollars have come to New York City, 
and that allocated or planned is roughly $19 billion. So we are short 
from the $21 billion.
  Mr. STARK. So that was over 10?
  Mrs. MALONEY. Yes.
  Mr. STARK. So that would be about 200 million a year that you are 
short. I wondered if the gentlewoman was aware that in this bill there 
is $61 million for the State of Washington and the Weyerhaeuser Timber 
Corporation to do a kind of experiment in how to save trees by cutting 
them down, and none of the other States were allowed to participate in 
this, including New York State where they have major timber and pulp. 
So all through this bill there are special little interests gifts. 
Think of the Weyerhaeuser Timber Corporation and how badly they need an 
extra $61 million as compared to the people of 9/11.
  Mrs. MALONEY. Reclaiming my time, I am outraged by this information. 
I thank the gentleman for letting me know about it. Certainly investing 
in human lives and trying to make them whole again after they have lost 
so much, in my opinion, is far more important than a timber subsidy.
  I repeat, $268 million is being taken from the individuals and the 
businesses, most of which are small businesses, back into the Federal 
government. And to make matters worse, the IRS did not tell these 
people until the eve of the tax date so that they spent the money, as 
Mrs. Olga Diaz did, investing in trying to get her business going 
again. Now they are coming in and taking a third of her grant, which is 
just a fraction of the grant that was owed to her in her $300,000 loss.
  So this is very unfair, and I do not believe that it is the intent of 
this body to tax these grants. I hope that in a subsequent bill or 
amendment it will be made in order or the bill from the delegation may 
come to the floor to correct this.
  Mr. LINDER. Mr. Speaker, I yield such time as he may consume to the 
gentleman from California (Mr. Dreier), the chairman of the Committee 
on Rules.
  Mr. DREIER. Mr. Speaker, I thank my friend for yielding me time and I 
rise in strong support of this rule.
  As we all know, this rule does in fact make in order the Democratic 
substitute, which was offered by the gentleman from Maryland (Mr. 
Cardin), and I believe that the rule itself should enjoy broad 
bipartisan support as I hope at the end of the day the legislation 
will.
  This is bipartisan legislation authored by our good friend, the 
gentleman from Missouri (Mr. Blunt), the distinguished majority whip, 
and the gentleman from Tennessee (Mr. Ford), who have worked forming a 
bipartisan compromise on this. I will say that the goal is a very 
simple one, and that is to encourage greater philanthropy in 
contribution.
  My friend, the gentleman from Georgia (Mr. Linder), regularly points 
to the fact that people in this country were contributing large amounts 
before the Internal Revenue Code was put into place in 1913, and we do 
have many people who do step up and voluntarily provide large 
contributions. We have a lot of foundations that, frankly, do not take 
the tax ramifications of their contributions into consideration. But 
there are also incentives that do exist and we need to recognize that 
and the idea of saying to people who do not itemize, meaning those who 
are lower, middle income taxpayers, that they should have an 
opportunity to qualify for a deduction for their charitable 
contribution is the right thing to do.
  This measure also goes a long way towards encouraging corporate 
philanthropy by increasing from 10 to 20 percent the cap on corporate 
contributions, so we want to see even greater support from the business 
community.
  Also, the legislation does go a long way towards addressing private 
foundations, and I think that is an important thing and it deals with 
the 5 percent minimum for contributions and distributions from those 
private foundations.
  Mr. Speaker, I think that we have here a piece of legislation which 
will allow us to do something that is very important. We have so many 
people looking to the Federal Government to provide assistance in a 
wide range of areas and we, according to Article I, Section 7 of the 
Constitution, have the responsibility to appropriate dollars. It seems 
to me that rather than constantly focusing on appropriating the hard 
earned tax dollars of the American people, what we should do is we 
should provide an incentive for every American to participate 
philanthropically by making contributions to meet societal needs that 
are out there, and I believe that H.R. 7 will go a long way in our 
quest to do just that.
  I urge my colleagues to support the rule and to support the 
underlying legislation at the end of the day so that we once again can 
get even more and more people involved in the very, very important 
decision making process of meeting the needs in their communities and 
in our Nation.
  Ms. SLAUGHTER. Mr. Speaker, I yield 1 minute to the gentleman from 
North Carolina (Mr. Watt).
  Mr. WATT. Mr. Speaker, I thank the gentlewoman for yielding me time.
  Mr. Speaker, I will say that I am not a member of the Committee on 
Ways and Means so I thought I would take this opportunity to say what I 
have to say on the rule itself.
  There are some things in this bill that cause me some heartburn and 
there are some things in this bill that I think are very valuable. And 
I am not sure exactly which one is taking precedence for me on the bill 
itself, but I did want to thank the Committee on Ways and Means for 
addressing a concern that had been raised about the administrative 
expense part of this bill by the Morehead Foundation, which is a major 
scholarship giving foundation in North Carolina. The Committee on Ways 
and Means addressed their concern, and I wanted to acknowledge that and 
thank them for doing that.
  Mr. LINDER. Mr. Speaker, I yield 2 minutes to the gentleman from New 
York (Mr. Houghton), our colleague on the Committee on Ways and Means.
  Mr. HOUGHTON. Mr. Speaker, I thank the gentleman for yielding me 
time.
  Mr. Speaker, I want to encourage my fellow Members to support H.R. 7. 
There are lots of provisions in the bill which I think are good and I 
appreciate the comments by the former speaker in terms of what the 
Committee on Ways and Means has done; but there is a particular 
provision that would help many Americans who are literally struggling 
to stay alive.

[[Page 22218]]

  This provision would expand the current deductions to all businesses, 
not just C corporations, and I believe this expansion would 
substantially increase the donation of food to food banks and other 
organizations. It is that simple.
  What these groups do is to provide the obviously daily nourishment to 
homeless and others that are down on their luck and just cannot provide 
for all their needs themselves.
  The bill also includes the provisions of H.R. 807. This is something 
that I introduced with the gentleman from Georgia (Mr. Lewis) and 
previous to last year Tony Hall. As many know, Tony Hall is now in Rome 
doing a wonderful job for the United Nations agencies for food and 
agriculture.
  But this bill would open up the deduction for all businesses, as I 
mentioned earlier, not just the larger corporations, and allow those 
businesses a deduction for the fair-market value of the food at the 
time they donate it.
  This is a good provision. I urge everybody to support the bill.
  Ms. SLAUGHTER. Mr. Speaker, I yield 2 minutes to the gentlewoman from 
Texas (Ms. Jackson-Lee).
  Ms. JACKSON-LEE of Texas. Mr. Speaker, I thank the distinguished 
gentlewoman for yielding me time. I thank the members of the Committee 
of Ways and Means for bringing this debate of H.R. 7 to the floor of 
the House.
  Let me first of all add my support to the Cardin substitute. It is an 
equalizing substitute in terms of adding to this legislation a 
provision to restore the Social Services block grant funding level to 
$2.8 billion from $1.7 billion. It helps to support the State, local 
government and community based organization programs intended for the 
same population as the foundations benefiting from the tax provision 
that we are now providing or discussing on the floor of the House; 
additionally, as the entire cost is offset with a set of corporate 
loophole closures similar to those included in other House Democratic 
substitutes.
  Let me also say that I would hope that in the weeks to come that we 
could discuss on the floor of the House the repeal of the President's 
very, if you will, misdirected tax cut in the light of the need for 
funding for our soldiers in Iraq and as well in light of the very huge 
budget crisis that we have.
  We are bringing this bill to the floor because we are trying to help 
people. We are trying to create an opportunity for smaller businesses 
and others to be able to give monies to these social agencies in order 
to provide for a better quality of life.
  Well, Mr. Speaker, I think we can start right here in the United 
States Congress to create an opportunity for a better quality of life 
by immediately repealing the President's tax cut so that we can in fact 
fund the necessary resources that are needed for our troops, and, as 
well, that we can provide the social services that our appropriators 
are now struggling to provide because they are in a crisis as to the 
amount of dollars that we will have.
  Mr. Speaker, I think that the Cardin substitute is a great 
enhancement of H.R. 7. I rise to support that substitute and certainly 
will consider its impact on H.R. 7 as I consider my vote on this 
legislation dealing with the Charitable Giving Act of 2003.
  Mr. LINDER. Mr. Speaker, does the gentlewoman from New York (Ms. 
Slaughter) have any further speakers?
  Ms. SLAUGHTER. Mr. Speaker, I did have speakers requesting time but 
they are not on the floor.
  Mr. LINDER. Is the gentlewoman prepared to yield back?
  Ms. SLAUGHTER. Mr. Speaker, I yield back the balance of my time.
  Mr. LINDER. Mr. Speaker, I yield back the balance of my time, and I 
move the previous question on the resolution.
  The previous question was ordered.
  The resolution was agreed to.
  A motion to reconsider was laid on the table.

                              {time}  1200

  Mr. THOMAS. Mr. Speaker, pursuant to House Resolution 370, I call up 
the bill (H.R. 7) to amend the Internal Revenue Code of 1986 to provide 
incentives for charitable contributions by individuals and businesses, 
and for other purposes, and ask for its immediate consideration.
  The Clerk read the title of the bill.
  The SPEAKER pro tempore (Mr. Thornberry). Pursuant to House 
Resolution 370, the bill is considered read for amendment.
  The text of H.R. 7 is, as follows:

                                 H.R. 7

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

     SECTION 1. SHORT TITLE; ETC.

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

Sec. 1. Short title; etc.

                 TITLE I--CHARITABLE GIVING INCENTIVES

Sec. 101. Deduction for portion of charitable contributions to be 
              allowed to individuals who do not itemize deductions.
Sec. 102. Tax-free distributions from individual retirement plans for 
              charitable purposes.
Sec. 103. Increase in cap on corporate charitable contributions.
Sec. 104. Charitable deduction for contributions of food inventory.
Sec. 105. Reform of certain excise taxes related to private 
              foundations.
Sec. 106. Excise tax on unrelated business taxable income of charitable 
              remainder trusts.
Sec. 107. Expansion of charitable contribution allowed for scientific 
              property used for research and for computer technology 
              and equipment used for educational purposes.
Sec. 108. Adjustment to basis of S corporation stock for certain 
              charitable contributions.

     TITLE II--TAX REFORM AND IMPROVEMENTS RELATING TO CHARITABLE 
                       ORGANIZATIONS AND PROGRAMS

Sec. 201. Suspension of tax-exempt status of terrorist organizations.
Sec. 202. Clarification of definition of church tax inquiry.
Sec. 203. Expansion of declaratory judgment remedy to tax-exempt 
              organizations.
Sec. 204. Landowner incentives programs.
Sec. 205. Modifications to section 512(b)(13).
Sec. 206. Simplification of lobbying expenditure limitation.
Sec. 207. Permitted holdings of private foundation where corporation is 
              publicly traded and publicly controlled.

                      TITLE III--OTHER PROVISIONS

Sec. 301. Compassion capital fund.
Sec. 302. Reauthorization of assets for independence demonstration.
Sec. 303. Sense of the Congress regarding corporate contributions to 
              faith-based organizations, etc.
Sec. 304. Maternity group homes.

                 TITLE I--CHARITABLE GIVING INCENTIVES

     SEC. 101. DEDUCTION FOR PORTION OF CHARITABLE CONTRIBUTIONS 
                   TO BE ALLOWED TO INDIVIDUALS WHO DO NOT ITEMIZE 
                   DEDUCTIONS.

       (a) In General.--Section 170 (relating to charitable, etc., 
     contributions and gifts) is amended by redesignating 
     subsection (m) as subsection (n) and by inserting after 
     subsection (l) the following new subsection:
       ``(m) Deduction for Individuals Not Itemizing Deductions.--
       ``(1) In general.--In the case of an individual who does 
     not itemize deductions for any taxable year, there shall be 
     taken into account as a direct charitable deduction under 
     section 63 an amount equal to the amount allowable under 
     subsection (a) for the taxable year for cash contributions 
     (determined without regard to any carryover), to the extent 
     that such contributions exceed $250 ($500 in the case of a 
     joint return) but do not exceed $500 ($1,000 in the case of a 
     joint return).
       ``(2) Termination.--This subsection shall not apply to any 
     taxable year beginning after December 31, 2005.''.
       (b) Direct Charitable Deduction.--
       (1) In general.--Subsection (b) of section 63 (defining 
     taxable income) is amended by striking ``and'' at the end of 
     paragraph (1), by striking the period at the end of paragraph 
     (2) and inserting ``, and'', and by adding at the end the 
     following new paragraph:
       ``(3) the direct charitable deduction.''.
       (2) Definition.--Section 63 is amended by redesignating 
     subsection (g) as subsection (h) and by inserting after 
     subsection (f) the following new subsection:
       ``(g) Direct Charitable Deduction.--For purposes of this 
     section, the term `direct charitable deduction' means that 
     portion of

[[Page 22219]]

     the amount allowable under section 170(a) which is taken as a 
     direct charitable deduction for the taxable year under 
     section 170(m).''.
       (3) Conforming amendment.--Subsection (d) of section 63 is 
     amended by striking ``and'' at the end of paragraph (1), by 
     striking the period at the end of paragraph (2) and inserting 
     ``, and'', and by adding at the end the following new 
     paragraph:
       ``(3) the direct charitable deduction.''.
       (c) Study.--
       (1) In general.--The Secretary of the Treasury shall study 
     the effect of the amendments made by this section on 
     increased charitable giving and taxpayer compliance, 
     including a comparison of taxpayer compliance between 
     taxpayers who itemize their charitable contributions and 
     taxpayers who claim a direct charitable deduction.
       (2) Report.--By not later than December 31, 2005, the 
     Secretary of the Treasury shall report on the study required 
     under paragraph (1) to the Committee on Finance of the Senate 
     and the Committee on Ways and Means of the House of 
     Representatives.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 102. TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT 
                   PLANS FOR CHARITABLE PURPOSES.

       (a) In General.--Subsection (d) of section 408 (relating to 
     individual retirement accounts) is amended by adding at the 
     end the following new paragraph:
       ``(8) Distributions for charitable purposes.--
       ``(A) In general.--No amount shall be includible in gross 
     income by reason of a qualified charitable distribution.
       ``(B) Qualified charitable distribution.--For purposes of 
     this paragraph, the term `qualified charitable distribution' 
     means any distribution from an individual retirement plan--
       ``(i) which is made on or after the date that the 
     individual for whose benefit the plan is maintained has 
     attained age 70 \1/2\, and
       ``(ii) which is made directly by the trustee--

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

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

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

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

     In addition to any penalty imposed on the trust pursuant to 
     this subparagraph, if the person required to file such return 
     knowingly fails to file the return, such penalty shall also 
     be imposed on such person who shall be personally liable for 
     such penalty.''.
       (3) Confidentiality of noncharitable beneficiaries.--
     Subsection (b) of section 6104 (relating to inspection of 
     annual information returns) is amended by adding at the end 
     the following new sentence: ``In the case of a trust which is 
     required to file a return under section 6034(a), this 
     subsection shall not apply to information regarding 
     beneficiaries which are not organizations described in 
     section 170(c).''.
       (c) Effective Dates.--
       (1) Subsection (a).--The amendment made by subsection (a) 
     shall apply to distributions made after December 31, 2003.
       (2) Subsection (b).--The amendments made by subsection (b) 
     shall apply to returns for taxable years beginning after 
     December 31, 2003.

     SEC. 103. INCREASE IN CAP ON CORPORATE CHARITABLE 
                   CONTRIBUTIONS.

       (a) In General.--Paragraph (2) of section 170(b) (relating 
     to corporations) is amended by striking ``10 percent'' and 
     inserting ``the applicable percentage''.
       (b) Applicable Percentage.--Subsection (b) of section 170 
     is amended by adding at the end the following new paragraph:
       ``(3) Applicable percentage defined.--For purposes of 
     paragraph (2), the applicable percentage shall be determined 
     in accordance with the following table:


[[Page 22220]]


``For taxable years beginning in calendarThe applicable percentage is--
      2004..........................................................11 
      2005..........................................................12 
      2006..........................................................13 
      2007..........................................................14 
      2008 through 2011.............................................15 
      2012 and thereafter........................................20.''.
       (c) Conforming Amendments.--
       (1) Sections 512(b)(10) and 805(b)(2)(A) are each amended 
     by striking ``10 percent'' each place it occurs and inserting 
     ``the applicable percentage (determined under section 
     170(b)(3))''.
       (2) Sections 545(b)(2) and 556(b)(2) are each amended by 
     striking ``10-percent limitation'' and inserting ``applicable 
     percentage limitation''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 104. CHARITABLE DEDUCTION FOR CONTRIBUTIONS OF FOOD 
                   INVENTORY.

       (a) In General.--Paragraph (3) of section 170(e) (relating 
     to special rule for certain contributions of inventory and 
     other property) is amended by redesignating subparagraph (C) 
     as subparagraph (D) and by inserting after subparagraph (B) 
     the following new subparagraph:
       ``(C) Special rule for contributions of food inventory.--
       ``(i) General rule.--In the case of a charitable 
     contribution of food, this paragraph shall be applied--

       ``(I) without regard to whether the contribution is made by 
     a C corporation, and
       ``(II) only for food that is apparently wholesome food.

       ``(ii) Limitation.--In the case of taxpayer other than a C 
     corporation, clause (i) shall not apply to any contribution 
     of apparently wholesome food from a trade or business of the 
     taxpayer to the extent that such contribution exceeds the 
     applicable percentage (within the meaning of subsection 
     (b)(3)) of the amount of net income of the taxpayer from the 
     trade or business with respect to which such food is 
     inventory. For purposes of the preceding sentence, the amount 
     of net income of the taxpayer from a trade or business is the 
     excess of--

       ``(I) the aggregate amount of gross income from such trade 
     or business received or accrued by the taxpayer during the 
     taxable year, over
       ``(II) the aggregate amount of any deductions allocable to 
     such trade or business allowed to the taxpayer under this 
     chapter for the taxable year.

       ``(iii) Determination of fair market value.--In the case of 
     a qualified contribution of apparently wholesome food to 
     which this paragraph applies and which, solely by reason of 
     internal standards of the taxpayer or lack of market, cannot 
     or will not be sold, the fair market value of such food shall 
     be determined by taking into account the price at which the 
     same or substantially the same food items (as to both type 
     and quality) are sold by the taxpayer at the time of the 
     contribution (or, if not so sold at such time, in the recent 
     past).
       ``(iv) Apparently wholesome food.--For purposes of this 
     subparagraph, the term `apparently wholesome food' shall have 
     the meaning given to such term by section 22(b)(2) of the 
     Bill Emerson Good Samaritan Food Donation Act (42 U.S.C. 
     1791(b)(2)), as in effect on the date of the enactment of 
     this subparagraph.''.
       (b) Effective Date.--The amendment made by section shall 
     apply to taxable years beginning after December 31, 2003.

     SEC. 105. REFORM OF CERTAIN EXCISE TAXES RELATED TO PRIVATE 
                   FOUNDATIONS.

       (a) Reduction of Tax on Net Investment Income.--Subsection 
     (a) of section 4940 (relating to excise tax based on 
     investment income) is amended by striking ``2 percent'' and 
     inserting ``1 percent''.
       (b) Repeal of Reduction In Tax Where Private Foundation 
     Meets Certain Distribution Requirements.--Section 4940 is 
     amended by striking subsection (e).
       (c) Modification of Excise Tax on Failure to Distribute 
     Income.--
       (1) Administrative expenses not treated as distributions.--
     Subparagraph (A) of section 4942(g)(1) is amended by striking 
     ``including that portion of reasonable and necessary 
     administrative expenses'' and inserting ``excluding 
     administrative expenses''.
       (2) Exclusion not to apply to certain private 
     foundations.--Paragraph (3) of section 4942(j) is amended--
       (A) by striking ``(within the meaning of paragraph (1) or 
     (2) of subsection (g))'' each place it appears, and
       (B) by inserting at the end the following: ``For purposes 
     of this paragraph, the term `qualifying distributions' means 
     qualifying distributions within the meaning of paragraph (1) 
     or (2) of subsection (g), except that `including that portion 
     of reasonable and necessary administrative expenses' shall be 
     substituted for `excluding administrative expenses' in 
     subsection (g)(1)(A).''.
       (3) Conforming amendment.--Subsection (g) of section 4942 
     is amended by striking paragraph (4).
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 106. EXCISE TAX ON UNRELATED BUSINESS TAXABLE INCOME OF 
                   CHARITABLE REMAINDER TRUSTS.

       (a) In General.--Subsection (c) of section 664 (relating to 
     exemption from income taxes) is amended to read as follows:
       ``(c) Taxation of Trusts.--
       ``(1) Income tax.--A charitable remainder annuity trust and 
     a charitable remainder unitrust shall, for any taxable year, 
     not be subject to any tax imposed by this subtitle.
       ``(2) Excise tax.--
       ``(A) In general.--In the case of a charitable remainder 
     annuity trust or a charitable remainder unitrust that has 
     unrelated business taxable income (within the meaning of 
     section 512, determined as if part III of subchapter F 
     applied to such trust) for a taxable year, there is hereby 
     imposed on such trust or unitrust an excise tax equal to the 
     amount of such unrelated business taxable income.
       ``(B) Certain rules to apply.--The tax imposed by 
     subparagraph (A) shall be treated as imposed by chapter 42 
     for purposes of this title other than subchapter E of chapter 
     42.
       ``(C) Character of distributions and coordination with 
     distribution requirements.--The amounts taken into account in 
     determining unrelated business taxable income (as defined in 
     subparagraph (A)) shall not be taken into account for 
     purposes of--
       ``(i) subsection (b),
       ``(ii) determining the value of trust assets under 
     subsection (d)(2), and
       ``(iii) determining income under subsection (d)(3).
       ``(D) Tax court proceedings.--For purposes of this 
     paragraph, the references in section 6212(c)(1) to section 
     4940 shall be deemed to include references to this 
     paragraph.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 107. EXPANSION OF CHARITABLE CONTRIBUTION ALLOWED FOR 
                   SCIENTIFIC PROPERTY USED FOR RESEARCH AND FOR 
                   COMPUTER TECHNOLOGY AND EQUIPMENT USED FOR 
                   EDUCATIONAL PURPOSES.

       (a) Scientific Property Used for Research.--
       (1) In general.--Clause (ii) of section 170(e)(4)(B) 
     (defining qualified research contributions) is amended by 
     inserting ``or assembled'' after ``constructed''.
       (2) Conforming amendment.--Clause (iii) of section 
     170(e)(4)(B) is amended by inserting ``or assembling'' after 
     ``construction''.
       (b) Computer Technology and Equipment for Educational 
     Purposes.--
       (1) In general.--Clause (ii) of section 170(e)(6)(B) is 
     amended by inserting ``or assembled'' after ``constructed'' 
     and ``or assembling'' after ``construction''.
       (2) Special rule extended.--Section 170(e)(6)(G) is amended 
     by striking ``2003'' and inserting ``2005''.
       (3) Conforming amendments.--Subparagraph (D) of section 
     170(e)(6) is amended by inserting ``or assembled'' after 
     ``constructed'' and ``or assembling'' after ``construction''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 108. ADJUSTMENT TO BASIS OF S CORPORATION STOCK FOR 
                   CERTAIN CHARITABLE CONTRIBUTIONS.

       (a) In General.--Paragraph (2) of section 1367(a) (relating 
     to adjustments to basis of stock of shareholders, etc.) is 
     amended by adding at the end the following new flush 
     sentence:

     ``The decrease under subparagraph (B) by reason of a 
     charitable contribution (as defined in section 170(c)) of 
     property shall be the amount equal to the shareholder's pro 
     rata share of the adjusted basis of such property.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     TITLE II--TAX REFORM AND IMPROVEMENTS RELATING TO CHARITABLE 
                       ORGANIZATIONS AND PROGRAMS

     SEC. 201. SUSPENSION OF TAX-EXEMPT STATUS OF TERRORIST 
                   ORGANIZATIONS.

       (a) In General.--Section 501 (relating to exemption from 
     tax on corporations, certain trusts, etc.) is amended by 
     redesignating subsection (p) as subsection (q) and by 
     inserting after subsection (o) the following new subsection:
       ``(p) Suspension of Tax-Exempt Status of Terrorist 
     Organizations.--
       ``(1) In general.--The exemption from tax under subsection 
     (a) with respect to any organization described in paragraph 
     (2), and the eligibility of any organization described in 
     paragraph (2) to apply for recognition of exemption under 
     subsection (a), shall be suspended during the period 
     described in paragraph (3).
       ``(2) Terrorist organizations.--An organization is 
     described in this paragraph if such organization is 
     designated or otherwise individually identified--
       ``(A) under section 212(a)(3)(B)(vi)(II) or 219 of the 
     Immigration and Nationality Act as a terrorist organization 
     or foreign terrorist organization,
       ``(B) in or pursuant to an Executive order which is related 
     to terrorism and issued under the authority of the 
     International Emergency Economic Powers Act or section 5 of 
     the United Nations Participation Act of 1945 for the purpose 
     of imposing on such organization an economic or other 
     sanction, or

[[Page 22221]]

       ``(C) in or pursuant to an Executive order issued under the 
     authority of any Federal law if--
       ``(i) the organization is designated or otherwise 
     individually identified in or pursuant to such Executive 
     order as supporting or engaging in terrorist activity (as 
     defined in section 212(a)(3)(B) of the Immigration and 
     Nationality Act) or supporting terrorism (as defined in 
     section 140(d)(2) of the Foreign Relations Authorization Act, 
     Fiscal Years 1988 and 1989); and
       ``(ii) such Executive order refers to this subsection.
       ``(3) Period of suspension.--With respect to any 
     organization described in paragraph (2), the period of 
     suspension--
       ``(A) begins on the later of--
       ``(i) the date of the first publication of a designation or 
     identification described in paragraph (2) with respect to 
     such organization, or
       ``(ii) the date of the enactment of this subsection, and
       ``(B) ends on the first date that all designations and 
     identifications described in paragraph (2) with respect to 
     such organization are rescinded pursuant to the law or 
     Executive order under which such designation or 
     identification was made.
       ``(4) Denial of deduction.--No deduction shall be allowed 
     under section 170, 545(b)(2), 556(b)(2), 642(c), 2055, 
     2106(a)(2), or 2522 for any contribution to an organization 
     described in paragraph (2) during the period described in 
     paragraph (3).
       ``(5) Denial of administrative or judicial challenge of 
     suspension or denial of deduction.--Notwithstanding section 
     7428 or any other provision of law, no organization or other 
     person may challenge a suspension under paragraph (1), a 
     designation or identification described in paragraph (2), the 
     period of suspension described in paragraph (3), or a denial 
     of a deduction under paragraph (4) in any administrative or 
     judicial proceeding relating to the Federal tax liability of 
     such organization or other person.
       ``(6) Erroneous designation.--
       ``(A) In general.--If--
       ``(i) the tax exemption of any organization described in 
     paragraph (2) is suspended under paragraph (1),
       ``(ii) each designation and identification described in 
     paragraph (2) which has been made with respect to such 
     organization is determined to be erroneous pursuant to the 
     law or Executive order under which such designation or 
     identification was made, and
       ``(iii) the erroneous designations and identifications 
     result in an overpayment of income tax for any taxable year 
     by such organization,

     credit or refund (with interest) with respect to such 
     overpayment shall be made.
       ``(B) Waiver of limitations.--If the credit or refund of 
     any overpayment of tax described in subparagraph (A)(iii) is 
     prevented at any time by the operation of any law or rule of 
     law (including res judicata), such credit or refund may 
     nevertheless be allowed or made if the claim therefor is 
     filed before the close of the 1-year period beginning on the 
     date of the last determination described in subparagraph 
     (A)(ii).
       ``(7) Notice of suspensions.--If the tax exemption of any 
     organization is suspended under this subsection, the Internal 
     Revenue Service shall update the listings of tax-exempt 
     organizations and shall publish appropriate notice to 
     taxpayers of such suspension and of the fact that 
     contributions to such organization are not deductible during 
     the period of such suspension.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to designations made before, on, or after the 
     date of the enactment of this Act.

     SEC. 202. CLARIFICATION OF DEFINITION OF CHURCH TAX INQUIRY.

       Subsection (i) of section 7611 (relating to section not to 
     apply to criminal investigations, etc.) is amended by 
     striking ``or'' at the end of paragraph (4), by striking the 
     period at the end of paragraph (5) and inserting ``, or'', 
     and by inserting after paragraph (5) the following:
       ``(6) information provided by the Secretary related to the 
     standards for exemption from tax under this title and the 
     requirements under this title relating to unrelated business 
     taxable income.''.

     SEC. 203. EXPANSION OF DECLARATORY JUDGMENT REMEDY TO TAX-
                   EXEMPT ORGANIZATIONS.

       (a) In General.--Paragraph (1) of section 7428(a) (relating 
     to creation of remedy) is amended--
       (1) in subparagraph (B) by inserting after ``509(a))'' the 
     following: ``or as a private operating foundation (as defined 
     in section 4942(j)(3))''; and
       (2) by amending subparagraph (C) to read as follows:
       ``(C) with respect to the initial qualification or 
     continuing qualification of an organization as an 
     organization described in subsection (c) (other than 
     paragraph (3)) or (d) of section 501 which is exempt from tax 
     under section 501(a), or''.
       (b) Court Jurisdiction.--Subsection (a) of section 7428 is 
     amended in the material following paragraph (2) by striking 
     ``United States Tax Court, the United States Claims Court, or 
     the district court of the United States for the District of 
     Columbia'' and inserting the following: ``United States Tax 
     Court (in the case of any such determination or failure) or 
     the United States Claims Court or the district court of the 
     United States for the District of Columbia (in the case of a 
     determination or failure with respect to an issue referred to 
     in subparagraph (A) or (B) of paragraph (1)),''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to pleadings filed with respect to determinations 
     (or requests for determinations) made after the date of the 
     enactment of this Act.

     SEC. 204. LANDOWNER INCENTIVES PROGRAMS.

       (a) In General.--Subsection (a) of section 126 is amended 
     by redesignating paragraph (10) as paragraph (11) and by 
     inserting after paragraph (9) the following new paragraph:
       ``(10) Landowner initiatives programs to conserve 
     threatened, endangered, or imperiled species, or protect or 
     restore habitat carried out under--
       ``(A) the Fish and Wildlife Coordination Act (16 U.S.C. 661 
     et seq.),
       ``(B) the Fish and Wildlife Act of 1956 (16 U.S.C. 742f), 
     or
       ``(C) section 6 of the Endangered Species Act (16 U.S.C. 
     11531 et seq.).''.
       (b) Excludable Portion.--Subparagraph (A) of section 
     126(b)(1) is amended by inserting after ``Secretary of 
     Agriculture'' the following: ``(the Secretary of the 
     Interior, in the case of the landowner incentives programs 
     described in subsection (a)(10) and the programs described in 
     subsection (a)(11) that are implemented by the Department of 
     the Interior)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to amounts received after the date of the 
     enactment of this Act, in taxable years ending after such 
     date.

     SEC. 205. MODIFICATIONS TO SECTION 512(B)(13).

       (a) In General.--Paragraph (13) of section 512(b) (relating 
     to special rules for certain amounts received from controlled 
     entities) is amended by redesignating subparagraph (E) as 
     subparagraph (F) and by inserting after subparagraph (D) the 
     following new subparagraph:
       ``(E) Paragraph to apply only to excess payments.--
       ``(i) In general.--Subparagraph (A) shall apply only to the 
     portion of a specified payment received or accrued by the 
     controlling organization that exceeds the amount which would 
     have been paid or accrued if such payment met the 
     requirements prescribed under section 482.
       ``(ii) Addition to tax for valuation misstatements.--The 
     tax imposed by this chapter on the controlling organization 
     shall be increased by an amount equal to 20 percent of the 
     larger of--

       ``(I) such excess determined without regard to any 
     amendment or supplement to a return of tax, or
       ``(II) such excess determined with regard to all such 
     amendments and supplements.''.

       (b) Effective Date.--
       (1) In general.--The amendment made by this section shall 
     apply to payments received or accrued after December 31, 
     2003.
       (2) Payments subject to binding contract transition rule.--
     If the amendments made by section 1041 of the Taxpayer Relief 
     Act of 1997 did not apply to any amount received or accrued 
     in the first 2 taxable years beginning on or after the date 
     of the enactment of the Taxpayer Relief Act of 1997 under any 
     contract described in subsection (b)(2) of such section, such 
     amendments also shall not apply to amounts received or 
     accrued under such contract before January 1, 2001.

     SEC. 206. SIMPLIFICATION OF LOBBYING EXPENDITURE LIMITATION.

       (a) Repeal of Grassroots Expenditure Limit.--Paragraph (1) 
     of section 501(h) (relating to expenditures by public 
     charities to influence legislation) is amended to read as 
     follows:
       ``(1) General rule.--In the case of an organization to 
     which this subsection applies, exemption from taxation under 
     subsection (a) shall be denied because a substantial part of 
     the activities of such organization consists of carrying on 
     propaganda, or otherwise attempting, to influence 
     legislation, but only if such organization normally makes 
     lobbying expenditures in excess of the lobbying ceiling 
     amount for such organization for each taxable year.''.
       (b) Excess Lobbying Expenditures.--Section 4911(b) is 
     amended to read as follows:
       ``(b) Excess Lobbying Expenditures.--For purposes of this 
     section, the term `excess lobbying expenditures' means, for a 
     taxable year, the amount by which the lobbying expenditures 
     made by the organization during the taxable year exceed the 
     lobbying nontaxable amount for such organization for such 
     taxable year.''.
       (c) Conforming Amendments.--
       (1) Section 501(h)(2) is amended by striking subparagraphs 
     (C) and (D).
       (2) Section 4911(c) is amended by striking paragraphs (3) 
     and (4).
       (3) Paragraph (1)(A) of section 4911(f) is amended by 
     striking ``limits of section 501(h)(1) have'' and inserting 
     ``limit of section 501(h)(1) has''.
       (4) Paragraph (1)(C) of section 4911(f) is amended by 
     striking ``limits of section 501(h)(1) are'' and inserting 
     ``limit of section 501(h)(1) is''.
       (5) Paragraphs (4)(A) and (4)(B) of section 4911(f) are 
     each amended by striking ``limits

[[Page 22222]]

     of section 501(h)(1)'' and inserting ``limit of section 
     501(h)(1)''.
       (6) Paragraph (8) of section 6033(b) (relating to certain 
     organizations described in section 501(c)(3)) is amended by 
     inserting ``and'' at the end of subparagraph (A) and by 
     striking subparagraphs (C) and (D).
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 207. PERMITTED HOLDINGS OF PRIVATE FOUNDATION WHERE 
                   CORPORATION IS PUBLICLY TRADED AND PUBLICLY 
                   CONTROLLED.

       (a) In General.--Paragraph (2) of section 4943(c) (relating 
     to the permitted holdings in a corporation) is amended by 
     adding at the end the following new subparagraphs:
       ``(D) Permitted holdings where corporation is publicly-
     traded and publicly controlled.--A private foundation shall 
     not be treated as having excess business holdings in any 
     corporation in any calendar year in which it (together with 
     all other private foundations which are described in section 
     4946(a)(1)(H)) owns not more than 5 percent of the voting 
     stock and not more than 5 percent in value of all outstanding 
     shares of all classes of stock if--
       ``(i) the common stock of the corporation, and any other 
     class of stock of which shares are held by the private 
     foundation, are regularly traded on an established securities 
     market (within the meaning of section 897(c)(3)),
       ``(ii) more than 50 percent of--

       ``(I) the total combined voting power of all classes of 
     stock of such corporation entitled to vote, and
       ``(II) the total value of the stock of such corporation,

     is owned directly or indirectly by persons other than the 
     private foundation and persons who are disqualified persons 
     with respect to the private foundation,
       ``(iii) the Board of Directors of such corporation consists 
     of a majority of persons who are not disqualified persons 
     with respect to the private foundation, and
       ``(iv) any undistributed income (within the meaning of 
     section 4942(c)) of the private foundation for such year 
     (determined after substituting `6 percent' for `5 percent' in 
     section 4942(e)(1)) shall have been distributed within the 
     required period under section 4942(a) so as to avoid 
     application of the initial tax on such undistributed income.
       ``(E) Exception to permitted holdings where corporation is 
     publicly-traded and publicly controlled.--No stock of a 
     corporation held by the private foundation shall be 
     considered permitted holdings pursuant to subparagraph (D) to 
     the extent such stock was acquired by the private foundation 
     by purchase in a taxable transaction or was acquired from a 
     disqualified person who acquired such stock by purchase in a 
     taxable transaction within the 5 years immediately preceding 
     the transfer of such stock to the private foundation. Solely 
     for purposes of applying the preceding sentence--
       ``(i) any such stock acquired by purchase in a taxable 
     transaction by such disqualified person within such 5 year 
     period shall be treated as included in such transfer to the 
     extent of such transfer,
       ``(ii) all stock acquired by such disqualified person by 
     purchase in a taxable transaction during the 24 month period 
     beginning on the date of the transfer to the private 
     foundation shall be treated as held by such disqualified 
     person on the date of such transfer and included in such 
     transfer, and
       ``(iii) the private foundation may specifically designate 
     any shares of stock not considered permitted holdings for 
     purposes of allowing such private foundation to dispose of 
     such stock.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

                      TITLE III--OTHER PROVISIONS

     SEC. 301. COMPASSION CAPITAL FUND.

       Title IV of the Social Security Act (42 U.S.C. 601-679b) is 
     amended by adding at the end the following:

                   ``PART F--COMPASSION CAPITAL FUND

     ``SEC. 481. SECRETARY'S FUND TO SUPPORT AND REPLICATE 
                   PROMISING SOCIAL SERVICE PROGRAMS.

       ``(a) Grant Authority.--
       ``(1) In general.--The Secretary may make grants to support 
     any private entity that operates a promising social services 
     program.
       ``(2) Applications.--An entity desiring to receive a grant 
     under paragraph (1) shall submit to the Secretary an 
     application for the grant, which shall contain such 
     information as the Secretary may require.
       ``(b) Contract Authority, Etc.--The Secretary may enter 
     into a grant, contract, or cooperative agreement with any 
     entity under which the entity would provide technical 
     assistance to another entity to operate a social service 
     program that assists persons and families in need, including 
     by--
       ``(1) providing the other entity with--
       ``(A) technical assistance and information, including legal 
     assistance and other business assistance;
       ``(B) information on capacity-building;
       ``(C) information and assistance in identifying and using 
     best practices for serving persons and families in need; or
       ``(D) assistance in replicating programs with demonstrated 
     effectiveness in assisting persons and families in need; or
       ``(2) supporting research on the best practices of social 
     service organizations.
       ``(c) Guidance and Technical Assistance.--The Secretary may 
     use not more than 25 percent of the amount appropriated under 
     this section for a fiscal year to provide guidance and 
     technical assistance to States and political subdivisions of 
     States with respect to the implementation of any social 
     service program.
       ``(d) Social Services Program Defined.--In this section, 
     the term `social services program' means a program that 
     provides benefits or services of any kind to persons and 
     families in need.
       ``(e) Limitations on Authorization of Appropriations.--To 
     carry out this section, there are authorized to be 
     appropriated to the Secretary $150,000,000 for fiscal year 
     2003, and such sums as may be necessary for fiscal years 2004 
     through 2007.''.

     SEC. 302. REAUTHORIZATION OF ASSETS FOR INDEPENDENCE 
                   DEMONSTRATION.

       Section 416 of the Assets for Independence Act (title IV of 
     Public Law 105-285; 42 U.S.C. 604 note) is amended by 
     striking ``and 2003'' and inserting ``2003, 2004, 2005, 2006, 
     2007, and 2008''.

     SEC. 303. SENSE OF THE CONGRESS REGARDING CORPORATE 
                   CONTRIBUTIONS TO FAITH-BASED ORGANIZATIONS, 
                   ETC.

       (a) Findings.--The Congress finds as follows:
       (1) America's community of faith has long played a leading 
     role in dealing with difficult societal problems that might 
     otherwise have gone unaddressed.
       (2) President Bush has called upon Americans ``to revive 
     the spirit of citizenship . . . to marshal the compassion of 
     our people to meet the continuing needs of our Nation''.
       (3) Although the work of faith-based organizations should 
     not be used by government as an excuse for backing away from 
     its historic and rightful commitment to help those who are 
     disadvantaged and in need, such organizations can and should 
     be seen as a valuable partner with government in meeting 
     societal challenges.
       (4) Every day faith-based organizations in the United 
     States help people recover from drug and alcohol addiction, 
     provide food and shelter for the homeless, rehabilitate 
     prison inmates so that they can break free from the cycle of 
     recidivism, and teach people job skills that will allow them 
     to move from poverty to productivity.
       (5) Faith-based organizations are often more successful in 
     dealing with difficult societal problems than government and 
     non-sectarian organizations.
       (6) As President Bush has stated, ``It is not sufficient to 
     praise charities and community groups; we must support them. 
     And this is both a public obligation and a personal 
     responsibility.''.
       (7) Corporate foundations contribute billions of dollars 
     each year to a variety of philanthropic causes.
       (8) According to a study produced by the Capital Research 
     Center, the 10 largest corporate foundations in the United 
     States contributed $1,900,000,000 to such causes.
       (9) According to the same study, faith-based organizations 
     only receive a small fraction of the contributions made by 
     corporations in the United States, and 6 of the 10 
     corporations that give the most to philanthropic causes 
     explicitly ban or restrict contributions to faith-based 
     organizations.
       (b) Corporations Encouraged To Contribute to Faith-Based 
     Organizations.--The Congress calls on corporations in the 
     United States, in the words of the President, ``to give more 
     and to give better'' by making greater contributions to 
     faith-based organizations that are on the front lines 
     battling some of the great societal challenges of our day.
       (c) Sense of the Congress.--It is the sense of Congress 
     that--
       (1) corporations in the United States are important 
     partners with government in efforts to overcome difficult 
     societal problems; and
       (2) no corporation in the United States should adopt 
     policies that prohibit the corporation from contributing to 
     an organization that is successfully advancing a 
     philanthropic cause merely because such organization is faith 
     based.

     SEC. 304. MATERNITY GROUP HOMES.

       (a) Permissible Use of Funds.--Section 322 of the Runaway 
     and Homeless Youth Act (42 U.S.C. 5714-2) is amended--
       (1) in subsection (a)(1), by inserting ``(including 
     maternity group homes)'' after ``group homes''; and
       (2) by adding at the end the following:
       ``(c) Maternity Group Home.--In this part, the term 
     `maternity group home' means a community-based, adult-
     supervised group home that provides--
       ``(1) young mothers and their children with a supportive 
     and supervised living arrangement in which such mothers are 
     required to learn parenting skills, including child 
     development, family budgeting, health and nutrition, and 
     other skills to promote their long-term economic independence 
     and the well-being of their children; and
       ``(2) pregnant women with--
       ``(A) information regarding the option of placing children 
     for adoption through licensed adoption service providers;

[[Page 22223]]

       ``(B) assistance with prenatal care and child birthing; and
       ``(C) pre- and post-placement adoption counseling.''.
       (b) Contract for Evaluation.--Part B of the Runaway and 
     Homeless Youth Act (42 U.S.C. 5701 et seq.) is amended by 
     adding at the end the following:

     ``SEC. 323. CONTRACT FOR EVALUATION.

       ``(a) In General.--The Secretary shall enter into a 
     contract with a public or private entity for an evaluation of 
     the maternity group homes that are supported by grant funds 
     under this Act.
       ``(b) Information.--The evaluation described in subsection 
     (a) shall include the collection of information about the 
     relevant characteristics of individuals who benefit from 
     maternity group homes such as those that are supported by 
     grant funds under this Act and what services provided by 
     those maternity group homes are most beneficial to such 
     individuals.
       ``(c) Report.--Not later than 2 years after the date on 
     which the Secretary enters into a contract for an evaluation 
     under subsection (a), and biennially thereafter, the entity 
     conducting the evaluation under this section shall submit to 
     Congress a report on the status, activities, and 
     accomplishments of maternity group homes that are supported 
     by grant funds under this Act.''.
       (c) Authorization of Appropriations.--Section 388 of the 
     Runaway and Homeless Youth Act (42 U.S.C. 5751) is amended--
       (1) in subsection (a)(1)--
       (A) by striking ``There'' and inserting the following:
       ``(A) In general.--There'';
       (B) in subparagraph (A), as redesignated, by inserting 
     ``and the purpose described in subparagraph (B)'' after 
     ``other than part E''; and
       (C) by adding at the end the following:
       ``(B) Maternity group homes.--There is authorized to be 
     appropriated, for maternity group homes eligible for 
     assistance under section 322(a)(1)--
       ``(i) $33,000,000 for fiscal year 2003; and
       ``(ii) such sums as may be necessary for fiscal year 
     2004.''; and
       (2) in subsection (a)(2)(A), by striking ``paragraph (1)'' 
     and inserting ``paragraph (1)(A)''.

  The SPEAKER pro tempore. The amendment printed in the bill, modified 
by the amendment printed in part A of House Report 108-273, is adopted.
  The committee amendment in the nature of a substitute, as modified, 
is as follows:

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

     SECTION 1. SHORT TITLE; ETC.

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

Sec. 1. Short title; etc.

                 TITLE I--CHARITABLE GIVING INCENTIVES

Sec. 101. Deduction for portion of charitable contributions to be 
              allowed to individuals who do not itemize deductions.
Sec. 102. Tax-free distributions from individual retirement plans for 
              charitable purposes.
Sec. 103. Increase in cap on corporate charitable contributions.
Sec. 104. Charitable deduction for contributions of food inventory.
Sec. 105. Reform of certain excise taxes related to private 
              foundations.
Sec. 106. Excise tax on unrelated business taxable income of charitable 
              remainder trusts.
Sec. 107. Expansion of charitable contribution allowed for scientific 
              property used for research and for computer technology 
              and equipment used for educational purposes.
Sec. 108. Adjustment to basis of S corporation stock for certain 
              charitable contributions.
Sec. 109. Charitable organizations permitted to make collegiate housing 
              and infrastructure grants.
Sec. 110. Conduct of certain games of chance not treated as unrelated 
              trade or business.
Sec. 111. Excise taxes exemption for blood collector organizations.
Sec. 112. Nonrecognition of gain on the sale of property used in 
              performance of an exempt function.
Sec. 113. Exemption of qualified 501(c)(3) bonds for nursing homes from 
              Federal guarantee prohibitions.

     TITLE II--TAX REFORM AND IMPROVEMENTS RELATING TO CHARITABLE 
                       ORGANIZATIONS AND PROGRAMS

Sec. 201. Suspension of tax-exempt status of terrorist organizations.
Sec. 202. Clarification of definition of church tax inquiry.
Sec. 203. Extension of declaratory judgment remedy to tax-exempt 
              organizations.
Sec. 204. Landowner incentives programs.
Sec. 205. Modifications to section 512(b)(13).
Sec. 206. Simplification of lobbying expenditure limitation.
Sec. 207. Pilot project for forest conservation activities.

                      TITLE III--OTHER PROVISIONS

Sec. 301. Compassion capital fund.
Sec. 302. Reauthorization of assets for independence demonstration.
Sec. 303. Sense of the Congress regarding corporate contributions to 
              faith-based organizations, etc.
Sec. 304. Maternity group homes.
Sec. 305. Authority of States to use 10 percent of their TANF funds to 
              carry out social services block grant programs.

                 TITLE I--CHARITABLE GIVING INCENTIVES

     SEC. 101. DEDUCTION FOR PORTION OF CHARITABLE CONTRIBUTIONS 
                   TO BE ALLOWED TO INDIVIDUALS WHO DO NOT ITEMIZE 
                   DEDUCTIONS.

