[Congressional Record (Bound Edition), Volume 149 (2003), Part 7]
[SE]
[Pages 8857-8894]
[From the U.S. Government Publishing Office, www.gpo.gov]




                            CARE ACT OF 2003

  The PRESIDING OFFICER. Under the previous order, the Senate will now 
resume consideration of S. 476, which the clerk will report.
  The legislative clerk read as follows:

       The bill (S. 476) to provide incentives for charitable 
     contributions by individuals and businesses, to improve the 
     public disclosure of activities of exempt organizations, and 
     to enhance the ability of low-income Americans to gain 
     financial security by building assets, and for other 
     purposes.

  Pending:

       Grassley/Baucus Amendment No. 526, to provide a manager's 
     amendment.

  The PRESIDING OFFICER. Under the previous order there will now be 30 
minutes equally divided for general debate.
  Mr. GRASSLEY. Madam President, the amendment by Senator Nickles is in 
order, is that right?
  The PRESIDING OFFICER. The Senator is correct.
  Mr. GRASSLEY. Senator Nickles will offer his amendment in just a 
minute. He asked if I would do my speaking on that amendment at this 
point. I am very happy to do that.
  I appreciate my friend's continued efforts to reform and reduce long 
term capital gain tax on real estate. And Senator Nickles is correct--
by excluding 25 percent of the capital gain on the sale of property we 
reduce the effective capital gain rate on sales for conservation 
purposes.
  However, that is not the purpose of the provision. We intend to 
preserve precious, environmentally sensitive land from ever being 
developed. I need not remind my fellow Senators that they are not 
making any more land and if we do not preserve sensitive wetlands and 
open space from development it will be lost forever and all of our 
children and grandchildren will suffer from our lack of responsibility.
  Senator Nickles' amendment would literally make it easier to develop 
the very land we are attempting to preserve. That is certainly not the 
intent of this provision. I