       (a) In General.--Section 170 (relating to charitable, etc., 
     contributions and gifts) is amended by redesignating 
     subsection (m) as subsection (n) and by inserting after 
     subsection (l) the following new subsection:
       ``(m) Deduction for Individuals Not Itemizing Deductions.--
       ``(1) In general.--In the case of an individual who does 
     not itemize deductions for a taxable year, there shall be 
     taken into account as a direct charitable deduction under 
     section 63 an amount equal to the amount allowable under 
     subsection (a) for the taxable year for cash contributions 
     (determined without regard to any carryover), to the extent 
     that such contributions exceed $250 ($500 in the case of a 
     joint return) but do not exceed $500 ($1,000 in the case of a 
     joint return).
       ``(2) Termination.--Paragraph (1) shall not apply to any 
     taxable year beginning after December 31, 2005.''.
       (b) Direct Charitable Deduction.--
       (1) In general.--Subsection (b) of section 63 (defining 
     taxable income) is amended by striking ``and'' at the end of 
     paragraph (1), by striking the period at the end of paragraph 
     (2) and inserting ``, and'', and by adding at the end the 
     following new paragraph:
       ``(3) the direct charitable deduction.''.
       (2) Definition.--Section 63 is amended by redesignating 
     subsection (g) as subsection (h) and by inserting after 
     subsection (f) the following new subsection:
       ``(g) Direct Charitable Deduction.--For purposes of this 
     section, the term `direct charitable deduction' means that 
     portion of the amount allowable under section 170(a) which is 
     taken as a direct charitable deduction for the taxable year 
     under section 170(m).''.
       (3) Conforming amendment.--Subsection (d) of section 63 is 
     amended by striking ``and'' at the end of paragraph (1), by 
     striking the period at the end of paragraph (2) and inserting 
     ``, and'', and by adding at the end the following new 
     paragraph:
       ``(3) the direct charitable deduction.''.
       (c) Study.--
       (1) In general.--The Secretary of the Treasury shall study 
     the effect of the amendments made by this section on 
     increased charitable giving and taxpayer compliance, 
     including a comparison of taxpayer compliance between 
     taxpayers who itemize their charitable contributions and 
     taxpayers who claim a direct charitable deduction.
       (2) Report.--Not later than December 31, 2006, the 
     Secretary of the Treasury shall report on the study required 
     under paragraph (1) to the Committee on Finance of the Senate 
     and the Committee on Ways and Means of the House of 
     Representatives.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 102. TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT 
                   PLANS FOR CHARITABLE PURPOSES.

       (a) In General.--Subsection (d) of section 408 (relating to 
     individual retirement accounts) is amended by adding at the 
     end the following new paragraph:
       ``(8) Distributions for charitable purposes.--
       ``(A) In general.--No amount shall be includible in gross 
     income by reason of a qualified charitable distribution.
       ``(B) Qualified charitable distribution.--For purposes of 
     this paragraph, the term `qualified charitable distribution' 
     means any distribution from an individual retirement plan 
     other than a plan described in subsection (k) or (p) of 
     section 408--
       ``(i) which is made on or after the date that the 
     individual for whose benefit the plan is maintained has 
     attained age 70\1/2\, and
       ``(ii) which is made directly by the trustee--

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

     A distribution shall be treated as a qualified charitable 
     distribution only to the extent that the distribution would 
     be includible in gross income without regard to subparagraph 
     (A) and, in the case of a distribution to a split-interest 
     entity, only if no person holds an income interest in the 
     amounts in the split-interest entity attributable to such 
     distribution other than one or more of the following: the 
     individual for whose benefit such plan is maintained, the 
     spouse of such individual, or any organization described in 
     section 170(c).
       ``(C) Contributions must be otherwise deductible.--For 
     purposes of this paragraph--

[[Page 22224]]

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

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

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

     In addition to any penalty imposed on the trust pursuant to 
     this subparagraph, if the person required to file such return 
     knowingly fails to file the return, such penalty shall also 
     be imposed on such person who shall be personally liable for 
     such penalty.''.
       (3) Confidentiality of noncharitable beneficiaries.--
     Subsection (b) of section 6104 (relating to inspection of 
     annual information returns) is amended by adding at the end 
     the following new sentence: ``In the case of a trust which is 
     required to file a return under section 6034(a), this 
     subsection shall not apply to information regarding 
     beneficiaries which are not organizations described in 
     section 170(c).''.
       (c) Effective Dates.--
       (1) Subsection (a).--The amendment made by subsection (a) 
     shall apply to distributions made after December 31, 2003.
       (2) Subsection (b).--The amendments made by subsection (b) 
     shall apply to returns for taxable years beginning after 
     December 31, 2003.

     SEC. 103. INCREASE IN CAP ON CORPORATE CHARITABLE 
                   CONTRIBUTIONS.

       (a) In General.--Paragraph (2) of section 170(b) (relating 
     to corporations) is amended by striking ``10 percent'' and 
     inserting ``the applicable percentage''.
       (b) Applicable Percentage.--Subsection (b) of section 170 
     is amended by adding at the end the following new paragraph:
       ``(3) Applicable percentage defined.--For purposes of 
     paragraph (2), the applicable percentage shall be determined 
     in accordance with the following table:

``For taxable years beginning in calendarThe applicable percentage is--
      2004..........................................................11 
      2005..........................................................12 
      2006..........................................................13 
      2007..........................................................14 
      2008 through 2011.............................................15 
      2012 and thereafter........................................20.''.
       (c) Conforming Amendments.--
       (1) Sections 512(b)(10) and 805(b)(2)(A) are each amended 
     by striking ``10 percent'' each place it occurs and inserting 
     ``the applicable percentage (determined under section 
     170(b)(3))''.
       (2) Sections 545(b)(2) and 556(b)(2) are each amended by 
     striking ``10-percent limitation'' and inserting ``applicable 
     percentage limitation''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 104. CHARITABLE DEDUCTION FOR CONTRIBUTIONS OF FOOD 
                   INVENTORY.

       (a) In General.--Paragraph (3) of section 170(e) (relating 
     to special rule for certain contributions of inventory and 
     other property) is amended by redesignating subparagraph (C) 
     as subparagraph (D) and by inserting after subparagraph (B) 
     the following new subparagraph:
       ``(C) Special rule for contributions of food inventory.--
       ``(i) General rule.--In the case of a charitable 
     contribution of food from any trade or business (or interest 
     therein) of the taxpayer, this paragraph shall be applied--

       ``(I) without regard to whether the contribution is made by 
     a C corporation, and
       ``(II) only to food that is apparently wholesome food.

       ``(ii) Limitation.--In the case of a taxpayer other than a 
     C corporation, the aggregate amount of such contributions for 
     any taxable year which may be taken into account under this 
     section shall not exceed the applicable percentage (within 
     the meaning of subsection (b)(3)) of the taxpayer's aggregate 
     net income for such taxable year from all trades or 
     businesses from which such contributions were made for such 
     year, computed without regard to this section.
       ``(iii) Determination of fair market value.--In the case of 
     a qualified contribution of apparently wholesome food to 
     which this paragraph applies and which, solely by reason of 
     internal standards of the taxpayer or lack of market, cannot 
     or will not be sold, the fair market value of such food shall 
     be determined by taking into account the price at which the 
     same or substantially the same food items (as to both type 
     and quality) are sold by the taxpayer at the time of the 
     contribution (or, if not so sold at such time, in the recent 
     past).
       ``(iv) Apparently wholesome food.--For purposes of this 
     subparagraph, the term `apparently wholesome food' has the 
     meaning given to such term by section 22(b)(2) of the Bill 
     Emerson Good Samaritan Food Donation Act (42 U.S.C. 
     1791(b)(2)), as in effect on the date of the enactment of 
     this subparagraph.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 105. REFORM OF CERTAIN EXCISE TAXES RELATED TO PRIVATE 
                   FOUNDATIONS.

       (a) Reduction of Tax on Net Investment Income.--Section 
     4940(a) (relating to tax-exempt foundations) is amended by 
     striking ``2 percent'' and inserting ``1 percent''.
       (b) Repeal of Reduction in Tax Where Private Foundation 
     Meets Certain Distribution Requirements.--Section 4940 
     (relating to

[[Page 22225]]

     excise tax based on investment income) is amended by striking 
     subsection (e).
       (c) Modification of Excise Tax on Self-Dealing.--The second 
     sentence of section 4941(a)(1) (relating to initial excise 
     tax imposed on self-dealer) is amended by striking ``5 
     percent'' and inserting ``25 percent''.
       (d) Modification of Excise Tax on Failure To Distribute 
     Income.--
       (1) Certain administrative expenses not treated as 
     distributions.--Section 4942(g) is amended by striking 
     paragraph (4) and inserting the following new paragraphs:
       ``(4) Limitation on administrative expenses treated as 
     distributions.--
       ``(A) In general.--For purposes of paragraph (1)(A), the 
     following administrative expenses shall not be treated as 
     qualifying distributions:
       ``(i) Any administrative expense which is not directly 
     attributable to direct charitable activities, grant selection 
     activities, grant monitoring and administration activities, 
     compliance with applicable Federal, State, or local law, or 
     furthering public accountability of the private foundation.
       ``(ii) Any compensation paid to a disqualified person to 
     the extent that such compensation exceeds an annual rate of 
     $100,000.
       ``(iii) Any expense incurred for transportation by air 
     unless such transportation is regularly-scheduled commercial 
     air transportation.
       ``(iv) Any expense incurred for regularly-scheduled 
     commercial air transportation to the extent that such expense 
     exceeds the cost of such transportation in coach-class 
     accommodations.
       ``(B) Adjustment for inflation.--In the case of a taxable 
     year beginning after December 31, 2004, the $100,000 amount 
     in subparagraph (A)(ii) shall be increased by an amount equal 
     to--
       ``(i) such dollar amount, multiplied by
       ``(ii) the cost-of-living adjustment determined under 
     section 1(f)(3) for the calendar year in which the taxable 
     year begins, determined by substituting `calendar year 2003' 
     for `calendar year 1992' in subparagraph (B) thereof.

     If any amount as increased under the preceding sentence is 
     not a multiple of $50, such amount shall be rounded to the 
     next lowest multiple of $50.
       ``(5) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary to carry out the purposes of 
     paragraph (4). Such regulations shall provide that 
     administrative expenses which are excluded from qualifying 
     distributions solely by reason of the limitations in 
     paragraph (4) shall not for such reason subject a private 
     foundation to any other excise taxes imposed by this 
     subchapter.''.
       (2) Disallowance not to apply to certain private 
     foundations.--
       (A) In general.--Section 4942(j)(3) (defining operating 
     foundation) is amended--
       (i) by striking ``(within the meaning of paragraph (1) or 
     (2) of subsection (g))'' each place it appears, and
       (ii) by adding at the end the following new sentence: ``For 
     purposes of this paragraph, the term `qualifying 
     distributions' means qualifying distributions within the 
     meaning of paragraph (1) or (2) of subsection (g) (determined 
     without regard to subsection (g)(4)).''.
       (B) Conforming amendment.--Section 4942(f)(2)(C)(i) is 
     amended by inserting ``(determined without regard to 
     subsection (g)(4))'' after ``within the meaning of subsection 
     (g)(1)(A)''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 106. EXCISE TAX ON UNRELATED BUSINESS TAXABLE INCOME OF 
                   CHARITABLE REMAINDER TRUSTS.

       (a) In General.--Subsection (c) of section 664 (relating to 
     exemption from income taxes) is amended to read as follows:
       ``(c) Taxation of Trusts.--
       ``(1) Income tax.--A charitable remainder annuity trust and 
     a charitable remainder unitrust shall, for any taxable year, 
     not be subject to any tax imposed by this subtitle.
       ``(2) Excise tax.--
       ``(A) In general.--In the case of a charitable remainder 
     annuity trust or a charitable remainder unitrust that has 
     unrelated business taxable income (within the meaning of 
     section 512, determined as if part III of subchapter F 
     applied to such trust) for a taxable year, there is hereby 
     imposed on such trust or unitrust an excise tax equal to the 
     amount of such unrelated business taxable income.
       ``(B) Certain rules to apply.--The tax imposed by 
     subparagraph (A) shall be treated as imposed by chapter 42 
     for purposes of this title other than subchapter E of chapter 
     42.
       ``(C) Character of distributions and coordination with 
     distribution requirements.--The amounts taken into account in 
     determining unrelated business taxable income (as defined in 
     subparagraph (A)) shall not be taken into account for 
     purposes of--
       ``(i) subsection (b),
       ``(ii) determining the value of trust assets under 
     subsection (d)(2), and
       ``(iii) determining income under subsection (d)(3).
       ``(D) Tax court proceedings.--For purposes of this 
     paragraph, the references in section 6212(c)(1) to section 
     4940 shall be deemed to include references to this 
     paragraph.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 107. EXPANSION OF CHARITABLE CONTRIBUTION ALLOWED FOR 
                   SCIENTIFIC PROPERTY USED FOR RESEARCH AND FOR 
                   COMPUTER TECHNOLOGY AND EQUIPMENT USED FOR 
                   EDUCATIONAL PURPOSES.

       (a) Scientific Property Used for Research.--
       (1) In general.--Clause (ii) of section 170(e)(4)(B) 
     (defining qualified research contributions) is amended by 
     inserting ``or assembled'' after ``constructed''.
       (2) Conforming amendment.--Clause (iii) of section 
     170(e)(4)(B) is amended by inserting ``or assembling'' after 
     ``construction''.
       (b) Computer Technology and Equipment for Educational 
     Purposes.--
       (1) In general.--Clause (ii) of section 170(e)(6)(B) is 
     amended by inserting ``or assembled'' after ``constructed'' 
     and ``or assembling'' after ``construction''.
       (2) Special rule made permanent.--Section 170(e)(6) is 
     amended by striking subparagraph (G).
       (3) Conforming amendments.--Subparagraph (D) of section 
     170(e)(6) is amended by inserting ``or assembled'' after 
     ``constructed'' and ``or assembling'' after ``construction''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 108. ADJUSTMENT TO BASIS OF S CORPORATION STOCK FOR 
                   CERTAIN CHARITABLE CONTRIBUTIONS.

       (a) In General.--Paragraph (2) of section 1367(a) (relating 
     to adjustments to basis of stock of shareholders, etc.) is 
     amended by adding at the end the following new flush 
     sentence:

     ``The decrease under subparagraph (B) by reason of a 
     charitable contribution (as defined in section 170(c)) of 
     property shall be the amount equal to the shareholder's pro 
     rata share of the adjusted basis of such property.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 109. CHARITABLE ORGANIZATIONS PERMITTED TO MAKE 
                   COLLEGIATE HOUSING AND INFRASTRUCTURE GRANTS.

       (a) In General.--Section 501 (relating to exemption from 
     tax on corporations, certain trusts, etc.), as amended by 
     section 201, is further amended by redesignating subsection 
     (q) as subsection (r) and by inserting after subsection (p) 
     the following new subsection:
       ``(q) Treatment of Organizations Making Collegiate Housing 
     and Infrastructure Improvement Grants.--
       ``(1) In general.--For purposes of subsection (c)(3) and 
     sections 170(c)(2)(B), 2055(a), and 2522(a)(2), an 
     organization shall not fail to be treated as organized and 
     operated exclusively for charitable or educational purposes 
     solely because such organization makes collegiate housing and 
     infrastructure grants to an organization described in 
     subsection (c)(7), so long as, at the time of the grant, 
     substantially all of the active members of the recipient 
     organization are full-time students at the college or 
     university with which such recipient organization is 
     associated.
       ``(2) Housing and infrastructure grants.--For purposes of 
     paragraph (1), collegiate housing and infrastructure grants 
     are grants to provide, improve, operate, or maintain 
     collegiate housing that may involve more than incidental 
     social, recreational, or private purposes, so long as such 
     grants are for purposes that would be permissible for a 
     dormitory of the college or university referred to in 
     paragraph (1). A grant shall not be treated as a collegiate 
     housing and infrastructure grant for purposes of paragraph 
     (1) to the extent that such grant is used to provide physical 
     fitness equipment.
       ``(3) Grants to certain organizations holding title to 
     property, etc.--For purposes of this subsection, a collegiate 
     housing and infrastructure grant to an organization described 
     in subsection (c)(2) or (c)(7) holding title to property 
     exclusively for the benefit of an organization described in 
     subsection (c)(7) shall be considered a grant to the 
     organization described in subsection (c)(7) for whose benefit 
     such property is held.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to grants made after December 31, 2003.

     SEC. 110. CONDUCT OF CERTAIN GAMES OF CHANCE NOT TREATED AS 
                   UNRELATED TRADE OR BUSINESS.

       (a) In General.--Paragraph (1) of section 513(f) (relating 
     to certain bingo games) is amended to read as follows:
       ``(1) In general.--The term `unrelated trade or business' 
     does not include--
       ``(A) any trade or business which consists of conducting 
     bingo games, and
       ``(B) any trade or business which consists of conducting 
     qualified games of chance if the net proceeds from such trade 
     or business are paid or set aside for payment for purposes 
     described in section 170(c)(2)(B), for the promotion of 
     social welfare (within the meaning of section 501(c)(4)), or 
     for a purpose for which State law specifically authorizes the 
     expenditure of such proceeds.''.
       (b) Qualified Games of Chance.--Subsection (f) of section 
     513 is amended by adding at the end the following new 
     paragraph:
       ``(3) Qualified games of chance.--For purposes of paragraph 
     (1), the term `qualified game of chance' means any game of 
     chance (other than bingo) conducted by an organization if--
       ``(A) such organization is licensed pursuant to State law 
     to conduct such game,
       ``(B) only organizations which are organized as nonprofit 
     corporations or are exempt from tax under section 501(a) may 
     be so licensed to conduct such game within the State, and

[[Page 22226]]

       ``(C) the conduct of such game does not violate State or 
     local law.''
       (c) Clerical Amendment.--The subsection heading of section 
     513(f) is amended by striking ``Bingo Games'' and inserting 
     ``Games of Chance''.
       (d) Effective Date.-- The amendments made by this section 
     shall apply to games conducted after December 31, 2003.

     SEC. 111. EXCISE TAXES EXEMPTION FOR BLOOD COLLECTOR 
                   ORGANIZATIONS.

       (a) Exemption From Imposition of Special Fuels Tax.--
     Section 4041(g) (relating to other exemptions) is amended by 
     striking ``and'' at the end of paragraph (3), by striking the 
     period in paragraph (4) and inserting ``; and'', and by 
     inserting after paragraph (4) the following new paragraph:
       ``(5) with respect to the sale of any liquid to a qualified 
     blood collector organization (as defined in section 
     7701(a)(48)) for such organization's exclusive use, or with 
     respect to the use by a qualified blood collector 
     organization of any liquid as a fuel.''.
       (b) Exemption From Manufacturers Excise Tax.--
       (1) In general.--Section 4221(a) (relating to certain tax-
     free sales) is amended by striking ``or'' at the end of 
     paragraph (4), by adding ``or'' at the end of paragraph (5), 
     and by inserting after paragraph (5) the following new 
     paragraph:
       ``(6) to a qualified blood collector organization (as 
     defined in section 7701(a)(48)) for such organization's 
     exclusive use,''.
       (2) Conforming amendments.--
       (A) The second sentence of section 4221(a) is amended by 
     striking ``Paragraphs (4) and (5)'' and inserting 
     ``Paragraphs (4), (5), and (6)''.
       (B) Section 6421(c) is amended by striking ``or (5)'' and 
     inserting ``(5), or (6)''.
       (c) Exemption From Communication Excise Tax.--
       (1) In general.--Section 4253 (relating to exemptions) is 
     amended by redesignating subsection (k) as subsection (l) and 
     inserting after subsection (j) the following new subsection:
       ``(k) Exemption for Qualified Blood Collector 
     Organizations.--Under regulations provided by the Secretary, 
     no tax shall be imposed under section 4251 on any amount paid 
     by a qualified blood collector organization (as defined in 
     section 7701(a)(48)) for services or facilities furnished to 
     such organization.''.
       (2) Conforming amendment.--Section 4253(l), as redesignated 
     by paragraph (1), is amended by striking ``or (j)'' and 
     inserting ``(j), or (k)''.
       (d) Credit for Refund for Certain Taxes on Sales and 
     Services.--
       (1) Deemed overpayment.--
       (A) In general.--Section 6416(b)(2) is amended by 
     redesignating subparagraphs (E) and (F) as subparagraphs (F) 
     and (G), respectively, and by inserting after subparagraph 
     (D) the following new subparagraph:
       ``(E) sold to a qualified blood collector organization (as 
     defined in section 7701(a)(48)) for such organization's 
     exclusive use;''.
       (B) Conforming amendments.--Section 6416(b)(2) is amended--
       (i) by striking ``Subparagraphs (C) and (D)'' and inserting 
     ``Subparagraphs (C), (D), and (E)'', and
       (ii) by striking ``(C), and (D)'' and inserting ``(C), (D), 
     and (E)''.
       (2) Sales of tires.--Clause (ii) of section 6416(b)(4)(B) 
     is amended by inserting ``sold to a qualified blood collector 
     organization (as defined in section 7701(a)(48)) for its 
     exclusive use,'' after ``for its exclusive use,''.
       (e) Definition of Qualified Blood Collector Organization.--
     Section 7701(a) is amended by inserting at the end the 
     following new paragraph:
       ``(48) Qualified blood collector organization.--The term 
     `qualified blood collector organization' means an 
     organization which is--
       ``(A) described in section 501(c)(3) and exempt from tax 
     under section 501(a),
       ``(B) registered by the Food and Drug Administration to 
     collect blood, and
       ``(C) primarily engaged in the activity of the collection 
     of blood.''.
       (f) Effective Date.--The amendments made by this section 
     shall take effect on January 1, 2004.

     SEC. 112. NONRECOGNITION OF GAIN ON THE SALE OF PROPERTY USED 
                   IN PERFORMANCE OF AN EXEMPT FUNCTION.

       (a) In General.--Subparagraph (D) of section 512(a)(3) is 
     amended to read as follows:
       ``(D) Nonrecognition of gain.--
       ``(i) In general.--If property used directly in the 
     performance of the exempt function of an organization 
     described in paragraph (7), (9), (17), or (20) of section 
     501(c) is sold by such organization, and within a period 
     beginning 1 year before the date of such sale, and ending 3 
     years (10 years, in the case of an organization described in 
     section 501(c)(7)) after such date, other property is 
     purchased and used by such organization directly in the 
     performance of its exempt function, gain (if any) from such 
     sale shall be recognized only to the extent that such 
     organization's sales price of the old property exceeds the 
     organization's cost of purchasing the other property.
       ``(ii) Statute of limitations.--If an organization 
     described in section 501(c)(7) sells property on which gain 
     is not recognized, in whole or in part, by reason of clause 
     (i), then the statutory period for the assessment of any 
     deficiency attributable to such gain shall not expire until 
     the end of the 3-year period beginning on the date that the 
     Secretary is notified by such organization (in such manner as 
     the Secretary may prescribe) that--

       ``(I) the organization has met the requirements of clause 
     (i) with respect to gain which was not recognized,
       ``(II) the organization does not intend to meet such 
     requirements, or
       ``(III) the organization failed to meet such requirements 
     within the prescribed period.

     For the purposes of this clause, any deficiency may be 
     assessed before the expiration of such 3-year period 
     notwithstanding the provisions of any other law or rule of 
     law which would otherwise prevent such assessment.
       ``(iii) Destruction and loss.--For purposes of this 
     subparagraph, the destruction in whole or in part, theft, 
     seizure, requisition, or condemnation of property, shall be 
     treated as the sale of such property, and rules similar to 
     the rules provided by subsections (b), (c), (e), and (j) of 
     section 1034 (as in effect on the day before the date of the 
     enactment of the Taxpayer Relief Act of 1997) shall apply.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply with respect to the sale of any property for 
     which the 3-year period for offsetting gain by purchasing 
     other property under subparagraph (D) of section 512(a)(3) of 
     the Internal Revenue Code (as in effect on the day before the 
     date of the enactment of this Act) had not expired as of 
     January 1, 2001.

     SEC. 113. EXEMPTION OF QUALIFIED 501(C)(3) BONDS FOR NURSING 
                   HOMES FROM FEDERAL GUARANTEE PROHIBITIONS.

       (a) In General.--For purposes of section 149(b)(1) of the 
     Internal Revenue Code of 1986, any qualified 501(c)(3) bond 
     (as defined in section 145 of such Code) shall not be treated 
     as federally guaranteed solely because such bond is part of 
     an issue supported by a letter of credit, if such bond--
       (1) is issued after December 31, 2003, and before the date 
     which is 1 year after the date of the enactment of this Act, 
     and
       (2) is part of an issue 95 percent or more of the net 
     proceeds of which are to be used to finance 1 or more of the 
     following facilities primarily for the benefit of the 
     elderly:
       (A) Licensed nursing home facility.
       (B) Licensed or certified assisted living facility.
       (C) Licensed personal care facility.
       (D) Continuing care retirement community.
       (b) Limitation on Issuer.--Subsection (a) shall not apply 
     to any bond described in such subsection if the aggregate 
     authorized face amount of the issue of which such bond is a 
     part, when increased by the outstanding amount of such bonds 
     issued by the issuer during the period described in 
     subsection (a)(1) exceeds $15,000,000.
       (c) Limitation on Beneficiary.--Rules similar to the rules 
     of section 144(a)(10) of the Internal Revenue Code of 1986 
     shall apply for purposes of this section, except that--
       (1) ``$15,000,000'' shall be substituted for 
     ``$40,000,000'' in subparagraph (A) thereof, and
       (2) such rules shall be applied--
       (A) only with respect to bonds described in this section, 
     and
       (B) with respect to the aggregate authorized face amount of 
     all issues of such bonds which are allocable to the 
     beneficiary.
       (d) Continuing Care Retirement Community.--For purposes of 
     this section, the term ``continuing care retirement 
     community'' means a community which provides, on the same 
     campus, a consortium of residential living options and 
     support services to persons at least 60 years of age under a 
     written agreement. For purposes of the preceding sentence, 
     the residential living options shall include independent 
     living units, nursing home beds, and either assisted living 
     units or personal care beds.

     TITLE II--TAX REFORM AND IMPROVEMENTS RELATING TO CHARITABLE 
                       ORGANIZATIONS AND PROGRAMS

     SEC. 201. SUSPENSION OF TAX-EXEMPT STATUS OF TERRORIST 
                   ORGANIZATIONS.

       (a) In General.--Section 501 (relating to exemption from 
     tax on corporations, certain trusts, etc.) is amended by 
     redesignating subsection (p) as subsection (q) and by 
     inserting after subsection (o) the following new subsection:
       ``(p) Suspension of Tax-Exempt Status of Terrorist 
     Organizations.--
       ``(1) In general.--The exemption from tax under subsection 
     (a) with respect to any organization described in paragraph 
     (2), and the eligibility of any organization described in 
     paragraph (2) to apply for recognition of exemption under 
     subsection (a), shall be suspended during the period 
     described in paragraph (3).
       ``(2) Terrorist organizations.--An organization is 
     described in this paragraph if such organization is 
     designated or otherwise individually identified--
       ``(A) under section 212(a)(3)(B)(vi)(II) or 219 of the 
     Immigration and Nationality Act as a terrorist organization 
     or foreign terrorist organization,
       ``(B) in or pursuant to an Executive order which is related 
     to terrorism and issued under the authority of the 
     International Emergency Economic Powers Act or section 5 of 
     the United Nations Participation Act of 1945 for the purpose 
     of imposing on such organization an economic or other 
     sanction, or
       ``(C) in or pursuant to an Executive order issued under the 
     authority of any Federal law if--
       ``(i) the organization is designated or otherwise 
     individually identified in or pursuant to such Executive 
     order as supporting or engaging in terrorist activity (as 
     defined in section

[[Page 22227]]

     212(a)(3)(B) of the Immigration and Nationality Act) or 
     supporting terrorism (as defined in section 140(d)(2) of the 
     Foreign Relations Authorization Act, Fiscal Years 1988 and 
     1989); and
       ``(ii) such Executive order refers to this subsection.
       ``(3) Period of suspension.--With respect to any 
     organization described in paragraph (2), the period of 
     suspension--
       ``(A) begins on the later of--
       ``(i) the date of the first publication of a designation or 
     identification described in paragraph (2) with respect to 
     such organization, or
       ``(ii) the date of the enactment of this subsection, and
       ``(B) ends on the first date that all designations and 
     identifications described in paragraph (2) with respect to 
     such organization are rescinded pursuant to the law or 
     Executive order under which such designation or 
     identification was made.
       ``(4) Denial of deduction.--No deduction shall be allowed 
     under section 170, 545(b)(2), 556(b)(2), 642(c), 2055, 
     2106(a)(2), or 2522 for any contribution to an organization 
     described in paragraph (2) during the period described in 
     paragraph (3).
       ``(5) Denial of administrative or judicial challenge of 
     suspension or denial of deduction.--Notwithstanding section 
     7428 or any other provision of law, no organization or other 
     person may challenge a suspension under paragraph (1), a 
     designation or identification described in paragraph (2), the 
     period of suspension described in paragraph (3), or a denial 
     of a deduction under paragraph (4) in any administrative or 
     judicial proceeding relating to the Federal tax liability of 
     such organization or other person.
       ``(6) Erroneous designation.--
       ``(A) In general.--If--
       ``(i) the tax exemption of any organization described in 
     paragraph (2) is suspended under paragraph (1),
       ``(ii) each designation and identification described in 
     paragraph (2) which has been made with respect to such 
     organization is determined to be erroneous pursuant to the 
     law or Executive order under which such designation or 
     identification was made, and
       ``(iii) the erroneous designations and identifications 
     result in an overpayment of income tax for any taxable year 
     by such organization,

     credit or refund (with interest) with respect to such 
     overpayment shall be made.
       ``(B) Waiver of limitations.--If the credit or refund of 
     any overpayment of tax described in subparagraph (A)(iii) is 
     prevented at any time by the operation of any law or rule of 
     law (including res judicata), such credit or refund may 
     nevertheless be allowed or made if the claim therefor is 
     filed before the close of the 1-year period beginning on the 
     date of the last determination described in subparagraph 
     (A)(ii).
       ``(7) Notice of suspensions.--If the tax exemption of any 
     organization is suspended under this subsection, the Internal 
     Revenue Service shall update the listings of tax-exempt 
     organizations and shall publish appropriate notice to 
     taxpayers of such suspension and of the fact that 
     contributions to such organization are not deductible during 
     the period of such suspension.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to designations made before, on, or after the 
     date of the enactment of this Act.

     SEC. 202. CLARIFICATION OF DEFINITION OF CHURCH TAX INQUIRY.

       Subsection (i) of section 7611 (relating to section not to 
     apply to criminal investigations, etc.) is amended by 
     striking ``or'' at the end of paragraph (4), by striking the 
     period at the end of paragraph (5) and inserting ``, or'', 
     and by inserting after paragraph (5) the following:
       ``(6) information provided by the Secretary related to the 
     standards for exemption from tax under this title and the 
     requirements under this title relating to unrelated business 
     taxable income.''.

     SEC. 203. EXTENSION OF DECLARATORY JUDGMENT REMEDY TO TAX-
                   EXEMPT ORGANIZATIONS.

       (a) In General.--Paragraph (1) of section 7428(a) (relating 
     to creation of remedy) is amended--
       (1) in subparagraph (B) by inserting after ``509(a))'' the 
     following: ``or as a private operating foundation (as defined 
     in section 4942(j)(3))''; and
       (2) by amending subparagraph (C) to read as follows:
       ``(C) with respect to the initial qualification or 
     continuing qualification of an organization as an 
     organization described in subsection (c) (other than 
     paragraph (3)) or (d) of section 501 which is exempt from tax 
     under section 501(a), or''.
       (b) Court Jurisdiction.--Subsection (a) of section 7428 is 
     amended in the material following paragraph (2) by striking 
     ``United States Tax Court, the United States Claims Court, or 
     the district court of the United States for the District of 
     Columbia'' and inserting the following: ``United States Tax 
     Court (in the case of any such determination or failure) or 
     the United States Claims Court or the district court of the 
     United States for the District of Columbia (in the case of a 
     determination or failure with respect to an issue referred to 
     in subparagraph (A) or (B) of paragraph (1)),''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to pleadings filed with respect to determinations 
     (or requests for determinations) made after the date of the 
     enactment of this Act.

     SEC. 204. LANDOWNER INCENTIVES PROGRAMS.

       (a) In General.--Subsection (a) of section 126 is amended 
     by redesignating paragraph (10) as paragraph (11) and by 
     inserting after paragraph (9) the following new paragraph:
       ``(10) Landowner initiatives programs to conserve 
     threatened, endangered, or imperiled species, or protect or 
     restore habitat carried out under--
       ``(A) the Fish and Wildlife Coordination Act (16 U.S.C. 661 
     et seq.),
       ``(B) the Fish and Wildlife Act of 1956 (16 U.S.C. 742f), 
     or
       ``(C) section 6 of the Endangered Species Act (16 U.S.C. 
     11531 et seq.).''.
       (b) Excludable Portion.--Subparagraph (A) of section 
     126(b)(1) is amended by inserting after ``Secretary of 
     Agriculture'' the following: ``(the Secretary of the 
     Interior, in the case of the landowner incentives programs 
     described in subsection (a)(10) and the programs described in 
     subsection (a)(11) that are implemented by the Department of 
     the Interior)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to amounts received after December 31, 2003, in 
     taxable years ending after such date.

     SEC. 205. MODIFICATIONS TO SECTION 512(B)(13).

       (a) In General.--Paragraph (13) of section 512(b) (relating 
     to special rules for certain amounts received from controlled 
     entities) is amended by redesignating subparagraph (E) as 
     subparagraph (F) and by inserting after subparagraph (D) the 
     following new subparagraph:
       ``(E) Paragraph to apply only to excess payments.--
       ``(i) In general.--Subparagraph (A) shall apply only to the 
     portion of a specified payment received or accrued by the 
     controlling organization that exceeds the amount which would 
     have been paid or accrued if such payment met the 
     requirements prescribed under section 482.
       ``(ii) Addition to tax for valuation misstatements.--The 
     tax imposed by this chapter on the controlling organization 
     shall be increased by an amount equal to 20 percent of the 
     larger of--

       ``(I) such excess determined without regard to any 
     amendment or supplement to a return of tax, or
       ``(II) such excess determined with regard to all such 
     amendments and supplements.''.

       (b) Effective Date.--
       (1) In general.--The amendment made by this section shall 
     apply to payments received or accrued after December 31, 
     2003.
       (2) Payments subject to binding contract transition rule.--
     If the amendments made by section 1041 of the Taxpayer Relief 
     Act of 1997 did not apply to any amount received or accrued 
     in the first 2 taxable years beginning on or after the date 
     of the enactment of the Taxpayer Relief Act of 1997 under any 
     contract described in subsection (b)(2) of such section, such 
     amendments also shall not apply to amounts received or 
     accrued under such contract before January 1, 2001.

     SEC. 206. SIMPLIFICATION OF LOBBYING EXPENDITURE LIMITATION.

       (a) Repeal of Grassroots Expenditure Limit.--Paragraph (1) 
     of section 501(h) (relating to expenditures by public 
     charities to influence legislation) is amended to read as 
     follows:
       ``(1) General rule.--In the case of an organization to 
     which this subsection applies, exemption from taxation under 
     subsection (a) shall be denied because a substantial part of 
     the activities of such organization consists of carrying on 
     propaganda, or otherwise attempting, to influence 
     legislation, but only if such organization normally makes 
     lobbying expenditures in excess of the lobbying ceiling 
     amount for such organization for each taxable year.''.
       (b) Excess Lobbying Expenditures.--Section 4911(b) is 
     amended to read as follows:
       ``(b) Excess Lobbying Expenditures.--For purposes of this 
     section, the term `excess lobbying expenditures' means, for a 
     taxable year, the amount by which the lobbying expenditures 
     made by the organization during the taxable year exceed the 
     lobbying nontaxable amount for such organization for such 
     taxable year.''.
       (c) Conforming Amendments.--
       (1) Section 501(h)(2) is amended by striking subparagraphs 
     (C) and (D).
       (2) Section 4911(c) is amended by striking paragraphs (3) 
     and (4).
       (3) Paragraph (1)(A) of section 4911(f) is amended by 
     striking ``limits of section 501(h)(1) have'' and inserting 
     ``limit of section 501(h)(1) has''.
       (4) Paragraph (1)(C) of section 4911(f) is amended by 
     striking ``limits of section 501(h)(1) are'' and inserting 
     ``limit of section 501(h)(1) is''.
       (5) Paragraphs (4)(A) and (4)(B) of section 4911(f) are 
     each amended by striking ``limits of section 501(h)(1)'' and 
     inserting ``limit of section 501(h)(1)''.
       (6) Paragraph (8) of section 6033(b) (relating to certain 
     organizations described in section 501(c)(3)) is amended by 
     inserting ``and'' at the end of subparagraph (A) and by 
     striking subparagraphs (C) and (D).
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 207. PILOT PROJECT FOR FOREST CONSERVATION ACTIVITIES.

       (a) Tax-Exempt Bond Financing.--
       (1) In general.--For purposes of the Internal Revenue Code 
     of 1986, any qualified forest conservation bond shall be 
     treated as an exempt facility bond under section 142 of such 
     Code.
       (2) Qualified forest conservation bond.--For purposes of 
     this section, the term ``qualified forest conservation bond'' 
     means any bond issued as part of an issue if--

[[Page 22228]]

       (A) 95 percent or more of the net proceeds (as defined in 
     section 150(a)(3) of such Code) of such issue are to be used 
     for qualified project costs,
       (B) such bond is an obligation of the State of Washington 
     or any political subdivision thereof, and
       (C) such bond is issued for a qualified organization before 
     December 31, 2006.
       (3) Limitation on aggregate amount issued.--The maximum 
     aggregate face amount of bonds which may be issued under this 
     subsection shall not exceed $250,000,000.
       (4) Qualified project costs.--For purposes of this 
     subsection, the term ``qualified project costs'' means the 
     sum of--
       (A) the cost of acquisition by the qualified organization 
     from an unrelated person of forests and forest land located 
     in the State of Washington which at the time of acquisition 
     or immediately thereafter are subject to a conservation 
     restriction described in subsection (c)(2),
       (B) interest on the qualified forest conservation bonds for 
     the 3-year period beginning on the date of issuance of such 
     bonds, and
       (C) credit enhancement fees which constitute qualified 
     guarantee fees (within the meaning of section 148 of such 
     Code).
       (5) Special rules.--In applying the Internal Revenue Code 
     of 1986 to any qualified forest conservation bond, the 
     following modifications shall apply:
       (A) Section 146 of such Code (relating to volume cap) shall 
     not apply.
       (B) For purposes of section 147(b) of such Code (relating 
     to maturity may not exceed 120 percent of economic life), the 
     land and standing timber acquired with proceeds of qualified 
     forest conservation bonds shall have an economic life of 35 
     years.
       (C) Subsections (c) and (d) of section 147 of such Code 
     (relating to limitations on acquisition of land and existing 
     property) shall not apply.
       (D) Section 57(a)(5) of such Code (relating to tax-exempt 
     interest) shall not apply to interest on qualified forest 
     conservation bonds.
       (6) Treatment of current refunding bonds.--Paragraphs 
     (2)(C) and (3) shall not apply to any bond (or series of 
     bonds) issued to refund a qualified forest conservation bond 
     issued before December 31, 2006, if--
       (A) the average maturity date of the issue of which the 
     refunding bond is a part is not later than the average 
     maturity date of the bonds to be refunded by such issue,
       (B) the amount of the refunding bond does not exceed the 
     outstanding amount of the refunded bond, and
       (C) the net proceeds of the refunding bond are used to 
     redeem the refunded bond not later than 90 days after the 
     date of the issuance of the refunding bond.

     For purposes of subparagraph (A), average maturity shall be 
     determined in accordance with section 147(b)(2)(A) of such 
     Code.
       (7) Effective date.--This subsection shall apply to 
     obligations issued on or after the date of enactment of this 
     Act.
       (b) Items From Qualified Harvesting Activities Not Subject 
     to Tax or Taken Into Account.--
       (1) In general.--Income, gains, deductions, losses, or 
     credits from a qualified harvesting activity conducted by a 
     qualified organization shall not be subject to tax or taken 
     into account under subtitle A of the Internal Revenue Code of 
     1986.
       (2) Limitation.--The amount of income excluded from gross 
     income under paragraph (1) for any taxable year shall not 
     exceed the amount used by the qualified organization to make 
     debt service payments during such taxable year for qualified 
     forest conservation bonds.
       (3) Qualified harvesting activity.--For purposes of 
     paragraph (1)--
       (A) In general.--The term ``qualified harvesting activity'' 
     means the sale, lease, or harvesting, of standing timber--
       (i) on land owned by a qualified organization which was 
     acquired with proceeds of qualified forest conservation 
     bonds, and
       (ii) pursuant to a qualified conservation plan adopted by 
     the qualified organization.
       (B) Exceptions.--
       (i) Cessation as qualified organization.--The term 
     ``qualified harvesting activity'' shall not include any sale, 
     lease, or harvesting for any period during which the 
     organization ceases to qualify as a qualified organization.
       (ii) Exceeding limits on harvesting.--The term ``qualified 
     harvesting activity'' shall not include any sale, lease, or 
     harvesting of standing timber on land acquired with proceeds 
     of qualified forest conservation bonds to the extent that--

       (I) the average annual area of timber harvested from such 
     land exceeds 2.5 percent of the total area of such land, or
       (II) the quantity of timber removed from such land exceeds 
     the quantity which can be removed from such land annually in 
     perpetuity on a sustained-yield basis with respect to such 
     land.

     The limitations under subclauses (I) and (II) shall not apply 
     to post-fire restoration and rehabilitation or sanitation 
     harvesting of timber stands which are substantially damaged 
     by fire, windthrow, or other catastrophes, or which are in 
     imminent danger from insect or disease attack.
       (4) Termination.--This subsection shall not apply to any 
     qualified harvesting activity occurring after the date on 
     which there is no outstanding qualified forest conservation 
     bond or any such bond ceases to be a tax-exempt bond.
       (5) Partial recapture of benefits if harvesting limit 
     exceeded.--If, as of the date that this subsection ceases to 
     apply under paragraph (4), the average annual area of timber 
     harvested from the land exceeds the requirement of paragraph 
     (3)(B)(ii)(I), the tax imposed by chapter 1 of such Code 
     shall be increased, under rules prescribed by the Secretary 
     of the Treasury, by the sum of the tax benefits attributable 
     to such excess and interest at the underpayment rate under 
     section 6621 of such Code for the period of the underpayment.
       (c) Definitions.--For purposes of this section--
       (1) Qualified conservation plan.--The term ``qualified 
     conservation plan'' means a multiple land use program or plan 
     which--
       (A) is designed and administered primarily for the purposes 
     of protecting and enhancing wildlife and fish, timber, scenic 
     attributes, recreation, and soil and water quality of the 
     forest and forest land,
       (B) mandates that conservation of forest and forest land is 
     the single-most significant use of the forest and forest 
     land, and
       (C) requires that timber harvesting be consistent with--
       (i) restoring and maintaining reference conditions for the 
     region's ecotype,
       (ii) restoring and maintaining a representative sample of 
     young, mid, and late successional forest age classes,
       (iii) maintaining or restoring the resources' ecological 
     health for purposes of preventing damage from fire, insect, 
     or disease,
       (iv) maintaining or enhancing wildlife or fish habitat, or
       (v) enhancing research opportunities in sustainable 
     renewable resource uses.
       (2) Conservation restriction.--The conservation restriction 
     described in this paragraph is a restriction which--
       (A) is granted in perpetuity to an unrelated person which 
     is described in section 170(h)(3) of such Code and which, in 
     the case of a nongovernmental unit, is organized and operated 
     for conservation purposes,
       (B) meets the requirements of clause (ii) or (iii)(II) of 
     section 170(h)(4)(A) of such Code,
       (C) obligates the qualified organization to pay the costs 
     incurred by the holder of the conservation restriction in 
     monitoring compliance with such restriction, and
       (D) requires an increasing level of conservation benefits 
     to be provided whenever circumstances allow it.
       (3) Qualified organization.--The term ``qualified 
     organization'' means an organization--
       (A) which is a nonprofit organization substantially all the 
     activities of which are charitable, scientific, or 
     educational, including acquiring, protecting, restoring, 
     managing, and developing forest lands and other renewable 
     resources for the long-term charitable, educational, 
     scientific and public benefit,
       (B) more than half of the value of the property of which 
     consists of forests and forest land acquired with the 
     proceeds from qualified forest conservation bonds,
       (C) which periodically conducts educational programs 
     designed to inform the public of environmentally sensitive 
     forestry management and conservation techniques,
       (D) which has at all times a board of directors--
       (i) at least 20 percent of the members of which represent 
     the holders of the conservation restriction described in 
     paragraph (2),
       (ii) at least 20 percent of the members of which are public 
     officials, and
       (iii) not more than one-third of the members of which are 
     individuals who are or were at any time within 5 years before 
     the beginning of a term of membership on the board, an 
     employee of, independent contractor with respect to, officer 
     of, director of, or held a material financial interest in, a 
     commercial forest products enterprise with which the 
     qualified organization has a contractual or other financial 
     arrangement,
       (E) the bylaws of which require at least two-thirds of the 
     members of the board of directors to vote affirmatively to 
     approve the qualified conservation plan and any change 
     thereto, and
       (F) upon dissolution, is required to dedicate its assets 
     to--
       (i) an organization described in section 501(c)(3) of such 
     Code which is organized and operated for conservation 
     purposes, or
       (ii) a governmental unit described in section 170(c)(1) of 
     such Code.
       (4) Unrelated person.--The term ``unrelated person'' means 
     a person who is not a related person.
       (5) Related person.--A person shall be treated as related 
     to another person if--
       (A) such person bears a relationship to such other person 
     described in section 267(b) (determined without regard to 
     paragraph (9) thereof), or 707(b)(1), of such Code, 
     determined by substituting ``25 percent'' for ``50 percent'' 
     each place it appears therein, and
       (B) in the case such other person is a nonprofit 
     organization, if such person controls directly or indirectly 
     more than 25 percent of the governing body of such 
     organization.
       (d) Report.--
       (1) In general.--The Comptroller General of the United 
     States shall conduct a study on the pilot project for forest 
     conservation activities under this section. Such study shall 
     examine the extent to which forests and forest lands were 
     managed during the 5-year period beginning on the date of the 
     enactment of this Act to achieve the goals of such project.
       (2) Submission of report to congress.--Not later than six 
     years after the date of the enactment of this Act, the 
     Comptroller General shall submit a report of such study to 
     the Committee

[[Page 22229]]

     on Ways and Means and the Committee on Resources of the House 
     of Representatives and the Committee on Finance and the 
     Committee on Energy and Natural Resources of the Senate.

                      TITLE III--OTHER PROVISIONS

     SEC. 301. COMPASSION CAPITAL FUND.

       Title IV of the Social Security Act (42 U.S.C. 601-679b) is 
     amended by adding at the end the following:

                   ``PART F--COMPASSION CAPITAL FUND

     ``SEC. 481. SECRETARY'S FUND TO SUPPORT AND REPLICATE 
                   PROMISING SOCIAL SERVICE PROGRAMS.

       ``(a) Grant Authority.--
       ``(1) In general.--The Secretary may make grants to support 
     any private entity that operates a promising social services 
     program.
       ``(2) Applications.--An entity desiring to receive a grant 
     under paragraph (1) shall submit to the Secretary an 
     application for the grant, which shall contain such 
     information as the Secretary may require.
       ``(b) Contract Authority, etc.--The Secretary may enter 
     into a grant, contract, or cooperative agreement with any 
     entity under which the entity would provide technical 
     assistance to another entity to operate a social service 
     program that assists persons and families in need, including 
     by--
       ``(1) providing the other entity with--
       ``(A) technical assistance and information, including legal 
     assistance and other business assistance;
       ``(B) information on capacity-building;
       ``(C) information and assistance in identifying and using 
     best practices for serving persons and families in need; or
       ``(D) assistance in replicating programs with demonstrated 
     effectiveness in assisting persons and families in need; or
       ``(2) supporting research on the best practices of social 
     service organizations.
       ``(c) Guidance and Technical Assistance.--The Secretary may 
     use not more than 25 percent of the amount appropriated under 
     this section for a fiscal year to provide guidance and 
     technical assistance to States and political subdivisions of 
     States with respect to the implementation of any social 
     service program.
       ``(d) Social Services Program Defined.--In this section, 
     the term `social services program' means a program that 
     provides benefits or services of any kind to persons and 
     families in need.
       ``(e) Limitations on Authorization of Appropriations.--To 
     carry out this section, there are authorized to be 
     appropriated to the Secretary $150,000,000 for fiscal year 
     2004, and such sums as may be necessary for fiscal years 2005 
     through 2008.''.

     SEC. 302. REAUTHORIZATION OF ASSETS FOR INDEPENDENCE 
                   DEMONSTRATION.

       (a) In General.--Section 416 of the Assets for Independence 
     Act (title IV of Public Law 105-285; 42 U.S.C. 604 note) is 
     amended by striking ``and 2003'' and inserting ``2003, 2004, 
     2005, 2006, 2007, and 2008''.
       (b) Removal of Economic Literacy Activities From Limitation 
     on Use of Amounts in the Reserve Fund.--Section 407(c)(3) of 
     such Act (title IV of Public Law 105-285; 42 U.S.C. 604 note) 
     is amended by adding at the end the following: ``The 
     preceding sentences of this paragraph shall not apply to 
     amounts used by an entity for any activity described in 
     paragraph (1)(A).''.
       (c) Eligibility Expanded To Include Individuals in 
     Households With Income Not Exceeding 50 Percent of Area 
     Median Income.--Section 408(a)(1) of such Act (title IV of 
     Public Law 105-285; 42 U.S.C. 604 note) is amended to read as 
     follows:
       ``(1) Income test.--The adjusted gross income of the 
     household--
       ``(A) does not exceed 200 percent of the poverty line (as 
     determined by the Office of Management and Budget) or the 
     earned income amount described in section 32 of the Internal 
     Revenue Code of 1986 (taking into account the size of the 
     household); or
       ``(B) does not exceed 50 percent of the area median income 
     (as determined by the Secretary of Housing and Urban 
     Development) for the area in which the household is 
     located.''.
       (d) Extension of Time for Account Holders To Access Federal 
     Funds.--Section 407(d) of such Act (title IV of Public Law 
     105-285; 42 U.S.C. 604 note) is amended--
       (1) in the subsection heading, by striking ``When Project 
     Terminates''; and
       (2) by striking ``upon'' and inserting ``on the date that 
     is 6 months after''.
       (e) Verification of Postsecondary Education Expenses.--
     Section 404(8)(A) of such Act (title IV of Public Law 105-
     285; 42 U.S.C. 604 note) is amended in the 1st sentence by 
     inserting ``or a vendor, but only to the extent that the 
     expenses are described in a document which explains the 
     educational items to be purchased, and the document and the 
     expenses are approved by the qualified entity'' before the 
     period.
       (f) Authority To Use Excess Interest To Fund Other 
     Individual Development Accounts.--Section 410 of such Act 
     (title IV of Public Law 105-285; 42 U.S.C. 604 note) is 
     amended--
       (1) in subsection (a)(3)--
       (A) by striking ``any interest that has accrued'' and 
     inserting ``interest that has accrued during that period''; 
     and
       (B) by striking the period and inserting ``, but only to 
     the extent that the amount of the interest does not exceed 
     the amount of interest that has accrued during that period on 
     amounts deposited in the account by that individual.''; and
       (2) by adding at the end the following:
       ``(f) Use of Excess Interest To Fund Other Individual 
     Development Accounts.--To the extent that a qualified entity 
     has an amount that, but for the limitation in subsection 
     (a)(3), would be required by that subsection to be deposited 
     into the individual development account of an individual or 
     into a parallel account maintained by the qualified entity, 
     the qualified entity may deposit the amount into the 
     individual development account of any individual or into any 
     such parallel account maintained by the qualified entity.''.

     SEC. 303. SENSE OF THE CONGRESS REGARDING CORPORATE 
                   CONTRIBUTIONS TO FAITH-BASED ORGANIZATIONS, 
                   ETC.

       (a) Findings.--The Congress finds as follows:
       (1) America's community of faith has long played a leading 
     role in dealing with difficult societal problems that might 
     otherwise have gone unaddressed.
       (2) President Bush has called upon Americans ``to revive 
     the spirit of citizenship . . . to marshal the compassion of 
     our people to meet the continuing needs of our Nation''.
       (3) Although the work of faith-based organizations should 
     not be used by government as an excuse for backing away from 
     its historic and rightful commitment to help those who are 
     disadvantaged and in need, such organizations can and should 
     be seen as a valuable partner with government in meeting 
     societal challenges.
       (4) Every day faith-based organizations in the United 
     States help people recover from drug and alcohol addiction, 
     provide food and shelter for the homeless, rehabilitate 
     prison inmates so that they can break free from the cycle of 
     recidivism, and teach people job skills that will allow them 
     to move from poverty to productivity.
       (5) Faith-based organizations are often more successful in 
     dealing with difficult societal problems than government and 
     non-sectarian organizations.
       (6) As President Bush has stated, ``It is not sufficient to 
     praise charities and community groups; we must support them. 
     And this is both a public obligation and a personal 
     responsibility.''.
       (7) Corporate foundations contribute billions of dollars 
     each year to a variety of philanthropic causes.
       (8) According to a study produced by the Capital Research 
     Center, the 10 largest corporate foundations in the United 
     States contributed $1,900,000,000 to such causes.
       (9) According to the same study, faith-based organizations 
     only receive a small fraction of the contributions made by 
     corporations in the United States, and 6 of the 10 
     corporations that give the most to philanthropic causes 
     explicitly ban or restrict contributions to faith-based 
     organizations.
       (b) Corporations Encouraged To Contribute to Faith-Based 
     Organizations.--The Congress calls on corporations in the 
     United States, in the words of the President, ``to give more 
     and to give better'' by making greater contributions to 
     faith-based organizations that are on the front lines 
     battling some of the great societal challenges of our day.
       (c) Sense of the Congress.--It is the sense of Congress 
     that--
       (1) corporations in the United States are important 
     partners with government in efforts to overcome difficult 
     societal problems; and
       (2) no corporation in the United States should adopt 
     policies that prohibit the corporation from contributing to 
     an organization that is successfully advancing a 
     philanthropic cause merely because such organization is faith 
     based.

     SEC. 304. MATERNITY GROUP HOMES.

       Section 322 of the Runaway and Homeless Youth Act (42 
     U.S.C. 5714-2) is amended--
       (1) in subsection (a)(1), by inserting ``(including 
     maternity group homes)'' after ``group homes''; and
       (2) by adding at the end the following:
       ``(c) Maternity Group Home.--In this part, the term 
     `maternity group home' means a community-based, adult-
     supervised group home that provides--
       ``(1) young mothers and their children with a supportive 
     and supervised living arrangement in which such mothers are 
     required to learn parenting skills, including child 
     development, family budgeting, health and nutrition, and 
     other skills to promote their long-term economic independence 
     and the well-being of their children; and
       ``(2) pregnant women with--
       ``(A) information regarding the option of placing children 
     for adoption through licensed adoption service providers;
       ``(B) assistance with prenatal care and child birthing; and
       ``(C) pre- and post-placement adoption counseling.''.

     SEC. 305. AUTHORITY OF STATES TO USE 10 PERCENT OF THEIR TANF 
                   FUNDS TO CARRY OUT SOCIAL SERVICES BLOCK GRANT 
                   PROGRAMS.

       Section 404(d)(2) of the Social Security Act (42 U.S.C. 
     604(d)(2)) is amended to read as follows:
       ``(2) Limitation on amount transferable to title xx 
     programs.--A State may use not more than 10 percent of the 
     amount of any grant made to the State under section 403(a) 
     for a fiscal year to carry out State programs pursuant to 
     title XX.''.

  The SPEAKER pro tempore. After one hour of debate on the bill, as 
amended, it shall be in order to consider the further amendment printed 
in part B of the report, if offered by the gentleman from Maryland (Mr. 
Cardin), or his designee, which shall be

[[Page 22230]]

considered read, and shall be debatable for one hour, equally divided 
and controlled by the proponent and an opponent.
  The gentleman from California (Mr. Thomas) and the gentleman from 
California (Mr. Stark) each will control 30 minutes of debate on the 
bill.
  The Chair recognizes the gentleman from California (Mr. Thomas).
  Mr. THOMAS. Mr. Speaker, I yield myself such time as I may consume.
  First of all, I want to compliment the cosponsors of the bill, the 
gentleman from Missouri (Mr. Blunt) and the gentleman from Tennessee 
(Mr. Ford). The fact that they decided on a bipartisan approach, I 
think set the tone for the changes that result in the bill we have 
before us.
  The President had indicated that one of his top priorities, as he 
said, to rally the armies of compassion, to help the underprivileged in 
the United States is, in fact, to a certain extent a uniquely American 
structure dealing with the creation of foundations, charitable trusts 
and other structures to assist those in need in a private plan from 
those who have wealth.
  These plans, approaches and foundations are governed, especially in 
terms of a privileged position, under the tax code as those who, when 
they conduct these activities, are exempt from various taxable 
consequences. Periodically, we really do need to review the structure, 
the relationships and the way in which these foundations and other 
structures relate to the tax code.
  In addition to that, there is nothing wrong with this society, 
through the tax code, influencing in a positive way a people's 
willingness to carry on contributions and charitable acts. That really 
is the core of H.R. 7, and I am pleased to say, notwithstanding the 
fact that the minority will offer a substitute for the bill, those 
portions that I have just discussed are identical between H.R. 7 and 
the substitute that will be offered.
  The difference is about other actions, other money, other funding 
arguments. Those will be examined in terms of the substitute versus the 
underlying bill, but I want to underscore, this bill came out of the 
Committee on Ways and Means by a voice vote. What that means is that, 
basically, it was supported by all of the Members. The compromise that 
was achieved that produced this result is an excellent example of 
people who are going to be governed working with those people who are 
empowered to do the governing and resolving differences.
  I do believe the core portion of H.R. 7 is not controversial and 
should be passed.
  Mr. Speaker, last week H.R. 7, the Charitable Giving Act of 2003 
passed the Committee on Ways and Means, as amended, by voice vote.
  The Charitable Giving Act is one of President Bush's top priorities, 
and will--as he has said--``rally the armies of compassion'' to help 
the underprivileged in the United States. The bill encourages 
charitable contributions by individuals, businesses and foundations, 
while improving the effectiveness and efficacy of the government's 
delivery program for these important donations. The tax incentives in 
H.R. 7 will encourage and promote philanthropic donations by removing 
barriers that restrict giving.
  H.R. 7 allows those taxpayers who do not itemize, which accounts for 
roughly two-thirds of returns, the opportunity to deduct a portion of 
their charitable contributions.
  The bill provides an exclusion from gross income for otherwise 
taxable withdrawals from traditional or Roth IRAs that are made for 
charitable purposes. IRAs represent a major untapped source of 
charitable contributions, and it is estimated that Americans have used 
these plans to save roughly $2.3 trillion. By allowing taxpayers who 
have reached age 70\1/2\ to make tax-free transfers of IRA assets for 
charitable purposes, this provision represents a key source of 
increased charitable giving while also providing safeguards to ensure 
that IRA owners have ample assets for retirement.
  H.R. 7 increases incentives that encourage benevolent contributions 
by corporations and other business. The bill increases the cap on 
corporate charitable contributions from 10 to 20 percent of modified 
taxable income and allows all businesses, rather than just C 
corporations, to take advantage of an extension of enhanced deductions 
for donations of food inventory. In addition, H.R. 7 better allows 
corporations to donate scientific property, computer technology and 
equipment to enhance research, and allows a shareholder in an S 
corporation to receive the benefit of a full charitable deduction for 
charitable contributions made by the S corporation.
  In addition, this bill includes legislation to authorize a new 
compassion capital fund to support propitious social programs while 
extending and strengthening current efforts that urge low-income 
families to save in hopes to pay for school, start a business, or 
purchase a home. Furthermore, the enhanced State flexibility outlined 
in H.R. 7 allows States to transfer 10 percent of annual Federal cash 
welfare funds to the Social Services Block Grant in order to better 
help low-income families.
  Mr. Speaker, this legislation is very important for two reasons: (1) 
it will help Americans help those who need it the most--whether it is 
through initiatives to end substance abuse and gang related violence, 
or to improve the health of the neediest; and (2) it will ensure 
uniformity exists in how charitable foundations operate. I urge my 
colleagues to vote in support of H.R. 7.
  Mr. Speaker, I yield the balance of my time to the gentleman from 
Missouri (Mr. Blunt) and ask unanimous consent that he control the 
balance of the time.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from California?
  There was no objection.
  Mr. STARK. Mr. Speaker, I yield myself such time as I may consume to 
address not just this bill but all the things that the bill either 
ignores or demeans by suggesting that these charitable acts will solve 
some of the major problems in our country.
  The bill suggests that it is going to spend $13 billion, when any 
reasonable assessment would suggest that it is a $23-billion bill 
because it sunsets the tax deduction in the second year, and we know 
that as night follows day, the next request will be to make it 
permanent, and I think it is rather deceptive to suggest to the public 
that it is, in fact, 13 when it is arguably substantially more, if one 
believes that the bill does the right thing to begin with.
  The bill ought to be noted for what it does not do. What it does not 
do is deal with 12 million children whose parents will not receive a 
tax credit, which the President supports, the other body supports, and 
for some reason, my Republican colleagues in this House feel that 
because their parents pay little or no income tax, while they may pay 
substantial payroll taxes, they ought not to receive this money.
  So many of the parents who are such low income, including the parents 
of 250,000 or more children who are children of our brave troops who 
will not receive this money, many of those same families will be 
importuned and given $6 a month in tax deduction for contributing to 
various causes. One imagines the United Crusade or whatever.
  Many of us suspect that that will not generate very much charitable 
giving, and it would seem to me to be much more direct to deal with tax 
credits for families under $25,000 a year who have children to raise 
wherein health care is limited, wherein there is no help for housing or 
clothing or school subsidies which we have talked about on this floor. 
So, again, this bill is notable for what it does not do.
  Then it has a certain amount of arrogance in what it does do. For 
example, it is almost cute, there is a college housing project, as it 
is called, in this bill, and what that basically does is help Delta 
Kappa Epsilon and Phi Beta Kappa and Kappa Kappa Alpha. It is a gift to 
fraternity and sorority houses on college campuses.

                              {time}  1215

  Now, I have no quarrel with fraternities and sororities; but they 
are, indeed, private social clubs; and it seems to me that we are 
taking the first step in giving taxpayer dollars to private clubs that 
have every right to restrict their membership by race, by religion, by 
ethnicity, or any other reason. And there is no quarrel, but we have 
never before in the history of our Tax Code of our country given 
taxpayer dollars to golf clubs or tennis clubs or any other types of 
clubs.
  And then we are going to go and have an experiment, and this is an 
experiment for a very limited group of Americans. We are going to give 
$61 million

[[Page 22231]]

to create experiments to show that by cutting down trees we are going 
to save trees. Now that may work, but if it works, it is only going to 
work in the State of Washington because the $61 million in experiments 
cannot be used in any one of the other 49 States.
  I noticed that the two distinguished sponsors of this bill are from 
Tennessee. To my knowledge, there is a timber industry in Tennessee. 
What is so shabby about the timber industry in Tennessee that we cannot 
help them do an experiment in ecological management of our forests? 
There happens to be a timber industry in California where the chairman 
of the Committee on Ways and Means resides. Why would we not like to 
help preserve the redwoods in California with some of this money, or 
the State of Oregon or the State of Maine? Why is it that only one 
State gets to participate in this experiment? And I might add it adds 
up to one timber company, the Weyerhaeuser timber company, which is 
owned by a very rich family, so we maybe could say it is only one 
family that participates. That is not right. It is not the proper thing 
to do.
  If these programs are good, in every other experiment, we let people 
apply and we try and award these not as pork and a reward to some 
individual politician, but we try to reward them to the program which 
shows they have the most potential for benefiting the most Americans. 
That is the way a democracy ought to work; and in this new 
administration which tends to interpret democracy any way that the 
Attorney General chooses on that particular day, we seem to be 
redefining in this bill how we should apply charity and what are 
charitable organizations, how we should apply the largess of the 
Federal Government with rifle-shot approaches to individual 
corporations.
  Mr. Speaker, this is a bill that is fraught with help for individual 
companies and individual interests; and it is most notable, as I would 
like to repeat once again, for what it does not do. It does not help 
those 12 million children in low-income families who most need 
assistance and which this House has repeatedly turned its back on due 
to the Republican leadership's refusal to bring up the child tax credit 
extension.
  So it is with heavy heart, Mr. Speaker, that I say that charitable 
giving here has been politicized to the extent that under the guise of 
helping low-income people with $6 a month, we are giving humongous 
rewards to fraternities and sororities, to the Weyerhaeuser timber 
company in the State of Washington, and to people who arguably do not 
need that charity today.
  Mr. Speaker, I reserve the balance of my time.
  Mr. BLUNT. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I am glad to be here to talk about this bill. This is a 
tax bill. It is a tax bill that really is an important step toward what 
we do for charities in this country. It is an important step in the 
President's faith-based agenda; but certainly as a tax bill that 
encourages charitable giving, all that giving is not necessarily done 
to faith-based institutions. This has broad bipartisan support. I am 
pleased with the way the Committee on Ways and Means dealt with this 
bill and brought this bill to the floor without any dissenting votes on 
Tuesday of last week.
  The gentleman from Tennessee (Mr. Ford), a cosponsor of the bill, 
worked hard on this bill; and we have over 80 bipartisan House 
cosponsors working with us on this bill.
  The truth is our charities need some encouragement. They have faced 
some difficult times. 2001 was the first year that charitable giving in 
this country was lower than the year before. Giving in 2002 seems to 
continue to reflect that trend. Corporate giving fell by almost 15 
percent between 2000 and 2001.
  As we look towards what this does for charities generally, we can 
also look at what it does for faith-based charities which are so 
important in providing services in the country. Seventy-five percent of 
the food pantries in America are run by religious organizations, 71 
percent of the food kitchens are faith based, 43 percent of the 
shelters are run by the faith-based community.
  This act really allows those who give to charity more ways to give 
and encourages them to give in new ways. This is a change in the Tax 
Code that has impact. In fact, the Congressional Budget Office estimate 
of the impact of this bill would indicate that $45 to $50 billion more 
will be given to charities over the next 10 years if this bill becomes 
law than would be given to charities if this bill does not become law.
  There are many things, particularly as charities reach out to 
individuals in need, food kitchens, shelters, food pantries, where the 
charity has proved to be such a compassionate way to deal with this 
problem with the most impact. Clearly the family unit intact is the 
best way to provide services to people. After that I think we could 
have a debate that my side would win advocating that when charities 
step in, they are almost always more compassionate, quicker, more cost 
effective, and get out more of the money available to them, and get 
help sooner and quicker and more effectively than any other way to do 
this. Of course, where both the family has failed, where individuals 
through the church and community have not been able to do the job, 
there is a place for government programs. But there is a clear place 
for charities.
  Let me talk about two or three things in this bill that make a 
difference in terms of how millions of Americans are affected. Eighty-
six million Americans do not itemize their taxes, but of those 86 
million Americans, many give money every week, every month, every year 
to a church or charity. The bill of the gentleman from Tennessee (Mr. 
Ford) and my bill changes the Tax Code in a way that lets those people 
who give to church and charity have credit for some of the giving that 
they do to church and charity. Just like people who itemize their 
taxes, they have to demonstrate that they did make that gift, but this 
treats them differently from the people who do not itemize their taxes 
and do not give. This really does reward giving for individuals and 
couples.
  The second big area of impact of the bill, I believe, will be the 
changes we make in those resources and how we deal with those resources 
that people have in IRAs. There are $2.5 trillion in the country today 
in IRAs. Many people, as they begin to utilize their IRAs, suddenly 
realize they do not have enough money in their IRAs to do all of the 
things that they would like to do; but many people realize through some 
good fortune in investing, an extraordinary commitment to funding their 
IRA, through that and the other things they have done providing for 
their retirement, their IRA is a big resource of money that they do not 
need or are not likely to need all of.
  Today, the tax consequences of gifting IRAs are such that almost none 
of that money is given to charity or faith-based charities. The change 
in this bill removes the tax obstacle from giving that money. After 
people reach the age of 70\1/2\ and begin to evaluate their resources 
and the need for those resources, suddenly that $2.5 trillion out there 
in IRAs is available for gifting potential.
  If we talk to our friends who raise money for their local college or 
university, for the Red Cross, for the blood center, for whatever it 
would be, they would say that this portion of the bill is the portion 
that they look to which has the greatest opportunity to change giving 
in the future.
  We raise the cap on corporate charitable contributions over the next 
10 years from 10 percent that could be gifted of profits to 20 percent 
of profits. We extend current incentives for food donations to apply to 
even more farmers, more restaurants, more retailers, more wholesalers. 
We allow value added to those products to have a greater value in 
gifting than it has today.
  This bill reauthorizes a program which allows low-income working 
Americans the opportunity to build assets through matching savings 
accounts, known as IDAs, which can be used to purchase a home, expand 
educational opportunity, or to start a small business.
  This bill provides $150 million a year for a compassion capital fund 
to assist

[[Page 22232]]

small community and faith-based organizations who want to start a 
charitable outreach to do that, to set up their organization or to 
expand their capacity to serve. This encourages conservation by private 
landowners by requiring certain Federal grant money for conservation be 
treated as tax free.
  Mr. Speaker, I yield 1\1/3\ minutes to the gentleman from Wisconsin 
(Mr. Ryan) to respond to one statement made by the gentleman from 
California (Mr. Stark).
  Mr. RYAN of Wisconsin. Mr. Speaker, I thank the gentleman for his 
tireless work on a bipartisan basis to bring this bill to the floor.
  I want to quickly address some of the inaccuracies dealing with the 
collegiate housing issue. The claim is the collegiate housing issue 
only helps sororities and fraternities. Let me tell Members exactly 
what this does and does not do. Number one, for many of us who 
represent colleges and universities in our districts, we realize that 
there is an undersupply of off-campus housing and an overcrowding on 
campus in our Nation's colleges and universities.
  What this simply does is it allows off-campus housing be built by 
nonprofit organizations to address this need, to bring up to code, to 
fire code, off-campus housing because right now if you are going to 
invest tax-deductible dollars into a nonprofit, you can deduct those 
and invest them on campus for university housing; but you cannot take 
tax-deductible dollars to invest in building collegiate housing off 
campus even though they are nonprofit, not-for-profit foundations.
  So this goes well beyond sororities and fraternities. It goes to 
religious organizations, Hillel; it goes to nonprofits and fraternities 
and sororities, and only to university students who have academic 
careers, not to country clubs or anything else. It is tightly defined, 
and it puts the need where it is required and that is to address this 
critical shortage of bringing buildings up to code and addressing this 
housing shortage need.
  Mr. STARK. Mr. Speaker, I yield 5\1/2\ minutes to the gentleman from 
Maryland (Mr. Cardin), the author of our proposed Democratic 
substitute, who can speak to the issue of how we might pay for this 
bill.

                              {time}  1230

  Mr. CARDIN. Mr. Speaker, first let me compliment the gentleman from 
Missouri (Mr. Blunt), the sponsor of this legislation, and the 
gentleman from Tennessee (Mr. Ford) for reaching, I think, a fair 
compromise on some very controversial issues so that we really do have 
a chance to enact a bill this year that can help our faith-based 
institutions, our nonprofit institutions in carrying out their very 
important responsibility. Major compromises were reached along with 
Senator Lieberman and Senator Santorum in the Senate that would provide 
our sponsors in the House to eliminate from the bill a very 
controversial provision dealing with employment discrimination. I know 
that many of our Members have been concerned about that. Those 
provisions are not included in this legislation, and I want to 
compliment all involved who were responsible for the removal of that 
provision.
  I also want to compliment the architects of this legislation for 
working out a fair compromise as it relates to a foundation's 
administrative costs. We have a fair compromise on that issue that puts 
some Federal controls on administrative costs but also allows the 
foundations to be able to do their business in the most cost-effective 
way.
  In my view, this legislation is a positive help to faith-based 
institutions, nonprofit institutions and is consistent with the 
tradition of our country to maintain the church-state separation. There 
is help here for those who want to privately give, whether they be 
individuals or corporations, to our nonprofit community through the use 
of direct contributions or their IRAs.
  Mr. Speaker, let me also agree with the gentleman from Wisconsin (Mr. 
Ryan) in regards to the provisions relating to housing.
  I think this bill is a positive bill. I agree with the distinguished 
Republican whip that this bill has moved in a bipartisan way through 
this body and through the other body and we therefore have a good bill 
before us. I would urge my good friend to continue that process and let 
Members vote their convictions on the amendment that I will be offering 
a little bit later.
  It includes two more provisions. It builds on the underlying bill but 
adds two more provisions that has strong bipartisan support not only in 
this body but also the other body. It provides an extra $1.1 billion 
for the social services block grant program. In 1996, we were financing 
the social services block grant program at $2.8 billion a year. We cut 
it in the welfare bill to $2.38 billion a year but we made a commitment 
in that legislation that we would restore that cut in 2003. That is 
exactly what the Cardin amendment will do. And it has strong bipartisan 
support. Many Members on the Republican side of the Committee on Ways 
and Means support that change. I hope they will vote that way today. It 
is vitally important to our faith-based institutions.
  Let me just give my colleagues one example. Catholic Charities relies 
upon public programs for 62 percent of their support. The social 
services block grant program is a very important part of that. It 
provides day care for low-income families, offers counseling services 
to at-risk youth, provides nutritional assistance to the elderly and 
provides community-based care to the disabled. This is their number one 
priority as far as help in order to be able to carry out their very 
important mission.
  The second change is that the bill is fully paid for by closing 
corporate loopholes through tax shelters. I know that a document was 
sent out that says this is extremely controversial. If it is extremely 
controversial, why did 95 members of the other body vote in favor of 
it? It passed 95 to 3 or 4 in the Senate. It is not controversial. It 
is controversial to add $13 billion more to the national debt and not 
pay for it. So this amendment pays for the cost of the bill through a 
provision that is good tax policy.
  Our deficit this year is projected to grow by over $500 billion. That 
does not even include the $87 billion that the President has asked us 
to pass by a supplemental appropriation to prosecute the war in Iraq 
and Afghanistan. What my amendment will do is close tax shelters by 
codifying the practice of the courts that will bring in moneys from 
activities that have no economic value. It is what the other body did 
to pay for it.
  There is one more thing I might add. We are in the closing days of 
this first session of this Congress. Major differences between the 
House and Senate will have difficult times being reconciled in 
conference. The adoption of my amendment gives us a much better chance 
to get this bill to the President this year. I urge my colleagues not 
only to support the underlying bill, support the Cardin amendment so 
that we can get a bill to the President and that we can also accomplish 
two more important factors that I think are supported on a bipartisan 
basis. I urge support for the amendment that will be offered later and 
I hope that we can continue to work in a bipartisan way to get this 
bill to the President's desk.
  Mr. BLUNT. Mr. Speaker, I appreciate the gentleman from Maryland's 
work on getting this bill out of committee unanimously and the fact 
that it is totally included in his substitute.
  Mr. Speaker, I yield 2 minutes to the gentlewoman from Washington 
(Ms. Dunn).
  Ms. DUNN. Mr. Speaker, I rise in support of H.R. 7 and I call for its 
swift adoption by the House. I think this is a piece of legislation 
that shows that all of us care and we are delighted to have it before 
the body today.
  I do want to respond to a mistaken and outdated characterization that 
came up in previous comments about one of the provisions on forestry 
bonds in this piece of legislation. This is a provision that was passed 
by this House last March. Forestry bonds as included in H.R. 7 are a 
new and collaborative approach to preserving sensitive lands that are 
close to major population areas. Instead of wasting millions of dollars 
on lawsuits, which

[[Page 22233]]

has been the case often in the past between members of the conservation 
community and timber owners, this proposal enables a board of trustees 
made up of timber executives, of conservationists and people 
representing the Contract Logging Association to purchase property 
through tax-free bonds from a willing seller. Twenty percent of the 
property is immediately put into conservation easements, probably the 
most sensitive portion of the property, around lakes and rivers and 
streams, for example. There is a continuation, however, of timber 
harvests, because the purpose of the harvests must be to pay off the 
bonds that are granted by an organization within the involved State. It 
is a broadly supported provision, broadly supported by the conservation 
community and also the timber community. I think it is an ideal way to 
provide a collaborative approach, one that will be an experiment and I 
think will yield great returns certainly out of this experiment, 
perhaps eventually something that could be used by folks all over the 
United States to preserve these important properties.
  Mr. STARK. Mr. Speaker, I am pleased to yield 5 minutes to the 
gentleman from Wisconsin (Mr. Kleczka).
  Mr. KLECZKA. Mr. Speaker, I always thought that charitable giving 
came from the heart and not through tax breaks in the Federal Tax Code. 
I come to the floor today to oppose this bill and I feel somewhat like 
the skunk at the picnic, but I think it is time that this Congress act 
more responsibly.
  Let me give my colleagues a little background as to where we are as 
far as the Federal deficit. This administration took over and inherited 
a $236 billion surplus. In 4 short years, they have turned it into a 
deficit, and the Congressional Budget Office indicates that deficit 
will be $580 billion. Yes, there has been a downturn in the economy, 
but more importantly over the last few years, this Congress has given 
almost $3 trillion in tax cuts. If these cuts were affordable, one 
would say fine. But they are not, my friends. For every tax cut we give 
today, it goes on the deficit and your kids and your grandkids are 
going to pay for it. Not us, your kids and grandkids will.
  So here we have a bill that costs $13 billion and it is geared to 
enhance charitable giving. What a noble purpose. If the economy was 
different, if the fiscal picture for the country was different, I 
probably would be supporting the bill, also. But, my friends, the 
plain, simple fact is, it is nice but we cannot afford it. My 
constituents would like to go and buy a new car and a new refrigerator, 
and those things are nice, but they cannot afford it, so they do not do 
it. But this Congress just cannot stop giving away money.
  Let us look at the bill itself. In the bill, we double the corporate 
charitable giving deduction. Currently corporations can give away and 
take a tax credit for 10 percent of their gross income. This bill 
doubles it. Are the corporations so overtaxed? A lot of them are 
running offshore to escape all taxation. In 1996, corporate taxes made 
up 12 percent of all the revenue the Federal Government takes in. In 
2002, that shrunk to 8 percent. So do not tell me corporations are in 
need of another tax break. Their liability is drastically being 
reduced. And to tell me that if we do not double their charitable 
giving to 20 percent, instead of 10, they are not going to give the 
excess food to the food pantry, they are going to throw it in the 
dumpster, that is nonsense.
  Another provision in the bill tells nonitemizers, those people who do 
the short form, that they can, after giving individually $500, take a 
$250 above-the-line credit. That seems well and good. However, the 
standard deduction that filer gets already includes a portion for 
charitable giving. So if we want to increase it, let us increase the 
standard deduction. But know full well 80 to 90 percent of those filers 
are going to claim the $250 credit and that is why we do not trust them 
because that provision is only good for 2 years. They are going to have 
a little study. But we do not have enough auditors to audit that and I 
suspect that almost all the filers will take that credit.
  Mr. Speaker, it is a great bill, but the fact of the matter is the 
taxpayers cannot afford this bill. And as I look at the various 
portions of it, even including the lumber company giveaway, those might 
be nice in better times. Another portion of the bill decreases the 
taxes for charitable foundations in half. That costs some $2.8 billion. 
Today charitable corporations pay 2 percent Federal tax on their 
income. That is not a heck of a lot. Boy, I wish my constituents only 
paid 2 percent. But we feel so generous today, we are going to cut that 
in half to 1 percent. And that $2.8 billion goes smack on to the 
deficit.
  One other item I think we should mention, I indicated that the 
Federal deficit is slated by the Congressional Budget Office to be $580 
billion. That is without the $87 billion the President has asked for 
the war in Iraq. That goes right on it. That means the deficit is going 
to be over $650 billion.
  Mr. BLUNT. Mr. Speaker, I yield 2 minutes to the gentleman from 
Florida (Mr. Feeney), the former Speaker of the House of Florida.
  Mr. FEENEY. Mr. Speaker, I rise in support of this great bill. I want 
to thank and congratulate the gentleman from Missouri (Mr. Blunt) and 
the gentleman from Tennessee (Mr. Ford) for this bipartisan effort.
  America is the most charitable country in the history of planet 
Earth. We ought to rejoice in the American great tradition of charity. 
The problem is that unfortunately, taxpayers, businesses and 
individuals, are punished through the Tax Code even when they use 
after-tax dollars to contribute to the well-being of their fellow 
citizens. For all of the reasons that the critics dislike this bill, 
one critic suggested he is opposed to this bill because it does not do 
everything that we should be doing to help America. The last speaker 
just suggested that what we have is a problem in that the Federal 
Government is losing money. Well, the whole presumption is that somehow 
this is the Federal Government's money in the first place. I would 
suggest that people in Oviedo, where I live, think it is their money 
and that they are best able to determine how to help the well-being of 
their neighbors and charities.
  This is a wonderful bill because it allows the two-thirds of us that 
do not itemize our deductions to participate in a tax deduction when we 
help our fellow citizens. I think that is a great idea. It levels the 
playing field. You do not have to be a wealthy, complicated tax filer 
in order to enjoy the deduction. This bill levels the playing field. 
All of us will get the deduction. It allows people that have built up 
assets in their IRA that maybe will not be necessary for their 
retirement to take advantage of a provision so that they will be able 
to contribute to important charities in their neighborhoods and 
communities. Finally, it adds additional help to businesses that want 
to provide food or shelter or well-being for the needy.
  I will end with the fact that there are two approaches to how we can 
help our fellow man. Some people, well-meaning, think we ought to 
confiscate as much tax dollars as we can from individuals and 
businesses in order to have a one-size-fits-all government program to 
help the needy. My experience is that the best way to help people is 
through local charitable giving where you can help people not become 
dependent on government but you can help them reform their lives, get 
back on their feet and help themselves. That is what this bill does.

                              {time}  1245

  Mr. STARK. Mr. Speaker, I yield 3 minutes to the gentleman from 
Washington State (Mr. McDermott).
  Mr. McDERMOTT. Mr. Speaker, I came rushing over here to make a public 
service announcement. There is a hurricane coming. But the name is not 
Isabel. The name is George.
  Ever since President Bush got elected, this Congress has rubber-
stamped every single tax cut he came up with. In fact, I got over here 
in such a hurry, I forgot my rubber stamp. But the fact is that, at 
some point, the President has to be brought to reality. I saw the 
gentleman from Maryland (Mr. Cardin) out here all exercised over this. 
This is only $12 billion he is giving away this time. This is chump 
change. I do not

[[Page 22234]]

know. I think he has lost his nerve maybe. Because he comes in here one 
day and asks for $87 billion, and then he says, by the way, let us give 
away another $12 billion to people. I hope Americans, if they just 
remember that I gave them all that money and put them $44 trillion in 
debt in the future, they will reelect me.
  You say where do I get that number? Well, the Financial Times, and 
this is no liberal newspaper I want the Members to understand, they 
revealed that the Bush administration shelved a report commissioned by 
the Treasury Department that shows that the U.S. economy faces a future 
of chronic budget deficits totaling $44 trillion, the study's most 
comprehensive assessment of how the U.S. Government is at risk at being 
overwhelmed by the baby boom generation's future health and retirement 
costs.
  This President does not care about anything except if he can trick 
the people with a tax cut, he thinks he can get elected. They will 
forget about the mess he has created in Iraq. They will forget about 
the mess in Afghanistan. I have got $12 billion more for you, folks, 
that is our President's plan, and they are going to keep trying to give 
money away. They act like the $480 billion is nothing. They put on 
another $100 billion this week, 87 for Iraq and $13 billion in this 
bill. Is there any end? One would say this was somebody who was 
addicted if one was talking in any other terms. I mean they cannot get 
off the needle of tax cuts. And if the Congress does not stand up, when 
are the people going to be taken care of? Is this bill saving our 
country? Is it going to make more jobs? I think not. There is no plan 
to spend any money on making jobs, no. This is just give $12 billion 
more away so that companies will give more to charity because the 
Government is not doing its job.
  Mr. BLUNT. Mr. Speaker, I yield myself 45 seconds.
  I would just remind the Members in the debate that this is about not 
$12 billion; it is really about $50 billion, $50 billion that the 
American people decide they want to give to charities to help their 
fellow citizens, and certainly that makes a difference in the character 
of the country. Anytime we individually reach out, frankly, that is 
more character developing than seeing the Government reach out. It does 
not mean there is not a place for the Government to reach out, but to 
suggest that it is a bad thing in any way to encourage people to reach 
out or to suggest that people who give money to church and charity 
every month will lie about whether they gave that money is 
inappropriate.
  I want to say how much I have appreciated the opportunity to work 
with the gentleman from Tennessee (Mr. Ford), my good friend. We came 
to Congress at the same time. We developed a bill here that has broad 
bipartisan support. That was voted unanimously out of the Committee on 
Ways and Means.
  Mr. Speaker, I yield 3\1/2\ minutes to the gentleman from Tennessee 
(Mr. Ford).
  The SPEAKER pro tempore (Mr. Thornberry). The Chair first announces 
to Members the gentleman from Missouri (Mr. Blunt) has 14 minutes 
remaining, and the gentleman from California (Mr. Stark) has 8\1/2\ 
minutes remaining.
  Mr. FORD. Mr. Speaker, I thank the gentleman from Missouri (Mr. 
Blunt) for yielding me this time. And I thank the leadership on my 
side, the gentleman from California (Mr. Stark) and the gentleman from 
Washington (Mr. McDermott) and, of course, the gentleman from New York 
(Mr. Rangel).
  I rise today in support of H.R. 7. It has been a pleasure to work 
with the gentleman from Missouri (Mr. Blunt) and the leadership on his 
side. I thank him for the new friendship, or the strengthened 
friendship, we now have, and I appreciate the bill we have been able to 
put together.
  The intent of the Charitable Giving Act, which has already been 
stated, is pretty simple. We want to help churches and charities and 
places of faith and nonprofit groups across the country who are 
committed to making a difference, and I dare say, making our 
communities better. With this slow economy, with some 3 million jobs 
lost and the end of a bull market now, it seems more important than 
ever to find new ways to encourage giving, charitable giving.
  As generous as our Nation is, we all know we face challenges, for 
many of my colleagues on my side of the aisle have highlighted how some 
of the decisions we have made here in this Congress have impacted our 
ability to grow. But as the Speaker knows, millions of Americans give a 
portion of their paychecks or their savings to help those less 
fortunate than them. In my community of Memphis and communities across 
America, nonprofit groups, volunteer organizations work every day to 
fill those vital needs. Often these efforts can do more to help than 
what we do here in Government. And at a time of mounting budget 
deficits in Washington and in almost all 50 State capitals, charities 
are carrying a heavier burden. States are cutting back money to 
hospitals, health clinics, schools, drug and alcohol rehab programs, 
preschool and afterschool programs. Because of the deep wells of 
compassion that exist in our communities, we cannot let any people fall 
through the cracks.
  But money is tight for millions of families. They want to give, but 
they also want to have money to pay the bills. This bill is one way we 
can empower people to give more to charity for it empowers those whose 
compassion runs deep, especially those who do not have deep pockets. As 
the Members know, many in Congress and in this country raised 
constitutional concerns about many aspects of the President's faith-
based agenda. We share the President's goal of rallying the armies of 
compassion, but we were concerned about the faith-based component. Our 
bill will encourage giving and help charities without regard to 
religious affiliation.
  What this bill does is remove obstacles to charitable giving in a tax 
code. First, the bill allows some 86 million Americans who do not 
itemize the opportunity to deduct a portion of their charitable 
contribution, between $250 and $500, $250 for individuals and $500 for 
married couples. It raises the cap on corporate charitable 
contributions from 10 percent to 20 percent over 10 years. It also 
provides for tax-free contributions from IRAs for charitable purposes, 
which will help a wide range of charities, especially education 
institutions. It provides $150 million a year for a Compassion Capital 
Fund to assist small community and faith-based organizations with 
technical assistance and to expand their capacity to serve.
  In closing, Mr. Speaker, I want to commend the gentleman from New 
York (Mr. Rangel) and the gentleman from Maryland (Mr. Cardin) for the 
substitute to H.R. 7, which I intend to support. The substitute 
includes the entire original bill, and it makes it better by increasing 
the authorization levels for the Social Services Block Grant by $1.1 
billion. The Senate companion of this bill includes funding for SSBG as 
well.
  I also commend the gentleman from Texas (Mr. Doggett) for working to 
make this bill revenue neutral. The revenue effect of H.R. 7 is tiny 
compared to the positive benefits, as the gentleman from Missouri (Mr. 
Blunt) has already stated, that will come out of it, and certainly 
compared to other bills that we have considered in this Chamber in 
recent years.
  In closing, I urge all of my colleagues, particularly my Democratic 
colleagues, to support this bill on final passage. I look forward to 
working with many here and others in the Chamber to reconcile whatever 
differences there may be and realize that when we support this bill, 
despite its minor cost, as the gentleman from Missouri (Mr. Blunt) and 
others have stated, it will help so many of our Nation's charities, 
places of faith, and educational institutions.
  Mr. BLUNT. Mr. Speaker, I yield 2 minutes to the gentleman from 
Wisconsin (Mr. Green).
  Mr. GREEN of Wisconsin. Mr. Speaker, I thank the gentleman for 
yielding me this time and I congratulate him and the gentleman from 
Tennessee (Mr. Ford) for this piece of legislation.

[[Page 22235]]

  The previous speaker asked rhetorically what does this bill do? By 
spurring investment in America's charities, this bill will help lift 
lives and heal neighborhoods. It sounds like a pretty good deal to me.
  I would like to talk about a very specific provision in this bill 
because this bill also rightly points to a problem that we have in 
charitable giving, one that Congress cannot by itself solve. As section 
303 of this bill points out, many of our Nation's largest foundations 
have a bias against giving to the community of faith. As so many people 
have noted, every day all across America, faith-based organizations 
help people, help them recover from drug and alcohol addiction, provide 
food and shelter to the homeless, teach people skills that they need to 
move from poverty to productivity, and so much more. And yet 
foundations, especially corporate foundations, will not give help to 
these groups. Corporate foundations give roughly $2 billion a year to 
charities, but a mere fraction of that goes to the community of faith. 
Of the ten largest corporations in America, six have restrictions 
either banning or greatly limiting contributions to faith-based 
organizations and not one of them gives more than 5 percent of its 
donations to these groups. The leading 1,000 foundations in America 
have targeted just 2.3 percent of their grants to faith-based 
organizations. The leading 100 have given just 1.5 percent. Shame on 
them. They are missing a chance to do so much good.
  Let us hope that the public, let us hope that shareholders demand a 
change. This legislation shines a spotlight on this problem and 
encourages them to rethink their restrictions. It is time for us to 
reach out. It is time for corporate America to reach out to the 
community of faith. There are so many needs and so many opportunities. 
There is so much good that we can do if corporate America, if 
foundations, if we all reach out and partner with those who are on the 
frontlines each and every day.
  I am proud to support this legislation. I think this is going to make 
a historic difference, and once again, I congratulate the authors.
  Mr. STARK. Mr. Speaker, I yield 4 minutes to the gentleman from Texas 
(Mr. Doggett).
  Mr. DOGGETT. Mr. Speaker, on January 29, 2002, President Bush stood 
at this podium, and he told this Congress and the Nation ``our budget 
will run a deficit that will be small and short term.'' He had hardly 
gotten out of the room before the deficit began soaring, soaring so 
much that this year, we have the largest deficit in the history of the 
United States. Soaring so much that over the course of this year and 
next year, we will probably exceed $1 trillion in additional national 
debt. Any honest projection shows that these deficits will continue 
rising throughout this decade. We have the largest fiscal reversal in 
the history of the United States, if not the history of the world, 
moving from the surplus the Bush Administration inherited to the 
unending debt with which we are now being burdened.
  We begin to understand why they call this a ``faith-based'' 
initiative because despite this devastating fiscal record, they ask us 
to have faith that somehow their speeches will balance the budget even 
while they continue depleting the national treasury with one good cause 
and some not so good causes after another, taking out $10 billion here, 
$20 billion there, $50 billion some other place.
  If you have faith in the bill that you are advancing today, have the 
good faith to deal straight with the American people instead of just 
giving them another IOU. And I commend the gentleman from Tennessee 
(Mr. Ford) for having the courage to support the substitute paying for 
this chartible giving initiative to which I know he is so committed. 
The Republican sponsor in the last Congress of this measure (Mr. Watts) 
was willing to do the same until he found out paying for it requires 
more than a speech.
  We can pay for this initiative today, and then some, by correcting a 
considerable inequity in our tax system. The Founding Fathers believed 
that there should be no ``taxation without representation,'' and 
certainly we all agree. But some taxpayers, as a result of the inaction 
of the House Committee on Ways and Means and the leadership of this 
House, are today turning that on its head. They believe that we should 
have no ``taxation through misrepresentation.'' Too many corporations 
have misrepresented to their shareholders, their investors, to the tax 
collector the true nature of their income. They give new meaning to 
Leona Helmsley's claim that ``only the little people pay taxes.'' And 
today my colleagues talk about charity. Charity is when Congress 
ignores $10 billion a year, according to some estimates, in losses due 
to sham corporate tax shelters--shelters that are abuses of our current 
legal system. Charity is when the Republican leadership persists 
turning a blind eye to that abuse.
  Since 1999, we have had a way to solve this problem. We have been 
asking for approval of a tax shelter measure that has had broad support 
in this body and is so ``controversial'' that almost every Republican 
Member of the United States Senate has voted for it. It passed 95 to 5 
as a part not of some other bill, but of this very chartible giving 
bill. So what happens when it gets to the House Committee on Ways and 
Means? The same people that have been protecting these corporate tax 
abusers all this time have again offered them a little ``charity'' by 
removing all of the tax shelter language.

                              {time}  1300

  They stripped out the ``pay-for'' in this bill, a ``pay-for'' that 
brings equity to our tax system, that ensures that these corporate tax 
abusers get a little fair treatment. When such tax evaders dodge their 
taxes, guess who has to pay for national security and homeland 
security? All of the small businesses and large businesses and 
taxpayers large and small, who are already doing their fair share, 
already paying their fair portion of taxes.
  Mr. Speaker, we have an opportunity today through the Democratic 
alternative to end this abuse of corporate tax shelters and at the same 
time pay for this charitable bill giving instead of incurring more 
public debt.
  Mr. BLUNT. Mr. Speaker, I yield 1 minute to the gentleman from 
Indiana (Mr. Souder).
  Mr. SOUDER. Mr. Speaker, first I want to thank the gentleman from 
Missouri (Mr. Blunt) and the gentleman from Tennessee (Mr. Ford) for 
their leadership on this bill. It is something that I have long waited 
to see, an actual change in our Tax Code to give more incentive to 
charitable giving.
  It is unfortunate that partisan politics has been, again, injected 
into this. Because as we have been holding a series of faith-based 
hearings around the country, one thing that we recently heard in Texas 
in San Antonio from the most effective faith-based drug addict rescue 
group in the State of Texas, and, really, in America, said, where do 
you think the financial support of our ministry comes from? The people 
who have come through the front door of that home.
  This bill will give those people a chance to get a tax break, many 
who have very little funds who have been ignored because of the way our 
Tax Code is structured in charitable giving. This is one small step, 
and I hope we can expand it in the future, but an important step and 
the most important step.
  We have been on the floor arguing over charitable choice. I said from 
the beginning that the Tax Code was the most important and the second 
most was the Compassion Capital Fund, which is also in this bill to 
help these little usually urban or rural organizations get an ability 
to do a 501(c)(3) corporation. And this bill also covers that. I am 
thrilled with this bill.
  Mr. STARK. Mr. Speaker, I yield 3 minutes to the gentleman from 
Virginia (Mr. Scott).
  Mr. SCOTT of Virginia. Mr. Speaker, I think it is important to speak 
about what is not in this bill as well as what is in it. This bill is 
in stark contrast to the bill which passed 2 years ago in that it does 
not include the provision that would allow employment discrimination 
with Federal dollars. In fact, the bill preserves current civil rights 
protections.

[[Page 22236]]

  Faith-based organizations willing to comply with civil rights laws 
will be able to get funding under this bill just as they can today. And 
organizations which refuse to comply with the 60-year tradition of no 
discrimination with Federal funds will not be able to get funding under 
this bill.
  When we talk about discrimination, let us remember that there was a 
time in America when people of certain religions were routinely denied 
jobs solely because of their religious beliefs, but we passed laws to 
end that invidious discrimination.
  All of us can be supportive of the work of faith-based organizations 
and recognize that many can successfully sponsor federally funded 
programs, but we do not have to sabotage anti-discrimination laws to do 
that. And it is insulting to suggest that we can get investments in 
needy areas only if we turn back the clock on civil rights.
  This bill allows us to support the work of faith-based organizations 
without sacrificing our hard-won civil rights protections. The language 
in the original bill that will allow faith-based organizations to 
proselytize to beneficiaries in public services and use Federal money 
to convert people to their own religion has likewise been dropped from 
this bill as well.
  An individual in a homeless shelter should not be required to have to 
consider changing his religion in order to get a meal if that meal is 
paid for with Federal funds. The Constitution does not permit this and 
neither should we.
  I hope this bill can be a positive step in the right direction, but 
all of us should be cognizant that although the old H.R. 7 is gone, 
there are currently several bills, individual bills, that would allow 
faith-based organizations to discriminate in employment based on 
religion with Federal funds.
  We have already seen these provisions in the reauthorization of the 
Head Start bill that passed the House and the Workforce Investment Act, 
and I am sure that there will be others.
  Mr. Speaker, this bill shows that we can do better than that. We can 
support good community organizations that do good work without 
sacrificing either civil rights protections or the Constitution.
  We can accomplish this by providing them more money to do that work 
and providing guidance and navigating the Federal bureaucracy, and we 
do not have to undermine constitutional and anti-discrimination laws to 
do that.
  Mr. BLUNT. Mr. Speaker, I yield 2 minutes to the gentleman from Ohio 
(Mr. Portman).
  Mr. PORTMAN. Mr. Speaker, I thank the gentleman for yielding me time 
and want to congratulate him and the gentleman from Tennessee (Mr. 
Ford) for their good bipartisan work on this legislation.
  The legislation does have a cost, as it is analyzed by the Joint Tax 
Committee, and I believe that is $12.6 billion. Guess what? Over that 
same period of time, the estimates are there will be about $50 billion 
more in contributions to our charities. These are faith-based 
charities, community organizations, those who are out there doing the 
good work to help those most in need.
  I love the provision on the nonitemizers, because it helps people who 
are nonitemizers now not only give more money to charity and gives them 
a break for it, but gets them more engaged as volunteers in their 
communities in helping out, having an investment in these charities.
  I like the provision on the IRA rollover. We ought to do the same 
with some other retirement accounts. With the IRAs, we are able to say 
if you are 70\1/2\, you can then roll over into a charity without 
having the tax consequences. That will help not only this year, but 
going forward, as baby boomers begin to get these big lump sums in 
their IRAs, to be able to give those to charities. There are a lot of 
assets there, and it is a great policy.
  The gentleman from Texas raises a substitute; and I just have to say, 
codifying this very complicated issue of economic substance doctrine is 
a very difficult thing to do. The Treasury Department is dead set 
against it. They instead believe what we ought to be doing is providing 
more disclosure and tightening the rules. That is going to be in a bill 
coming to the floor, we hope soon, out of the FSC-ETI bill. That is a 
better way to approach it.
  Finally, the codification of economic substance, to my understanding, 
is retroactive, so you are actually changing the rules of the game 
after the fact. So those who have entered into transactions and 
arrangements are now being told after the fact, guess what, the rules 
all change; now we have this new rule to be applied.
  I am afraid what will happen is you will see tax shelters going 
underground. You will not see what we ought to be seeing, which is more 
disclosure and tightening of the rules.
  So I think this is a great bill. I would urge my colleagues to 
support it, because it does the right thing on policy grounds; and I 
would be very skeptical about this substitute. I think it is bad tax 
policy; and it will result, perhaps inadvertently, in more problems in 
our Tax Code.
  Mr. BLUNT. Mr. Speaker, I am pleased that the gentleman from Ohio 
(Mr. Portman) and the gentleman from Michigan (Mr. Camp), the next 
speaker, have done such a good job to get this bill to the floor.
  Mr. Speaker, I yield 1 minute to the gentleman from Michigan (Mr. 
Camp).
  Mr. CAMP. Mr. Speaker, I thank the majority whip for his hard work on 
this bill; and I lend my strong support to H.R. 7, which passed the 
committee by voice vote. I think all members on the committee agreed 
that this policy was an appropriate way to increase philanthropy among 
individuals, corporations, and foundations. I think it contains the 
right mix of tax incentives to spur individual giving, business and 
foundation giving, for example, the nonitemizer provision for low- and 
middle-income taxpayers. In my view, the Tax Code should provide a tax 
incentive to all taxpayers to give to charity, not just those who 
itemize; and this bill does that.
  Another important feature is those who have reached 70\1/2\ can make 
tax-free contributions from their IRAs.
  Last, I want to thank the majority whip and the committee for their 
hard work in making sure that we also do what we can to increase giving 
from charitable organizations and foundations. I think we have the 
right mix in this bill to do that.
  I lend my strong support to this legislation.
  Mr. BLUNT. Mr. Speaker, I yield 1 minute to the gentleman from 
Florida (Mr. Crenshaw).
  Mr. CRENSHAW. Mr. Speaker, I just want to rise in strong support of 
this legislation. I want to highlight a charitable organization in my 
community, Jacksonville, Florida, called the Jessie Ball duPont Fund. 
Last year they gave away about $13.5 million. They gave it to over 300 
different organizations, everything from the Boys Clubs to the Girls 
Clubs to the United Way.
  What this legislation does is encourages foundations like the duPont 
Fund and other charitable organizations, it gives them technical 
advice, it gives them guidance, and, more than anything, maybe holds 
them to public accountability.
  The bottom line, Mr. Speaker, is this kind of legislation encourages 
people to be good stewards in their own community. America is great 
because America is about people helping people; and any time that 
people want to give money, in terms of charity, we ought to do 
everything we can to pave the way. So I urge support of this 
legislation.
  Mr. BLUNT. Mr. Speaker, I yield 1 minute to the gentleman from 
Indiana (Mr. Pence).
  Mr. PENCE. Mr. Speaker, I rise with a deep sense of gratitude to our 
majority whip, the gentleman from Missouri (Mr. Blunt), and to his 
colleague, the gentleman from Tennessee (Mr. Ford), for their yeoman's 
work in crafting the Blunt-Ford Charitable Giving Act. It is an 
extraordinary piece of legislation that will encourage the investment 
by everyday Americans into the organizations that make our communities 
great.
  While this bill is targeted to all charities, its impact will be 
profound, especially in the faith-based community. It is worthy of 
noting that 75 percent of

[[Page 22237]]

food pantries are religious-based, 71 percent of food kitchens are 
faith-based, and 43 percent of shelters in this country are faith-based 
providers. Today's Blunt-Ford Charitable Giving Act is part of 
President Bush's vision of a faith-based initiative encouraging 
everyday Americans to come along side those who each and every day do 
for the least of these.
  I strongly support this legislation and strongly urge its passage 
today.
  Mr. STARK. Mr. Speaker, I yield the balance of my time to the 
gentleman from Texas (Mr. Doggett).
  Mr. DOGGETT. Mr. Speaker, without a doubt there are many good 
features of this proposal. That is why so many people support it. 
Perhaps the benefits are a bit exaggerated in the suggestion there will 
be $40 billion or $50 billion in additional money motivated by tax 
considerations instead of the heart. That probably overstates the case. 
But the important argument in favor of the Democratic substitute is 
that this proposal is presented as just another free lunch, like so 
many other allegedly pain free measures that keep rolling through this 
House.
  As proposed, this bill will add to the burden of our children and our 
grandchildren billions of dollars that could and should be paid for 
now. That is why one of the cosponsors, the gentleman from Tennessee 
(Mr. Ford), has said he supports the substitute. He is ready to pay for 
his bill, he has that much confidence in it. The only argument against 
paying for it was the unusual suggestion of the gentleman from Ohio 
(Mr. Portman) that it would be ``difficult.''
  I agree, it has proven very difficult for the Committee on Ways and 
Means to do anything about corporate tax cheats. They have known about 
this problem since at least 1999, and they have chosen to sit on their 
hands.
  Most people have heard about something called Enron, a Texas 
corporation. The Committee on Ways and Means was afraid though to look 
under the rock for all the Enron dirty tax secrets, about how much it 
avoided paying of its fair share of taxes, for fear of what Republicans 
might find, and they have still not, until this very day, found it 
possible to overcome what they call the ``difficulties'' of dealing 
with the Enron tax transgressions, nor those of any other corporation.
  Pay for this bill. The Democratic substitute does.
  Mr. BLUNT. Mr. Speaker, I yield 1 minute to the gentlewoman from 
Connecticut (Mrs. Johnson).
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I thank the gentleman for 
yielding me time.
  I want to commend the chairman for crafting a bill that will reward 
average taxpayers for their generosity and eliminate unnecessary 
barriers to giving. This is a bipartisan bill that will expand our 
communities' ability to help each other. However, there are some 
additional provisions that I hope we will be able to work on with the 
Senate.
  First of all, the social services block grant enables communities to 
address special needs in a very flexible and very local manner, and I 
am thrilled that this bill reinstates the 10 percent right of 
transferring money from the TANF block grant to the social services 
block grant. But more needs to be done, and the Senate bill does offer 
us that opportunity in the conference.
  Secondly, I hope that it will look at some of the charitable 
incentives for conservation in the Senate bill, a higher deduction for 
donating land to qualified land trusts, for example, that will enable 
small landowners to be part of conservation and preservation in their 
communities.

                              {time}  1315

  Mr. BLUNT. Mr. Speaker, I yield 1 minute to the gentleman from 
Illinois (Mr. Crane).
  Mr. CRANE. Mr. Speaker, charitable organizations are vital to the 
health and well-being of American citizens. Charity benefits both the 
giver and the receiver in like proportions. The act of giving elevates 
the heart of the giver; the act of receiving elevates the condition of 
the recipient. Charity is a blessed act that should suffer no 
discouragement from something so punitive as the Tax Code.
  Mr. Speaker, I am very pleased that two major components of H.R. 7 
are based upon legislation I have introduced for almost 20 years, the 
Charitable Giving Tax Relief Act and the IRA Charitable Rollover 
Incentive Act. The Charitable Giving Tax Relief Act allow nonitemizers 
to deduct 100 percent of any charitable contributions up to the amount 
of standard deduction.
  Secondly, under H.R. 7, individuals age 70\1/2\ or older will be able 
to contribute amounts currently held in IRA accounts directly to 
qualified charities without having to first recognize the income for 
tax purposes and then take a charitable deduction.
  We now have an excellent opportunity to advance sound tax policy and 
sound social policy by returning to our Nation's historical emphasis on 
private activities and personal involvement in the well-being of our 
communities.
  I congratulate all, and I urge everyone to vote for the bill.
  Mr. BLUNT. Mr. Speaker, I would just like to say as I yield myself 
the remainder of my time that I appreciate the character of the debate, 
I appreciate the opportunity to work with the gentleman from Tennessee 
(Mr. Ford) and the members of the Committee on Ways and Means in 
bringing this bill to the floor. We look forward to passage today and a 
quick effort to work with our friends in the other body and see this 
bill on the President's desk become law and make a difference in the 
way people are encouraged to do things for others in their community 
and in our country and around the world.
  Ms. JACKSON-LEE of Texas. Mr. Speaker, I rise in support of H.R. 7, 
the Charitable Giving Act of 2003 along with the Democrats' Substitute 
Amendment Agreement. The Democrats' Substitute Amendment has three 
parts. First, the Substitute would include all the provisions of the 
underlying bill, H.R. 7, as reported by the Committee on Ways and 
Means. Second, the Substitute would add a provision increasing the 
funding for the Social Services Block Grant, SSBG, by $1.1 billion next 
year. Third, the Substitute would add revenue offset provisions to 
curtail abusive tax shelter schemes. The Substitute is a fiscally 
responsible approach for encouraging charitable giving and providing 
assistance to vulnerable families during these particularly difficult 
times.
  Considering that the federal deficit is projected to exceed $500 
billion next year and the President's request for an additional $87 
billion for Iraq, I urge all House Members vote for the Democratic 
Substitute Amendment.
  The Substitute increases funding for the Social Services Block Grant, 
SSBG, by $1.1 billion next year. This increase is included in S. 476, 
the Senate-passed CARE Act of 2003. The SSBG funds community programs 
to protect abused children, provide day care to low-income families, 
offer counseling services to at-risk youth, provide nutritional 
assistance to the elderly, and provide community-based care to the 
disabled.
  The Substitute provides immediate resources to States to address 
program cuts in these important areas. Rep. Cardin offered such a 
provision as an amendment during Committee markup of H.R. 7.
  The Substitute includes provisions to curtail abusive tax shelter 
schemes. These provisions would prevent tax shelter transactions that 
have no economic substance, without affecting legitimate business 
transactions, and would tighten penalties for egregious behavior. The 
provisions would offset the costs of the Substitute (including both the 
underlying bill and increased funding for the SSBG).
  Congressman Doggett offered such an offset during Committee markup of 
H.R. 7. Corporations increasingly are engaged in aggressive tax 
avoidance transactions. Those transactions often are very complicated 
transactions that lack little, if any, business purpose or profit 
motive. The transactions are very similar in their structure with the 
accounting gimmicks used by Enron. They both pretend to technically 
comply with complicated rules, but create results that cannot be 
justified.
  Not surprisingly, large accounting firms, the same people who 
assisted Enron, sell corporate tax shelters. The Joint Committee on 
Taxation recommended many of anti-tax shelter provisions in the 
Substitute.
  The major provision of the Substitute would codify and slightly 
strengthen the ``economic substance doctrine.'' The economic substance 
doctrine is a court-made rule of law that disallows claimed tax 
benefits if the benefits arise out of a transaction for which there is 
no business purpose or profit motive.

[[Page 22238]]

  The other major provision of the Substitute would not permit legal 
opinions to be used in order to avoid penalties when courts disallow 
tax benefits using economic substance analysis. (Under current law, 
legal opinions provide protection against penalties even when the legal 
opinions are fairly poor.) All of Enron's tax shelter transactions had 
legal opinions supporting them.
  Mr. Speaker, for the above reasons, I support this bill with the 
Substitute Amendment.
  Mr. TURNER. Mr. Speaker, I rise today in strong support of H.R. 7, 
the Charitable Giving Act, and to urge my colleagues to do the same.
  Let me begin by saying that I value the role of charitable 
organizations in the delivery and provision of social services. Our 
country has been made stronger through the good works of people who 
dedicate their time, efforts, and skills to helping those in need. 
These organizations have long fed the hungry, clothed the poor, given 
shelter to the homeless, and helped heal the sick. Their contributions 
have been absolutely essential for millions of Americans throughout the 
history of our great nation.
  It is time now that we help these charitable organizations continue 
to help those in need. The bill before us today contains many important 
provisions that work toward a single goal of encouraging charitable 
giving in the United States. The bill does this by making it easier for 
individuals to deduct their charitable contributions from their income 
taxes, by allowing tax-free distributions from IRAs for charities and 
by encouraging donations of important items such as food and computers.
  I know firsthand about the important role that charitable 
organizations play in every community. In my own district the Matile 
Family Foundation, the Dayton Foundation, and the Iddings Foundation 
have a long and distinguished record of giving and serving the Dayton 
community. Similarly our community is home to numerous faith-based 
organizations that also provide important services to those in need, 
including the Gospel Mission, Revival Center Ministries and St. Mary's 
Neighborhood Development Corporation.
  In May I convened a community and faith-based forum where over 80 
individuals from charitable organizations met to discuss partnering 
with the Federal government on the delivery of social services. I 
believe the bill before us will help these and many other organizations 
throughout my congressional district.
  As a cosponsor of this important legislation, I am proud to join my 
colleagues in expressing support for H.R. 7 and urge all Members to 
vote in favor of it. This critical measure will help ensure that 
charitable organizations can continue to attract the resources 
necessary to help our most vulnerable populations by improving the 
incentives for individuals and corporations to donate to charitable 
entities.
  Mr. EMANUEL. Mr. Speaker, I rise proudly as an original cosponsor of 
the Charitable Giving Act and also in strong support of Cardin-Doggett 
substitute.
  I signed on as an original cosponsor of H.R. 7 because our Nation's 
charities are struggling in this weak economy to meet increasing 
demands with diminishing resources. In response, this bill delivers tax 
fairness and strong incentives for America's donors to give generously, 
even those with modest means.
  I am pleased that the substitute makes this bill even stronger by 
taking this opportunity to shut down tax avoidance schemes built into 
the Tax Code that encourage dishonest corporate transactions and 
bookkeeping practices. Another improvement is that the substitute pays 
for the bill. This is critical since the President has asked Congress 
for another $87 billion for rebuilding Iraq, twice the amount 
originally anticipated.
  I am as pleased as the next person when corporations earn profits. 
But there is something wrong when tax breaks for working families are 
outnumbered by corporate subsidies for oil drilling, insurance, nuclear 
power, commercial real estate, equipment purchases, drug manufacturing, 
ethanol production, and more.
  President Reagan criticized corporate tax subsidies as wasteful and 
in direct conflict with free market principles and economic growth. In 
1986, he issued executive orders to cut back many of these subsidies. 
Republicans and Democrats should continue working together to follow 
his lead.
  In recent years, however, subsidies have made a comeback. At the same 
time, corporate income taxes are virtually the lowest among the world's 
developed countries. The Bermuda scheme is the tip of the offshore 
iceberg now costing U.S. taxpayers $50 billion or more a year. 
Taxpayers subsidize overall corporate subsidies worth $125 billion. 
This amount is equivalent to the income taxes paid by 60 million 
individuals and families.
  Many of these subsidies fail to serve any worthwhile economic or 
social objective. But since 2001, more loopholes and breaks for special 
and corporate interests have been added to the code. It is replete with 
sunsets, phase-ins, phase outs, and gimmicks that encouraged Enron, 
Tyco, and WorldCom to circumvent tax law. But nothing has been done to 
make it easier for working families to navigate the Code. There is 
something wrong when more than 60 percent of Americans found it 
necessary to pay an accountant or tax preparer to file their taxes in 
2002.
  Ending offshore havens, gimmicks and tax shelters should go hand in 
hand with simplification in any tax reform initiative. The Cardin 
substitute is a first step toward reforming a tax code that's proven 
more user-friendly to corporations and the wealthy than America's 
working families. Another important step would be for Congress to 
consider my proposal to create a Simplified Family Credit that merges 
the EITC, the child tax credit and the dependent exemption into one 
easy-to-claim credit. I will continue supporting legislation that 
simplifies the Code for reward working families as much as corporate 
interests.
  Mr. Speaker, to that end, I am please to vote for the Cardin-Doggett 
substitute, and in support of the Charitable Giving Act of 2003. This 
important legislation, in addition to closing unfair tax loopholes, 
will recreate new incentives for Americans to make charitable donations 
for an array of worth and important social services in our Nation.
  Mr. TERRY. Mr. Speaker, I rise today in support of H.R. 7, the 
Charitable Giving Act of 2003. I commend Whip Blunt and Chairman Thomas 
for their diligent efforts on this important legislation.
  As a cosponsor, I have supported this bill for several reasons.
  The American people are the most generous people in the world. It is 
estimated Americans gave more than 183 billion dollars last year to 
charitable organizations. Foundations, bequests, and corporations 
brought charitable giving up to 241 billion dollars.
  These donations advanced noble causes in religion, health, science, 
the environment. To alleviate pain and suffering. To promote culture 
and world understanding.
  For example, in my own district, The Durham Research Center at the 
University of Nebraska Medical Center, a $77 million, 10-level 
facility, was completed without tax dollars. It will enable UNMC to 
enhance its research in a number of areas including cancer, 
cardiovascular diseases, neurosciences, transplantation biology, 
genetics and eye research.
  Charities and institutions often serve purposes that exceed 
government efforts to promote the health, safety, and well-being of its 
citizens, and often with lower costs.
  The purpose behind this act is simple. We must ensure the best 
policies to encourage people to donate to charities. Whether the goal 
is collecting food for the hungry, shelter for the indigent, or 
treatment for the addicted, this bill strengthens the existing tax code 
to encourage charitable donations.
  For example, this bill:
  Provides 86 million Americans who do not itemize the opportunity to 
deduct a portion of their charitable contributions--representing more 
than two-thirds of tax returns filed.
  Provides incentives for individuals to give tax-free contributions 
from their Individual Retirement Accounts (IRAs) for charitable 
purposes, which will help a wide range of charities.
  Raises the cap on corporate charitable contributions from 10% to 20% 
over 10 years.
  Extends current incentives for food donations to apply to even more 
farmers, restaurants, and corporations to help those in need.
  Anne Frank once wrote: ``No one has ever become poor by giving.'' We 
recognize this sentiment with H.R. 7 and I urge my colleagues to join 
me in supporting the Charitable Giving Act.
  Mr. WOLF. Mr. Speaker, I rise today in support of H.R. 7, the 
Charitable Giving Act. This legislation takes an important step to help 
further the efforts begun nearly 40 years when President Johnson 
declared war on poverty and hunger. Sadly, according to the U.S. 
Department of Agriculture reports that 13 million kids live in 
households that do not have an adequate supply of food.
  In 2001, the USDA says there were 33.6 million Americans--20 million 
adults and 13 million children--who were hungry or at risk of hunger. 
In Matthew 25, Jesus talks about the obligation to feed the hungry. In 
a world, and especially a nation, as plentiful as ours, it is tragic 
that even one child is hungry.
  Barriers need to be eliminated to allow businesses to do the morally 
conscionable thing and donate their surplus food. It's outrageous that 
it is more ``cost effective'' for a business to throw out or destroy 
surplus food rather

[[Page 22239]]

than donate it to a local soup kitchen. The Charitable Giving Act takes 
important steps to ensure that more of America's abundant food supply 
ends up in the mouths of America's hungry families, not in landfills. 
The USDA estimates that 96 billion pounds of food are thrown away each 
year.
  I would like to submit for the Record a recent article from the 
Chicago Tribune titled ``Hunger has a new face.'' This article points 
out that many of these hungry children live in households in with 
working parents. As the cost of living in many urban areas continues to 
increase, the number of working poor is expanding rapidly, hitting 
single moms particularly hard. As the face of hunger in America 
changes, we must make sure that our policies continue to meet the 
needs.
  The Charitable Giving Act provides incentives to farmers and small 
businesses, whose resources are also constrained in these economic 
times. I applaud the authors of this bill for their dedication to 
building a greater America. But our work is not yet done. I want to 
encourage my colleagues appointed to conference this important 
legislation to consider the food donation provision contained in the 
Senate bill--the same food donation provision, I might add, that was 
introduced earlier this year by my colleague Mr. Baker  from Louisiana.
  America's Second Harvest estimates that the Senate version would 
produce over 878 million new meals by 2013--that's over three times the 
number of new meals than the House bill will provide. Make no mistake, 
the bill we have in front of us today is a very good start and is a 
victory for all those who have hope for a better America. Let us now 
move forward, and show America that fighting hunger isn't about what 
side of the aisle you stand on, but rather what kind of humanity we 
seek to be.

               [From the Chicago Tribune, Sept. 1, 2003]

                         Hunger Has a New Face

                          (By V. Dion Haynes)

       Bend, Ore.--Despite working full time as a waitress at an 
     International House of Pancakes restaurant, Crystal Carter 
     regularly must turn to charities and generous friends to feed 
     herself and her three small children.
       Likewise, Leslie Ramaekers finds it difficult to stretch 
     the wages from her full-time auto-detailing job to buy enough 
     food. She often skips breakfast and lunch to ensure that her 
     four children can eat.
       Randy Malone has it even worse. Laid off 1\1/2\ years ago, 
     he has to use his sparse resources to feed his two nieces and 
     nephew, who live with him. Forced to skip meals, Malone has 
     lost 25 pounds.
       ``I don't normally eat breakfast or lunch. Sometimes for 
     dinner I might get a peanut butter sandwich or a piece of 
     bread,'' said Malone, 42, who was picking up a bag of free 
     groceries from a food pantry in northeast Portland one day 
     this summer.
       ``I'd rather them eat it than me,'' he added, referred to 
     the children, age 7 to 12.
       In a survey, 25 U.S. cities reported on average a 19 
     percent increase in demand for emergency food assistance from 
     2001 to 2002. Some city officials say Carter, Ramaekers and 
     Malone represent the new face of hunger in America.


                          single moms affected

       The ranks of the hungry more and more include single 
     mothers stuck in low-wage jobs, married couples who can't 
     keep up with soaring housing costs and able-bodied people who 
     can't find jobs.
       Their predicament forces them every month to grapple with 
     vexing trade-offs: Pay the rent or child care? Buy that 
     prescription for a sick child or pay that overdue electric 
     bill? Put gas in the car or food on the table?
       ``We're seeing Depression-era food lines in 21st Century 
     America. . . . This is the most food productive nation on the 
     planet, and we should not have hunger,'' said Doug O'Brien, 
     vice president for policy and research at Chicago-based 
     America's Second Harvest, the umbrella organization for the 
     nation's food banks and the largest hunger relief 
     organization in the U.S.
       The previous profile of a hungry person, O'Brien said, was 
     ``a homeless, chronically unemployed, mentally ill substance 
     abuser.''
       But by 2001, ``we were as likely to see a single mother 
     who's employed as we would a homeless man,'' he added. 
     ``Nationwide, 40 percent of the people we serve come from 
     households where at least one person is working.''
       Agriculture Department experts peg the number of hungry or 
     ``food insecure'' people at about 34 million, up from about 
     30 million in 1995. Hunger and food insecurity are defined 
     broadly--when people are forced to skip a meal or cut back on 
     what they eat because they lack money, when people don't know 
     where their next meal is coming from or when people must 
     visit a soup kitchen or food pantry for emergency assistance.
       Demand for emergency food rose dramatically from 2001 to 
     2002 in about 25 cities polled late last year by the U.S. 
     Conference of Mayors. Requests for food jumped 52 percent in 
     Kansas City, 49 percent in Miami, 28 percent in Chicago, 25 
     percent in Los Angeles, 14 percent in Cleveland and 10 
     percent in New Orleans.


                        States step up outreach

       The issue has been receiving attention in recent months. 
     Oregon, Wisconsin, Virginia and West Virginia have stepped up 
     their outreach to hungry people who might qualify for 
     assistance from food stamp programs. And two bills have been 
     introduced in Congress to expand the number of children 
     eligible for free school meal programs.
       A study released in July by the Center on Hunger and 
     Poverty at Brandeis University suggested that hunger is 
     released to the epidemic of obesity. The study said that low-
     income families ``may consume low-cost foods with relatively 
     higher levels of calories per dollar to stave off hunger'' 
     rather than more nutritious food when their resources run 
     short.
       No state better exemplifies the crisis than Oregon, which 
     has been ranked by the U.S. Department of Agriculture as No. 
     1 in hunger and food insecurity.
       Oregon, which prospered in the 1990s from the dot-com boom 
     and has an image as a recreation-friendly and environmentally 
     conscious state, hardly seems a candidate for hunger capital 
     of the nation.
       But the state, which also ranks at or near the top in 
     unemployment, has been grappling with an economic meltdown. 
     If has made drastic spending cuts for schools, health care, 
     social programs and courts to relieve a nearly $3 billion 
     deficit.
       As serious as the budget problems are, according to 
     experts, the current crisis is the product of a systemic 
     shift as low-paying, low-skill jobs in the service industry 
     replaced high-paying, low-skill jobs in the timber and 
     fishing industries.
       Bend, Ore., reflects that wage gap and economic 
     metamorphosis.
       For generations, this region was timber country, with an 
     abundance of family-run mills. But from 1989 to 1997, jobs in 
     the forest industry declined by 47 percent in central Oregon. 
     Now only one family-run mill is left in the region.
       During the same time, dozens of golf courses, spas, 
     mountain lake and ski lodges and new housing developments 
     sprang up, transforming central Oregon into a resort and an 
     upscale retirement area.
       ``A lot of people say it's going to be another Aspen, 
     Colo.,'' said Carter; the IHOP waitress, who often visits an 
     area food pantry to feed her two daughters and son.
       ``There's no middle class here,'' added Carter. ``Either 
     you have money or you don't.''
       Instead of making $17 an hour in a mill, the most people 
     can get around here [in serviced industry jobs] is around 
     minimum wage,'' said Sweet Pea Cole, a coordinator for the 
     Central Oregon Community Action Agency, where Carter gets her 
     free food.
       Advocates for the poor say Oregon officials largely were in 
     denial about the state's hunger problem--until this year:
       When Gov. Ted Kulongoski took office in January, he made 
     fighting hunger a priority. Kulongoski, a Democrat, is 
     appearing in TV public service announcements to raise 
     awareness.
       The governor also is calling for more affordable housing. 
     And he recently signed legislation to refurbish crumbling 
     bridges and highways, which would create 5,000 jobs annually 
     for 10 years.
       But some people struggling to put food on the table say the 
     efforts will do little to help them.
       ``There has to be some way of training people, people who 
     are stuck and struggling and want to do something with their 
     lives,'' said Ramaekers, 28, of Tualatin, Ore., the auto-
     detail worker and mother of four who skips meals and 
     frequents food banks.
       ``You're working harder but always staying in the same 
     place.''

  Mr. SOUDER. Mr. Speaker, for several years now we have been having 
the discussion on how best to help faith-based organizations. Very few 
clear answers have emerged. Today we are here to discuss H.R. 7, the 
Charitable Giving Act, which addresses the two areas where I believe 
the government can best assist faith-based and community organizations 
in their work.
  A few months ago I initiated a series of field hearings to talk 
directly to the faith-based providers of social services. We've put the 
cart before the horse in this debate, and what we're trying to do with 
these hearings is to take a step back, and ask the providers what 
qualities they possess that makes them unique. Time and time again, 
they are telling me that it is their faith that drives them to do the 
work that they do, often in undesirable conditions for little or no 
recognitnition. Our second hearing was held in San Antonio, where 
Freddie Garcia has built a very successful drug treatment program that 
is not only faith-base, but faith-saturated. Jack Willome is a San 
Antonio businessman who volunteers his time to help Victory Fellowship 
with financial planning. During his testimony at our hearing he 
recounted a conversation he had had with a friend prior to his 
involvement with Victory Fellowship. His friend counseled him, ``Jack, 
when you're giving money away, your first objective should be to try to 
do no harm.''

[[Page 22240]]

  When we as the Congress are debating how we can best support the 
scores of faith-based organizations working in our neighborhoods, we 
need to heed that same advice. Do no harm. We know that organizations 
like Victory Fellowship, Lutheran Social Services, Prison Fellowship, 
Chicago's Emmaus Ministries and T.E.A.M. III in my hometown of Fort 
Wayne, Indiana, are helping people every day, and they do not apologize 
for the role faith plays in their programs. As we start attaching 
restrictions and qualifications to the money government is wiling to 
give faith-based organizations, we put ourselves in the position of 
asking those charities to drain their programs of the very qualities 
that make them effective providers of social services.
  So how can we best help these organizations without asking them to 
dilute or eliminate their religious character? The Charitable Giving 
Act, is a good step in the right direction. Research shows that 
individuals who receive a tax deduction for charitable giving 
contribute more than individuals who do not receive such tax benefits. 
By allowing the 86 million Americans who currently do not itemize on 
their tax returns an opportunity to deduct a portion of their 
charitable contributions, we are recognizing that the best way to help 
the private sector is to encourage more charitable giving by 
individuals. We know that there are limits on how much money the 
government is able to spend on social services. Unfortunately, the 
demand for social services far exceeds the money government is able to 
spend. It doesn't matter who is in office, the dollars just aren't 
there.
  So, we need to turn to the neighborhood organizations that are 
providing services, with or without government aid. Americans know 
which organizations in their communities are making a difference. By 
encouraging individuals to increase their charitable giving, we improve 
the likelihood that the dollars are going to go to the organizations 
that will produce the best results. Jack Willome also testified about 
the fundraising and fiscal accountability of Victory Fellowship. He 
said that that 90 percent of Victory Fellowship's budget comes from the 
giving of people who have benefited from the ministry. As he testified,

       It's the only project I have ever been involved in as a 
     donor where I have total confidence that the organization has 
     the ability to sustain the operations in the new facility, 
     and I don't have to worry about that because of their track 
     record. The financial support of the ministry, guess where it 
     comes from? The people who have come through the front door 
     of that home after--as their characters are being transformed 
     and they become involved in Victory Temple Church and they 
     give financially to the work of the church.''

It makes no difference if the government is involved with a faith-based 
organization or not. Those charities will be accountable, first and 
foremost, to their clients and to their donors. The support of the 
community is perhaps our best indicator of how successful an 
organization is at improving the lives of their clients.
  I believe that the best way we can help the faith-based community is 
to encourage private sector philanthropy for all individuals who 
contribute to charitable organizations, not just those who itemize. 
Approximately two-thirds of tax returns filed do not claim itemized 
deductions; therefore those taxpayers are not eligible to deduct their 
charitable contributions. The majority of non-itemizers are low- and 
middle-income taxpayers--the very taxpayers who would benefit from this 
piece of legislation.
  Here are a few examples of who would benefit from this bill. A non-
itemizing, single taxpayer with a taxable income of $45,000 owes about 
$8,060 in federal income taxes. This legislation would reduce the 
individual's taxes owed by $62.50 if he or she donated $500 to a 
charity of his or her choice. Likewise, a family of four with a taxable 
income of $65,000 would save $125 in taxes for a donation of $1,000 to 
a local charity. While the savings may seem small, it is certainly 
better than the current tax policy of providing no benefit to non-
itemizers. It is my hope that Congress will revisit this issue in the 
future to further expand tax relief for individuals and families who 
contribute financially to the valuable work of faith-based 
organizations.
  The second thing we can do to help the countless faith-based and 
community organizations serve their communities is to provide these 
organizations with the training and technical assistance they need in 
order to serve their clients more effectively. Mark Terrell, CEO of 
Lifeline Youth and Family Services in Fort Wayne, a program that 
provides prevention, intervention, and aftercare service for families 
and children in the Fort Wayne community testified at our Chicago field 
hearing that

     there needs to be a system put in place that will help both 
     small and large agencies meet the financial reporting 
     requirements that are necessary when using public funds. The 
     desire and ability of these organizations to do great work 
     within a community that desperately needs their help can be 
     undermined or undone when they don't have the skills or 
     resources necessary to meet high-maintenance reporting 
     requirements.

The authorization of a Compassion Capital Fund recognizes the unique 
contributions of faith-based and community organizations to the 
provision of social services by providing the resources necessary for 
these smaller organizations to improve and expand their services. Last 
year, the Department of Health and Human Services created a Compassion 
Capital Fund funded with $30 million appropriated by Congress. HHS then 
took $24.8 million of that appropriation and awarded it in grants to 21 
intermediary organizations whose purpose was to help smaller 
organizations operate and manage their programs more effectively, train 
staff, and expand the types and scope of the social services they 
provide to their communities.
  Two years ago I stood in this Chamber and told you about Pastor Jesse 
Beasley. Pastor Beasley was trying to start a youth program for kids to 
protect them from the drug problem and high murder rate affecting Fort 
Wayne. Now, two years later, that desire to help improve the lives of 
his neighbors has led Pastor Jesse Beasley along with several other 
Fort Wayne clergy to begin a program called T.E.A.M. III, which is an 
acronym for Touching and Equipping All Mankind. T.E.A.M. III now 
provides mentoring, a summer feeding program, a workforce development 
program and other social services. As T.E.A.M. III is working to 
provide services, they would benefit from the training that a 
Compassion Capital Fund would provide. They know where the need is, 
they have the faith to tackle any problem that comes their way, but 
they may need additional assistance if they desire to apply for a 
federal grant. There are a lot of small faith-based and community 
organizations in this country that have the heart for service but lack 
the finances to hire a CPA or attorney on their staff.
  I commend the Ways and Means Committee for including a $150 million 
Compassion Capital grant fund in this bill. This authorization level 
will enable the Health and Human Services Department to expand their 
technical assistance services to greater numbers of faith-based 
organizations.
  The Charitable Giving Act of 2003 is the culmination of several years 
of hard work, and I am proud to be a cosponsor of this important bill. 
It contains, in large part, what I believe are the most effective ways 
the federal government can lend its support to faith-based 
organizations. As Jack Willome said, it does no harm. It encourages 
individuals and businesses to make private contributions to 
organizations that are truly transforming people's lives--not just 
through assisting people with their physical needs, but also their 
spiritual needs.
  While government can be helpful in alleviating some of the problems 
our society faces today, it will never have the answers for some of our 
country's neediest people--people who need more than their physical 
needs met. They need help spiritually; they need God to fill the void 
in their lives. Community and faith-based organizations are critical to 
the stability and health of our country, and they rely on the support 
of private donations, not government aid. I encourage my colleagues to 
vote for this legislation. The return on the dollar from private 
donations resulting from this legislation will be immeasurable. Not 
only will individual lives be changed, but our entire society will 
change as crime rates do down, unwed pregnancies decrease, drug rates 
and suicides diminish and, in time, those same people begin to give 
back to their communities as others once helped them.
  Mr. CRANE. Mr. Speaker, from spiritual counseling to rape crisis 
centers, charitable organizations are vital to the health and well-
being of American citizens. Charity benefits both the giver and 
receiver in like proportions. The act of giving elevates the heart of 
the giver; the act of receiving elevates the condition of the 
recipient.
  Charity is a blessed act that should suffer no discouragement from 
something so punitive as the tax code, which contains absurd, yet very 
real, disincentives to individuals willing and able to exercise the 
gift of charity. Such disincentives have terrible consequences in 
reducing the resources available to private organizations. If our tax 
code were not so laden with peculiarities and oddities, this 
legislation would not be needed. Unfortunately, in many cases under 
current law, a contribution results in a loss of some portion of the 
charitable deduction.
  Mr. Speaker, I am very pleased that two major components of H.R. 7 
are based upon legislation I have introduced for many years,

[[Page 22241]]

the Charitable Giving Tax Relief Act and the IRA Charitable Rollover 
Incentive Act. The Charitable Giving Tax Relief Act allows non-
itemizers to deduct 100 percent of any charitable contributions up to 
the amount of the standard deduction. Under current law, while non-
itemizers receive the standard deduction, only itemizers can take a 
deduction for their charitable contributions. Approximately two-thirds 
of tax returns filed do not claim itemized deductions; therefore those 
taxpayers are not eligible to deduct their charitable contributions. 
the majority of non-itemizers are low- and middle-income taxpayers. The 
tax code should provide a tax benefit to all taxpayers, not just those 
who itemize.
  Secondly, I am pleased that H.R. 7 includes language based upon the 
IRA Charitable Rollover Incentive Act. Under H.R. 7, individuals age 
70\1/2\ or older will be able to contribute amounts currently held in 
Individual Retirement Accounts (IRAs) directly to qualified charities 
without having to first recognize the income for tax purposes and then 
take a charitable deduction.
  The IRA was intended to encourage individuals to save for retirement, 
but due to the general increase in asset values over the years, many 
individuals have more than sufficient funds to retire comfortably. Thus 
it is a common practice for retirees to transfer some of their wealth 
to charities and, in some cases, that wealth is held in an IRA. 
Unfortunately, in many cases under current law such a simple 
arrangement results in a loss of some portion of the charitable 
deduction. This legislation will give individuals more freedom to 
allocate their resources as they see fit while providing badly needed 
resources to churches, colleges and universities, and other social 
organizations.
  We now have an excellent opportunity to advance sound tax policy and 
sound social policy by returning to our Nation's historical emphasis on 
private activities and personal involvement in the well-being of our 
communities. I commend the authors of this legislation and urge all of 
my colleagues to support this vitally important bill.
  Mr. BLUNT. Mr. Speaker, I yield back the balance of my time.


     Amendment in the Nature of a Substitute Offered by Mr. Cardin

  Mr. CARDIN. Mr. Speaker, I offer an amendment in the nature of a 
substitute.
  The SPEAKER pro tempore. The Clerk will designate the amendment in 
the nature of a substitute.
  The text of the amendment in the nature of a substitute is as 
follows:
  Amendment in the nature of a substitute offered by Mr. Cardin:

       Strike all after the enacting clause and insert the 
     following:

     SECTION 1. SHORT TITLE; ETC.

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

Sec. 1. Short title; etc.

                 TITLE I--CHARITABLE GIVING INCENTIVES

Sec. 101. Deduction for portion of charitable contributions to be 
              allowed to individuals who do not itemize deductions.
Sec. 102. Tax-free distributions from individual retirement plans for 
              charitable purposes.
Sec. 103. Increase in cap on corporate charitable contributions.
Sec. 104. Charitable deduction for contributions of food inventory.
Sec. 105. Reform of certain excise taxes related to private 
              foundations.
Sec. 106. Excise tax on unrelated business taxable income of charitable 
              remainder trusts.
Sec. 107. Expansion of charitable contribution allowed for scientific 
              property used for research and for computer technology 
              and equipment used for educational purposes.
Sec. 108. Adjustment to basis of s corporation stock for certain 
              charitable contributions.
Sec. 109. Charitable organizations permitted to make collegiate housing 
              and infrastructure grants.
Sec. 110. Conduct of certain games of chance not treated as unrelated 
              trade or business.
Sec. 111. Excise taxes exemption for blood collector organizations.
Sec. 112. Nonrecognition of gain on the sale of property used in 
              performance of an exempt function.
Sec. 113. Exemption of qualified 501(c)(3) bonds for nursing homes from 
              Federal guarantee prohibitions.

     TITLE II--TAX REFORM AND IMPROVEMENTS RELATING TO CHARITABLE 
                       ORGANIZATIONS AND PROGRAMS

Sec. 201. Suspension of tax-exempt status of terrorist organizations.
Sec. 202. Clarification of definition of church tax inquiry.
Sec. 203. Extension of declaratory judgment remedy to tax-exempt 
              organizations.
Sec. 204. Landowner incentives programs.
Sec. 205. Modifications to section 512(b)(13).
Sec. 206. Simplification of lobbying expenditure limitation.
Sec. 207. Pilot project for forest conservation activities.

                      TITLE III--OTHER PROVISIONS

Sec. 301. Compassion capital fund.
Sec. 302. Reauthorization of assets for independence demonstration.
Sec. 303. Sense of the Congress regarding corporate contributions to 
              faith-based organizations, etc.

                 TITLE IV--SOCIAL SERVICES BLOCK GRANT

Sec. 401. Restoration of funds for the social services block grant.
Sec. 402. Restoration of authority to transfer up to 10 percent of TANF 
              funds to the social services block grant.
Sec. 403. Requirement to submit annual report on State activities.

                     TITLE V--ABUSIVE TAX SHELTERS

Sec. 501. Short title.
Sec. 502. Findings and purpose.

        Subtitle A--Provisions Designed to Curtail Tax Shelters

Sec. 511. Clarification of economic substance doctrine.
Sec. 512. Penalty for failing to disclose reportable transaction.
Sec. 513. Accuracy-related penalty for listed transactions and other 
              reportable transactions having a significant tax 
              avoidance purpose.
Sec. 514. Penalty for understatements attributable to transactions 
              lacking economic substance, etc.
Sec. 515. Modifications of substantial understatement penalty for 
              nonreportable transactions.
Sec. 516. Tax shelter exception to confidentiality privileges relating 
              to taxpayer communications.
Sec. 517. Disclosure of reportable transactions.
Sec. 518. Modifications to penalty for failure to register tax 
              shelters.
Sec. 519. Modification of penalty for failure to maintain lists of 
              investors.
Sec. 520. Modification of actions to enjoin certain conduct related to 
              tax shelters and reportable transactions.
Sec. 521. Understatement of taxpayer's liability by income tax return 
              preparer.
Sec. 522. Penalty on failure to report interests in foreign financial 
              accounts.
Sec. 523. Frivolous tax submissions.
Sec. 524. Regulation of individuals practicing before the Department of 
              Treasury.
Sec. 525. Penalty on promoters of tax shelters.
Sec. 526. Statute of limitations for taxable years for which listed 
              transactions not reported.
Sec. 527. Denial of deduction for interest on underpayments 
              attributable to nondisclosed reportable and noneconomic 
              substance transactions.

  Subtitle B--Affirmation of Consolidated Return Regulation Authority

Sec. 531. Affirmation of consolidated return regulation authority.

                 TITLE I--CHARITABLE GIVING INCENTIVES

     SEC. 101. DEDUCTION FOR PORTION OF CHARITABLE CONTRIBUTIONS 
                   TO BE ALLOWED TO INDIVIDUALS WHO DO NOT ITEMIZE 
                   DEDUCTIONS.

       (a) In General.--Section 170 (relating to charitable, etc., 
     contributions and gifts) is amended by redesignating 
     subsection (m) as subsection (n) and by inserting after 
     subsection (l) the following new subsection:
       ``(m) Deduction for Individuals Not Itemizing Deductions.--
       ``(1) In general.--In the case of an individual who does 
     not itemize deductions for a taxable year, there shall be 
     taken into account as a direct charitable deduction under 
     section 63 an amount equal to the amount allowable under 
     subsection (a) for the taxable year for cash contributions 
     (determined without regard to any carryover), to the extent 
     that such contributions exceed $250 ($500 in the case of a 
     joint return) but do not exceed $500 ($1,000 in the case of a 
     joint return).
       ``(2) Termination.--Paragraph (1) shall not apply to any 
     taxable year beginning after December 31, 2005.''.
       (b) Direct Charitable Deduction.--
       (1) In general.--Subsection (b) of section 63 (defining 
     taxable income) is amended by striking ``and'' at the end of 
     paragraph (1), by striking the period at the end of paragraph 
     (2) and inserting ``, and'', and by adding at the end the 
     following new paragraph:
       ``(3) the direct charitable deduction.''.
       (2) Definition.--Section 63 is amended by redesignating 
     subsection (g) as subsection

[[Page 22242]]

     (h) and by inserting after subsection (f) the following new 
     subsection:
       ``(g) Direct Charitable Deduction.--For purposes of this 
     section, the term `direct charitable deduction' means that 
     portion of the amount allowable under section 170(a) which is 
     taken as a direct charitable deduction for the taxable year 
     under section 170(m).''.
       (3) Conforming amendment.--Subsection (d) of section 63 is 
     amended by striking ``and'' at the end of paragraph (1), by 
     striking the period at the end of paragraph (2) and inserting 
     ``, and'', and by adding at the end the following new 
     paragraph:
       ``(3) the direct charitable deduction.''.
       (c) Study.--
       (1) In general.--The Secretary of the Treasury shall study 
     the effect of the amendments made by this section on 
     increased charitable giving and taxpayer compliance, 
     including a comparison of taxpayer compliance between 
     taxpayers who itemize their charitable contributions and 
     taxpayers who claim a direct charitable deduction.
       (2) Report.--Not later than December 31, 2006, the 
     Secretary of the Treasury shall report on the study required 
     under paragraph (1) to the Committee on Finance of the Senate 
     and the Committee on Ways and Means of the House of 
     Representatives.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 102. TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT 
                   PLANS FOR CHARITABLE PURPOSES.

       (a) In General.--Subsection (d) of section 408 (relating to 
     individual retirement accounts) is amended by adding at the 
     end the following new paragraph:
       ``(8) Distributions for charitable purposes.--
       ``(A) In general.--No amount shall be includible in gross 
     income by reason of a qualified charitable distribution.
       ``(B) Qualified charitable distribution.--For purposes of 
     this paragraph, the term `qualified charitable distribution' 
     means any distribution from an individual retirement plan 
     other than a plan described in subsection (k) or (p) of 
     section 408--
       ``(i) which is made on or after the date that the 
     individual for whose benefit the plan is maintained has 
     attained age 70 \1/2\, and
       ``(ii) which is made directly by the trustee--

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

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

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

       ``(a) Trusts Described in Section 4947(a)(2).--Every trust 
     described in section 4947(a)(2) shall furnish such 
     information with respect to the taxable year as the Secretary 
     may by forms or regulations require.
       ``(b) Trusts Claiming a Charitable Deduction Under Section 
     642(c).--
       ``(1) In general.--Every trust not required to file a 
     return under subsection (a) but claiming a deduction under 
     section 642(c) for the taxable year shall furnish such 
     information with respect to such taxable year as the 
     Secretary may by forms or regulations prescribe, including--
       ``(A) the amount of the deduction taken under section 
     642(c) within such year,
       ``(B) the amount paid out within such year which represents 
     amounts for which deductions under section 642(c) have been 
     taken in prior years,
       ``(C) the amount for which such deductions have been taken 
     in prior years but which has not been paid out at the 
     beginning of such year,
       ``(D) the amount paid out of principal in the current and 
     prior years for the purposes described in section 642(c),
       ``(E) the total income of the trust within such year and 
     the expenses attributable thereto, and
       ``(F) a balance sheet showing the assets, liabilities, and 
     net worth of the trust as of the beginning of such year.
       ``(2) Exceptions.--Paragraph (1) shall not apply to a trust 
     for any taxable year if--
       ``(A) all the net income for such year, determined under 
     the applicable principles of the law of trusts, is required 
     to be distributed currently to the beneficiaries, or
       ``(B) the trust is described in section 4947(a)(1).''.
       (2) Increase in penalty relating to filing of information 
     return by split-interest trusts.--Paragraph (2) of section 
     6652(c) (relating to returns by exempt organizations and by 
     certain trusts) is amended by adding at the end the following 
     new subparagraph:
       ``(C) Split-interest trusts.--In the case of a trust which 
     is required to file a return under section 6034(a), 
     subparagraphs (A) and (B) of this paragraph shall not apply 
     and paragraph (1) shall apply in the same manner as if such 
     return were required under section 6033, except that--
       ``(i) the 5 percent limitation in the second sentence of 
     paragraph (1)(A) shall not apply,
       ``(ii) in the case of any trust with gross income in excess 
     of $250,000, the first sentence of paragraph (1)(A) shall be 
     applied by substituting `$100' for `$20', and the second 
     sentence thereof shall be applied by substituting `$50,000' 
     for `$10,000', and
       ``(iii) the third sentence of paragraph (1)(A) shall be 
     disregarded.
     In addition to any penalty imposed on the trust pursuant to 
     this subparagraph, if the person required to file such return 
     knowingly fails to file the return, such penalty shall also 
     be imposed on such person who shall be personally liable for 
     such penalty.''.
       (3) Confidentiality of noncharitable beneficiaries.--
     Subsection (b) of section 6104 (relating to inspection of 
     annual information returns) is amended by adding at the end 
     the following new sentence: ``In the case of a trust which is 
     required to file a return under section 6034(a), this 
     subsection shall not apply to information regarding 
     beneficiaries which are not organizations described in 
     section 170(c).''.
       (c) Effective Dates.--
       (1) Subsection (a).--The amendment made by subsection (a) 
     shall apply to distributions made after December 31, 2003.
       (2) Subsection (b).--The amendments made by subsection (b) 
     shall apply to returns for taxable years beginning after 
     December 31, 2003.

     SEC. 103. INCREASE IN CAP ON CORPORATE CHARITABLE 
                   CONTRIBUTIONS.

       (a) In General.--Paragraph (2) of section 170(b) (relating 
     to corporations) is amended by striking ``10 percent'' and 
     inserting ``the applicable percentage''.

[[Page 22243]]

       (b) Applicable Percentage.--Subsection (b) of section 170 
     is amended by adding at the end the following new paragraph:
       ``(3) Applicable percentage defined.--For purposes of 
     paragraph (2), the applicable percentage shall be determined 
     in accordance with the following table:

``For taxable years beginning in calendarThe applicable percentage is--
      2004..........................................................11 
      2005..........................................................12 
      2006..........................................................13 
      2007..........................................................14 
      2008 through 2011.............................................15 
      2012 and thereafter........................................20.''.
       (c) Conforming Amendments.--
       (1) Sections 512(b)(10) and 805(b)(2)(A) are each amended 
     by striking ``10 percent'' each place it occurs and inserting 
     ``the applicable percentage (determined under section 
     170(b)(3))''.
       (2) Sections 545(b)(2) and 556(b)(2) are each amended by 
     striking ``10-percent limitation'' and inserting ``applicable 
     percentage limitation''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 104. CHARITABLE DEDUCTION FOR CONTRIBUTIONS OF FOOD 
                   INVENTORY.

       (a) In General.--Paragraph (3) of section 170(e) (relating 
     to special rule for certain contributions of inventory and 
     other property) is amended by redesignating subparagraph (C) 
     as subparagraph (D) and by inserting after subparagraph (B) 
     the following new subparagraph:
       ``(C) Special rule for contributions of food inventory.--
       ``(i) General rule.--In the case of a charitable 
     contribution of food from any trade or business (or interest 
     therein) of the taxpayer, this paragraph shall be applied--

       ``(I) without regard to whether the contribution is made by 
     a C corporation, and
       ``(II) only to food that is apparently wholesome food.

       ``(ii) Limitation.--In the case of a taxpayer other than a 
     C corporation, the aggregate amount of such contributions for 
     any taxable year which may be taken into account under this 
     section shall not exceed the applicable percentage (within 
     the meaning of subsection (b)(3)) of the taxpayer's aggregate 
     net income for such taxable year from all trades or 
     businesses from which such contributions were made for such 
     year, computed without regard to this section.
       ``(iii) Determination of fair market value.--In the case of 
     a qualified contribution of apparently wholesome food to 
     which this paragraph applies and which, solely by reason of 
     internal standards of the taxpayer or lack of market, cannot 
     or will not be sold, the fair market value of such food shall 
     be determined by taking into account the price at which the 
     same or substantially the same food items (as to both type 
     and quality) are sold by the taxpayer at the time of the 
     contribution (or, if not so sold at such time, in the recent 
     past).
       ``(iv) Apparently wholesome food.--For purposes of this 
     subparagraph, the term `apparently wholesome food' has the 
     meaning given to such term by section 22(b)(2) of the Bill 
     Emerson Good Samaritan Food Donation Act (42 U.S.C. 
     1791(b)(2)), as in effect on the date of the enactment of 
     this subparagraph.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 105. REFORM OF CERTAIN EXCISE TAXES RELATED TO PRIVATE 
                   FOUNDATIONS.

       (a) Reduction of Tax on Net Investment Income.--Section 
     4940(a) (relating to tax-exempt foundations) is amended by 
     striking ``2 percent'' and inserting ``1 percent''.
       (b) Repeal of Reduction in Tax Where Private Foundation 
     Meets Certain Distribution Requirements.--Section 4940 
     (relating to excise tax based on investment income) is 
     amended by striking subsection (e).
       (c) Modification of Excise Tax on Self-Dealing.--The second 
     sentence of section 4941(a)(1) (relating to initial excise 
     tax imposed on self-dealer) is amended by striking ``5 
     percent'' and inserting ``25 percent''.
       (d) Modification of Excise Tax on Failure To Distribute 
     Income.--
       (1) Certain administrative expenses not treated as 
     distributions.--Section 4942(g) is amended by striking 
     paragraph (4) and inserting the following new paragraphs:
       ``(4) Limitation on administrative expenses treated as 
     distributions.--
       ``(A) In general.--For purposes of paragraph (1)(A), the 
     following administrative expenses shall not be treated as 
     qualifying distributions:
       ``(i) Any administrative expense which is not directly 
     attributable to direct charitable activities, grant selection 
     activities, grant monitoring and administration activities, 
     compliance with applicable Federal, State, or local law, or 
     furthering public accountability of the private foundation.
       ``(ii) Any compensation paid to a disqualified person to 
     the extent that such compensation exceeds an annual rate of 
     $100,000.
       ``(iii) Any expense incurred for transportation by air 
     unless such transportation is regularly-scheduled commercial 
     air transportation.
       ``(iv) Any expense incurred for regularly-scheduled 
     commercial air transportation to the extent that such expense 
     exceeds the cost of such transportation in coach-class 
     accommodations.
       ``(B) Adjustment for inflation.--In the case of a taxable 
     year beginning after December 31, 2004, the $100,000 amount 
     in subparagraph (A)(ii) shall be increased by an amount equal 
     to--
       ``(i) such dollar amount, multiplied by
       ``(ii) the cost-of-living adjustment determined under 
     section 1(f)(3) for the calendar year in which the taxable 
     year begins, determined by substituting `calendar year 2003' 
     for `calendar year 1992' in subparagraph (B) thereof.
     If any amount as increased under the preceding sentence is 
     not a multiple of $50, such amount shall be rounded to the 
     next lowest multiple of $50.
       ``(5) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary to carry out the purposes of 
     paragraph (4). Such regulations shall provide that 
     administrative expenses which are excluded from qualifying 
     distributions solely by reason of the limitations in 
     paragraph (4) shall not for such reason subject a private 
     foundation to any other excise taxes imposed by this 
     subchapter.''.
       (2) Disallowance not to apply to certain private 
     foundations.--
       (A) In general.--Section 4942(j)(3) (defining operating 
     foundation) is amended--
       (i) by striking ``(within the meaning of paragraph (1) or 
     (2) of subsection (g))'' each place it appears, and
       (ii) by adding at the end the following new sentence: ``For 
     purposes of this paragraph, the term `qualifying 
     distributions' means qualifying distributions within the 
     meaning of paragraph (1) or (2) of subsection (g) (determined 
     without regard to subsection (g)(4)).''.
       (B) Conforming amendment.--Section 4942(f)(2)(C)(i) is 
     amended by inserting ``(determined without regard to 
     subsection (g)(4))'' after ``within the meaning of subsection 
     (g)(1)(A)''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 106. EXCISE TAX ON UNRELATED BUSINESS TAXABLE INCOME OF 
                   CHARITABLE REMAINDER TRUSTS.

       (a) In General.--Subsection (c) of section 664 (relating to 
     exemption from income taxes) is amended to read as follows:
       ``(c) Taxation of Trusts.--
       ``(1) Income tax.--A charitable remainder annuity trust and 
     a charitable remainder unitrust shall, for any taxable year, 
     not be subject to any tax imposed by this subtitle.
       ``(2) Excise tax.--
       ``(A) In general.--In the case of a charitable remainder 
     annuity trust or a charitable remainder unitrust that has 
     unrelated business taxable income (within the meaning of 
     section 512, determined as if part III of subchapter F 
     applied to such trust) for a taxable year, there is hereby 
     imposed on such trust or unitrust an excise tax equal to the 
     amount of such unrelated business taxable income.
       ``(B) Certain rules to apply.--The tax imposed by 
     subparagraph (A) shall be treated as imposed by chapter 42 
     for purposes of this title other than subchapter E of chapter 
     42.
       ``(C) Character of distributions and coordination with 
     distribution requirements.--The amounts taken into account in 
     determining unrelated business taxable income (as defined in 
     subparagraph (A)) shall not be taken into account for 
     purposes of--
       ``(i) subsection (b),
       ``(ii) determining the value of trust assets under 
     subsection (d)(2), and
       ``(iii) determining income under subsection (d)(3).
       ``(D) Tax court proceedings.--For purposes of this 
     paragraph, the references in section 6212(c)(1) to section 
     4940 shall be deemed to include references to this 
     paragraph.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 107. EXPANSION OF CHARITABLE CONTRIBUTION ALLOWED FOR 
                   SCIENTIFIC PROPERTY USED FOR RESEARCH AND FOR 
                   COMPUTER TECHNOLOGY AND EQUIPMENT USED FOR 
                   EDUCATIONAL PURPOSES.

       (a) Scientific Property Used for Research.--
       (1) In general.--Clause (ii) of section 170(e)(4)(B) 
     (defining qualified research contributions) is amended by 
     inserting ``or assembled'' after ``constructed''.
       (2) Conforming amendment.--Clause (iii) of section 
     170(e)(4)(B) is amended by inserting ``or assembling'' after 
     ``construction''.
       (b) Computer Technology and Equipment for Educational 
     Purposes.--
       (1) In general.--Clause (ii) of section 170(e)(6)(B) is 
     amended by inserting ``or assembled'' after ``constructed'' 
     and ``or assembling'' after ``construction''.
       (2) Special rule made permanent.--Section 170(e)(6) is 
     amended by striking subparagraph (G).
       (3) Conforming amendments.--Subparagraph (D) of section 
     170(e)(6) is amended by inserting ``or assembled'' after 
     ``constructed'' and ``or assembling'' after ``construction''.

[[Page 22244]]

       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 108. ADJUSTMENT TO BASIS OF S CORPORATION STOCK FOR 
                   CERTAIN CHARITABLE CONTRIBUTIONS.

       (a) In General.--Paragraph (2) of section 1367(a) (relating 
     to adjustments to basis of stock of shareholders, etc.) is 
     amended by adding at the end the following new flush 
     sentence:
     ``The decrease under subparagraph (B) by reason of a 
     charitable contribution (as defined in section 170(c)) of 
     property shall be the amount equal to the shareholder's pro 
     rata share of the adjusted basis of such property.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 109. CHARITABLE ORGANIZATIONS PERMITTED TO MAKE 
                   COLLEGIATE HOUSING AND INFRASTRUCTURE GRANTS.

       (a) In General.--Section 501 (relating to exemption from 
     tax on corporations, certain trusts, etc.), as amended by 
     section 201, is further amended by redesignating subsection 
     (q) as subsection (r) and by inserting after subsection (p) 
     the following new subsection:
       ``(q) Treatment of Organizations Making Collegiate Housing 
     and Infrastructure Improvement Grants.--
       ``(1) In general.--For purposes of subsection (c)(3) and 
     sections 170(c)(2)(B), 2055(a), and 2522(a)(2), an 
     organization shall not fail to be treated as organized and 
     operated exclusively for charitable or educational purposes 
     solely because such organization makes collegiate housing and 
     infrastructure grants to an organization described in 
     subsection (c)(7), so long as, at the time of the grant, 
     substantially all of the active members of the recipient 
     organization are full-time students at the college or 
     university with which such recipient organization is 
     associated.
       ``(2) Housing and infrastructure grants.--For purposes of 
     paragraph (1), collegiate housing and infrastructure grants 
     are grants to provide, improve, operate, or maintain 
     collegiate housing that may involve more than incidental 
     social, recreational, or private purposes, so long as such 
     grants are for purposes that would be permissible for a 
     dormitory of the college or university referred to in 
     paragraph (1). A grant shall not be treated as a collegiate 
     housing and infrastructure grant for purposes of paragraph 
     (1) to the extent that such grant is used to provide physical 
     fitness equipment.
       ``(3) Grants to certain organizations holding title to 
     property, etc.--For purposes of this subsection, a collegiate 
     housing and infrastructure grant to an organization described 
     in subsection (c)(2) or (c)(7) holding title to property 
     exclusively for the benefit of an organization described in 
     subsection (c)(7) shall be considered a grant to the 
     organization described in subsection (c)(7) for whose benefit 
     such property is held.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to grants made after December 31, 2003.

     SEC. 110. CONDUCT OF CERTAIN GAMES OF CHANCE NOT TREATED AS 
                   UNRELATED TRADE OR BUSINESS.

       (a) In General.--Paragraph (1) of section 513(f) (relating 
     to certain bingo games) is amended to read as follows:
       ``(1) In general.--The term `unrelated trade or business' 
     does not include--
       ``(A) any trade or business which consists of conducting 
     bingo games, and
       ``(B) any trade or business which consists of conducting 
     qualified games of chance if the net proceeds from such trade 
     or business are paid or set aside for payment for purposes 
     described in section 170(c)(2)(B), for the promotion of 
     social welfare (within the meaning of section 501(c)(4)), or 
     for a purpose for which State law specifically authorizes the 
     expenditure of such proceeds.''.
       (b) Qualified Games of Chance.--Subsection (f) of section 
     513 is amended by adding at the end the following new 
     paragraph:
       ``(3) Qualified games of chance.--For purposes of paragraph 
     (1), the term `qualified game of chance' means any game of 
     chance (other than bingo) conducted by an organization if--
       ``(A) such organization is licensed pursuant to State law 
     to conduct such game,
       ``(B) only organizations which are organized as nonprofit 
     corporations or are exempt from tax under section 501(a) may 
     be so licensed to conduct such game within the State, and
       ``(C) the conduct of such game does not violate State or 
     local law.''
       (c) Clerical Amendment.--The subsection heading of section 
     513(f) is amended by striking ``Bingo Games'' and inserting 
     ``Games of Chance''.
       (d) Effective Date.-- The amendments made by this section 
     shall apply to games conducted after December 31, 2003.

     SEC. 111. EXCISE TAXES EXEMPTION FOR BLOOD COLLECTOR 
                   ORGANIZATIONS.

       (a) Exemption From Imposition of Special Fuels Tax.--
     Section 4041(g) (relating to other exemptions) is amended by 
     striking ``and'' at the end of paragraph (3), by striking the 
     period in paragraph (4) and inserting ``; and'', and by 
     inserting after paragraph (4) the following new paragraph:
       ``(5) with respect to the sale of any liquid to a qualified 
     blood collector organization (as defined in section 
     7701(a)(48)) for such organization's exclusive use, or with 
     respect to the use by a qualified blood collector 
     organization of any liquid as a fuel.''.
       (b) Exemption From Manufacturers Excise Tax.--
       (1) In general.--Section 4221(a) (relating to certain tax-
     free sales) is amended by striking ``or'' at the end of 
     paragraph (4), by adding ``or'' at the end of paragraph (5), 
     and by inserting after paragraph (5) the following new 
     paragraph:
       ``(6) to a qualified blood collector organization (as 
     defined in section 7701(a)(48)) for such organization's 
     exclusive use,''.
       (2) Conforming amendments.--
       (A) The second sentence of section 4221(a) is amended by 
     striking ``Paragraphs (4) and (5)'' and inserting 
     ``Paragraphs (4), (5), and (6)''.
       (B) Section 6421(c) is amended by striking ``or (5)'' and 
     inserting ``(5), or (6)''.
       (c) Exemption From Communication Excise Tax.--
       (1) In general.--Section 4253 (relating to exemptions) is 
     amended by redesignating subsection (k) as subsection (l) and 
     inserting after subsection (j) the following new subsection:
       ``(k) Exemption for Qualified Blood Collector 
     Organizations.--Under regulations provided by the Secretary, 
     no tax shall be imposed under section 4251 on any amount paid 
     by a qualified blood collector organization (as defined in 
     section 7701(a)(48)) for services or facilities furnished to 
     such organization.''.
       (2) Conforming amendment.--Section 4253(l), as redesignated 
     by paragraph (1), is amended by striking ``or (j)'' and 
     inserting ``(j), or (k)''.
       (d) Credit for Refund for Certain Taxes on Sales and 
     Services.--
       (1) Deemed overpayment.--
       (A) In general.--Section 6416(b)(2) is amended by 
     redesignating subparagraphs (E) and (F) as subparagraphs (F) 
     and (G), respectively, and by inserting after subparagraph 
     (D) the following new subparagraph:
       ``(E) sold to a qualified blood collector organization (as 
     defined in section 7701(a)(48)) for such organization's 
     exclusive use;''.
       (B) Conforming amendments.--Section 6416(b)(2) is amended--
       (i) by striking ``Subparagraphs (C) and (D)'' and inserting 
     ``Subparagraphs (C), (D), and (E)'', and
       (ii) by striking ``(C), and (D)'' and inserting ``(C), (D), 
     and (E)''.
       (2) Sales of tires.--Clause (ii) of section 6416(b)(4)(B) 
     is amended by inserting ``sold to a qualified blood collector 
     organization (as defined in section 7701(a)(48)) for its 
     exclusive use,'' after ``for its exclusive use,''.
       (e) Definition of Qualified Blood Collector Organization.--
     Section 7701(a) is amended by inserting at the end the 
     following new paragraph:
       ``(48) Qualified blood collector organization.--The term 
     `qualified blood collector organization' means an 
     organization which is--
       ``(A) described in section 501(c)(3) and exempt from tax 
     under section 501(a),
       ``(B) registered by the Food and Drug Administration to 
     collect blood, and
       ``(C) primarily engaged in the activity of the collection 
     of blood.''.
       (f) Effective Date.--The amendments made by this section 
     shall take effect on January 1, 2004.

     SEC. 112. NONRECOGNITION OF GAIN ON THE SALE OF PROPERTY USED 
                   IN PERFORMANCE OF AN EXEMPT FUNCTION.

       (a) In General.--Subparagraph (D) of section 512(a)(3) is 
     amended to read as follows:
       ``(D) Nonrecognition of gain.--
       ``(i) In general.--If property used directly in the 
     performance of the exempt function of an organization 
     described in paragraph (7), (9), (17), or (20) of section 
     501(c) is sold by such organization, and within a period 
     beginning 1 year before the date of such sale, and ending 3 
     years (10 years, in the case of an organization described in 
     section 501(c)(7)) after such date, other property is 
     purchased and used by such organization directly in the 
     performance of its exempt function, gain (if any) from such 
     sale shall be recognized only to the extent that such 
     organization's sales price of the old property exceeds the 
     organization's cost of purchasing the other property.
       ``(ii) Statute of limitations.--If an organization 
     described in section 501(c)(7) sells property on which gain 
     is not recognized, in whole or in part, by reason of clause 
     (i), then the statutory period for the assessment of any 
     deficiency attributable to such gain shall not expire until 
     the end of the 3-year period beginning on the date that the 
     Secretary is notified by such organization (in such manner as 
     the Secretary may prescribe) that--

       ``(I) the organization has met the requirements of clause 
     (i) with respect to gain which was not recognized,
       ``(II) the organization does not intend to meet such 
     requirements, or
       ``(III) the organization failed to meet such requirements 
     within the prescribed period.

     For the purposes of this clause, any deficiency may be 
     assessed before the expiration of such 3-year period 
     notwithstanding the provisions of any other law or rule of 
     law which would otherwise prevent such assessment.

[[Page 22245]]

       ``(iii) Destruction and loss.--For purposes of this 
     subparagraph, the destruction in whole or in part, theft, 
     seizure, requisition, or condemnation of property, shall be 
     treated as the sale of such property, and rules similar to 
     the rules provided by subsections (b), (c), (e), and (j) of 
     section 1034 (as in effect on the day before the date of the 
     enactment of the Taxpayer Relief Act of 1997) shall apply.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply with respect to the sale of any property for 
     which the 3-year period for offsetting gain by purchasing 
     other property under subparagraph (D) of section 512(a)(3) of 
     the Internal Revenue Code (as in effect on the day before the 
     date of the enactment of this Act) had not expired as of 
     January 1, 2001.

     SEC. 113. EXEMPTION OF QUALIFIED 501(C)(3) BONDS FOR NURSING 
                   HOMES FROM FEDERAL GUARANTEE PROHIBITIONS.

       (a) In General.--For purposes of section 149(b)(1) of the 
     Internal Revenue Code of 1986, any qualified 501(c)(3) bond 
     (as defined in section 145 of such Code) shall not be treated 
     as federally guaranteed solely because such bond is part of 
     an issue supported by a letter of credit, if such bond--
       (1) is issued after December 31, 2003, and before the date 
     which is 1 year after the date of the enactment of this Act, 
     and
       (2) is part of an issue 95 percent or more of the net 
     proceeds of which are to be used to finance 1 or more of the 
     following facilities primarily for the benefit of the 
     elderly:
       (A) Licensed nursing home facility.
       (B) Licensed or certified assisted living facility.
       (C) Licensed personal care facility.
       (D) Continuing care retirement community.
       (b) Limitation on Issuer.--Subsection (a) shall not apply 
     to any bond described in such subsection if the aggregate 
     authorized face amount of the issue of which such bond is a 
     part, when increased by the outstanding amount of such bonds 
     issued by the issuer during the period described in 
     subsection (a)(1) exceeds $15,000,000.
       (c) Limitation on Beneficiary.--Rules similar to the rules 
     of section 144(a)(10) of the Internal Revenue Code of 1986 
     shall apply for purposes of this section, except that--
       (1) ``$15,000,000'' shall be substituted for 
     ``$40,000,000'' in subparagraph (A) thereof, and
       (2) such rules shall be applied--
       (A) only with respect to bonds described in this section, 
     and
       (B) with respect to the aggregate authorized face amount of 
     all issues of such bonds which are allocable to the 
     beneficiary.
       (d) Continuing Care Retirement Community.--For purposes of 
     this section, the term ``continuing care retirement 
     community'' means a community which provides, on the same 
     campus, a consortium of residential living options and 
     support services to persons at least 60 years of age under a 
     written agreement. For purposes of the preceding sentence, 
     the residential living options shall include independent 
     living units, nursing home beds, and either assisted living 
     units or personal care beds.

     TITLE II--TAX REFORM AND IMPROVEMENTS RELATING TO CHARITABLE 
                       ORGANIZATIONS AND PROGRAMS

     SEC. 201. SUSPENSION OF TAX-EXEMPT STATUS OF TERRORIST 
                   ORGANIZATIONS.

       (a) In General.--Section 501 (relating to exemption from 
     tax on corporations, certain trusts, etc.) is amended by 
     redesignating subsection (p) as subsection (q) and by 
     inserting after subsection (o) the following new subsection:
       ``(p) Suspension of Tax-Exempt Status of Terrorist 
     Organizations.--
       ``(1) In general.--The exemption from tax under subsection 
     (a) with respect to any organization described in paragraph 
     (2), and the eligibility of any organization described in 
     paragraph (2) to apply for recognition of exemption under 
     subsection (a), shall be suspended during the period 
     described in paragraph (3).
       ``(2) Terrorist organizations.--An organization is 
     described in this paragraph if such organization is 
     designated or otherwise individually identified--
       ``(A) under section 212(a)(3)(B)(vi)(II) or 219 of the 
     Immigration and Nationality Act as a terrorist organization 
     or foreign terrorist organization,
       ``(B) in or pursuant to an Executive order which is related 
     to terrorism and issued under the authority of the 
     International Emergency Economic Powers Act or section 5 of 
     the United Nations Participation Act of 1945 for the purpose 
     of imposing on such organization an economic or other 
     sanction, or
       ``(C) in or pursuant to an Executive order issued under the 
     authority of any Federal law if--
       ``(i) the organization is designated or otherwise 
     individually identified in or pursuant to such Executive 
     order as supporting or engaging in terrorist activity (as 
     defined in section 212(a)(3)(B) of the Immigration and 
     Nationality Act) or supporting terrorism (as defined in 
     section 140(d)(2) of the Foreign Relations Authorization Act, 
     Fiscal Years 1988 and 1989); and
       ``(ii) such Executive order refers to this subsection.
       ``(3) Period of suspension.--With respect to any 
     organization described in paragraph (2), the period of 
     suspension--
       ``(A) begins on the later of--
       ``(i) the date of the first publication of a designation or 
     identification described in paragraph (2) with respect to 
     such organization, or
       ``(ii) the date of the enactment of this subsection, and
       ``(B) ends on the first date that all designations and 
     identifications described in paragraph (2) with respect to 
     such organization are rescinded pursuant to the law or 
     Executive order under which such designation or 
     identification was made.
       ``(4) Denial of deduction.--No deduction shall be allowed 
     under section 170, 545(b)(2), 556(b)(2), 642(c), 2055, 
     2106(a)(2), or 2522 for any contribution to an organization 
     described in paragraph (2) during the period described in 
     paragraph (3).
       ``(5) Denial of administrative or judicial challenge of 
     suspension or denial of deduction.--Notwithstanding section 
     7428 or any other provision of law, no organization or other 
     person may challenge a suspension under paragraph (1), a 
     designation or identification described in paragraph (2), the 
     period of suspension described in paragraph (3), or a denial 
     of a deduction under paragraph (4) in any administrative or 
     judicial proceeding relating to the Federal tax liability of 
     such organization or other person.
       ``(6) Erroneous designation.--
       ``(A) In general.--If--
       ``(i) the tax exemption of any organization described in 
     paragraph (2) is suspended under paragraph (1),
       ``(ii) each designation and identification described in 
     paragraph (2) which has been made with respect to such 
     organization is determined to be erroneous pursuant to the 
     law or Executive order under which such designation or 
     identification was made, and
       ``(iii) the erroneous designations and identifications 
     result in an overpayment of income tax for any taxable year 
     by such organization,

     credit or refund (with interest) with respect to such 
     overpayment shall be made.
       ``(B) Waiver of limitations.--If the credit or refund of 
     any overpayment of tax described in subparagraph (A)(iii) is 
     prevented at any time by the operation of any law or rule of 
     law (including res judicata), such credit or refund may 
     nevertheless be allowed or made if the claim therefor is 
     filed before the close of the 1-year period beginning on the 
     date of the last determination described in subparagraph 
     (A)(ii).
       ``(7) Notice of suspensions.--If the tax exemption of any 
     organization is suspended under this subsection, the Internal 
     Revenue Service shall update the listings of tax-exempt 
     organizations and shall publish appropriate notice to 
     taxpayers of such suspension and of the fact that 
     contributions to such organization are not deductible during 
     the period of such suspension.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to designations made before, on, or after the 
     date of the enactment of this Act.

     SEC. 202. CLARIFICATION OF DEFINITION OF CHURCH TAX INQUIRY.

       Subsection (i) of section 7611 (relating to section not to 
     apply to criminal investigations, etc.) is amended by 
     striking ``or'' at the end of paragraph (4), by striking the 
     period at the end of paragraph (5) and inserting ``, or'', 
     and by inserting after paragraph (5) the following:
       ``(6) information provided by the Secretary related to the 
     standards for exemption from tax under this title and the 
     requirements under this title relating to unrelated business 
     taxable income.''.

     SEC. 203. EXTENSION OF DECLARATORY JUDGMENT REMEDY TO TAX-
                   EXEMPT ORGANIZATIONS.

       (a) In General.--Paragraph (1) of section 7428(a) (relating 
     to creation of remedy) is amended--
       (1) in subparagraph (B) by inserting after ``509(a))'' the 
     following: ``or as a private operating foundation (as defined 
     in section 4942(j)(3))''; and
       (2) by amending subparagraph (C) to read as follows:
       ``(C) with respect to the initial qualification or 
     continuing qualification of an organization as an 
     organization described in subsection (c) (other than 
     paragraph (3)) or (d) of section 501 which is exempt from tax 
     under section 501(a), or''.
       (b) Court Jurisdiction.--Subsection (a) of section 7428 is 
     amended in the material following paragraph (2) by striking 
     ``United States Tax Court, the United States Claims Court, or 
     the district court of the United States for the District of 
     Columbia'' and inserting the following: ``United States Tax 
     Court (in the case of any such determination or failure) or 
     the United States Claims Court or the district court of the 
     United States for the District of Columbia (in the case of a 
     determination or failure with respect to an issue referred to 
     in subparagraph (A) or (B) of paragraph (1)),''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to pleadings filed with respect to determinations 
     (or requests for determinations) made after the date of the 
     enactment of this Act.

     SEC. 204. LANDOWNER INCENTIVES PROGRAMS.

       (a) In General.--Subsection (a) of section 126 is amended 
     by redesignating paragraph

[[Page 22246]]

     (10) as paragraph (11) and by inserting after paragraph (9) 
     the following new paragraph:
       ``(10) Landowner initiatives programs to conserve 
     threatened, endangered, or imperiled species, or protect or 
     restore habitat carried out under--
       ``(A) the Fish and Wildlife Coordination Act (16 U.S.C. 661 
     et seq.),
       ``(B) the Fish and Wildlife Act of 1956 (16 U.S.C. 742f), 
     or
       ``(C) section 6 of the Endangered Species Act (16 U.S.C. 
     11531 et seq.).''.
       (b) Excludable Portion.--Subparagraph (A) of section 
     126(b)(1) is amended by inserting after ``Secretary of 
     Agriculture'' the following: ``(the Secretary of the 
     Interior, in the case of the landowner incentives programs 
     described in subsection (a)(10) and the programs described in 
     subsection (a)(11) that are implemented by the Department of 
     the Interior)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to amounts received after December 31, 2003, in 
     taxable years ending after such date.

     SEC. 205. MODIFICATIONS TO SECTION 512(B)(13).

       (a) In General.--Paragraph (13) of section 512(b) (relating 
     to special rules for certain amounts received from controlled 
     entities) is amended by redesignating subparagraph (E) as 
     subparagraph (F) and by inserting after subparagraph (D) the 
     following new subparagraph:
       ``(E) Paragraph to apply only to excess payments.--
       ``(i) In general.--Subparagraph (A) shall apply only to the 
     portion of a specified payment received or accrued by the 
     controlling organization that exceeds the amount which would 
     have been paid or accrued if such payment met the 
     requirements prescribed under section 482.
       ``(ii) Addition to tax for valuation misstatements.--The 
     tax imposed by this chapter on the controlling organization 
     shall be increased by an amount equal to 20 percent of the 
     larger of--

       ``(I) such excess determined without regard to any 
     amendment or supplement to a return of tax, or
       ``(II) such excess determined with regard to all such 
     amendments and supplements.''.

       (b) Effective Date.--
       (1) In general.--The amendment made by this section shall 
     apply to payments received or accrued after December 31, 
     2003.
       (2) Payments subject to binding contract transition rule.--
     If the amendments made by section 1041 of the Taxpayer Relief 
     Act of 1997 did not apply to any amount received or accrued 
     in the first 2 taxable years beginning on or after the date 
     of the enactment of the Taxpayer Relief Act of 1997 under any 
     contract described in subsection (b)(2) of such section, such 
     amendments also shall not apply to amounts received or 
     accrued under such contract before January 1, 2001.

     SEC. 206. SIMPLIFICATION OF LOBBYING EXPENDITURE LIMITATION.

       (a) Repeal of Grassroots Expenditure Limit.--Paragraph (1) 
     of section 501(h) (relating to expenditures by public 
     charities to influence legislation) is amended to read as 
     follows:
       ``(1) General rule.--In the case of an organization to 
     which this subsection applies, exemption from taxation under 
     subsection (a) shall be denied because a substantial part of 
     the activities of such organization consists of carrying on 
     propaganda, or otherwise attempting, to influence 
     legislation, but only if such organization normally makes 
     lobbying expenditures in excess of the lobbying ceiling 
     amount for such organization for each taxable year.''.
       (b) Excess Lobbying Expenditures.--Section 4911(b) is 
     amended to read as follows:
       ``(b) Excess Lobbying Expenditures.--For purposes of this 
     section, the term `excess lobbying expenditures' means, for a 
     taxable year, the amount by which the lobbying expenditures 
     made by the organization during the taxable year exceed the 
     lobbying nontaxable amount for such organization for such 
     taxable year.''.
       (c) Conforming Amendments.--
       (1) Section 501(h)(2) is amended by striking subparagraphs 
     (C) and (D).
       (2) Section 4911(c) is amended by striking paragraphs (3) 
     and (4).
       (3) Paragraph (1)(A) of section 4911(f) is amended by 
     striking ``limits of section 501(h)(1) have'' and inserting 
     ``limit of section 501(h)(1) has''.
       (4) Paragraph (1)(C) of section 4911(f) is amended by 
     striking ``limits of section 501(h)(1) are'' and inserting 
     ``limit of section 501(h)(1) is''.
       (5) Paragraphs (4)(A) and (4)(B) of section 4911(f) are 
     each amended by striking ``limits of section 501(h)(1)'' and 
     inserting ``limit of section 501(h)(1)''.
       (6) Paragraph (8) of section 6033(b) (relating to certain 
     organizations described in section 501(c)(3)) is amended by 
     inserting ``and'' at the end of subparagraph (A) and by 
     striking subparagraphs (C) and (D).
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 207. PILOT PROJECT FOR FOREST CONSERVATION ACTIVITIES.

       (a) Tax-Exempt Bond Financing.--
       (1) In general.--For purposes of the Internal Revenue Code 
     of 1986, any qualified forest conservation bond shall be 
     treated as an exempt facility bond under section 142 of such 
     Code.
       (2) Qualified forest conservation bond.--For purposes of 
     this section, the term ``qualified forest conservation bond'' 
     means any bond issued as part of an issue if--
       (A) 95 percent or more of the net proceeds (as defined in 
     section 150(a)(3) of such Code) of such issue are to be used 
     for qualified project costs,
       (B) such bond is an obligation of the State of Washington 
     or any political subdivision thereof, and
       (C) such bond is issued for a qualified organization before 
     December 31, 2006.
       (3) Limitation on aggregate amount issued.--The maximum 
     aggregate face amount of bonds which may be issued under this 
     subsection shall not exceed $250,000,000.
       (4) Qualified project costs.--For purposes of this 
     subsection, the term ``qualified project costs'' means the 
     sum of--
       (A) the cost of acquisition by the qualified organization 
     from an unrelated person of forests and forest land located 
     in the State of Washington which at the time of acquisition 
     or immediately thereafter are subject to a conservation 
     restriction described in subsection (c)(2),
       (B) interest on the qualified forest conservation bonds for 
     the 3-year period beginning on the date of issuance of such 
     bonds, and
       (C) credit enhancement fees which constitute qualified 
     guarantee fees (within the meaning of section 148 of such 
     Code).
       (5) Special rules.--In applying the Internal Revenue Code 
     of 1986 to any qualified forest conservation bond, the 
     following modifications shall apply:
       (A) Section 146 of such Code (relating to volume cap) shall 
     not apply.
       (B) For purposes of section 147(b) of such Code (relating 
     to maturity may not exceed 120 percent of economic life), the 
     land and standing timber acquired with proceeds of qualified 
     forest conservation bonds shall have an economic life of 35 
     years.
       (C) Subsections (c) and (d) of section 147 of such Code 
     (relating to limitations on acquisition of land and existing 
     property) shall not apply.
       (D) Section 57(a)(5) of such Code (relating to tax-exempt 
     interest) shall not apply to interest on qualified forest 
     conservation bonds.
       (6) Treatment of current refunding bonds.--Paragraphs 
     (2)(C) and (3) shall not apply to any bond (or series of 
     bonds) issued to refund a qualified forest conservation bond 
     issued before December 31, 2006, if--
       (A) the average maturity date of the issue of which the 
     refunding bond is a part is not later than the average 
     maturity date of the bonds to be refunded by such issue,
       (B) the amount of the refunding bond does not exceed the 
     outstanding amount of the refunded bond, and
       (C) the net proceeds of the refunding bond are used to 
     redeem the refunded bond not later than 90 days after the 
     date of the issuance of the refunding bond.
     For purposes of subparagraph (A), average maturity shall be 
     determined in accordance with section 147(b)(2)(A) of such 
     Code.
       (7) Effective date.--This subsection shall apply to 
     obligations issued on or after the date of enactment of this 
     Act.
       (b) Items From Qualified Harvesting Activities Not Subject 
     to Tax or Taken Into Account.--
       (1) In general.--Income, gains, deductions, losses, or 
     credits from a qualified harvesting activity conducted by a 
     qualified organization shall not be subject to tax or taken 
     into account under subtitle A of the Internal Revenue Code of 
     1986.
       (2) Limitation.--The amount of income excluded from gross 
     income under paragraph (1) for any taxable year shall not 
     exceed the amount used by the qualified organization to make 
     debt service payments during such taxable year for qualified 
     forest conservation bonds.
       (3) Qualified harvesting activity.--For purposes of 
     paragraph (1)--
       (A) In general.--The term ``qualified harvesting activity'' 
     means the sale, lease, or harvesting, of standing timber--
       (i) on land owned by a qualified organization which was 
     acquired with proceeds of qualified forest conservation 
     bonds, and
       (ii) pursuant to a qualified conservation plan adopted by 
     the qualified organization.
       (B) Exceptions.--
       (i) Cessation as qualified organization.--The term 
     ``qualified harvesting activity'' shall not include any sale, 
     lease, or harvesting for any period during which the 
     organization ceases to qualify as a qualified organization.
       (ii) Exceeding limits on harvesting.--The term ``qualified 
     harvesting activity'' shall not include any sale, lease, or 
     harvesting of standing timber on land acquired with proceeds 
     of qualified forest conservation bonds to the extent that--

       (I) the average annual area of timber harvested from such 
     land exceeds 2.5 percent of the total area of such land, or
       (II) the quantity of timber removed from such land exceeds 
     the quantity which can be removed from such land annually in 
     perpetuity on a sustained-yield basis with respect to such 
     land.

     The limitations under subclauses (I) and (II) shall not apply 
     to post-fire restoration and rehabilitation or sanitation 
     harvesting of

[[Page 22247]]

     timber stands which are substantially damaged by fire, 
     windthrow, or other catastrophes, or which are in imminent 
     danger from insect or disease attack.
       (4) Termination.--This subsection shall not apply to any 
     qualified harvesting activity occurring after the date on 
     which there is no outstanding qualified forest conservation 
     bond or any such bond ceases to be a tax-exempt bond.
       (5) Partial recapture of benefits if harvesting limit 
     exceeded.--If, as of the date that this subsection ceases to 
     apply under paragraph (4), the average annual area of timber 
     harvested from the land exceeds the requirement of paragraph 
     (3)(B)(ii)(I), the tax imposed by chapter 1 of such Code 
     shall be increased, under rules prescribed by the Secretary 
     of the Treasury, by the sum of the tax benefits attributable 
     to such excess and interest at the underpayment rate under 
     section 6621 of such Code for the period of the underpayment.
       (c) Definitions.--For purposes of this section--
       (1) Qualified conservation plan.--The term ``qualified 
     conservation plan'' means a multiple land use program or plan 
     which--
       (A) is designed and administered primarily for the purposes 
     of protecting and enhancing wildlife and fish, timber, scenic 
     attributes, recreation, and soil and water quality of the 
     forest and forest land,
       (B) mandates that conservation of forest and forest land is 
     the single-most significant use of the forest and forest 
     land, and
       (C) requires that timber harvesting be consistent with--
       (i) restoring and maintaining reference conditions for the 
     region's ecotype,
       (ii) restoring and maintaining a representative sample of 
     young, mid, and late successional forest age classes,
       (iii) maintaining or restoring the resources' ecological 
     health for purposes of preventing damage from fire, insect, 
     or disease,
       (iv) maintaining or enhancing wildlife or fish habitat, or
       (v) enhancing research opportunities in sustainable 
     renewable resource uses.
       (2) Conservation restriction.--The conservation restriction 
     described in this paragraph is a restriction which--
       (A) is granted in perpetuity to an unrelated person which 
     is described in section 170(h)(3) of such Code and which, in 
     the case of a nongovernmental unit, is organized and operated 
     for conservation purposes,
       (B) meets the requirements of clause (ii) or (iii)(II) of 
     section 170(h)(4)(A) of such Code,
       (C) obligates the qualified organization to pay the costs 
     incurred by the holder of the conservation restriction in 
     monitoring compliance with such restriction, and
       (D) requires an increasing level of conservation benefits 
     to be provided whenever circumstances allow it.
       (3) Qualified organization.--The term ``qualified 
     organization'' means an organization--
       (A) which is a nonprofit organization substantially all the 
     activities of which are charitable, scientific, or 
     educational, including acquiring, protecting, restoring, 
     managing, and developing forest lands and other renewable 
     resources for the long-term charitable, educational, 
     scientific and public benefit,
       (B) more than half of the value of the property of which 
     consists of forests and forest land acquired with the 
     proceeds from qualified forest conservation bonds,
       (C) which periodically conducts educational programs 
     designed to inform the public of environmentally sensitive 
     forestry management and conservation techniques,
       (D) which has at all times a board of directors--
       (i) at least 20 percent of the members of which represent 
     the holders of the conservation restriction described in 
     paragraph (2),
       (ii) at least 20 percent of the members of which are public 
     officials, and
       (iii) not more than one-third of the members of which are 
     individuals who are or were at any time within 5 years before 
     the beginning of a term of membership on the board, an 
     employee of, independent contractor with respect to, officer 
     of, director of, or held a material financial interest in, a 
     commercial forest products enterprise with which the 
     qualified organization has a contractual or other financial 
     arrangement,
       (E) the bylaws of which require at least two-thirds of the 
     members of the board of directors to vote affirmatively to 
     approve the qualified conservation plan and any change 
     thereto, and
       (F) upon dissolution, is required to dedicate its assets 
     to--
       (i) an organization described in section 501(c)(3) of such 
     Code which is organized and operated for conservation 
     purposes, or
       (ii) a governmental unit described in section 170(c)(1) of 
     such Code.
       (4) Unrelated person.--The term ``unrelated person'' means 
     a person who is not a related person.
       (5) Related person.--A person shall be treated as related 
     to another person if--
       (A) such person bears a relationship to such other person 
     described in section 267(b) (determined without regard to 
     paragraph (9) thereof), or 707(b)(1), of such Code, 
     determined by substituting ``25 percent'' for ``50 percent'' 
     each place it appears therein, and
       (B) in the case such other person is a nonprofit 
     organization, if such person controls directly or indirectly 
     more than 25 percent of the governing body of such 
     organization.
       (d) Report.--
       (1) In general.--The Comptroller General of the United 
     States shall conduct a study on the pilot project for forest 
     conservation activities under this section. Such study shall 
     examine the extent to which forests and forest lands were 
     managed during the 5-year period beginning on the date of the 
     enactment of this Act to achieve the goals of such project.
       (2) Submission of report to congress.--Not later than six 
     years after the date of the enactment of this Act, the 
     Comptroller General shall submit a report of such study to 
     the Committee on Ways and Means and the Committee on 
     Resources of the House of Representatives and the Committee 
     on Finance and the Committee on Energy and Natural Resources 
     of the Senate.

                      TITLE III--OTHER PROVISIONS

     SEC. 301. COMPASSION CAPITAL FUND.

       Title IV of the Social Security Act (42 U.S.C. 601-679b) is 
     amended by adding at the end the following:

                   ``PART F--COMPASSION CAPITAL FUND

     ``SEC. 481. SECRETARY'S FUND TO SUPPORT AND REPLICATE 
                   PROMISING SOCIAL SERVICE PROGRAMS.

       ``(a) Grant Authority.--
       ``(1) In general.--The Secretary may make grants to support 
     any private entity that operates a promising social services 
     program.
       ``(2) Applications.--An entity desiring to receive a grant 
     under paragraph (1) shall submit to the Secretary an 
     application for the grant, which shall contain such 
     information as the Secretary may require.
       ``(b) Contract Authority, Etc.--The Secretary may enter 
     into a grant, contract, or cooperative agreement with any 
     entity under which the entity would provide technical 
     assistance to another entity to operate a social service 
     program that assists persons and families in need, including 
     by--
       ``(1) providing the other entity with--
       ``(A) technical assistance and information, including legal 
     assistance and other business assistance;
       ``(B) information on capacity-building;
       ``(C) information and assistance in identifying and using 
     best practices for serving persons and families in need; or
       ``(D) assistance in replicating programs with demonstrated 
     effectiveness in assisting persons and families in need; or
       ``(2) supporting research on the best practices of social 
     service organizations.
       ``(c) Guidance and Technical Assistance.--The Secretary may 
     use not more than 25 percent of the amount appropriated under 
     this section for a fiscal year to provide guidance and 
     technical assistance to States and political subdivisions of 
     States with respect to the implementation of any social 
     service program.
       ``(d) Social Services Program Defined.--In this section, 
     the term `social services program' means a program that 
     provides benefits or services of any kind to persons and 
     families in need.
       ``(e) Limitations on Authorization of Appropriations.--To 
     carry out this section, there are authorized to be 
     appropriated to the Secretary $150,000,000 for fiscal year 
     2004, and such sums as may be necessary for fiscal years 2005 
     through 2008.''.

     SEC. 302. REAUTHORIZATION OF ASSETS FOR INDEPENDENCE 
                   DEMONSTRATION.

       (a) In General.--Section 416 of the Assets for Independence 
     Act (title IV of Public Law 105-285; 42 U.S.C. 604 note) is 
     amended by striking ``and 2003'' and inserting ``2003, 2004, 
     2005, 2006, 2007, and 2008''.
       (b) Removal of Economic Literacy Activities From Limitation 
     on Use of Amounts in the Reserve Fund.--Section 407(c)(3) of 
     such Act (title IV of Public Law 105-285; 42 U.S.C. 604 note) 
     is amended by adding at the end the following: ``The 
     preceding sentences of this paragraph shall not apply to 
     amounts used by an entity for any activity described in 
     paragraph (1)(A).''.
       (c) Eligibility Expanded to Include Individuals In 
     Households With Income Not Exceeding 50 Percent of Area 
     Median Income.--Section 408(a)(1) of such Act (title IV of 
     Public Law 105-285; 42 U.S.C. 604 note) is amended to read as 
     follows:
       ``(1) Income test.--The adjusted gross income of the 
     household--
       ``(A) does not exceed 200 percent of the poverty line (as 
     determined by the Office of Management and Budget) or the 
     earned income amount described in section 32 of the Internal 
     Revenue Code of 1986 (taking into account the size of the 
     household); or
       ``(B) does not exceed 50 percent of the area median income 
     (as determined by the Secretary of Housing and Urban 
     Development) for the area in which the household is 
     located.''.
       (d) Extension of Time for Account Holders to Access Federal 
     Funds.--Section 407(d) of such Act (title IV of Public Law 
     105-285; 42 U.S.C. 604 note) is amended--
       (1) in the subsection heading, by striking ``When Project 
     Terminates''; and
       (2) by striking ``upon'' and inserting ``on the date that 
     is 6 months after''.
       (e) Verification of Postsecondary Education Expenses.--
     Section 404(8)(A) of such

[[Page 22248]]

     Act (title IV of Public Law 105-285; 42 U.S.C. 604 note) is 
     amended in the 1st sentence by inserting ``or a vendor, but 
     only to the extent that the expenses are described in a 
     document which explains the educational items to be 
     purchased, and the document and the expenses are approved by 
     the qualified entity'' before the period.
       (f) Authority to Use Excess Interest to Fund Other 
     Individual Development Accounts.--Section 410 of such Act 
     (title IV of Public Law 105-285; 42 U.S.C. 604 note) is 
     amended--
       (1) in subsection (a)(3)--
       (A) by striking ``any interest that has accrued'' and 
     inserting ``interest that has accrued during that period''; 
     and
       (B) by striking the period and inserting ``, but only to 
     the extent that the amount of the interest does not exceed 
     the amount of interest that has accrued during that period on 
     amounts deposited in the account by that individual.''; and
       (2) by adding at the end the following:
       ``(f) Use of Excess Interest to Fund Other Individual 
     Development Accounts.--To the extent that a qualified entity 
     has an amount that, but for the limitation in subsection 
     (a)(3), would be required by that subsection to be deposited 
     into the individual development account of an individual or 
     into a parallel account maintained by the qualified entity, 
     the qualified entity may deposit the amount into the 
     individual development account of any individual or into any 
     such parallel account maintained by the qualified entity.''.

     SEC. 303. SENSE OF THE CONGRESS REGARDING CORPORATE 
                   CONTRIBUTIONS TO FAITH-BASED ORGANIZATIONS, 
                   ETC.

       (a) Findings.--The Congress finds as follows:
       (1) America's community of faith has long played a leading 
     role in dealing with difficult societal problems that might 
     otherwise have gone unaddressed.
       (2) President Bush has called upon Americans ``to revive 
     the spirit of citizenship . . . to marshal the compassion of 
     our people to meet the continuing needs of our Nation''.
       (3) Although the work of faith-based organizations should 
     not be used by government as an excuse for backing away from 
     its historic and rightful commitment to help those who are 
     disadvantaged and in need, such organizations can and should 
     be seen as a valuable partner with government in meeting 
     societal challenges.
       (4) Every day faith-based organizations in the United 
     States help people recover from drug and alcohol addiction, 
     provide food and shelter for the homeless, rehabilitate 
     prison inmates so that they can break free from the cycle of 
     recidivism, and teach people job skills that will allow them 
     to move from poverty to productivity.
       (5) Faith-based organizations are often more successful in 
     dealing with difficult societal problems than government and 
     non-sectarian organizations.
       (6) As President Bush has stated, ``It is not sufficient to 
     praise charities and community groups; we must support them. 
     And this is both a public obligation and a personal 
     responsibility.''.
       (7) Corporate foundations contribute billions of dollars 
     each year to a variety of philanthropic causes.
       (8) According to a study produced by the Capital Research 
     Center, the 10 largest corporate foundations in the United 
     States contributed $1,900,000,000 to such causes.
       (9) According to the same study, faith-based organizations 
     only receive a small fraction of the contributions made by 
     corporations in the United States, and 6 of the 10 
     corporations that give the most to philanthropic causes 
     explicitly ban or restrict contributions to faith-based 
     organizations.
       (b) Corporations Encouraged To Contribute to Faith-Based 
     Organizations.--The Congress calls on corporations in the 
     United States, in the words of the President, ``to give more 
     and to give better'' by making greater contributions to 
     faith-based organizations that are on the front lines 
     battling some of the great societal challenges of our day.
       (c) Sense of the Congress.--It is the sense of Congress 
     that--
       (1) corporations in the United States are important 
     partners with government in efforts to overcome difficult 
     societal problems; and
       (2) no corporation in the United States should adopt 
     policies that prohibit the corporation from contributing to 
     an organization that is successfully advancing a 
     philanthropic cause merely because such organization is faith 
     based.

                 TITLE IV--SOCIAL SERVICES BLOCK GRANT

     SEC. 401. RESTORATION OF FUNDS FOR THE SOCIAL SERVICES BLOCK 
                   GRANT.

       (a) Findings.--Congress makes the following findings:
       (1) On August 22, 1996, the Personal Responsibility and 
     Work Opportunity Reconciliation Act of 1996 (Public Law 104-
     193; 110 Stat. 2105) was signed into law.
       (2) In enacting that law, Congress authorized 
     $2,800,000,000 for fiscal year 2003 and each fiscal year 
     thereafter to carry out the Social Services Block Grant 
     program established under title XX of the Social Security Act 
     (42 U.S.C. 1397 et seq.).
       (b) Restoration of Funds.--Section 2003(c)(11) of the 
     Social Security Act (42 U.S.C. 1397b(c)(11)) is amended by 
     inserting ``, except that, with respect to fiscal year 2004, 
     the amount shall be $2,800,000,000'' after ``thereafter''.

     SEC. 402. RESTORATION OF AUTHORITY TO TRANSFER UP TO 10 
                   PERCENT OF TANF FUNDS TO THE SOCIAL SERVICES 
                   BLOCK GRANT.

       (a) In General.--Section 404(d)(2) of the Social Security 
     Act (42 U.S.C. 604(d)(2)) is amended to read as follows:
       ``(2) Limitation on amount transferable to title xx 
     programs.--A State may use not more than 10 percent of the 
     amount of any grant made to the State under section 403(a) 
     for a fiscal year to carry out State programs pursuant to 
     title XX.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     applies to amounts made available for fiscal year 2004 and 
     each fiscal year thereafter.

     SEC. 403. REQUIREMENT TO SUBMIT ANNUAL REPORT ON STATE 
                   ACTIVITIES.

       (a) In General.--Section 2006(c) of the Social Security Act 
     (42 U.S.C. 1397e(c)) is amended by adding at the end the 
     following:
     ``The Secretary shall compile the information submitted by 
     the States and submit that information to Congress on an 
     annual basis.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     applies to information submitted by States under section 2006 
     of the Social Security Act (42 U.S.C. 1397e) with respect to 
     fiscal year 2004 and each fiscal year thereafter.

                     TITLE V--ABUSIVE TAX SHELTERS

     SEC. 501. SHORT TITLE.

       This title may be cited as the ``Abusive Tax Shelter 
     Shutdown and Taxpayer Accountability Act of 2003''.

     SEC. 502. FINDINGS AND PURPOSE.

       (a) Findings.--The Congress hereby finds that:
       (1) Many corporate tax shelter transactions are complicated 
     ways of accomplishing nothing aside from claimed tax 
     benefits, and the legal opinions justifying those 
     transactions take an inappropriately narrow and restrictive 
     view of well-developed court doctrines under which--
       (A) the taxation of a transaction is determined in 
     accordance with its substance and not merely its form,
       (B) transactions which have no significant effect on the 
     taxpayer's economic or beneficial interests except for tax 
     benefits are treated as sham transactions and disregarded,
       (C) transactions involving multiple steps are collapsed 
     when those steps have no substantial economic meaning and are 
     merely designed to create tax benefits,
       (D) transactions with no business purpose are not given 
     effect, and
       (E) in the absence of a specific congressional 
     authorization, it is presumed that Congress did not intend a 
     transaction to result in a negative tax where the taxpayer's 
     economic position or rate of return is better after tax than 
     before tax.
       (2) Permitting aggressive and abusive tax shelters not only 
     results in large revenue losses but also undermines voluntary 
     compliance with the Internal Revenue Code of 1986.
       (b) Purpose.--The purpose of this title is to eliminate 
     abusive tax shelters by denying tax attributes claimed to 
     arise from transactions that do not meet a heightened 
     economic substance requirement and by repealing the provision 
     that permits legal opinions to be used to avoid penalties on 
     tax underpayments resulting from transactions without 
     significant economic substance or business purpose.

        Subtitle A--Provisions Designed to Curtail Tax Shelters

     SEC. 511. CLARIFICATION OF ECONOMIC SUBSTANCE DOCTRINE.

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

       ``(I) the transaction changes in a meaningful way (apart 
     from Federal tax effects and, if there are any Federal tax 
     effects, also apart from any foreign, State, or local tax 
     effects) the taxpayer's economic position, and

       ``(II) the taxpayer has a substantial nontax purpose for 
     entering into such transaction and the transaction is a 
     reasonable means of accomplishing such purpose.

       ``(ii) Special rule where taxpayer relies on profit 
     potential.--A transaction shall not be treated as having 
     economic substance by reason of having a potential for profit 
     unless--

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

[[Page 22249]]

       ``(II) the reasonably expected pre-tax profit from the 
     transaction exceeds a risk-free rate of return.

       ``(C) Treatment of fees and foreign taxes.--Fees and other 
     transaction expenses and foreign taxes shall be taken into 
     account as expenses in determining pre-tax profit under 
     subparagraph (B)(ii).
       ``(2) Special rules for transactions with tax-indifferent 
     parties.--
       ``(A) Special rules for financing transactions.--The form 
     of a transaction which is in substance the borrowing of money 
     or the acquisition of financial capital directly or 
     indirectly from a tax-indifferent party shall not be 
     respected if the present value of the deductions to be 
     claimed with respect to the transaction is substantially in 
     excess of the present value of the anticipated economic 
     returns of the person lending the money or providing the 
     financial capital. A public offering shall be treated as a 
     borrowing, or an acquisition of financial capital, from a 
     tax-indifferent party if it is reasonably expected that at 
     least 50 percent of the offering will be placed with tax-
     indifferent parties.
       ``(B) Artificial income shifting and basis adjustments.--
     The form of a transaction with a tax-indifferent party shall 
     not be respected if--
       ``(i) it results in an allocation of income or gain to the 
     tax-indifferent party in excess of such party's economic 
     income or gain, or
       ``(ii) it results in a basis adjustment or shifting of 
     basis on account of overstating the income or gain of the 
     tax-indifferent party.
       ``(3) Definitions and special rules.--For purposes of this 
     subsection--
       ``(A) Economic substance doctrine.--The term `economic 
     substance doctrine' means the common law doctrine under which 
     tax benefits under subtitle A with respect to a transaction 
     are not allowable if the transaction does not have economic 
     substance or lacks a business purpose.
       ``(B) Tax-indifferent party.--The term `tax-indifferent 
     party' means any person or entity not subject to tax imposed 
     by subtitle A. A person shall be treated as a tax-indifferent 
     party with respect to a transaction if the items taken into 
     account with respect to the transaction have no substantial 
     impact on such person's liability under subtitle A.
       ``(C) Substantial nontax purpose.--In applying subclause 
     (II) of paragraph (1)(B)(i), a purpose of achieving a 
     financial accounting benefit shall not be taken into account 
     in determining whether a transaction has a substantial nontax 
     purpose if the origin of such financial accounting benefit is 
     a reduction of income tax.
       ``(D) Exception for personal transactions of individuals.--
     In the case of an individual, this subsection shall apply 
     only to transactions entered into in connection with a trade 
     or business or an activity engaged in for the production of 
     income.
       ``(E) Treatment of lessors.--In applying subclause (I) of 
     paragraph (1)(B)(ii) to the lessor of tangible property 
     subject to a lease, the expected net tax benefits shall not 
     include the benefits of depreciation, or any tax credit, with 
     respect to the leased property and subclause (II) of 
     paragraph (1)(B)(ii) shall be disregarded in determining 
     whether any of such benefits are allowable.
       ``(4) Other common law doctrines not affected.--Except as 
     specifically provided in this subsection, the provisions of 
     this subsection shall not be construed as altering or 
     supplanting any other rule of law, and the requirements of 
     this subsection shall be construed as being in addition to 
     any such other rule of law.
       ``(5) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this subsection. Such regulations may include 
     exemptions from the application of this subsection.''
       (b) Effective Date.--The amendments made by this section 
     shall apply to transactions entered into after February 13, 
     2003.

     SEC. 512. PENALTY FOR FAILING TO DISCLOSE REPORTABLE 
                   TRANSACTION.

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

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

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

     the penalty under paragraph (1) or (2) shall be twice the 
     amount determined without regard to this paragraph.
       ``(B) Large entity.--For purposes of subparagraph (A), the 
     term `large entity' means, with respect to any taxable year, 
     a person (other than a natural person) with gross receipts in 
     excess of $10,000,000 for the taxable year in which the 
     reportable transaction occurs or the preceding taxable year. 
     Rules similar to the rules of paragraph (2) and subparagraphs 
     (B), (C), and (D) of paragraph (3) of section 448(c) shall 
     apply for purposes of this subparagraph.
       ``(C) High net worth individual.--For purposes of 
     subparagraph (A), the term `high net worth individual' means, 
     with respect to a reportable transaction, a natural person 
     whose net worth exceeds $2,000,000 immediately before the 
     transaction.
       ``(c) Definitions.--For purposes of this section--
       ``(1) Reportable transaction.--The term `reportable 
     transaction' means any transaction with respect to which 
     information is required to be included with a return or 
     statement because, as determined under regulations prescribed 
     under section 6011, such transaction is of a type which the 
     Secretary determines as having a potential for tax avoidance 
     or evasion.
       ``(2) Listed transaction.--Except as provided in 
     regulations, the term `listed transaction' means a reportable 
     transaction which is the same as, or substantially similar 
     to, a transaction specifically identified by the Secretary as 
     a tax avoidance transaction for purposes of section 6011.
       ``(d) Authority To Rescind Penalty.--
       ``(1) In general.--The Commissioner of Internal Revenue may 
     rescind all or any portion of any penalty imposed by this 
     section with respect to any violation if--
       ``(A) the violation is with respect to a reportable 
     transaction other than a listed transaction,
       ``(B) the person on whom the penalty is imposed has a 
     history of complying with the requirements of this title,
       ``(C) it is shown that the violation is due to an 
     unintentional mistake of fact;
       ``(D) imposing the penalty would be against equity and good 
     conscience, and
       ``(E) rescinding the penalty would promote compliance with 
     the requirements of this title and effective tax 
     administration.
       ``(2) Discretion.--The exercise of authority under 
     paragraph (1) shall be at the sole discretion of the 
     Commissioner and may be delegated only to the head of the 
     Office of Tax Shelter Analysis. The Commissioner, in the 
     Commissioner's sole discretion, may establish a procedure to 
     determine if a penalty should be referred to the Commissioner 
     or the head of such Office for a determination under 
     paragraph (1).
       ``(3) No appeal.--Notwithstanding any other provision of 
     law, any determination under this subsection may not be 
     reviewed in any administrative or judicial proceeding.
       ``(4) Records.--If a penalty is rescinded under paragraph 
     (1), the Commissioner shall place in the file in the Office 
     of the Commissioner the opinion of the Commissioner or the 
     head of the Office of Tax Shelter Analysis with respect to 
     the determination, including--
       ``(A) the facts and circumstances of the transaction,
       ``(B) the reasons for the rescission, and
       ``(C) the amount of the penalty rescinded.
       ``(5) Report.--The Commissioner shall each year report to 
     the Committee on Ways and Means of the House of 
     Representatives and the Committee on Finance of the Senate--
       ``(A) a summary of the total number and aggregate amount of 
     penalties imposed, and rescinded, under this section, and
       ``(B) a description of each penalty rescinded under this 
     subsection and the reasons therefor.
       ``(e) Penalty Reported to SEC.--In the case of a person--
       ``(1) which is required to file periodic reports under 
     section 13 or 15(d) of the Securities Exchange Act of 1934 or 
     is required to be consolidated with another person for 
     purposes of such reports, and
       ``(2) which--
       ``(A) is required to pay a penalty under this section with 
     respect to a listed transaction,
       ``(B) is required to pay a penalty under section 6662A with 
     respect to any reportable transaction at a rate prescribed 
     under section 6662A(c), or
       ``(C) is required to pay a penalty under section 6662B with 
     respect to any noneconomic substance transaction,

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

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

       (c) Effective Date.--The amendments made by this section 
     shall apply to returns

[[Page 22250]]

     and statements the due date for which is after the date of 
     the enactment of this Act.

     SEC. 513. ACCURACY-RELATED PENALTY FOR LISTED TRANSACTIONS 
                   AND OTHER REPORTABLE TRANSACTIONS HAVING A 
                   SIGNIFICANT TAX AVOIDANCE PURPOSE.

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

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

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

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

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

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

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

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

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

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

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

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

       ``(I) is based on unreasonable factual or legal assumptions 
     (including assumptions as to future events),
       ``(II) unreasonably relies on representations, statements, 
     findings, or agreements of the taxpayer or any other person,
       ``(III) does not identify and consider all relevant facts, 
     or
       ``(IV) fails to meet any other requirement as the Secretary 
     may prescribe.''

       (2) Conforming amendment.--The heading for subsection (c) 
     of section 6664 is amended by inserting ``for Underpayments'' 
     after ``Exception''.
       (d) Conforming Amendments.--
       (1) Subparagraph (C) of section 461(i)(3) is amended by 
     striking ``section 6662(d)(2)(C)(iii)'' and inserting 
     ``section 1274(b)(3)(C)''.
       (2) Paragraph (3) of section 1274(b) is amended--
       (A) by striking ``(as defined in section 
     6662(d)(2)(C)(iii))'' in subparagraph (B)(i), and
       (B) by adding at the end the following new subparagraph:
       ``(C) Tax shelter.--For purposes of subparagraph (B), the 
     term `tax shelter' means--

[[Page 22251]]

       ``(i) a partnership or other entity,
       ``(ii) any investment plan or arrangement, or
       ``(iii) any other plan or arrangement,

     if a significant purpose of such partnership, entity, plan, 
     or arrangement is the avoidance or evasion of Federal income 
     tax.''
       (3) Section 6662(d)(2) is amended by striking subparagraphs 
     (C) and (D).
       (4) Section 6664(c)(1) is amended by striking ``this part'' 
     and inserting ``section 6662 or 6663''.
       (5) Subsection (b) of section 7525 is amended by striking 
     ``section 6662(d)(2)(C)(iii)'' and inserting ``section 
     1274(b)(3)(C)''.
       (6)(A) The heading for section 6662 is amended to read as 
     follows:

     ``SEC. 6662. IMPOSITION OF ACCURACY-RELATED PENALTY ON 
                   UNDERPAYMENTS.''

       (B) The table of sections for part II of subchapter A of 
     chapter 68 is amended by striking the item relating to 
     section 6662 and inserting the following new items:

``Sec. 6662. Imposition of accuracy-related penalty on underpayments.
``Sec. 6662A. Imposition of accuracy-related penalty on understatements 
              with respect to reportable transactions.''

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

     SEC. 514. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO 
                   TRANSACTIONS LACKING ECONOMIC SUBSTANCE, ETC.

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

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

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

  ``(1) For coordination of penalty with understatements under section 
6662 and other special rules, see section 6662A(e).

  ``(2) For reporting of penalty imposed under this section to the 
Securities and Exchange Commission, see section 6707A(e).''

       (b) Clerical Amendment.--The table of sections for part II 
     of subchapter A of chapter 68 is amended by inserting after 
     the item relating to section 6662A the following new item:

``Sec. 6662B. Penalty for understatements attributable to transactions 
              lacking economic substance, etc.''

       (c) Effective Date.--The amendments made by this section 
     shall apply to transactions entered into after February 13, 
     2003.

     SEC. 515. MODIFICATIONS OF SUBSTANTIAL UNDERSTATEMENT PENALTY 
                   FOR NONREPORTABLE TRANSACTIONS.

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

     SEC. 516. TAX SHELTER EXCEPTION TO CONFIDENTIALITY PRIVILEGES 
                   RELATING TO TAXPAYER COMMUNICATIONS.

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

     SEC. 517. DISCLOSURE OF REPORTABLE TRANSACTIONS.

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

     ``SEC. 6111. DISCLOSURE OF REPORTABLE TRANSACTIONS.

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


[[Page 22252]]


``Sec. 6111. Disclosure of reportable transactions.''

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

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

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

``Sec. 6112. Material advisors of reportable transactions must keep 
              lists of advisees.''

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

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

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

``Sec. 6708. Failure to maintain lists of advisees with respect to 
              reportable transactions.''

       (c) Effective Date.--The amendments made by this section 
     shall apply to transactions with respect to which material 
     aid, assistance, or advice referred to in section 
     6111(b)(1)(A)(i) of the Internal Revenue Code of 1986 (as 
     added by this section) is provided after the date of the 
     enactment of this Act.

     SEC. 518. MODIFICATIONS TO PENALTY FOR FAILURE TO REGISTER 
                   TAX SHELTERS.

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

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

       ``(a) In General.--If a person who is required to file a 
     return under section 6111(a) with respect to any reportable 
     transaction--
       ``(1) fails to file such return on or before the date 
     prescribed therefor, or
       ``(2) files false or incomplete information with the 
     Secretary with respect to such transaction,
     such person shall pay a penalty with respect to such return 
     in the amount determined under subsection (b).
       ``(b) Amount of Penalty.--
       ``(1) In general.--Except as provided in paragraph (2), the 
     penalty imposed under subsection (a) with respect to any 
     failure shall be $50,000.
       ``(2) Listed transactions.--The penalty imposed under 
     subsection (a) with respect to any listed transaction shall 
     be an amount equal to the greater of--
       ``(A) $200,000, or
       ``(B) 50 percent of the gross income derived by such person 
     with respect to aid, assistance, or advice which is provided 
     with respect to the reportable transaction before the date 
     the return including the transaction is filed under section 
     6111.

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

     SEC. 519. MODIFICATION OF PENALTY FOR FAILURE TO MAINTAIN 
                   LISTS OF INVESTORS.

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

     SEC. 520. MODIFICATION OF ACTIONS TO ENJOIN CERTAIN CONDUCT 
                   RELATED TO TAX SHELTERS AND REPORTABLE 
                   TRANSACTIONS.

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

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

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

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

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

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

     SEC. 521. UNDERSTATEMENT OF TAXPAYER'S LIABILITY BY INCOME 
                   TAX RETURN PREPARER.

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

     SEC. 522. PENALTY ON FAILURE TO REPORT INTERESTS IN FOREIGN 
                   FINANCIAL ACCOUNTS.

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

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

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

       ``(I) $25,000, or

[[Page 22253]]

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

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

     SEC. 523. FRIVOLOUS TAX SUBMISSIONS.

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

     ``SEC. 6702. FRIVOLOUS TAX SUBMISSIONS.

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

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

       ``(ii) an application under--

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

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

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

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

     SEC. 524. REGULATION OF INDIVIDUALS PRACTICING BEFORE THE 
                   DEPARTMENT OF TREASURY.

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

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

     SEC. 525. PENALTY ON PROMOTERS OF TAX SHELTERS.

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

     SEC. 526. STATUTE OF LIMITATIONS FOR TAXABLE YEARS FOR WHICH 
                   LISTED TRANSACTIONS NOT REPORTED.

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

[[Page 22254]]

     this Act in taxable years ending after such date.

     SEC. 527. DENIAL OF DEDUCTION FOR INTEREST ON UNDERPAYMENTS 
                   ATTRIBUTABLE TO NONDISCLOSED REPORTABLE AND 
                   NONECONOMIC SUBSTANCE TRANSACTIONS.

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

  Subtitle B--Affirmation of Consolidated Return Regulation Authority

     SEC. 531. AFFIRMATION OF CONSOLIDATED RETURN REGULATION 
                   AUTHORITY.

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

  The SPEAKER pro tempore. Pursuant to House Resolution 370, the 
gentleman from Maryland (Mr. Cardin) and a Member opposed each will 
control 30 minutes.
  The Chair recognizes the gentleman from Maryland (Mr. Cardin).
  Mr. CARDIN. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, this amendment adds two important provisions to the 
underlying legislation. As I mentioned during general debate, I support 
the underlying bill. I think a good compromise has been reached on some 
very important issues, including the elimination of the employment 
discrimination provisions and a compromise in regards to foundations' 
administrative costs. I think this bill will help nonprofit, faith-
based organizations consistent with our tradition of church and State.
  The two additions that my amendment adds are very important to this 
legislation. The Republican whip pointed out that this legislation has 
been developed among Democrats and Republicans in a bipartisan way and 
in cooperation with the other body, particularly Senator Lieberman and 
Senator Santorum. All I ask is that the Members consider this amendment 
and vote on it by their convictions. Both provisions have bipartisan 
support.
  The first provision adds an additional $1.1 billion to the next 
fiscal year for the social services block grant, taking it from $1.7 
billion to $2.8 billion. This is not a novel concept. I see the 
gentlewoman from Connecticut (Mrs. Johnson) here who was very 
instrumental in the social services block grant program and in the 
welfare reform legislation. When we passed welfare reform in 1996, we 
reduced the social services block grant from $2.8 billion to $2.38 
billion, but we also included in that legislation a commitment to our 
States that in 2003 we would reinstate the level at $2.8 billion. That 
is exactly what this amendment would do.
  Number two, this amendment is consistent with the other body. They 
have already put the money in their reported bill. It puts us together 
with the other body at $2.8 billion for next year.
  Now, what is the social services block grant? Why is it so relevant 
to the legislation that is before us? If we ask the faith-based groups 
as to what is the most important funding source for them to be able to 
do their work, they will tell us it is the social services block grant 
program. It provides funding for day care for low-income families, for 
offering counseling services to at-risk children, nutritional 
assistance to the elderly, and providing community-based care to the 
disabled.
  I need not tell my colleagues the fiscal restraints that our States 
are currently confronting, with record deficits, and they are forced to 
cut these very programs that the social services block grant program 
helps them to fund. For my own State of Maryland, this amendment will 
mean $20 million; for the State of California, $132 million; for the 
State of Texas, $81 million; New York, $73 million; Florida, $63 
million. If we take a look at our major faith-based institutions such 
as Catholic Charities, United Jewish Community, Lutheran Services, 
Salvation Army, in each one of those cases they rely in large part on 
government assistance to fund these community-based programs. For 
Catholic Charities it is over 650 percent; 62 percent of their support 
comes from governmental grants. The social services block grant program 
is key. This amendment allows us to live up to our commitment that we 
made in 1996 to restore the level to what it was in 1996.
  The second part of this amendment is for fiscal responsibility. I 
think there is not a person in this body who has not lamented the fact 
that we now have over $500 billion annual deficit that we are adding to 
the national debt, and that does not include the $87 billion the 
President has requested for Iraq and Afghanistan. We have a fiscal 
responsibility as legislators to make sure we do not add more to that 
national debt. That is why the other body reached out to find a revenue 
offset to the bill that they reported.
  My amendment is not original. We have taken basically the provisions 
that were included in the other body to say that if you are doing a tax 
shelter you should not get the benefit. The courts are already doing 
that, and the revenues that it will generate will offset the revenues 
that are lost under this bill so that we do not add to the deficit.
  Now, I have gotten some material this morning and I have listened to 
the debate as to why this would not be a good idea. I have heard that 
there was a sheet put out that said this was extremely controversial. I 
then listened to why it was extremely controversial, considering it 
received 95 votes in the other body. The first reason that my colleague 
said is that it would be administratively difficult. Well, this is 
currently being done by the courts on a case-by-case basis. We have a 
responsibility as the legislature to clarify this law. We should not be 
doing tax policy in our courts. That is our responsibility.
  I have not heard one complaint against the fact that tax shelters 
should be outlawed and there should be penalties for tax shelters. This 
bill deals with it in a responsible way.
  The second point I have heard is that it is retroactive. Now, let me 
tell my colleagues, the date in this bill is what we have done by 
tradition in this body since I have been here and well before that. 
When a bill is noted by a committee, they use that as the effective 
date, and that is exactly what is in the bill that was reported by the 
other body. We incorporate that same date. Now, if that is 
retroactivity, the other side has been guilty of it many, many times. 
So let us be at least straightforward in the debate. Let people vote 
their convictions. We should pay for the bill and we should provide 
help to the faith-based organizations in our States through the social 
services block grant that many of us have supported in the past.
  Mr. Speaker, I urge my colleagues to support the amendment.
  Mr. Speaker, I reserve the balance of my time.
  Mr. THOMAS. Mr. Speaker, I rise in opposition to the substitute, I 
claim the time in opposition, and I yield myself such time as I may 
consume.
  Mr. Speaker, perhaps I should address the gentleman from Maryland's 
last point first. This is not about the date of enactment. Pick any 
date one wants. What normally happens is that if we now say something 
that was legitimate is no longer legitimate, we do

[[Page 22255]]

it on what we say is a prospective basis. From now on, you are put on 
notice; you cannot do this any more. That is not what his amendment, or 
his substitute, says.
  What his substitute says is that it is applicable to taxable years 
beginning before, on, or after the date of enactment. It is not the 
date of enactment that we are concerned about; it is the fact that if 
this language is adopted in the substitute it means that when it does 
become effective, behavior that has already taken place, which was 
legitimate at the time that it took place, is now no longer allowed. 
That is called retroactive. As a matter of fact, if it were in the area 
of criminal law, it would be unconstitutional. But since it is in the 
area of civil law, it may be immoral, it may be unfair, it may be 
wrong, but the government can do that.
  I personally think in the area of tax law, we should never have a 
retroactive procedure. It is one of the primary reasons I voted against 
the 1986 tax bill. It had a number of retroactive provisions.
  How in the world are citizens supposed to trust the actions of 
government if when they conduct perhaps an irrevocable decision of a 
financial nature under the Tax Code, the time at which it was carried 
out was legal, several years later the Congress says it is no longer 
permissible, and we can go back and deal with it retroactively? How 
more fundamentally unfair can government be than that?
  That is what is in here. It is not over the date; it is over what 
happens when the date becomes effective. Prospectively, we can go to 
the substance of what the amendment contains, which is unacceptable, 
but the fact that it can reach back and deal negatively with behavior 
which was acceptable at the time that it was carried out on its face 
should be rejected.
  In addition to that, there is much discussion about how we need to 
make sure that these various lifesavers are available to the States in 
carrying out very useful and needed purposes dealing with those 
individuals who are in need. So if we are talking about lifesavers, the 
question is this: are we talking about lifesavers or are we talking 
about orange lifesavers, or perhaps cherry lifesavers, or perhaps lime 
lifesavers? I think we have to really visit what we have done in this 
year alone.
  In the tax bill, we have already passed at the insistence of the 
Senate a tax bill which contains $20 billion of gifts distributed to 
the States. Half of it, $10 billion, was to go to Medicaid. The other 
half, $10 billion, was totally flexible. It is available for social 
services block grants or any other services that States might want to 
use it for within their jurisdiction. They got $5 billion of it in 
July, they are getting another $5 billion this month.
  But in addition to that, earlier money that we had provided, almost 
$6 billion, is still unspent in Federal TANF money that is available 
for welfare, child care, other social services. And to make sure that 
it would be available and could be used, we did not limit ourselves to 
the modest percentage under the appropriations bill, we passed a 
welfare bill that said you get the full 10 percent. The welfare bill 
may hit rocky shoals in the Senate; we are providing it here again. Not 
a 4 percent, not a 5 percent, but a full 10 percent transfer 
capability. If, in fact, what we are now doing is not arguing that the 
States need lifesavers, they want a particular flavor of lifesaver; 
Members have to ask themselves is it really something that we need to 
do when there is more than enough money in the system, transferability 
is not a question; it is just that they want a particular flavor of 
lifesaver their way. And, if, in fact, they are going to fund it under 
a structure which reaches back and penalizes taxpayers when at the time 
they conducted the behavior it was legal, I would say, boy, that is 
overreaching, especially when the underlying bill, the key part that we 
are looking at, not welfare payments or social services block grants, 
but the charitable giving which is at the heart of the bill, is the 
same in both bills.

                              {time}  1330

  The stuff they are adding is really beyond the narrow focus of what 
this bill is all about and that is charitable giving.
  So for all those reasons, I would urge Members, notwithstanding the 
appeals that are going to be made to tell you that there is more than 
enough money in the system, underscoring more than $6 billion in TANF 
money that still has not been spent by the States available to be 
transferred for the very purposes, they argue they want to force more 
money on the States.
  Mr. Speaker, I reserve the balance of the time, and I ask unanimous 
consent that the remainder of my time be controlled by the gentleman 
from Missouri (Mr. Blunt), the cosponsor of the underlying bill.
  The SPEAKER pro tempore (Mr. Whitfield). Is there objection to the 
request of the gentleman from California?
  There was no objection.
  Mr. CARDIN. Mr. Speaker, I yield 1 minute to the gentleman from Texas 
(Mr. Doggett).
  Mr. DOGGETT. Mr. Speaker, I will yield to the gentleman for purposes 
of a colloquy on my time.
  Mr. Speaker, I am sure the gentleman intended no deceit of the House 
in complaining of one of the 16 effective dates listed in the bill, the 
only one of the 16 that has a date that is retroactive; isn't that 
correct?
  Mr. THOMAS. Mr. Speaker, will the gentleman yield?
  Mr. DOGGETT. I yield to the gentleman from California.
  Mr. THOMAS. Mr. Speaker, is the gentleman referring to the effective 
date on page 76 of his substitute?
  Mr. DOGGETT. There are effective dates throughout the bill. There is 
one effective date that applies on February 13 of this year. They are 
all specific dates on transactions this year with the exception of the 
last one, which is totally retroactive. The very last one on page 121 
is totally retroactive and copies, as I understand it, verbatim 
language that the gentleman from California (Mr. Thomas) introduced 
last year in his international tax bill. It was not, apparently, 
``fundamentally unfair'' last year when you introduced it.
  There is one thing that is consistent because whether it is 
retroactive, prospective, past, present or future, the indifference of 
the Committee on Ways and Means to corporate tax abuse is consistent.
  Mr. THOMAS. Might I respond or was the gentleman simply making a 
statement while the gentleman from California stood? The gentleman 
indicated in his opening statement that he would yield time for 
colloquy.
  Mr. CARDIN. Mr. Speaker, I believe I control the time.
  The SPEAKER pro tempore. The gentleman from Maryland (Mr. Cardin) 
controls the time.
  Mr. CARDIN. Mr. Speaker, I have no objection to the gentleman from 
California (Mr. Thomas) getting time from the gentleman from Missouri 
(Mr. Blunt) to respond.
  Mr. THOMAS. I tell the gentleman that the gentleman from Texas (Mr. 
Doggett) rose and said he would yield to me on his time. That tells you 
about the way they operate.
  Mr. CARDIN. Mr. Speaker, I yield myself 30 seconds.
  To clarify some of the points that my chairman made, when he referred 
to the States having all this TANF money that is left over, let me 
point out that the States are currently spending more money every year 
in TANF funds than they currently receive and that they have obligated 
almost all of their money. The 10 percent transfer authority has been 
approved every year. That is nothing new. So when he mentions these 
issues I think we need to clarify that. And on the effective dates we 
are following the tradition of this House under Republican leadership. 
There is really nothing new this year.
  Mr. Speaker, I yield 4 minutes to the gentleman from Michigan (Mr. 
Levin).
  Mr. LEVIN. Mr. Speaker, I want to review the history of this block 
grant. I am sorry that tempers have been lost.
  I really think we need to spend a few minutes looking at the history 
of this block grant because what happened was this: It was $2.8 billion 
before welfare reform, and then we reduced it as part of a welfare 
reform. Many of us were unhappy about that, those of us

[[Page 22256]]

who were able eventually to be able to improve welfare reform with 
child care and also with health care. The promise then was made that 
this money would be returned to the States after 5 years. Then a few 
years later it was reduced to $1.7 billion.
  Money was taken from this block grant to pay for transportation, 
totally unrelated. So we have a commitment to the States to return the 
money for this block grant, money that goes for child abuse prevention, 
Meals on Wheels, home care for the disabled, child care, adoption 
services and domestic violence programs. The Senate has done this. And 
now apparently the leadership on the Republican side is urging 
everybody within your ranks to march once again in unison in opposition 
to the gentleman from Maryland's (Mr. Cardin) proposal.
  That is inconsistent with what we have pledged, inconsistent with the 
bill that the gentlewoman from Connecticut (Mrs. Johnson) and I and 
others have introduced year after year, inconsistent with the position 
taken by a majority of the Republicans on the Committee on Ways and 
Means.
  So why are you today again not fulfilling a promise that you 
essentially made? Oh, the argument is there is money in TANF. The 
gentleman from Maryland (Mr. Cardin) has already answered that. What is 
happening in TANF now is that more is being spent than is being 
provided. It is not a good excuse.
  The excuse is given, well, we provided billions to the States 
recently. They needed this money, not for the block grant but for other 
purposes. So I urge support for the Cardin amendment for these 
important purposes; and I close with this in terms of fiscal 
responsibility. Look, we try to pay for this. You are digging a deeper 
hole.
  If you do not like everything that is in the Cardin proposal, come up 
with your own. But you insist time after time bringing up bills that 
cost billions of dollars, and you have sunset the provision for the 
deductions for those who do not itemize. You know that sunset will 
never be allowed to persist. We are not going to take away from 
deductions from nonitemizers after 2 years. You know that. So this bill 
is really going to cost $20 billion more or less, and the Democrats 
have said we will step up to the plate and we will be fiscally 
responsible. And you as part of the leadership are again asking the 
Republicans to march in lockstep against fiscal responsibility.
  You should be in support of this bill, in support of the Cardin 
amendment.
  Mr. BLUNT. Mr. Speaker, I yield myself 1 minute.
  Mr. Speaker, I am very pleased that the underlying parts of the 
Cardin substitute is of course the bill that we have on the floor 
today. The bill is provided for in the budget document we voted on some 
time ago. This is well within the amount that we had set aside for tax 
reduction. But this tax reduction multiplies many times the good things 
that are done for people with the money spent and the good things are 
done for society when you encourage people to give their money to 
others, to help others.
  Mr. Speaker, I yield 1\1/2\ minutes to the gentleman from 
Pennsylvania (Mr. Pitts).
  Mr. PITTS. Mr. Speaker, I rise today in opposition to the substitute 
amendment and in strong support of the underlying legislation which 
will help provide necessary relief for our Nation's charities.
  Our tax code should encourage, not hinder individuals from giving 
generously to organizations to help people in need.
  In the wake of September 11, more Americans than ever answered the 
call to help a neighbor in need even while many were facing financial 
hardships on their own.
  Americans are a generous people. Our laws should help people to keep 
more of their money so they can invest it in charitable organizations 
that reflect their values. But we also need to take practical steps to 
help make it easier for individuals and corporations to give, and this 
legislation accomplishes this goal by helping nonitemizers to deduct 
charitable contributions, by raising the cap on corporate charitable 
contributions and allowing people to donate their individual retirement 
accounts to charity tax free.
  I am also pleased the underlying bill includes the reauthorization of 
a program that allows low income working Americans the opportunity to 
build assets through matched savings accounts, known as Individual 
Development Accounts, to purchase a home, expand educational 
opportunity, or start a small business. IDAs have been very effective 
in Pennsylvania and other States in helping lower income individuals to 
access the American dream.
  The underlying bill is a good bill and I urge my colleague to oppose 
the substitute amendment and support the bill.
  Mr. CARDIN. Mr. Speaker, I yield 2 minutes to the gentleman from 
Texas (Mr. Edwards).
  Mr. EDWARDS. Mr. Speaker, I support this substitute. We have the 
largest deficit in American history which just 2 years ago was the 
largest surplus in American history, and we ought to do something about 
it, and this substitute helps pay for the cost of this bill.
  Let me just say that I think, Mr. Speaker, the Republican leadership 
in this House has very misplaced priorities. I think the American 
people would agree with me.
  If you in America this year make $1 million sitting safely at home 
here in the continental United States in dividend income, you will get 
a $230,000 tax break. But under this bill the Republican leadership 
would say to servicemen and women serving in Iraq and to their families 
that if you are killed in Iraq this year and in service to your country 
and if Congress happens to increase deaths benefits to your family, to 
your widow, then we want to tax those benefits.
  The bill on the other side of this Capitol did not do that. I am 
puzzled and perplexed and, frankly, deeply disappointed and somewhat 
angered that the Republican leadership would be willing to give a 
$230,000 tax break to somebody making $1 million a year in dividend 
income, but they want to have higher taxes on death benefits for 
servicemen and women who might be killed in Iraq.
  Secondly, those same folks who want to give that huge tax break, 
$230,000 worth, to someone sitting here safely in the U.S., actually 
wants to put a cap on the amount of money that can be deducted for tax 
purposes for National Guardsmen and Reservists, the costs that they 
incur trying to serve their country as they travel to and from places 
where our Nation has asked them to travel to, they will only be able to 
deduct $1,500 in taxes under this bill, according to the Republican 
leadership.
  Now, Mr. Speaker, we are at war today, a war on terrorism, and I 
think it sends a horrible message to our servicemen and women in harm's 
way today that if you are in the Guard or Reserves we will be stingy on 
letting you get tax benefits to cover your cost of serving the country, 
but let us help those folks making $1 million a year on dividend 
income.
  Mr. BLUNT. Mr. Speaker, I am sure the gentleman knows we sent that 
legislation to the Senate already.
  Mr. Speaker, I yield 2\1/2\ minutes to the gentlewoman from 
Connecticut (Mrs. Johnson).
  Mrs. JOHNSON from Connecticut. Mr. Speaker, I thank the gentleman for 
yielding me time.
  This is a very important bill that we are considering today. It 
allows people to contribute more to their local United Way agencies, 
their local YWCAs, their local church programs, that it can be very 
effectively focused on serving the families and individuals, meeting 
the needs of people in their own community. That is what is so 
wonderful about charitable giving. So this is an important bill that we 
need to move forward.
  I am a very strong advocate of the social services block grant. I am 
glad in this bill we do reaffirm by law that States will have the right 
to transfer 10 percent of their TANF money to other purposes. Now, in 
the appropriations bill earlier this year, we dropped that to 5 
percent. So it is significant that

[[Page 22257]]

we beef that back up in this law and the States do routinely use this 
transfer capability to better fund whatever programs they think are 
important to them. And for many States this is the way they use all of 
their TANF money and for many States they actually do not use all of 
their TANF money.
  There are some that use all of their TANF money and this social 
services block grant expansion is extremely important for that reason. 
On the other hand, the Senate bill does have an expansion in it and in 
conference we will be able to work on that. The problem with this bill 
is that it moves forward on an issue that we need to move forward in 
conference on, but it does it by adopting a pay-for that is real an 
unwise pay-for.
  The provisions in this bill that try to deal with tax shelters would 
put forward a whole new concept as one of its tests, the concept of a 
risk-free rate of return. Now, we have had trouble implementing the tax 
shelter law. The States at first interpreted some of the provisions of 
that law in varied ways. They are now moving toward consistent 
interpretation. We are now moving toward consistency in the courts, and 
so this is a particularly bad time to now change the law, putting in a 
concept that has had no judicial interpretation and is not in and of 
itself clear; that is, the concept of a risk-free rate of return.

                              {time}  1345

  In addition, our own Assistant Secretary of the Treasury, Pam Olson, 
has stated that codifying the economic substance doctrine could be 
counterproductive and would drive tax shelters further underground.
  We have a solution to this problem in the American Jobs Creation Act, 
H.R. 2896, and I urge the body to solve this problem at that time and 
oppose the motion to recommit.
  Mr. CARDIN. Mr. Speaker, I yield myself such time as I may consume.
  Let me just point out to my friend from Connecticut that the transfer 
authority will have no impact on her State since her State's obligated 
all of their TANF funds.
  Let me point out to my friend from Missouri (Mr. Blunt), if we want 
to do something for the military, the bill is sitting at the desk from 
the other body. We could take it up and get it done before we leave 
here this afternoon.
  Mr. Speaker, I am pleased to yield 2\1/2\ minutes to the gentleman 
from Massachusetts (Mr. Tierney).
  Mr. TIERNEY. Mr. Speaker, I thank the gentleman for yielding me the 
time.
  Mr. Speaker, I rise today to add a word of caution to my colleagues 
about this legislation and to support the Democratic substitute. 
Everybody in this body supposedly supports charities and the important 
work that they do.
  At the same time, however, the Federal Government is currently 
projected to run the largest deficits in history. The need for 
assistance in education and health care and housing among low and 
moderate income Americans is great, and unfortunately, there is little 
evidence that this bill is going to do anything to address those needs. 
I fear that larger deficits are going to occur and the result of this 
bill is going to serve as an excuse to cut programs already 
inadequately funded.
  At a minimum, this bill should contain an offset. In analysis of a 
similar bill that is in the Senate, the Congressional Research Service 
report estimated that the charitable deduction for nonitemizers would 
yield only 12 cents of additional giving for every dollar of revenue 
lost to the Treasury, 12 cents. CRS concluded that the vast majority of 
the cost of the deduction would go to subsidizing existing donations 
rather than generating new gifts.
  The charitable donations generated by this bill will support many 
good causes, but that same Budget and Policy Priorities report 
indicated that no more than 10 percent of all charitable giving will 
directly benefit the poor. The largest recipient of the funds by far 
would be religious institutions, and while religious giving is 
commendable, the Center for Budget and Policy Priorities also reported 
that only 6 percent of donations to religious institutions end up in 
services to the poor.
  My point is that this bill proposes to reduce Federal revenues by $13 
billion over the next 10 years. Yet only a few cents of each dollar 
will actually translate into charitable works to help the neediest 
Americans. Given the projected $500 billion deficit next year and well 
over $3.3 trillion debt over the next 10 years, I think colleagues need 
to decide whether or not this is the best way to spend $13 billion rare 
dollars.
  This country has tremendous needs. America's charities can obviously 
help, but it is unrealistic to think that America's charities are going 
to feed the hungry, house the homeless and heal the sick left behind by 
this Congress. No Child Left Behind, underfunded by $8 billion; housing 
assistance that served 20,000 less families for the first time in 30 
years; Head Start only serves 60 percent of the children who need it 
and only 3 percent of the children who need early Head Start; and 
Americans without health care number 42 million.
  We are in a tough fiscal time, Mr. Speaker, as a result of the failed 
economic policies of this administration. The need is great. We have to 
decide if this is the best way to spend $13 billion.
  Mr. BLUNT. Mr. Speaker, I yield 2\1/2\ minutes to the gentleman from 
California (Mr. Herger), a member of the Committee on Ways and Means.
  Mr. HERGER. Mr. Speaker, I respectfully oppose the substitute to H.R. 
7 offered by the gentleman from Maryland (Mr. Cardin). I oppose the tax 
increases included in the substitute. As the Subcommittee on Human 
Resources chairman, I also oppose increased funding in the substitute 
for the Social Services Block Grant.
  First, such funding is really a welfare, not a charitable giving, 
issue. In the House welfare reform bill passed in February, we 
continued record welfare funding despite 50 percent caseload decline 
since 1996. We even proposed more than $2 billion in increased funds 
for child care to support more parents in work and other activities. We 
already have proposed increased funding for welfare and related 
benefits in our welfare bill.
  Second, Members will recall we just gave States $20 billion in May in 
the jobs and growth tax relief bill. Of that, $10 billion can be spent 
however States choose, including for social services.
  Third, last week the General Accounting Office reported that States 
have $5.6 billion in unspent welfare funds today.
  Mr. Speaker, this Congress has been very generous in terms of 
funding, including for the very types of services my good friend from 
Maryland (Mr. Cardin) addresses as part of the welfare reform bill.
  One final point, we know many are insisting on more funds in exchange 
for continued welfare reforms. Providing more funds without achieving 
such reforms would inadvertently undermine the potential for getting a 
welfare reform deal done this year. We should resist anything that does 
that.
  I urge opposition to the substitute and support for the underlying 
bill.
  Mr. CARDIN. Mr. Speaker, I yield myself such time as I may consume.
  I am curious why my friend from California points out that the Social 
Services Block Grant is not part of this legislation, even though all 
the faith-based nonprofit groups say it is very important to them, why 
the underlying bill provides transfer authority to the Social Services 
Block Grant from TANF if it is not relevant to this legislation. Maybe 
the gentleman from California will try to answer that.
  Mr. Speaker, I yield 2\1/2\ minutes to the gentlewoman from Oregon 
(Ms. Hooley).
  Ms. HOOLEY of Oregon. Mr. Speaker, I thank my good friend for 
yielding time to me.
  I rise today in support of the substitute to H.R. 7. This bill 
permits taxpayers who do not itemize deductions on their tax returns to 
deduct up to $250 in charitable donations, which is a good thing. It 
permits tax-free charitable contributions from IRAs, another good thing 
to do. It increases the amount corporations may contribute to charity, 
a good thing to do, and it

[[Page 22258]]

reduces the administrative expenses that foundations may count towards 
a required charitable contribution, a good thing to do. This bill also 
cuts in half the current excise tax on foundations' investment, a good 
thing to do.
  Charitable organizations provide life-enhancing programs that 
Oregonians and Americans would otherwise do without: soup kitchens, 
food pantries, health care clinics, domestic violence shelters. The 
list is endless. These organizations make the lives of millions of 
Americans a little better and a little easier. This bill helps 
charities carry out their missions.
  It lessens the tax burden on charitable trusts, will allow more money 
to be focused on helping people. Providing tax incentives to 
individuals and corporations will encourage giving to charity. These 
are both great and noble goals.
  However, these tax incentives come at a cost, and given the current 
budget outlook, Congress should show fiscal responsibility by passing a 
bill with an offset provision for the cost. This substitute does that 
by simply stopping abusive tax shelter schemes. So we get two good 
things out of this.
  First of all, we are going to close loopholes in the current tax law, 
and we are going to give charitable organizations incentives, and we 
can make this a revenue-neutral bill by doing both of those. At a time 
when our budget deficit is out of control, this offset provision is 
imperative.
  The Democratic substitute allows us to encourage charitable giving 
and stop tax shelter schemes at the same time. Both good things to do.
  I urge my colleagues to vote yes to help charitable organizations and 
yes to stopping abusive tax shelters.
  Mr. BLUNT. Mr. Speaker, I yield 1\1/2\ minutes to the gentleman from 
South Carolina (Mr. Wilson), my colleague and assistant whip.
  Mr. WILSON of South Carolina. Mr. Speaker, I thank the gentleman very 
much for yielding me the time.
  Mr. Speaker, as a long-time volunteer for charitable organizations, I 
rise in opposition to this amendment and encourage all of my colleagues 
to vote no.
  The proper level of Social Services Block Grant funding is a welfare 
reform question, not a charitable giving issue. The House-passed 
welfare bill holds SSBG funding constant at $1.7 billion but allows 
States to transfer up to 10 percent of annual Federal Temporary 
Assistance for Needy Families, TANF, funds to the SSBG.
  This same 10 percent transfer provision has been included in H.R. 7. 
Adding more funds for the SSBG will make welfare reauthorization, as 
indicated by the gentleman from California (Mr. Herger), even less 
unlikely by providing more funds without updating work requirements.
  GAO estimates States today have almost $6 billion in unspent Federal 
TANF funds available for welfare, child care, and other social 
services. The 1996 welfare reform law has already resulted in more SSBG 
spending.
  I strongly support the underlying bill, H.R. 7, and want to thank the 
gentleman from Missouri (Mr. Blunt), our majority whip, for his 
leadership on this critical issue. This bill gets to the heart of what 
it means to be an American. We are a compassionate Nation where 
neighbors look out for one another. This bill helps institutions that 
have been historically successful in helping the less fortunate and 
encourages all Americans to increase their charitable giving.
  H.R. 7 is an important bill for America we should pass without this 
amendment. I urge my colleagues to support H.R. 7 and vote no on the 
amendment.
  Mr. CARDIN. Mr. Speaker, may I inquire as to the time that remains?
  The SPEAKER pro tempore (Mr. Whitfield). The gentleman from Maryland 
(Mr. Cardin) has 10\1/2\ minutes remaining. The gentleman from Missouri 
(Mr. Blunt) has 15 minutes remaining.
  Mr. CARDIN. Mr. Speaker, I reserve the balance of our time.
  Mr. BLUNT. Mr. Speaker, I yield 2 minutes to the gentleman from 
Florida (Mr. Weldon).
  Mr. WELDON of Florida. Mr. Speaker, I thank the distinguished 
majority whip for recognizing me, and it is a real pleasure for me to 
be able to rise and speak in support of the underlying bill and against 
the substitute.
  One of the things that I have learned over and over again as I 
traveled around my congressional district, and indeed throughout the 
State of Florida and within the United States, and that is that some of 
the greatest work helping the needy and the unfortunate in our Nation, 
and indeed throughout the history of our Nation, has always been 
performed by a whole host of different charitable groups, the most 
significant of which, of course, is religious groups, but many 
nonreligious groups or groups with very loose religious affiliations.
  I think one of the most important provisions in our tax law, which 
has been the ability to tax deduct charitable donations, has encouraged 
a lot of people. It has encouraged me to give and to give generously, 
and I think it has helped strengthen our Nation, make our Nation a 
better place and extending one of the provisions of this bill, and that 
is one of the main things I rise and speak in support of, extending 
that provision to nonitemizers I think is something actually long 
overdue.
  Regarding the issue that is under debate in the substitute regarding 
the Social Services Block Grant, while indeed this may be a very 
worthwhile issue, as I understand it we are increasing the funding in 
this in the underlying appropriation and to tack on an additional 
amount of this magnitude I think is, at this time, unnecessary and 
inappropriate, and therefore, I would strongly encourage all of my 
colleagues on both sides of the aisle to vote no on the substitute and 
vote yes on the underlying bill.
  Mr. CARDIN. Mr. Speaker, I yield 3 minutes to the gentleman from 
Texas (Mr. Doggett).
  Mr. DOGGETT. Mr. Speaker, I thank the gentleman for yielding me the 
time.
  I believe there are three very important issues in this debate. 
First, the gentleman from Maryland (Mr. Cardin) has proposed a 
bipartisan initiative to complement the good intention of the sponsors 
of this measure to help children, especially abused children, in the 
State of Texas. This proposal was good enough for every one of our 
Republican colleagues across the Capitol to support as a part of this 
bill. It was in the bill when it came from the Senate, and it is being 
stripped out today in a way that I think is indifferent to the needs of 
many children and many others who the sponsors of this bill say they 
want to help.
  The second issue is: is the bill good enough to be paid for? When 
this bill arrived from the Senate it was paid for. It was a fiscally-
responsible bill, and that responsibility has also now been stripped 
from the bill. How will our children and our grandchildren pay for the 
debt to which this bill contributes, piled upon, more debt atop even 
more debt? Our Nation is headed in the direction of the economic 
disaster of Argentina. We are mortgaging our prosperity--leaving our 
children and our grandchildren the hope of holding out a tin cup and 
begging for charity themselves to pay off this National debt unless we 
pay now for proposals like this.

                              {time}  1400

  Mr. Speaker, that is why the bipartisan sponsor of this measure, the 
gentleman from Tennessee (Mr. Ford), says he is ready to pay for it. 
That is why Mr. J.C. Watts, the Republican sponsor of this measure in 
the last Congress, told our committee he was willing to pay for it. Why 
do today's Republican sponsors of this bill not put their money where 
their mouth is? If they are so concerned about charity, how about 
financing this bill instead of shifting more of the burden to future 
generations?
  And the third equally important issue: we can pay for this and at the 
same time correct a gross injustice in our tax system.
  In 1999 an Austin constituent drew my attention to Forbes magazine. 
It prouldly bears the title proudly ``The Capitalist Tool,'' and it 
published this cover story, ``Tax Shelter Hustlers, Respectable 
Accountants Are Peddling Dicey Tax Loopholes.''

[[Page 22259]]

  In 1999 after I introduced legislation and we had a hearing great 
sympathy was expressed by the Republican members of the Committee on 
Ways and Means, but no action. Absolutely nothing was done about a 
problem that one Texas multinational told my office was receiving at 
one point a cold call every day trying to con them into these abusive 
corporate tax shelters. It had become an industry for major accounting 
firms like Arthur Andersen to engage in promoting these corporate tax 
shelters.
  With the passage of several additional years and one corporate 
scandal after another, still no remedial action in the House, there has 
been some hope that this problem might be addressed because this year, 
not in a Democratic bill, but in the tax bill that President Bush 
offered, the Republican Members of the Senate added essentially the 
same tax shelter language that the gentleman from Maryland (Mr. Cardin) 
and I are offering today in that tax bill. The Republican Senate passed 
it overwhelmingly. Yet it was stripped out by the same House Committee 
on Ways and Means that has consistenly turned a blind eye to this abuse 
since at least 1999.
  So the Senate put it in again in this charitable giving bill to pay 
for it--to be fiscally responsible. They sent legislative language over 
here similar to that the gentleman from Maryland (Mr. Cardin) and I are 
proposing, and today we hear Republican colleagues in the House tell us 
that although it was good enough for all of the Senate Republicans it 
is not good enough for us. ``We think it is difficult.'' ``We think it 
is challenging.'' ``We think it is confusing.''
  Well, it is not ``confusing'' to anyone other than to those who are 
the so-called respectable accountants, who choose to use challenging, 
confusing tax gimmicks so their well-healed clients can avoid paying 
their fair share of taxes. This unfairly doged ``fair share of taxes'' 
is believed to run as high as $10 billion a year. When one of those 
corporations does not pay its fair share, the rest of us have to pay 
the difference and this is wrong. We can correct this abuse today in 
the same way that the Republican Senate corrected it, and on behalf of 
all honest taxpayers, I hope we will.
  Mr. BLUNT. Mr. Speaker, I yield 2 minutes to the gentleman from Texas 
(Mr. Sam Johnson), a member of the Committee on Ways and Means and a 
leader on this issue.
  Mr. SAM JOHNSON of Texas. Mr. Speaker, it is disconcerting when 
someone from the other side tries to tell us we are not taking care of 
problems when we are. Members will find that what was just stated was 
taken care of in a different bill. But I rise to support the basic 
bill, H.R. 7.
  It contains a provision to permit restaurant owners to deduct cost of 
food donated to hunger relief charities. The United States Department 
of Agriculture estimates that 96 billion pounds of edible food are 
wasted and dumped in landfills each year. If even 1 percent of that 
food was redirected from landfills to local charities, it will 
significantly reduce the number of people who have a difficult time 
getting food on their table. We are talking about wholesome and 
nutritious food that is left over at grocery stores and restaurants, 
and even those trays of foods that are left at the end of the night at 
receptions that we all attend. It is a shame for that food to go to 
waste.
  With the tax incentives included in this bill, companies will have an 
added incentive to make sure that this food goes to a good cause, the 
hungry. I also want to talk about the provisions in the bill that help 
foundations. I work with many of the Texas-based foundations to make 
sure this bill does the good it is supposed to do without harming 
foundations like the Meadows Foundation in Dallas, which has allocated 
$25 million for grants for 2003, including a $3 million emergency loan 
fund available to assist agencies that are facing crises. That is a lot 
of money from one foundation. I am glad to say the money pretty much 
stays in the State of Texas.
  One of my favorite projects of the Meadows Foundation is the Wilson 
District, which is a nonprofit community established by the foundation 
in 1981 to restore and preserve some of the last Victorian structures 
in Dallas. Its mission is to provide rent-free office space. We need to 
pass this bill and help our foundations and our charities.
  I also want to talk about the provisions in this bill that help 
foundations. I worked with many of the Texas-based foundations to make 
sure that this bill does the good it is supposed to do without harming 
foundations like the Meadows Foundation based in Dallas.
  The Meadows Foundation has allocated $25 million toward grants for 
the year 2003, including a $3 million emergency loan fund available to 
assist those agencies that are facing crisis situations.
  This is a lot of money from one foundation and I'm glad to say that 
the money pretty much stays in Texas.
  One of my favorite projects of the Meadows Foundation is the Wilson 
district.
  It is a nonprofit community established by the foundation in 1981 to 
restore and preserve some of the last Victorian structures in Dallas 
but its mission is to provide rent-free office space to nonprofit 
charitable organizations.
  Groups like the Greater Dallas Community of Churches, the Suicide and 
Crisis Center, the United Negro College Fund, the Center for Housing 
Resources, and Dallas Reads are all able to have office space that lets 
them focus on the good and charitable works they do without having to 
worry about the rent, the light bill or other office space concerns.
  It is this direct charitable work by foundations that I felt needed 
to be protected in this bill.
  I thank Chairman Thomas and the majority whip for working to be sure 
that necessary changes were made to this bill.
  Mr. BLUNT. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, let me say, as we look at this substitute again, that 
this is a substitute that really encompasses the bill and that suggests 
we add other things to the bill that I think can be better handled in 
other pieces of legislation.
  The effort to work with the Treasury Department and the 
administration on tax shelters is in a bill which should be before the 
committee at any time.
  The social services block grant, I think, better fits another bill.
  This is a bill about charitable giving. It is a tax bill. We 
specifically eliminated the things about program delivery from a 
similar bill that the House passed last year because we wanted to focus 
on charitable giving. We did not want to focus on other programs. We 
wanted our focus to be on those things that changed the character of 
our communities because they encouraged people to assist others in 
their community.
  The House passed bills that really give the States $20 billion 
already, $10 billion is for Medicare costs, and $10 billion is totally 
flexible to the States. There is another $9 billion that is available 
to the States because of unspent TANF funds and welfare reform funds. 
That is $19 billion States could spend for these purposes.
  This bill is well within the amount of money we set aside this year 
in the budget, which I think all of the proponents of the substitute 
probably also oppose the budget; but the budget did pass, and it set 
aside money for tax relief. This is tax relief that does not just cost 
the Federal Government money, but it truly does encourage people to 
invest their money in the things they care about, in the charities they 
care about, in the communities they care about, in the individuals and 
families they care about that are assisted there. That is what this 
bill is about.
  This bill is not about trying to codify some very technical tax 
policy retroactive or not that, as I understand it, not being a member 
of the Committee on Ways and Means, as I understand the tax policy, 
would suggest that it is interpreted differently in almost every 
circuit of the country, you cannot invest money or spend money if you 
are a business that you would not invest in if the Tax Code did not 
exist.
  Most businesses wish the Tax Code did not exist, but it does exist 
and it does affect the bottom line. It does affect decisionmaking. How 
many Americans would buy a home if there was no Tax Code incentive to 
buy that home?
  Do we want to say we cannot make any decisions in the country, make 
it illegal to make any decisions in the country based on tax policy? 
How

[[Page 22260]]

many decisions are made by Americans every single day based upon the 
tax policy of the country? This is a very complicated thing. It does 
not belong on this bill.
  Mr. Speaker, I ask unanimous consent to yield the balance of my time 
to the gentleman from Texas (Mr. Sam Johnson), and that as a member of 
the Committee on Ways and Means, he may control that time.
  The SPEAKER pro tempore (Mr. Terry). Is there objection to the 
request of the gentleman from Missouri that the gentleman from Texas 
control the balance of the time and be given the right to close debate?
  There was no objection.
  Mr. CARDIN. Mr. Speaker, I yield 1\1/2\ minutes to the gentleman from 
Texas (Mr. Edwards).
  Mr. EDWARDS. Mr. Speaker, I support the substitute because I think we 
ought to be sensitive about the largest deficit in American history. I 
would also like to go back to something mentioned that the gentleman 
from Missouri (Mr. Blunt) responded to. I said I have a concern about 
this bill. It limits the amount of money that National Guardsmen and 
Reservists can charge off as tax deductions when they have expenses 
serving their country, such as going overnight to their local reserve 
location.
  I also object to the fact that this bill will actually provide 
increased taxes on military death benefits if we increase those 
benefits, for example, for our Iraqi troops today.
  The gentleman from Missouri (Mr. Blunt) responded by saying that bill 
we have sent to the Senate. I would like to clarify the rest of that 
story. That bill, to my knowledge, is sitting at the Speaker's desk 
today, and it has been sitting there since March. I would be happy to 
yield to the gentleman if he would be willing to work on a unanimous 
consent basis to bring that bill from the Speaker's desk today, and 
before we leave because of the impending rain, we could actually 
provide increased tax benefits to our servicemen and -women. If the 
gentleman would agree to a unanimous consent request, we could do it 
that way; or the Republican leadership can vote for our motion to 
recommit, which would provide those increased military benefits today.
  What bothers me is the reason that bill is being held up there is it 
seems some in the Republican leadership have more interest in tax 
breaks for people who renounce their citizenship than in tax benefits 
to Guardsmen and Reservists and men and women serving very 
patriotically and at great risk to their lives in Iraq and Afghanistan 
today. I do not think that reflects the values of the American people.
  Mr. CARDIN. Mr. Speaker, I yield myself the balance of my time.
  Mr. Speaker, in closing, first let me reiterate what I said earlier. 
I support the underlying bill. I think the gentleman from Missouri (Mr. 
Blunt) and the gentleman from Tennessee (Mr. Ford) have done an 
excellent job in bringing forth an excellent bill, and I compliment 
them for that.
  I noticed that many of the speakers on the opposition side of my 
amendment were speaking in support of the underlying bill which I 
support and which is incorporated in the amendment that I offer. I want 
to make it clear if Members support the underlying bill, they can 
certainly support this amendment, as the gentleman from Tennessee (Mr. 
Ford) supports this amendment.
  So let me deal with the points which have been made in opposition to 
this amendment. I hope Members will take this into consideration when 
voting on the amendment.
  First, the issue of relevancy has been waged as to why the social 
services block grant is included in this underlying bill. As pointed 
out, the underlying bill includes the TANF legislation giving 
authorization for the transfer of social services block grants. If it 
is relevant for the body of the bill, it is certainly relevant for our 
amendment.
  Secondly, if we ask the charitable groups as to what will help them 
the most in carrying out the social functions that we want them to do, 
they all support the increasing of the social services block grant. The 
next issue which has been raised is do the States really need this and 
are the funds really necessary? After all, we have TANF reserves.
  As I pointed out, the States are spending more every year in TANF 
funds than they are receiving from the Federal Government. They are 
running deficits right now.

                              {time}  1415

  In regards to the multiyear authorization, almost all those funds 
have been committed. If you look at the deficits our States are 
currently confronting in their budgets, it is just intuitive that we 
know they need the money. Lastly, this was a commitment we made when we 
passed welfare reform, that we would restore the social services block 
grant funds in 2003. Congress should live up to its commitment. They 
should adopt that amendment.
  Then I hear criticisms about the offset. I hear that it is going to 
be hard to enforce. It is our responsibility to clarify the law. 
Currently it is being implemented by the court on a case-by-case basis. 
That is certainly not in the best interest of tax policy. It is our 
responsibility to do that. The way that we have drafted this in regards 
to effective dates, et cetera, is consistent with the prior policy of 
this body in passing tax legislation. We frequently note dates and that 
is exactly what the other body did. This is very consistent.
  Then lastly, Mr. Speaker, I have heard just about every Member lament 
the fact that we are adding to the national debt and we have to do 
something about it, that we have to exercise fiscal restraint. When are 
we going to do it? Here is an easy one, my colleagues. This is an easy 
one. Closing a loophole that if you ask any tax accountant or tax 
attorney, they will tell you it is the right thing to do. Shelters do 
not help our economy. That is why the courts are taking it on when we 
should be taking it on and that is why the other body passed it in 
their legislation. It is time for us to stand up to our responsibility, 
to do the right thing. This is a bipartisan bill. Both of these 
recommendations have been brought forward with bipartisan support, both 
the increase in the social services block grant and the funding 
mechanism. It passed the other body by a vote of 95 to 5.
  The last point I make, Mr. Speaker, is that we have a lot of work to 
do between now and adjournment. The more work we put in conference, the 
less likely it is going to come out of conference. Here is our chance 
to really make it likely that we could enact a bill that is going to 
help our charitable groups by moving closer to the other body 
consistent with the policy of this body, consistent with both Democrats 
and Republicans. I urge my colleagues to continue the tradition of this 
legislation which has moved in a bipartisan manner and look at this 
amendment objectively. I hope you will vote with me. Vote your 
conscience. Vote in support of the Cardin amendment.
  Mr. Speaker, I yield back the balance of my time.
  Mr. SAM JOHNSON of Texas. Mr. Speaker, I yield myself such time as I 
may consume.
  It is impossible for me to figure out why we need an amendment when 
this bill passed the Committee on Ways and Means unanimously. Our 
country's charities are facing a crunch. This bill is targeted for all 
charities. So it does not need amending. This is a tax cut with a punch 
and it will spur investment in organizations that make a difference in 
the places we live and work. The basic bill is what we should vote for, 
not the amendment.
  Mr. Speaker, I yield such time as he may consume to the gentleman 
from Missouri (Mr. Blunt).
  Mr. BLUNT. I thank the gentleman from Texas (Mr. Sam Johnson) for 
yielding me this time and for being here to represent the committee on 
this bill. I want to thank the committee for voting the bill out of 
committee unanimously and my chief cosponsor the gentleman from 
Tennessee (Mr. Ford) and all of the other bipartisan cosponsors that 
have gotten behind this bill. This will make a difference in the 
charitable community. I am confident that our commitment to

[[Page 22261]]

this bill will be so great today that we will be able to move quickly 
to a conference, quickly to the President's desk and begin to see the 
impact of this bill right away. Certainly I urge my colleagues to 
reject the substitute, reject any further efforts to delay this 
measure. Let us get this bill passed today, get it headed toward a 
final conclusion and toward the President's desk.
  Mr. SAM JOHNSON of Texas. Mr. Speaker, I yield back the balance of my 
time.
  The SPEAKER pro tempore (Mr. Terry). Pursuant to House Resolution 
370, the previous question is ordered on the bill and on the amendment 
in the nature of a substitute offered by the gentleman from Maryland 
(Mr. Cardin).
  The question is on the amendment in the nature of a substitute 
offered by the gentleman from Maryland (Mr. Cardin).
  The question was taken; and the Speaker pro tempore announced that 
the noes appeared to have it.
  Mr. CARDIN. Mr. Speaker, I object to the vote on the ground that a 
quorum is not present and make the point of order that a quorum is not 
present.
  The SPEAKER pro tempore. Evidently a quorum is not present.
  The Sergeant at Arms will notify absent Members.
  The vote was taken by electronic device, and there were--yeas 203, 
nays 220, not voting 11, as follows:

                             [Roll No. 506]

                               YEAS--203

     Abercrombie
     Ackerman
     Alexander
     Allen
     Andrews
     Baca
     Baird
     Baldwin
     Ballance
     Becerra
     Bell
     Berkley
     Berman
     Bishop (GA)
     Bishop (NY)
     Blumenauer
     Boswell
     Boucher
     Boyd
     Brady (PA)
     Brown (OH)
     Brown, Corrine
     Capps
     Capuano
     Cardin
     Cardoza
     Carson (IN)
     Carson (OK)
     Case
     Castle
     Clay
     Clyburn
     Conyers
     Cooper
     Costello
     Cramer
     Crowley
     Cummings
     Davis (AL)
     Davis (CA)
     Davis (FL)
     Davis (IL)
     Davis (TN)
     DeFazio
     DeGette
     Delahunt
     DeLauro
     Deutsch
     Dicks
     Dingell
     Doggett
     Dooley (CA)
     Doyle
     Edwards
     Emanuel
     Engel
     Eshoo
     Etheridge
     Evans
     Farr
     Fattah
     Filner
     Ford
     Frank (MA)
     Frost
     Gonzalez
     Gordon
     Green (TX)
     Grijalva
     Gutierrez
     Hall
     Harman
     Hastings (FL)
     Hill
     Hinchey
     Hinojosa
     Hoeffel
     Holden
     Holt
     Honda
     Hooley (OR)
     Hoyer
     Inslee
     Israel
     Jackson (IL)
     Jackson-Lee (TX)
     Jefferson
     John
     Johnson, E. B.
     Jones (OH)
     Kanjorski
     Kaptur
     Kennedy (RI)
     Kildee
     Kilpatrick
     Kind
     Kleczka
     Kucinich
     Lampson
     Langevin
     Lantos
     Larsen (WA)
     Larson (CT)
     Leach
     Lee
     Levin
     Lewis (GA)
     Lipinski
     Lofgren
     Lowey
     Lucas (KY)
     Lynch
     Majette
     Maloney
     Markey
     Marshall
     Matheson
     Matsui
     McCarthy (MO)
     McCarthy (NY)
     McCollum
     McDermott
     McGovern
     McNulty
     Meehan
     Meek (FL)
     Meeks (NY)
     Menendez
     Michaud
     Millender-McDonald
     Miller (NC)
     Miller, George
     Mollohan
     Moore
     Moran (VA)
     Murtha
     Nadler
     Napolitano
     Neal (MA)
     Oberstar
     Obey
     Olver
     Ortiz
     Owens
     Pallone
     Pascrell
     Pastor
     Payne
     Pelosi
     Pomeroy
     Price (NC)
     Rahall
     Rangel
     Reyes
     Rodriguez
     Ross
     Rothman
     Roybal-Allard
     Ruppersberger
     Ryan (OH)
     Sabo
     Sanchez, Linda T.
     Sanchez, Loretta
     Sanders
     Sandlin
     Schakowsky
     Schiff
     Scott (GA)
     Scott (VA)
     Serrano
     Sherman
     Skelton
     Slaughter
     Smith (WA)
     Snyder
     Solis
     Spratt
     Stark
     Stenholm
     Strickland
     Stupak
     Tancredo
     Tanner
     Tauscher
     Taylor (MS)
     Thompson (MS)
     Tierney
     Towns
     Turner (TX)
     Udall (CO)
     Udall (NM)
     Van Hollen
     Velazquez
     Visclosky
     Waters
     Watson
     Watt
     Waxman
     Weiner
     Wexler
     Woolsey
     Wu
     Wynn

                               NAYS--220

     Aderholt
     Akin
     Bachus
     Baker
     Ballenger
     Barrett (SC)
     Bartlett (MD)
     Barton (TX)
     Bass
     Beauprez
     Bereuter
     Biggert
     Bilirakis
     Bishop (UT)
     Blackburn
     Blunt
     Boehlert
     Boehner
     Bonilla
     Bonner
     Bono
     Boozman
     Bradley (NH)
     Brady (TX)
     Brown (SC)
     Brown-Waite, Ginny
     Burgess
     Burns
     Burr
     Burton (IN)
     Buyer
     Calvert
     Camp
     Cannon
     Cantor
     Capito
     Carter
     Chabot
     Chocola
     Coble
     Cole
     Collins
     Cox
     Crane
     Crenshaw
     Culberson
     Cunningham
     Davis, Jo Ann
     Davis, Tom
     Deal (GA)
     DeLay
     DeMint
     Diaz-Balart, L.
     Diaz-Balart, M.
     Doolittle
     Dreier
     Duncan
     Dunn
     Ehlers
     Emerson
     English
     Everett
     Feeney
     Ferguson
     Flake
     Fletcher
     Foley
     Fossella
     Franks (AZ)
     Frelinghuysen
     Gallegly
     Garrett (NJ)
     Gerlach
     Gibbons
     Gilchrest
     Gillmor
     Gingrey
     Goode
     Goodlatte
     Goss
     Granger
     Graves
     Green (WI)
     Greenwood
     Gutknecht
     Harris
     Hart
     Hastings (WA)
     Hayes
     Hayworth
     Hefley
     Hensarling
     Herger
     Hobson
     Hoekstra
     Hostettler
     Houghton
     Hulshof
     Hunter
     Hyde
     Isakson
     Issa
     Istook
     Janklow
     Jenkins
     Johnson (CT)
     Johnson (IL)
     Johnson, Sam
     Jones (NC)
     Keller
     Kelly
     Kennedy (MN)
     King (IA)
     King (NY)
     Kingston
     Kirk
     Kline
     Knollenberg
     Kolbe
     LaHood
     Latham
     LaTourette
     Lewis (CA)
     Lewis (KY)
     Linder
     LoBiondo
     Lucas (OK)
     Manzullo
     McCotter
     McCrery
     McHugh
     McInnis
     McKeon
     Mica
     Miller (MI)
     Miller, Gary
     Moran (KS)
     Murphy
     Musgrave
     Myrick
     Nethercutt
     Neugebauer
     Ney
     Northup
     Norwood
     Nunes
     Nussle
     Osborne
     Ose
     Otter
     Oxley
     Paul
     Pearce
     Pence
     Peterson (MN)
     Peterson (PA)
     Petri
     Pickering
     Pitts
     Pombo
     Porter
     Portman
     Pryce (OH)
     Putnam
     Quinn
     Radanovich
     Ramstad
     Regula
     Rehberg
     Renzi
     Reynolds
     Rogers (AL)
     Rogers (KY)
     Rogers (MI)
     Ros-Lehtinen
     Royce
     Ryan (WI)
     Ryun (KS)
     Saxton
     Schrock
     Sensenbrenner
     Sessions
     Shadegg
     Shaw
     Shays
     Sherwood
     Shimkus
     Shuster
     Simmons
     Simpson
     Smith (MI)
     Smith (NJ)
     Smith (TX)
     Souder
     Sullivan
     Sweeney
     Tauzin
     Taylor (NC)
     Terry
     Thomas
     Thornberry
     Tiahrt
     Tiberi
     Toomey
     Turner (OH)
     Upton
     Vitter
     Walden (OR)
     Walsh
     Wamp
     Weldon (FL)
     Weldon (PA)
     Weller
     Whitfield
     Wicker
     Wilson (NM)
     Wilson (SC)
     Wolf
     Young (AK)
     Young (FL)

                             NOT VOTING--11

     Berry
     Cubin
     Forbes
     Gephardt
     McIntyre
     Miller (FL)
     Platts
     Rohrabacher
     Rush
     Stearns
     Thompson (CA)


                Announcement by the Speaker Pro Tempore

  The SPEAKER pro tempore (Mr. Terry) (during the vote). Members are 
advised there are 2 minutes remaining in this vote.

                              {time}  1447

  Ms. ROS-LEHTINEN, Mr. LoBIONDO and Mr. TAUZIN changed their vote from 
``yea'' to ``nay.''
  Mr. MOLLOHAN and Mr. MURTHA changed their vote from ``nay'' to 
``yea.''
  So the amendment in the nature of a substitute was rejected.
  The result of the vote was announced as above recorded.
  Stated against:
  Mr. TANCREDO. Mr. Speaker, on rollcall No. 506. I inadvertently voted 
``yea.'' I would like the Record to reflect I meant to vote ``nay.''
  The SPEAKER pro tempore (Mr. Terry). The question is on the 
engrossment and third reading of the bill.
  The bill was ordered to be engrossed and read a third time, and was 
read the third time.


        Motion to Recommit Offered by Mr. Neal of Massachusetts

  Mr. NEAL of Massachusetts. Mr. Speaker, I offer a motion to recommit.
  The SPEAKER pro tempore. Is the gentleman opposed to the bill?
  Mr. NEAL of Massachusetts. I am opposed to this bill in its current 
form.
  The SPEAKER pro tempore. The Clerk will report the motion to 
recommit.
  The Clerk read as follows:

       Mr. Neal of Massachusetts moves to recommit the bill HR. 7 
     to the Committee on Ways and Means with instructions that the 
     Committee report the same back to the House forthwith with 
     the following amendment:

       At the end of the bill insert the following new titles (and 
     conform the table of contents accordingly):

               TITLE IV--TAX RELIEF FOR WORKING FAMILIES

                      Subtitle A--Child Tax Credit

     SEC. 401. ACCELERATION OF INCREASE IN REFUNDABILITY OF THE 
                   CHILD TAX CREDIT.

       (a) Acceleration of Refundability.--
       (1) In general.--Section 24(d)(1)(B)(i) of the Internal 
     Revenue Code of 1986 (relating to portion of credit 
     refundable) is amended by striking ``(10 percent in the case 
     of taxable years beginning before January 1, 2005)''.
       (2) Advance payment.--Subsection (b) of section 6429 of 
     such Code (relating to advance payment of portion of 
     increased child credit for 2003) is amended by striking 
     ``and''

[[Page 22262]]

     at the end of paragraph (2), by striking the period at the 
     end of paragraph (3) and inserting ``, and'', and by adding 
     at the end the following new paragraph:
       ``(4) section 24(d)(1)(B)(i) applied without regard to the 
     first parenthetical therein.''.
       (3) Earned income includes combat pay.--Section 24(d)(1) of 
     such Code is amended by adding at the end the following new 
     sentence: ``For purposes of subparagraph (B), any amount 
     excluded from gross income by reason of section 112 shall be 
     treated as earned income which is taken into account in 
     computing taxable income for the taxable year.''.
       (b) Effective Dates.--
       (1) Subsections (a)(1) and (a)(3).--The amendments made by 
     subsections (a)(1) and (a)(3) shall take effect on October 1, 
     2003, and apply to taxable years ending on or after such 
     date.
       (2) Subsection (a)(2).--The amendments made by subsection 
     (a)(2) shall take effect as if included in the amendments 
     made by section 101(b) of the Jobs and Growth Tax Relief 
     Reconciliation Act of 2003.

     SEC. 402. REDUCTION IN MARRIAGE PENALTY IN CHILD TAX CREDIT.

       (a) In General.--Section 24(b)(2) of the Internal Revenue 
     Code of 1986 (defining threshold amount) is amended--
       (1) by inserting ``($115,000 for taxable years beginning in 
     2008 or 2009, and $150,000 for taxable years beginning in 
     2010)'' after ``$110,000'', and
       (2) by striking ``$55,000'' in subparagraph (C) and 
     inserting ``\1/2\ of the amount in effect under subparagraph 
     (A)''.
       (b) Effective Date.--The amendments made by this section 
     shall take effect on October 1, 2003, and apply to taxable 
     years ending on or after such date.

     SEC. 103. APPLICATION OF EGTRRA SUNSET TO THIS SECTION.

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

                Subtitle B--Uniform Definition of Child

     SEC. 411. UNIFORM DEFINITION OF CHILD, ETC.

       Section 152 of the Internal Revenue Code of 1986 is amended 
     to read as follows:

     ``SEC. 152. DEPENDENT DEFINED.

       ``(a) In General.--For purposes of this subtitle, the term 
     `dependent' means--
       ``(1) a qualifying child, or
       ``(2) a qualifying relative.
       ``(b) Exceptions.--For purposes of this section--
       ``(1) Dependents ineligible.--If an individual is a 
     dependent of a taxpayer for any taxable year of such taxpayer 
     beginning in a calendar year,

      such individual shall be treated as having no dependents for 
     any taxable year of such individual beginning in such 
     calendar year.  ``(2) Married dependents.--An individual 
     shall not be treated as a dependent of a taxpayer under 
     subsection (a) if such individual has made a joint return 
     with the individual's spouse under section 6013 for the 
     taxable year beginning in the calendar year in which the 
     taxable year of the taxpayer begins.
       ``(3) Citizens or nationals of other countries.--
       ``(A) In general.--The term `dependent' does not include an 
     individual who is not a citizen or national of the United 
     States unless such individual is a resident of the United 
     States or a country contiguous to the United States.
       ``(B) Exception for adopted child.--Subparagraph (A) shall 
     not exclude any child of a taxpayer (within the meaning of 
     subsection (f)(1)(B)) from the definition of `dependent' if--
       ``(i) for the taxable year of the taxpayer, the child's 
     principal place of abode is the home of the taxpayer, and
       ``(ii) the taxpayer is a citizen or national of the United 
     States.
       ``(c) Qualifying Child.--For purposes of this section--
       ``(1) In general.--The term `qualifying child' means, with 
     respect to any taxpayer for any taxable year, an individual--
       ``(A) who bears a relationship to the taxpayer described in 
     paragraph (2),
       ``(B) who has the same principal place of abode as the 
     taxpayer for more than one-half of such taxable year,
       ``(C) who meets the age requirements of paragraph (3), and
       ``(D) who has not provided over one-half of such 
     individual's own support for the calendar year in which the 
     taxable year of the taxpayer begins.
       ``(2) Relationship test.--For purposes of paragraph (1)(A), 
     an individual bears a relationship to the taxpayer described 
     in this paragraph if such individual is--
       ``(A) a child of the taxpayer or a descendant of such a 
     child, or
       ``(B) a brother, sister, stepbrother, or stepsister of the 
     taxpayer or a descendant of any such relative.
       ``(3) Age requirements.--
       ``(A) In general.--For purposes of paragraph (1)(C), an 
     individual meets the requirements of this paragraph if such 
     individual--
       ``(i) has not attained the age of 19 as of the close of the 
     calendar year in which the taxable year of the taxpayer 
     begins, or
       ``(ii) is a student who has not attained the age of 24 as 
     of the close of such calendar year.
       ``(B) Special rule for disabled.--In the case of an 
     individual who is permanently and totally disabled (as 
     defined in section 22(e)(3)) at any time during such calendar 
     year, the requirements of subparagraph (A) shall be treated 
     as met with respect to such individual.
       ``(4) Special rule relating to 2 or more claiming 
     qualifying child.--
       ``(A) In general.--Except as provided in subparagraph (B) 
     and subsection (e), if (but for this paragraph) an individual 
     may be and is claimed as a qualifying child by 2 or more 
     taxpayers for a taxable year beginning in the same calendar 
     year, such individual shall be treated as the qualifying 
     child of the taxpayer who is--
       ``(i) a parent of the individual, or
       ``(ii) if clause (i) does not apply, the taxpayer with the 
     highest adjusted gross income for such taxable year.
       ``(B) More than 1 parent claiming qualifying child.--If the 
     parents claiming any qualifying child do not file a joint 
     return together, such child shall be treated as the 
     qualifying child of--
       ``(i) the parent with whom the child resided for the 
     longest period of time during the taxable year, or
       ``(ii) if the child resides with both parents for the same 
     amount of time during such taxable year, the parent with the 
     highest adjusted gross income.
       ``(d) Qualifying Relative.--For purposes of this section--
       ``(1) In general.--The term `qualifying relative' means, 
     with respect to any taxpayer for any taxable year, an 
     individual--
       ``(A) who bears a relationship to the taxpayer described in 
     paragraph (2),
       ``(B) whose gross income for the calendar year in which 
     such taxable year begins is less than the exemption amount 
     (as defined in section 151(d)),
       ``(C) with respect to whom the taxpayer provides over one-
     half of the individual's support for the calendar year in 
     which such taxable year begins, and
       ``(D) who is not a qualifying child of such taxpayer or of 
     any other taxpayer for any taxable year beginning in the 
     calendar year in which such taxable year begins.
       ``(2) Relationship.--For purposes of paragraph (1)(A), an 
     individual bears a relationship to the taxpayer described in 
     this paragraph if the individual is any of the following with 
     respect to the taxpayer:
       ``(A) A child or a descendant of a child.
       ``(B) A brother, sister, stepbrother, or stepsister.
       ``(C) The father or mother, or an ancestor of either.
       ``(D) A stepfather or stepmother.
       ``(E) A son or daughter of a brother or sister of the 
     taxpayer.
       ``(F) A brother or sister of the father or mother of the 
     taxpayer.
       ``(G) A son-in-law, daughter-in-law, father-in-law, mother-
     in-law, brother-in-law, or sister-in-law.
       ``(H) An individual (other than an individual who at any 
     time during the taxable year was the spouse, determined 
     without regard to section 7703, of the taxpayer) who, for the 
     taxable year of the taxpayer, has as such individual's 
     principal place of abode the home of the taxpayer and is a 
     member of the taxpayer's household.
       ``(3) Special rule relating to multiple support 
     agreements.--For purposes of paragraph (1)(C), over one-half 
     of the support of an individual for a calendar year shall be 
     treated as received from the taxpayer if--
       ``(A) no one person contributed over one-half of such 
     support,
       ``(B) over one-half of such support was received from 2 or 
     more persons each of whom, but for the fact that any such 
     person alone did not contribute over one-half of such 
     support, would have been entitled to claim such individual as 
     a dependent for a taxable year beginning in such calendar 
     year,
       ``(C) the taxpayer contributed over 10 percent of such 
     support, and
       ``(D) each person described in subparagraph (B) (other than 
     the taxpayer) who contributed over 10 percent of such support 
     files a written declaration (in such manner and form as the 
     Secretary may by regulations prescribe) that such person will 
     not claim such individual as a dependent for any taxable year 
     beginning in such calendar year.
       ``(4) Special rule relating to income of handicapped 
     dependents.--
       ``(A) In general.--For purposes of paragraph (1)(B), the 
     gross income of an individual who is permanently and totally 
     disabled (as defined in section 22(e)(3)) at any time during 
     the taxable year shall not include income attributable to 
     services performed by the individual at a sheltered workshop 
     if--
       ``(i) the availability of medical care at such workshop is 
     the principal reason for the individual's presence there, and
       ``(ii) the income arises solely from activities at such 
     workshop which are incident to such medical care.
       ``(B) Sheltered workshop defined.--For purposes of 
     subparagraph (A), the term `sheltered workshop' means a 
     school--
       ``(i) which provides special instruction or training 
     designed to alleviate the disability of the individual, and

[[Page 22263]]

       ``(ii) which is operated by an organization described in 
     section 501(c)(3) and exempt from tax under section 501(a), 
     or by a State, a possession of the United States, any 
     political subdivision of any of the foregoing, the United 
     States, or the District of Columbia.
       ``(5) Special support test in case of students.--For 
     purposes of paragraph (1)(C), in the case of an individual 
     who is--
       ``(A) a child of the taxpayer, and
       ``(B) a student,
     amounts received as scholarships for study at an educational 
     organization described in section 170(b)(1)(A)(ii) shall not 
     be taken into account in determining whether such individual 
     received more than one-half of such individual's support from 
     the taxpayer.
       ``(6) Special rules for support.--For purposes of this 
     subsection--
       ``(A) payments to a spouse which are includible in the 
     gross income of such spouse under section 71 or 682 shall not 
     be treated as a payment by the payor spouse for the support 
     of any dependent,
       ``(B) amounts expended for the support of a child or 
     children shall be treated as received from the noncustodial 
     parent (as defined in subsection (e)(3)(B)) to the extent 
     that such parent provided amounts for such support, and
       ``(C) in the case of the remarriage of a parent, support of 
     a child received from the parent's spouse shall be treated as 
     received from the parent.
       ``(e) Special Rule for Divorced Parents.--
       ``(1) In general.--Notwithstanding subsection (c)(4) or 
     (d)(1)(C), if--
       ``(A) a child receives over one-half of the child's support 
     during the calendar year from the child's parents--
       ``(i) who are divorced or legally separated under a decree 
     of divorce or separate maintenance,
       ``(ii) who are separated under a written separation 
     agreement, or
       ``(iii) who live apart at all times during the last 6 
     months of the calendar year, and
       ``(B) such child is in the custody of 1 or both of the 
     child's parents for more than \1/2\ of the calendar year,
     such child shall be treated as being the qualifying child or 
     qualifying relative of the noncustodial parent for a calendar 
     year if the requirements described in paragraph (2) are met.
       ``(2) Requirements.--For purposes of paragraph (1), the 
     requirements described in this paragraph are met if--
       ``(A) a decree of divorce or separate maintenance or 
     written separation agreement between the parents applicable 
     to the taxable year beginning in such calendar year provides 
     that--
       ``(i) the noncustodial parent shall be entitled to any 
     deduction allowable under section 151 for such child, or
       ``(ii) the custodial parent will sign a written declaration 
     (in such manner and form as the Secretary may prescribe) that 
     such parent will not claim such child as a dependent for such 
     taxable year, and
       ``(B) in the case of such an agreement executed before 
     January 1, 1985, the noncustodial parent provides at least 
     $600 for the support of such child during such calendar year.
       ``(3) Custodial parent and noncustodial parent.--For 
     purposes of this subsection--
       ``(A) Custodial parent.--The term `custodial parent' means 
     the parent with whom a child shared the same principal place 
     of abode for the greater portion of the calendar year.
       ``(B) Noncustodial parent.--The term `noncustodial parent' 
     means the parent who is not the custodial parent.
       ``(4) Exception for multiple-support agreements.--This 
     subsection shall not apply in any case where over one-half of 
     the support of the child is treated as having been received 
     from a taxpayer under the provision of subsection (d)(3).
       ``(f) Other Definitions and Rules.--For purposes of this 
     section--
       ``(1) Child defined.--
       ``(A) In general.--The term `child' means an individual who 
     is--
       ``(i) a son, daughter, stepson, or stepdaughter of the 
     taxpayer, or
       ``(ii) an eligible foster child of the taxpayer.
       ``(B) Adopted child.--In determining whether any of the 
     relationships specified in subparagraph (A)(i) or paragraph 
     (4) exists, a legally adopted individual of the taxpayer, or 
     an individual who is placed with the taxpayer by an 
     authorized placement agency for adoption by the taxpayer, 
     shall be treated as a child of such individual by blood.
       ``(C) Eligible foster child.--For purposes of subparagraph 
     (A)(ii), the term `eligible foster child' means an individual 
     who is placed with the taxpayer by an authorized placement 
     agency or by judgment, decree, or other order of any court of 
     competent jurisdiction.
       ``(2) Student defined.--The term `student' means an 
     individual who during each of 5 calendar months during the 
     calendar year in which the taxable year of the taxpayer 
     begins--
       ``(A) is a full-time student at an educational organization 
     described in section 170(b)(1)(A)(ii), or
       ``(B) is pursuing a full-time course of institutional on-
     farm training under the supervision of an accredited agent of 
     an educational organization described in section 
     170(b)(1)(A)(ii) or of a State or political subdivision of a 
     State.
       ``(3) Place of abode.--An individual shall not be treated 
     as having the same principal place of abode of the taxpayer 
     if at any time during the taxable year of the taxpayer the 
     relationship between the individual and the taxpayer is in 
     violation of local law.
       ``(4) Brother and sister.--The terms `brother' and `sister' 
     include a brother or sister by the half blood.
       ``(5) Treatment of missing children.--
       ``(A) In general.--Solely for the purposes referred to in 
     subparagraph (B), a child of the taxpayer--
       ``(i) who is presumed by law enforcement authorities to 
     have been kidnapped by someone who is not a member of the 
     family of such child or the taxpayer, and
       ``(ii) who had, for the taxable year in which the 
     kidnapping occurred, the same principal place of abode as the 
     taxpayer for more than one-half of the portion of such year 
     before the date of the kidnapping,
     shall be treated as meeting the requirement of subsection 
     (c)(1)(B) with respect to a taxpayer for all taxable years 
     ending during the period that the individual is kidnapped.
       ``(B) Purposes.--Subparagraph (A) shall apply solely for 
     purposes of determining--
       ``(i) the deduction under section 151(c),
       ``(ii) the credit under section 24 (relating to child tax 
     credit),
       ``(iii) whether an individual is a surviving spouse or a 
     head of a household (as such terms are defined in section 2), 
     and
       ``(iv) the earned income credit under section 32.
       ``(C) Comparable treatment of certain qualifying 
     relatives.--For purposes of this section, a child of the 
     taxpayer--
       ``(i) who is presumed by law enforcement authorities to 
     have been kidnapped by someone who is not a member of the 
     family of such child or the taxpayer, and
       ``(ii) who was (without regard to this paragraph) a 
     qualifying relative of the taxpayer for the portion of the 
     taxable year before the date of the kidnapping,
     shall be treated as a qualifying relative of the taxpayer for 
     all taxable years ending during the period that the child is 
     kidnapped.
       ``(D) Termination of treatment.--Subparagraphs (A) and (C) 
     shall cease to apply as of the first taxable year of the 
     taxpayer beginning after the calendar year in which there is 
     a determination that the child is dead (or, if earlier, in 
     which the child would have attained age 18).
       ``(6) Cross references.--

``For provision treating child as dependent of both parents for 
purposes of certain provisions, see sections 105(b), 132(h)(2)(B), and 
213(d)(5).''.

     SEC. 412. MODIFICATIONS OF DEFINITION OF HEAD OF HOUSEHOLD.

       (a) Head of Household.--Clause (i) of section 2(b)(1)(A) of 
     the Internal Revenue Code of 1986 is amended to read as 
     follows:
       ``(i) a qualifying child of the individual (as defined in 
     section 152(c), determined without regard to section 152(e)), 
     but not if such child--

       ``(I) is married at the close of the taxpayer's taxable 
     year, and
       ``(II) is not a dependent of such individual by reason of 
     section 152(b)(2) or 152(b)3), or both, or''.

       (b) Conforming Amendments.--
       (1) Section 2(b)(2) of the Internal Revenue Code of 1986 is 
     amended by striking subparagraph (A) and by redesignating 
     subparagraphs (B), (C), and (D) as subparagraphs (A), (B), 
     and (C), respectively.
       (2) Clauses (i) and (ii) of section 2(b)(3)(B) of such Code 
     are amended to read as follows:
       ``(i) subparagraph (H) of section 152(d)(2), or
       ``(ii) paragraph (3) of section 152(d).''.

     SEC. 413. MODIFICATIONS OF DEPENDENT CARE CREDIT.

       (a) In General.--Section 21(a)(1) of the Internal Revenue 
     Code of 1986 is amended by striking ``In the case of an 
     individual who maintains a household which includes as a 
     member one or more qualifying individuals (as defined in 
     subsection (b)(1))'' and inserting ``In the case of an 
     individual for which there are 1 or more qualifying 
     individuals (as defined in subsection (b)(1)) with respect to 
     such individual''.
       (b) Qualifying Individual.--Paragraph (1) of section 21(b) 
     of the Internal Revenue Code of 1986 is amended to read as 
     follows:
       ``(1) Qualifying individual.--The term `qualifying 
     individual' means--
       ``(A) a dependent of the taxpayer (as defined in section 
     152(a)(1)) who has not attained age 13,
       ``(B) a dependent of the taxpayer who is physically or 
     mentally incapable of caring for himself or herself and who 
     has the same principal place of abode as the taxpayer for 
     more than one-half of such taxable year, or
       ``(C) the spouse of the taxpayer, if the spouse is 
     physically or mentally incapable of caring for himself or 
     herself and who has the same principal place of abode as the 
     taxpayer for more than one-half of such taxable year.''.

[[Page 22264]]

       (c) Conforming Amendment.--Paragraph (1) of section 21(e) 
     of the Internal Revenue Code of 1986 is amended to read as 
     follows:
       ``(1) Place of abode.--An individual shall not be treated 
     as having the same principal place of abode of the taxpayer 
     if at any time during the taxable year of the taxpayer the 
     relationship between the individual and the taxpayer is in 
     violation of local law.''.

     SEC. 414. MODIFICATIONS OF CHILD TAX CREDIT.

       (a) In General.--Paragraph (1) of section 24(c) of the 
     Internal Revenue Code of 1986 is amended to read as follows:
       ``(1) In general.--The term `qualifying child' means a 
     qualifying child of the taxpayer (as defined in section 
     152(c)) who has not attained age 17.''.
       (b) Conforming Amendment.--Section 24(c)(2) of the Internal 
     Revenue Code of 1986 is amended by striking ``the first 
     sentence of section 152(b)(3)'' and inserting ``subparagraph 
     (A) of section 152(b)(3)''.

     SEC. 415. MODIFICATIONS OF EARNED INCOME CREDIT.

       (a) Qualifying Child.--Paragraph (3) of section 32(c) of 
     the Internal Revenue Code of 1986 is amended to read as 
     follows:
       ``(3) Qualifying child.--
       ``(A) In general.--The term `qualifying child' means a 
     qualifying child of the taxpayer (as defined in section 
     152(c), determined without regard to paragraph (1)(D) thereof 
     and section 152(e)).
       ``(B) Married individual.--The term `qualifying child' 
     shall not include an individual who is married as of the 
     close of the taxpayer's taxable year unless the taxpayer is 
     entitled to a deduction under section 151 for such taxable 
     year with respect to such individual (or would be so entitled 
     but for section 152(e)).
       ``(C) Place of abode.--For purposes of subparagraph (A), 
     the requirements of section 152(c)(1)(B) shall be met only if 
     the principal place of abode is in the United States.
       ``(D) Identification requirements.--
       ``(i) In general.--A qualifying child shall not be taken 
     into account under subsection (b) unless the taxpayer 
     includes the name, age, and TIN of the qualifying child on 
     the return of tax for the taxable year.
       ``(ii) Other methods.--The Secretary may prescribe other 
     methods for providing the information described in clause 
     (i).''.
       (b) Conforming Amendments.--
       (1) Section 32(c)(1) of the Internal Revenue Code of 1986 
     is amended by striking subparagraph (C) and by redesignating 
     subparagraphs (D), (E), (F), and (G) as subparagraphs (C), 
     (D), (E), and (F), respectively.
       (2) Section 32(c)(4) of such Code is amended by striking 
     ``(3)(E)'' and inserting ``(3)(C)''.
       (3) Section 32(m) of such Code is amended by striking 
     ``subsections (c)(1)(F)'' and inserting ``subsections 
     (c)(1)(E)''.

     SEC. 416. MODIFICATIONS OF DEDUCTION FOR PERSONAL EXEMPTION 
                   FOR DEPENDENTS.

       Subsection (c) of section 151 of the Internal Revenue Code 
     of 1986 is amended to read as follows:
       ``(c) Additional Exemption for Dependents.--An exemption of 
     the exemption amount for each individual who is a dependent 
     (as defined in section 152) of the taxpayer for the taxable 
     year.''.

     SEC. 417. TECHNICAL AND CONFORMING AMENDMENTS.

       (1) Section 2(a)(1)(B)(i) of such Code is amended by 
     inserting ``, determined without regard to subsections 
     (b)(1), (b)(2), and (d)(1)(B) thereof'' after ``section 
     152''.
       (2) Section 21(e)(5) of the Internal Revenue Code of 1986 
     is amended--
       (A) by striking ``paragraph (2) or (4) of'' in subparagraph 
     (A), and
       (B) by striking ``within the meaning of section 152(e)(1)'' 
     and inserting ``as defined in section 152(e)(3)(A)''.
       (3) Section 21(e)(6)(B) of such Code is amended by striking 
     ``section 151(c)(3)'' and inserting ``section 152(f)(1)''.
       (4) Section 25B(c)(2)(B) of such Code is amended by 
     striking ``151(c)(4)'' and inserting ``152(f)(2)''.
       (5)(A) Subparagraphs (A) and (B) of section 51(i)(1) of 
     such Code are each amended by striking ``paragraphs (1) 
     through (8) of section 152(a)'' both places it appears and 
     inserting ``subparagraphs (A) through (G) of section 
     152(d)(2)''.
       (B) Section 51(i)(1)(C) of such Code is amended by striking 
     ``152(a)(9)'' and inserting ``152(d)(2)(H)''.
       (6) Section 72(t)(2)(D)(i)(III) of such Code is amended by 
     inserting ``, determined without regard to subsections 
     (b)(1), (b)(2), and (d)(1)(B) thereof'' after ``section 
     152''.
       (7) Section 72(t)(7)(A)(iii) of such Code is amended by 
     striking ``151(c)(3)'' and inserting ``152(f)(1)''.
       (8) Section 42(i)(3)(D)(ii)(I) of such Code is amended by 
     inserting ``, determined without regard to subsections 
     (b)(1), (b)(2), and (d)(1)(B) thereof'' after ``section 
     152''.
       (9) Subsections (b) and (c)(1) of section 105 of such Code 
     are amended by inserting ``, determined without regard to 
     subsections (b)(1), (b)(2), and (d)(1)(B) thereof'' after 
     ``section 152''.
       (10) Section 120(d)(4) of such Code is amended by inserting 
     ``(determined without regard to subsections (b)(1), (b)(2), 
     and (d)(1)(B) thereof)'' after ``section 152''.
       (11) Section 125(e)(1)(D) of such Code is amended by 
     inserting ``, determined without regard to subsections 
     (b)(1), (b)(2), and (d)(1)(B) thereof'' after ``section 
     152''.
       (12) Section 129(c)(2) of such Code is amended by striking 
     ``151(c)(3)'' and inserting ``152(f)(1)''.
       (13) The first sentence of section 132(h)(2)(B) of such 
     Code is amended by striking ``151(c)(3)'' and inserting 
     ``152(f)(1)''.
       (14) Section 153 of such Code is amended by striking 
     paragraph (1) and by redesignating paragraphs (2), (3), and 
     (4) as paragraphs (1), (2), and (3), respectively.
       (15) Section 170(g)(1) of such Code is amended by inserting 
     ``(determined without regard to subsections (b)(1), (b)(2), 
     and (d)(1)(B) thereof)'' after ``section 152''.
       (16) Section 170(g)(3) of such Code is amended by striking 
     ``paragraphs (1) through (8) of section 152(a)'' and 
     inserting ``subparagraphs (A) through (G) of section 
     152(d)(2)''.
       (17) Section 213(a) of such Code is amended by inserting 
     ``, determined without regard to subsections (b)(1), (b)(2), 
     and (d)(1)(B) thereof'' after ``section 152''.
       (18) The second sentence of section 213(d)(11) of such Code 
     is amended by striking ``paragraphs (1) through (8) of 
     section 152(a)'' and inserting ``subparagraphs (A) through 
     (G) of section 152(d)(2)''.
       (19) Section 220(d)(2)(A) of such Code is amended by 
     inserting ``, determined without regard to subsections 
     (b)(1), (b)(2), and (d)(1)(B) thereof'' after ``section 
     152''.
       (20) Section 221(d)(4) of such Code is amended by inserting 
     ``(determined without regard to subsections (b)(1), (b)(2), 
     and (d)(1)(B) thereof)'' after ``section 152''.
       (21) Section 529(e)(2)(B) of such Code is amended by 
     striking ``paragraphs (1) through (8) of section 152(a)'' and 
     inserting ``subparagraphs (A) through (G) of section 
     152(d)(2)''.
       (22) Section 2032A(c)(7)(D) of such Code is amended by 
     striking ``section 151(c)(4)'' and inserting ``section 
     152(f)(2)''.
       (23) Section 2057(d)(2)(B) of such Code is amended by 
     inserting ``, determined without regard to subsections 
     (b)(1), (b)(2), and (d)(1)(B) thereof'' after ``section 
     152''.
       (24) Section 7701(a)(17) of such Code is amended by 
     striking ``152(b)(4), 682,'' and inserting ``682''.
       (25) Section 7702B(f)(2)(C)(iii) of such Code is amended by 
     striking ``paragraphs (1) through (8) of section 152(a)'' and 
     inserting ``subparagraphs (A) through (G) of section 
     152(d)(2)''.
       (26) Section 7703(b)(1) of such Code is amended--
       (A) by striking ``151(c)(3)'' and inserting ``152(f)(1)'', 
     and
       (B) by striking ``paragraph (2) or (4) of''.

     SEC. 418. EFFECTIVE DATE.

       The amendments made by this title shall take effect on 
     October 1, 2003, and apply to taxable years ending on or 
     after such date.

                     Subtitle C--Customs User Fees

     SEC. 421. FEES FOR CERTAIN CUSTOMS SERVICES.

       (a) In General.--Subtitle A of the Internal Revenue Code of 
     1986 is amended by inserting after chapter 55 the following 
     new chapter:

            ``CHAPTER 56--FEES FOR CERTAIN CUSTOMS SERVICES

``Sec. 5896. Imposition of fees.

     ``SEC. 5896. IMPOSITION OF FEES.

       ``(a) In General.--The Secretary shall charge and collect 
     fees under this title which are equivalent to the fees which 
     would be imposed by section 13031 of the Consolidated Omnibus 
     Budget Reconciliation Act of 1985 (19 U.S.C. 58c) were such 
     section in effect after September 30, 2003.
       ``(b) Collection and Disposition of Fees, Etc.--References 
     in such section 13031 to fees thereunder shall be treated as 
     including references to the fees charged under this 
     section.''
       (b) Clerical Amendment.--The table of chapters for subtitle 
     A of such Code is amended by adding at the end the following 
     new item:

``Chapter 56. Fees for certain customs services.''

       (c) Effective date.--The amendments made by this section 
     shall take effect on October 1, 2003.

                   TITLE V--ARMED FORCES TAX FAIRNESS

        Subtitle A--Improving Tax Equity For Military Personnel

     SEC. 501. EXCLUSION OF GAIN FROM SALE OF A PRINCIPAL 
                   RESIDENCE BY A MEMBER OF THE UNIFORMED SERVICES 
                   OR THE FOREIGN SERVICE.

       (a) In General.--Subsection (d) of section 121 (relating to 
     exclusion of gain from sale of principal residence) is 
     amended by redesignating paragraph (9) as paragraph (10) and 
     by inserting after paragraph (8) the following new paragraph:
       ``(9) Members of uniformed services and foreign service.--
       ``(A) In general.--At the election of an individual with 
     respect to a property, the running of the 5-year period 
     described in subsections (a) and (c)(1)(B) and paragraph (7) 
     of this subsection with respect to such property shall be 
     suspended during any period that such individual or such 
     individual's spouse is serving on qualified official extended 
     duty as a member of the uniformed services or of the Foreign 
     Service of the United States.
       ``(B) Maximum period of suspension.--The 5-year period 
     described in subsection (a)

[[Page 22265]]

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

     SEC. 502. EXCLUSION FROM GROSS INCOME OF CERTAIN DEATH 
                   GRATUITY PAYMENTS.

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

     SEC. 503. EXCLUSION FOR AMOUNTS RECEIVED UNDER DEPARTMENT OF 
                   DEFENSE HOMEOWNERS ASSISTANCE PROGRAM.

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

     SEC. 504. EXPANSION OF COMBAT ZONE FILING RULES TO 
                   CONTINGENCY OPERATIONS.

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

     SEC. 505. MODIFICATION OF MEMBERSHIP REQUIREMENT FOR 
                   EXEMPTION FROM TAX FOR CERTAIN VETERANS' 
                   ORGANIZATIONS.

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

     SEC. 506. CLARIFICATION OF THE TREATMENT OF CERTAIN DEPENDENT 
                   CARE ASSISTANCE PROGRAMS.

       (a) In General.--Section 134(b) (defining qualified 
     military benefit) is amended by adding at the end the 
     following new paragraph:
       ``(4) Clarification of certain benefits.--For purposes of 
     paragraph (1), such term includes any dependent care 
     assistance program (as in effect on the date of the enactment 
     of this paragraph) for any individual described in paragraph 
     (1)(A).''.
       (b) Conforming Amendments.--
       (1) Section 134(b)(3)(A), as amended by section 502, is 
     amended by inserting ``and paragraph (4)'' after 
     ``subparagraphs (B) and (C)''.
       (2) Section 3121(a)(18) is amended by striking ``or 129'' 
     and inserting ``, 129, or 134(b)(4)''.
       (3) Section 3306(b)(13) is amended by striking ``or 129'' 
     and inserting ``, 129, or 134(b)(4)''.
       (4) Section 3401(a)(18) is amended by striking ``or 129'' 
     and inserting ``, 129, or 134(b)(4)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2002.
       (d) No Inference.--No inference may be drawn from the 
     amendments made by this section with respect to the tax 
     treatment of any amounts under the program described in 
     section 134(b)(4) of the Internal Revenue Code of 1986 (as 
     added by this section) for any taxable year beginning before 
     January 1, 2003.

     SEC. 507. CLARIFICATION RELATING TO EXCEPTION FROM ADDITIONAL 
                   TAX ON CERTAIN DISTRIBUTIONS FROM QUALIFIED 
                   TUITION PROGRAMS, ETC. ON ACCOUNT OF ATTENDANCE 
                   AT MILITARY ACADEMY.

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

     SEC. 508. SUSPENSION OF TAX-EXEMPT STATUS OF TERRORIST 
                   ORGANIZATIONS.

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

[[Page 22266]]

       ``(2) Terrorist organizations.--An organization is 
     described in this paragraph if such organization is 
     designated or otherwise individually identified--
       ``(A) under section 212(a)(3)(B)(vi)(II) or 219 of the 
     Immigration and Nationality Act as a terrorist organization 
     or foreign terrorist organization,
       ``(B) in or pursuant to an Executive order which is related 
     to terrorism and issued under the authority of the 
     International Emergency Economic Powers Act or section 5 of 
     the United Nations Participation Act of 1945 for the purpose 
     of imposing on such organization an economic or other 
     sanction, or
       ``(C) in or pursuant to an Executive order issued under the 
     authority of any Federal law if--
       ``(i) the organization is designated or otherwise 
     individually identified in or pursuant to such Executive 
     order as supporting or engaging in terrorist activity (as 
     defined in section 212(a)(3)(B) of the Immigration and 
     Nationality Act) or supporting terrorism (as defined in 
     section 140(d)(2) of the Foreign Relations Authorization Act, 
     Fiscal Years 1988 and 1989); and
       ``(ii) such Executive order refers to this subsection.
       ``(3) Period of suspension.--With respect to any 
     organization described in paragraph (2), the period of 
     suspension--
       ``(A) begins on the later of--
       ``(i) the date of the first publication of a designation or 
     identification described in paragraph (2) with respect to 
     such organization, or
       ``(ii) the date of the enactment of this subsection, and
       ``(B) ends on the first date that all designations and 
     identifications described in paragraph (2) with respect to 
     such organization are rescinded pursuant to the law or 
     Executive order under which such designation or 
     identification was made.
       ``(4) Denial of deduction.--No deduction shall be allowed 
     under any provision of this title, including sections 170, 
     545(b)(2), 556(b)(2), 642(c), 2055, 2106(a)(2), and 2522, 
     with respect to any contribution to an organization described 
     in paragraph (2) during the period described in paragraph 
     (3).
       ``(5) Denial of administrative or judicial challenge of 
     suspension or denial of deduction.--Notwithstanding section 
     7428 or any other provision of law, no organization or other 
     person may challenge a suspension under paragraph (1), a 
     designation or identification described in paragraph (2), the 
     period of suspension described in paragraph (3), or a denial 
     of a deduction under paragraph (4) in any administrative or 
     judicial proceeding relating to the Federal tax liability of 
     such organization or other person.
       ``(6) Erroneous designation.--
       ``(A) In general.--If--
       ``(i) the tax exemption of any organization described in 
     paragraph (2) is suspended under paragraph (1),
       ``(ii) each designation and identification described in 
     paragraph (2) which has been made with respect to such 
     organization is determined to be erroneous pursuant to the 
     law or Executive order under which such designation or 
     identification was made, and
       ``(iii) the erroneous designations and identifications 
     result in an overpayment of income tax for any taxable year 
     by such organization,

     credit or refund (with interest) with respect to such 
     overpayment shall be made.
       ``(B) Waiver of limitations.--If the credit or refund of 
     any overpayment of tax described in subparagraph (A)(iii) is 
     prevented at any time by the operation of any law or rule of 
     law (including res judicata), such credit or refund may 
     nevertheless be allowed or made if the claim therefor is 
     filed before the close of the 1-year period beginning on the 
     date of the last determination described in subparagraph 
     (A)(ii).
       ``(7) Notice of Suspensions.--If the tax exemption of any 
     organization is suspended under this subsection, the Internal 
     Revenue Service shall update the listings of tax-exempt 
     organizations and shall publish appropriate notice to 
     taxpayers of such suspension and of the fact that 
     contributions to such organization are not deductible during 
     the period of such suspension.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to designations made before, on, or after the 
     date of the enactment of this Act.

     SEC. 509. ABOVE-THE-LINE DEDUCTION FOR OVERNIGHT TRAVEL 
                   EXPENSES OF NATIONAL GUARD AND RESERVE MEMBERS.

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

     SEC. 510. TAX RELIEF AND ASSISTANCE FOR FAMILIES OF SPACE 
                   SHUTTLE COLUMBIA HEROES.

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

                      Subtitle B--Other Provisions

     SEC. 521. EXTENSION OF INTERNAL REVENUE SERVICE USER FEES.

       (a) In General.--Chapter 77 (relating to miscellaneous 
     provisions) is amended by adding at the end the following new 
     section:

     ``SEC. 7528. INTERNAL REVENUE SERVICE USER FEES.

       ``(a) General Rule.--The Secretary shall establish a 
     program requiring the payment of user fees for--
       ``(1) requests to the Internal Revenue Service for ruling 
     letters, opinion letters, and determination letters, and
       ``(2) other similar requests.
       ``(b) Program Criteria.--
       ``(1) In general.--The fees charged under the program 
     required by subsection (a)--
       ``(A) shall vary according to categories (or subcategories) 
     established by the Secretary,
       ``(B) shall be determined after taking into account the 
     average time for (and difficulty of) complying with requests 
     in each category (and subcategory), and
       ``(C) shall be payable in advance.
       ``(2) Exemptions, etc.--
       ``(A) In general.--The Secretary shall provide for such 
     exemptions (and reduced fees) under such program as the 
     Secretary determines to be appropriate.
       ``(B) Exemption for certain requests regarding pension 
     plans.--The Secretary shall not require payment of user fees 
     under

[[Page 22267]]

     such program for requests for determination letters with 
     respect to the qualified status of a pension benefit plan 
     maintained solely by 1 or more eligible employers or any 
     trust which is part of the plan. The preceding sentence shall 
     not apply to any request--
       ``(i) made after the later of--

       ``(I) the fifth plan year the pension benefit plan is in 
     existence, or
       ``(II) the end of any remedial amendment period with 
     respect to the plan beginning within the first 5 plan years, 
     or

       ``(ii) made by the sponsor of any prototype or similar plan 
     which the sponsor intends to market to participating 
     employers.
       ``(C) Definitions and special rules.--For purposes of 
     subparagraph (B)--
       ``(i) Pension benefit plan.--The term `pension benefit 
     plan' means a pension, profit-sharing, stock bonus, annuity, 
     or employee stock ownership plan.
       ``(ii) Eligible employer.--The term `eligible employer' 
     means an eligible employer (as defined in section 
     408(p)(2)(C)(i)(I)) which has at least 1 employee who is not 
     a highly compensated employee (as defined in section 414(q)) 
     and is participating in the plan. The determination of 
     whether an employer is an eligible employer under 
     subparagraph (B) shall be made as of the date of the request 
     described in such subparagraph.
       ``(iii) Determination of average fees charged.--For 
     purposes of any determination of average fees charged, any 
     request to which subparagraph (B) applies shall not be taken 
     into account.
       ``(3) Average fee requirement.--The average fee charged 
     under the program required by subsection (a) shall not be 
     less than the amount determined under the following table:

                                                                Average
``Category                                                          fee
  Employee plan ruling and opinion............................$250 ....

  Exempt organization ruling..................................$350 ....

  Employee plan determination.................................$300 ....

  Exempt organization determination...........................$275 ....

  Chief counsel ruling........................................$200.....

       ``(c) Termination.--No fee shall be imposed under this 
     section with respect to requests made after September 30, 
     2013.''.
       (b) Conforming Amendments.--
       (1) The table of sections for chapter 77 is amended by 
     adding at the end the following new item:

``Sec. 7528. Internal Revenue Service user fees.''.

       (2) Section 10511 of the Revenue Act of 1987 is repealed.
       (3) Section 620 of the Economic Growth and Tax Relief 
     Reconciliation Act of 2001 is repealed.
       (c) Limitations.--Notwithstanding any other provision of 
     law, any fees collected pursuant to section 7528 of the 
     Internal Revenue Code of 1986, as added by subsection (a), 
     shall not be expended by the Internal Revenue Service unless 
     provided by an appropriations Act.
       (d) Effective Date.--The amendments made by this section 
     shall apply to requests made after the date of the enactment 
     of this Act.

     SEC. 522. PARTIAL PAYMENT OF TAX LIABILITY IN INSTALLMENT 
                   AGREEMENTS.

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

     SEC. 523. REVISION OF TAX RULES ON EXPATRIATION.

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

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

       ``(a) General Rules.--For purposes of this subtitle--
       ``(1) Mark to market.--Except as provided in subsections 
     (d) and (f), all property of a covered expatriate to whom 
     this section applies shall be treated as sold on the day 
     before the expatriation date for its fair market value.
       ``(2) Recognition of gain or loss.--In the case of any sale 
     under paragraph (1)--
       ``(A) notwithstanding any other provision of this title, 
     any gain arising from such sale shall be taken into account 
     for the taxable year of the sale, and
       ``(B) any loss arising from such sale shall be taken into 
     account for the taxable year of the sale to the extent 
     otherwise provided by this title, except that section 1091 
     shall not apply to any such loss.

     Proper adjustment shall be made in the amount of any gain or 
     loss subsequently realized for gain or loss taken into 
     account under the preceding sentence.
       ``(3) Exclusion for certain gain.--
       ``(A) In general.--The amount which, but for this 
     paragraph, would be includible in the gross income of any 
     individual by reason of this section shall be reduced (but 
     not below zero) by $600,000. For purposes of this paragraph, 
     allocable expatriation gain taken into account under 
     subsection (f)(2) shall be treated in the same manner as an 
     amount required to be includible in gross income.
       ``(B) Cost-of-living adjustment.--
       ``(i) In general.--In the case of an expatriation date 
     occurring in any calendar year after 2003, the $600,000 
     amount under subparagraph (A) shall be increased by an amount 
     equal to--

       ``(I) such dollar amount, multiplied by
       ``(II) the cost-of-living adjustment determined under 
     section 1(f)(3) for such calendar year, determined by 
     substituting `calendar year 2002' for `calendar year 1992' in 
     subparagraph (B) thereof.

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

[[Page 22268]]

     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 the trust if the beneficiary held 
     directly all assets allocable to such interests.

[[Page 22269]]

       ``(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

[[Page 22270]]

     officers and employees of the Federal agency responsible for 
     administering section 212(a)(10)(E) of the Immigration and 
     Nationality Act solely for the purpose of, and to the extent 
     necessary in, administering such section 212(a)(10)(E).''.
       (B) Safeguards.--
       (i) Technical amendments.--Paragraph (4) of section 6103(p) 
     of the Internal Revenue Code of 1986, as amended by section 
     202(b)(2)(B) of the Trade Act of 2002 (Public Law 107-210; 
     116 Stat. 961), is amended by striking ``or (17)'' after 
     ``any other person described in subsection (l)(16)'' each 
     place it appears and inserting ``or (18)''.
       (ii) Conforming amendments.--Section 6103(p)(4) (relating 
     to safeguards), as amended by clause (i), is amended by 
     striking ``or (18)'' after ``any other person described in 
     subsection (l)(16)'' each place it appears and inserting 
     ``(18), or (19)''.
       (3) Effective dates.--
       (A) In general.--Except as provided in subparagraph (B), 
     the amendments made by this subsection shall apply to 
     individuals who relinquish United States citizenship on or 
     after the date of the enactment of this Act.
       (B) Technical amendments.--The amendments made by paragraph 
     (2)(B)(i) shall take effect as if included in the amendments 
     made by section 202(b)(2)(B) of the Trade Act of 2002 (Public 
     Law 107-210; 116 Stat. 961).
       (e) Conforming Amendments.--
       (1) Section 877 is amended by adding at the end the 
     following new subsection:
       ``(g) Application.--This section shall not apply to an 
     expatriate (as defined in section 877A(e)) whose expatriation 
     date (as so defined) occurs on or after February 5, 2003.''.
       (2) Section 2107 is amended by adding at the end the 
     following new subsection:
       ``(f) Application.--This section shall not apply to any 
     expatriate subject to section 877A.''.
       (3) Section 2501(a)(3) is amended by adding at the end the 
     following new subparagraph:
       ``(F) Application.--This paragraph shall not apply to any 
     expatriate subject to section 877A.''.
       (4)(A) Paragraph (1) of section 6039G(d) is amended by 
     inserting ``or 877A'' after ``section 877''.
       (B) The second sentence of section 6039G(e) is amended by 
     inserting ``or who relinquishes United States citizenship 
     (within the meaning of section 877A(e)(3))'' after 
     ``877(a))''.
       (C) Section 6039G(f) is amended by inserting ``or 
     877A(e)(2)(B)'' after ``877(e)(1)''.
       (f) Clerical Amendment.--The table of sections for subpart 
     A of part II of subchapter N of chapter 1 is amended by 
     inserting after the item relating to section 877 the 
     following new item:

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

       (g) Effective Date.--
       (1) In general.--Except as provided in this subsection, the 
     amendments made by this section shall apply to expatriates 
     (within the meaning of section 877A(e) of the Internal 
     Revenue Code of 1986, as added by this section) whose 
     expatriation date (as so defined) occurs on or after February 
     5, 2003.
       (2) Gifts and bequests.--Section 102(d) of the Internal 
     Revenue Code of 1986 (as added by subsection (b)) shall apply 
     to gifts and bequests received on or after February 5, 2003, 
     from an individual or the estate of an individual whose 
     expatriation date (as so defined) occurs after such date.
       (3) Due date for tentative tax.--The due date under section 
     877A(h)(2) of the Internal Revenue Code of 1986, as added by 
     this section, shall in no event occur before the 90th day 
     after the date of the enactment of this Act.

  Mr. NEAL of Massachusetts (during the reading). Mr. Speaker, I ask 
unanimous consent that the motion be considered as read and printed in 
the Record.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Massachusetts?
  There was no objection.
  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Massachusetts (Mr. Neal) is recognized for 5 minutes in support of his 
motion.
  Mr. NEAL of Massachusetts. Mr. Speaker, my motion is indeed very 
simple. It adds two matters to this charity tax bill: tax benefits for 
our military families and an enhanced child tax credit.
  Both the Senate and House versions provide much-needed military tax 
relief, including the expansion of combat zone filing rules and 
clarification of dependent care benefits, as well as relief for 
families of as the Columbia Space Shuttle astronauts. But the Senate 
bill is better in several ways. It would not tax any increase in death 
benefits, whereas the House bill would; it provides a 10-year extension 
of tax relief from the gains on the sale of a residence by a military 
member, whereas the House bill only provides 5 years; and the Senate 
bill has no limit on the deduction for overnight travel expenses of the 
National Guard and Reserve members, whereas the House limits this 
deduction.
  Mr. Speaker, at a time when our Reservists are being told that 1-year 
deployments will quickly turn into 2, when our brave soldiers are 
facing even longer periods of absence from family and home, this 
Congress should, at a minimum, provide some relief for those families. 
The delay is inexcusable.
  Secondly, Mr. Speaker, this motion to recommit will add the Senate-
passed child tax credit bill. Since June we have debated whether 12 
million children in low-income families are worthy of the same enhanced 
tax credit as children of wealthier families, and one, indeed, that 
they have already received. While President Bush said the child credit 
must be given to low-income Americans as well, there has been 
resistance from the majority in this institution. In fact, I might 
quote two: ``Ain't going to happen,'' said one of the leaders. ``All 
but dead,'' said another, in a quote last week.
  The conferees have never even met, and every vote to revive this 
legislation thus far has failed. But today we have a chance to pass the 
Senate version, which eliminates one terrible flaw. Under the House 
bill, 200,000 military families who were formerly ineligible for 
enhanced tax credit would receive it, even though they served honorably 
in Iraq and Afghanistan and other combat zones.
  Before we leave here today in anticipation of Isabel, let us resolve 
ourselves to do something good for these families. Let us encourage 
more charitable giving, let us provide much-needed tax relief to the 
families of our brave soldiers, and let us heed President Bush's call 
to help those struggling families at the bottom of the ladder with the 
same benefits that those at the top have already received.
  I hope there will be broad support for this motion to recommit.
  Mr. Speaker, I yield the balance of my time to the gentleman from 
Texas (Mr. Edwards).
  Mr. EDWARDS. Mr. Speaker, this issue is simple, but important, to our 
military families. If you want to support increased tax benefits for 
the loved ones who have lost a soldier, sailor, airman or Marine in 
Iraq, then you should vote for this motion to recommit. If you want to 
help Guardsmen and Reservists who take money out of their own pocket to 
serve our country to travel over 100 miles and stay in hotels to do the 
duty that our country asked them to do, if you want to help those 
people with tax benefits on those expenses, then you ought to vote 
``yes'' on this motion to recommit.
  Mr. Speaker, I think the American people would be offended to find 
out why we have to support this motion to recommit. For 6 months there 
has been a bill sitting in this Chamber at the Speaker's desk that 
would provide these benefits, earned benefits, to our servicemen and -
women and to the families of servicemen and -women killed in combat.
  But do you know why that bill has been held up by the House 
Republican leadership? Because the military tax benefits are paid for 
by closing the loophole of tax benefits for those who leave this 
country and renounce their American citizenship in order not to pay 
taxes.
  Let me repeat that. A bill has been held up for 6 months at the 
Speaker's desk. We could pass it by unanimous consent today if the 
Republican leadership would work with us on it. But for 6 months it has 
been held up. We are holding up military benefits because the 
Republican House leadership is more interested in protecting tax 
benefits for those who would renounce their American citizenship.
  Mr. Speaker, that offends every American value that I have ever been 
taught. I think that goes against the grain of every patriotic speech 
that has been given on the floor this year saluting the sacrifices of 
our servicemen and -women.
  I know we all intend to support our servicemen and -women, but in 
Congress we should be judged not by what we say, but by what we do.
  Right now, on a bipartisan basis, we can vote to provide increased 
military tax benefits to those who have not only

[[Page 22271]]

served our country, but the families of those who have died for our 
country.
  The SPEAKER pro tempore. The gentleman's time has expired.
  Mr. THOMAS. Mr. Speaker, I rise in opposition to the motion to 
recommit.
  The SPEAKER pro tempore. The gentleman from California is recognized 
for 5 minutes.
  Mr. THOMAS. Mr. Speaker, first of all, I want to compliment the 
gentleman from Massachusetts for structuring this motion to recommit 
actually as a motion to recommit, rather than one which cannot be 
honored. So what we do is we look at the content of the motion to 
recommit, rather than the key words that determine whether or not he is 
serious. The gentleman from Massachusetts, by the way he has structured 
his motion to recommit, is serious.
  If in fact the House is judged on what we do, rather than what we 
say, all you have to do is go back to last March when this House passed 
the provisions which deal directly with this issue. Way before 
hurricane season, the House of Representatives said a child credit 
should be $1,000 and it should stay at $1,000 for the rest of the 
decade. If the Senate bill is better, why does the Senate bill contain 
a snap-back to $700 in December of 2004, right after the election?
  If the Senate bill is better, the House bill said marriage penalty, 
now, for the rest of the decade. The Senate bill says marriage penalty 
eliminated in 2010. They say, therefore, helping the military. The bill 
we passed last March offers more help dollar-wise and substance-wise to 
the military than the one they are proposing now.
  So I think it is fairly ironic that they are asking us to do what we 
have done.
  The argument that the conference on this bill has not met should not 
be directed to the House; it should be directed to the other body, 
because the other body chairs that conference. No call has been made.
  What we need to do for the rest of the afternoon is simple: vote 
``no'' for 15 minutes, vote ``yes'' for 5 minutes, and we can beat the 
hurricane home.
  Ms. JONES of Ohio. Mr. Speaker, I want to take this opportunity to 
support my colleague from Massachusetts who has offered this motion to 
recommit H.R. 7 to the Ways and Means Committee with instructions to 
incorporate provisions that have not received the attention they 
deserve from this Congress.
  I am speaking of course about the child tax credit that Democrats 
have been calling to strengthen, only to see our calls fall on deaf 
ears, despite the clear benefits such action will have on strengthening 
our stagnant economy.
  This plea was ignored while Congress went on vacation, it was ignored 
while a tax cut that increased our Federal deficit to new highs was 
signed into law, it was ignored while young men and women were sent to 
fight in Iraq, and is being ignored while the Congress is being asked 
to consider authorizing even more money for Iraq operations. It is 
being ignored while those very men and women who we sent to Iraq could 
benefit from action expanding the child tax credit to lower income 
families.
  In a time where a saying like ``I support the troops'' is a common 
mantra among Congressional leaders on both sides of the aisle, in both 
chambers of Congress, and among all walks of life and ideologies, I 
call on my colleagues in the House of Representatives to put your money 
where your mouth is and support this motion to recommit that will bring 
much needed, much appreciated, and much deserved tax relief to 
Americans who will most benefit from it.
  Mr. THOMAS. Mr. Speaker, I yield back the balance of my time.
  The SPEAKER pro tempore. Without objection, the previous question is 
ordered on the motion to recommit.
  There was no objection.
  The SPEAKER pro tempore. The question is on the motion to recommit.
  The question was taken; and the Speaker pro tempore announced that 
the noes appeared to have it.


                             Recorded Vote

  Mr. NEAL of Massachusetts. Mr. Speaker, I demand a recorded vote.
  A recorded vote was ordered.
  The SPEAKER pro tempore. Pursuant to clause 9, rule XX, the Chair 
will reduce to 5 minutes the minimum time for any electronic vote on 
the question of passage.
  The vote was taken by electronic device, and there were--ayes 201, 
noes 221, not voting 12, as follows:

                             [Roll No. 507]

                               AYES--201

     Abercrombie
     Ackerman
     Alexander
     Allen
     Andrews
     Baca
     Baird
     Baldwin
     Ballance
     Becerra
     Bell
     Berkley
     Berman
     Bishop (GA)
     Bishop (NY)
     Blumenauer
     Boswell
     Boucher
     Boyd
     Brady (PA)
     Brown (OH)
     Brown, Corrine
     Capps
     Capuano
     Cardin
     Cardoza
     Carson (IN)
     Carson (OK)
     Case
     Castle
     Clay
     Clyburn
     Conyers
     Cooper
     Costello
     Cramer
     Crowley
     Cummings
     Davis (AL)
     Davis (CA)
     Davis (FL)
     Davis (IL)
     Davis (TN)
     DeFazio
     DeGette
     Delahunt
     DeLauro
     Deutsch
     Dicks
     Dingell
     Doggett
     Dooley (CA)
     Doyle
     Edwards
     Emanuel
     Engel
     Eshoo
     Etheridge
     Evans
     Farr
     Fattah
     Filner
     Ford
     Frank (MA)
     Frost
     Gonzalez
     Gordon
     Green (TX)
     Grijalva
     Gutierrez
     Hall
     Harman
     Hastings (FL)
     Hill
     Hinchey
     Hinojosa
     Hoeffel
     Holden
     Holt
     Honda
     Hooley (OR)
     Inslee
     Israel
     Jackson (IL)
     Jackson-Lee (TX)
     Jefferson
     John
     Johnson, E. B.
     Jones (OH)
     Kanjorski
     Kaptur
     Kennedy (RI)
     Kildee
     Kilpatrick
     Kind
     Kleczka
     Kucinich
     Lampson
     Langevin
     Lantos
     Larsen (WA)
     Larson (CT)
     Lee
     Levin
     Lewis (GA)
     Lipinski
     Lofgren
     Lowey
     Lucas (KY)
     Lynch
     Majette
     Maloney
     Markey
     Marshall
     Matheson
     Matsui
     McCarthy (MO)
     McCarthy (NY)
     McCollum
     McDermott
     McGovern
     McNulty
     Meehan
     Meek (FL)
     Meeks (NY)
     Menendez
     Michaud
     Millender-McDonald
     Miller (NC)
     Miller, George
     Mollohan
     Moore
     Moran (VA)
     Murtha
     Nadler
     Napolitano
     Neal (MA)
     Oberstar
     Obey
     Olver
     Ortiz
     Owens
     Pallone
     Pascrell
     Pastor
     Payne
     Pelosi
     Peterson (MN)
     Pomeroy
     Price (NC)
     Rahall
     Rangel
     Reyes
     Rodriguez
     Ross
     Rothman
     Roybal-Allard
     Ruppersberger
     Ryan (OH)
     Sabo
     Sanchez, Linda T.
     Sanchez, Loretta
     Sanders
     Sandlin
     Schakowsky
     Schiff
     Scott (GA)
     Scott (VA)
     Serrano
     Sherman
     Skelton
     Slaughter
     Smith (WA)
     Snyder
     Solis
     Spratt
     Stark
     Stenholm
     Strickland
     Stupak
     Tanner
     Tauscher
     Taylor (MS)
     Thompson (MS)
     Tierney
     Towns
     Turner (TX)
     Udall (CO)
     Udall (NM)
     Van Hollen
     Velazquez
     Visclosky
     Waters
     Watson
     Watt
     Waxman
     Weiner
     Wexler
     Woolsey
     Wu
     Wynn

                               NOES--221

     Aderholt
     Akin
     Bachus
     Baker
     Ballenger
     Barrett (SC)
     Bartlett (MD)
     Barton (TX)
     Bass
     Beauprez
     Bereuter
     Biggert
     Bilirakis
     Bishop (UT)
     Blackburn
     Blunt
     Boehlert
     Boehner
     Bonilla
     Bonner
     Bono
     Boozman
     Bradley (NH)
     Brady (TX)
     Brown (SC)
     Brown-Waite, Ginny
     Burgess
     Burns
     Burr
     Burton (IN)
     Buyer
     Calvert
     Camp
     Cannon
     Cantor
     Capito
     Carter
     Chabot
     Chocola
     Coble
     Cole
     Collins
     Cox
     Crane
     Crenshaw
     Culberson
     Cunningham
     Davis, Jo Ann
     Davis, Tom
     Deal (GA)
     DeLay
     DeMint
     Diaz-Balart, L.
     Diaz-Balart, M.
     Doolittle
     Dreier
     Duncan
     Dunn
     Ehlers
     Emerson
     English
     Everett
     Feeney
     Ferguson
     Flake
     Fletcher
     Foley
     Fossella
     Franks (AZ)
     Frelinghuysen
     Gallegly
     Garrett (NJ)
     Gerlach
     Gibbons
     Gilchrest
     Gillmor
     Gingrey
     Goode
     Goodlatte
     Goss
     Granger
     Graves
     Green (WI)
     Greenwood
     Gutknecht
     Harris
     Hart
     Hastings (WA)
     Hayes
     Hayworth
     Hefley
     Hensarling
     Herger
     Hobson
     Hoekstra
     Hostettler
     Houghton
     Hulshof
     Hunter
     Hyde
     Isakson
     Issa
     Istook
     Janklow
     Jenkins
     Johnson (CT)
     Johnson (IL)
     Johnson, Sam
     Jones (NC)
     Keller
     Kelly
     Kennedy (MN)
     King (IA)
     King (NY)
     Kingston
     Kirk
     Kline
     Knollenberg
     Kolbe
     LaHood
     Latham
     LaTourette
     Leach
     Lewis (CA)
     Lewis (KY)
     Linder
     LoBiondo
     Lucas (OK)
     Manzullo
     McCotter
     McCrery
     McHugh
     McInnis
     McKeon
     Mica
     Miller (MI)
     Miller, Gary
     Moran (KS)
     Murphy
     Musgrave
     Myrick
     Nethercutt
     Neugebauer
     Ney
     Northup
     Norwood
     Nunes
     Nussle
     Osborne
     Ose
     Otter
     Oxley
     Paul
     Pearce
     Pence
     Peterson (PA)
     Petri
     Pickering
     Pitts
     Pombo
     Porter
     Portman
     Pryce (OH)
     Putnam
     Quinn
     Radanovich
     Ramstad
     Regula
     Rehberg
     Renzi
     Reynolds
     Rogers (AL)
     Rogers (KY)
     Rogers (MI)
     Ros-Lehtinen
     Royce
     Ryan (WI)
     Ryun (KS)
     Saxton
     Schrock
     Sensenbrenner
     Sessions
     Shadegg
     Shaw
     Shays
     Sherwood
     Shimkus
     Shuster
     Simmons
     Simpson
     Smith (MI)
     Smith (NJ)
     Smith (TX)
     Souder
     Sullivan
     Sweeney
     Tancredo
     Tauzin
     Taylor (NC)
     Terry

[[Page 22272]]


     Thomas
     Thornberry
     Tiahrt
     Tiberi
     Toomey
     Turner (OH)
     Upton
     Vitter
     Walden (OR)
     Walsh
     Wamp
     Weldon (FL)
     Weldon (PA)
     Weller
     Whitfield
     Wicker
     Wilson (NM)
     Wilson (SC)
     Wolf
     Young (AK)
     Young (FL)

                             NOT VOTING--12

     Berry
     Cubin
     Forbes
     Gephardt
     Hoyer
     McIntyre
     Miller (FL)
     Platts
     Rohrabacher
     Rush
     Stearns
     Thompson (CA)


                Announcement by the Speaker Pro Tempore

  The SPEAKER pro tempore (Mr. Terry) (during the vote). Members are 
advised that there are 2 minutes in this vote.

                              {time}  1515

  Mrs. MYRICK changed her vote from ``aye'' to ``no.''
  So the motion to recommit was rejected.
  The result of the vote was announced as above recorded.
  The SPEAKER pro tempore. The question is on passage of the bill.
  The question was taken; and the Speaker pro tempore announced that 
the ayes appeared to have it.
  Mr. KLECZKA. Mr. Speaker, on that I demand the yeas and nays.
  The yeas and nays were ordered.
  The SPEAKER pro tempore. This will be a 5-minute vote.
  The vote was taken by electronic device, and there were--yeas 408, 
nays 13, not voting 13, as follows:

                             [Roll No. 508]

                               YEAS--408

     Abercrombie
     Ackerman
     Aderholt
     Akin
     Alexander
     Allen
     Andrews
     Baca
     Bachus
     Baird
     Baker
     Baldwin
     Ballance
     Ballenger
     Barrett (SC)
     Bartlett (MD)
     Barton (TX)
     Bass
     Beauprez
     Becerra
     Bell
     Bereuter
     Berkley
     Berman
     Biggert
     Bilirakis
     Bishop (GA)
     Bishop (NY)
     Bishop (UT)
     Blackburn
     Blunt
     Boehlert
     Boehner
     Bonilla
     Bonner
     Bono
     Boozman
     Boswell
     Boucher
     Boyd
     Bradley (NH)
     Brady (PA)
     Brady (TX)
     Brown (OH)
     Brown (SC)
     Brown, Corrine
     Brown-Waite, Ginny
     Burgess
     Burns
     Burr
     Burton (IN)
     Buyer
     Calvert
     Camp
     Cannon
     Cantor
     Capito
     Capps
     Capuano
     Cardin
     Cardoza
     Carson (IN)
     Carson (OK)
     Carter
     Case
     Castle
     Chabot
     Chocola
     Clay
     Clyburn
     Coble
     Cole
     Collins
     Conyers
     Cooper
     Costello
     Cox
     Cramer
     Crane
     Crenshaw
     Crowley
     Culberson
     Cummings
     Cunningham
     Davis (AL)
     Davis (CA)
     Davis (FL)
     Davis (IL)
     Davis (TN)
     Davis, Jo Ann
     Davis, Tom
     Deal (GA)
     DeGette
     Delahunt
     DeLauro
     DeLay
     DeMint
     Deutsch
     Diaz-Balart, L.
     Diaz-Balart, M.
     Dicks
     Dingell
     Dooley (CA)
     Doolittle
     Doyle
     Dreier
     Duncan
     Dunn
     Edwards
     Ehlers
     Emanuel
     Emerson
     Engel
     English
     Eshoo
     Etheridge
     Evans
     Everett
     Farr
     Fattah
     Feeney
     Ferguson
     Filner
     Flake
     Fletcher
     Foley
     Ford
     Fossella
     Frank (MA)
     Franks (AZ)
     Frelinghuysen
     Frost
     Gallegly
     Garrett (NJ)
     Gerlach
     Gibbons
     Gilchrest
     Gillmor
     Gingrey
     Gonzalez
     Goode
     Goodlatte
     Gordon
     Goss
     Granger
     Graves
     Green (TX)
     Green (WI)
     Greenwood
     Grijalva
     Gutierrez
     Gutknecht
     Hall
     Harman
     Harris
     Hart
     Hastings (FL)
     Hastings (WA)
     Hayes
     Hayworth
     Hefley
     Hensarling
     Herger
     Hinchey
     Hinojosa
     Hobson
     Hoeffel
     Hoekstra
     Holden
     Holt
     Honda
     Hooley (OR)
     Hostettler
     Houghton
     Hoyer
     Hulshof
     Hunter
     Hyde
     Inslee
     Isakson
     Israel
     Issa
     Istook
     Jackson (IL)
     Jackson-Lee (TX)
     Janklow
     Jefferson
     Jenkins
     John
     Johnson (CT)
     Johnson (IL)
     Johnson, E. B.
     Johnson, Sam
     Jones (NC)
     Jones (OH)
     Kaptur
     Keller
     Kelly
     Kennedy (MN)
     Kennedy (RI)
     Kildee
     Kilpatrick
     Kind
     King (IA)
     King (NY)
     Kingston
     Kirk
     Kline
     Knollenberg
     Kolbe
     LaHood
     Lampson
     Langevin
     Lantos
     Larsen (WA)
     Larson (CT)
     Latham
     LaTourette
     Leach
     Lee
     Levin
     Lewis (CA)
     Lewis (GA)
     Lewis (KY)
     Linder
     Lipinski
     LoBiondo
     Lofgren
     Lowey
     Lucas (KY)
     Lucas (OK)
     Lynch
     Majette
     Maloney
     Manzullo
     Markey
     Marshall
     Matheson
     Matsui
     McCarthy (MO)
     McCarthy (NY)
     McCollum
     McCotter
     McCrery
     McGovern
     McHugh
     McInnis
     McKeon
     McNulty
     Meehan
     Meek (FL)
     Meeks (NY)
     Menendez
     Mica
     Michaud
     Millender-McDonald
     Miller (MI)
     Miller (NC)
     Miller, Gary
     Miller, George
     Moore
     Moran (KS)
     Moran (VA)
     Murphy
     Musgrave
     Myrick
     Nadler
     Napolitano
     Neal (MA)
     Nethercutt
     Neugebauer
     Ney
     Northup
     Norwood
     Nunes
     Nussle
     Oberstar
     Obey
     Olver
     Ortiz
     Osborne
     Ose
     Otter
     Owens
     Oxley
     Pallone
     Pastor
     Paul
     Payne
     Pearce
     Pelosi
     Pence
     Peterson (MN)
     Peterson (PA)
     Petri
     Pickering
     Pitts
     Pombo
     Pomeroy
     Porter
     Portman
     Price (NC)
     Pryce (OH)
     Putnam
     Quinn
     Radanovich
     Rahall
     Ramstad
     Rangel
     Regula
     Rehberg
     Renzi
     Reyes
     Reynolds
     Rodriguez
     Rogers (AL)
     Rogers (KY)
     Rogers (MI)
     Ros-Lehtinen
     Ross
     Rothman
     Roybal-Allard
     Royce
     Ruppersberger
     Ryan (OH)
     Ryan (WI)
     Ryun (KS)
     Sabo
     Sanchez, Linda T.
     Sanchez, Loretta
     Sanders
     Sandlin
     Saxton
     Schakowsky
     Schiff
     Schrock
     Scott (GA)
     Scott (VA)
     Sensenbrenner
     Serrano
     Sessions
     Shadegg
     Shaw
     Shays
     Sherman
     Sherwood
     Shimkus
     Shuster
     Simmons
     Simpson
     Skelton
     Slaughter
     Smith (MI)
     Smith (NJ)
     Smith (TX)
     Smith (WA)
     Snyder
     Solis
     Souder
     Spratt
     Strickland
     Stupak
     Sullivan
     Sweeney
     Tancredo
     Tanner
     Tauscher
     Tauzin
     Taylor (NC)
     Terry
     Thomas
     Thompson (MS)
     Thornberry
     Tiahrt
     Tiberi
     Toomey
     Towns
     Turner (OH)
     Turner (TX)
     Udall (CO)
     Udall (NM)
     Upton
     Van Hollen
     Velazquez
     Visclosky
     Vitter
     Walden (OR)
     Walsh
     Wamp
     Waters
     Watson
     Watt
     Waxman
     Weiner
     Weldon (FL)
     Weldon (PA)
     Weller
     Wexler
     Whitfield
     Wicker
     Wilson (NM)
     Wilson (SC)
     Wolf
     Woolsey
     Wu
     Wynn
     Young (AK)
     Young (FL)

                                NAYS--13

     Doggett
     Hill
     Kanjorski
     Kleczka
     Kucinich
     McDermott
     Mollohan
     Murtha
     Pascrell
     Stark
     Stenholm
     Taylor (MS)
     Tierney

                             NOT VOTING--13

     Berry
     Blumenauer
     Cubin
     DeFazio
     Forbes
     Gephardt
     McIntyre
     Miller (FL)
     Platts
     Rohrabacher
     Rush
     Stearns
     Thompson (CA)


                Announcement by the Speaker Pro Tempore

  The SPEAKER pro tempore (during the vote). Members are advised that 
there are 2 minutes remaining in the vote.

                              {time}  1526

  Ms. Jackson-Lee of Texas changed her vote from ``nay'' to ``yea''.
  So the bill was passed.
  The result of the vote was announced as above recorded.
  A motion to reconsider was laid upon the table.

                          ____________________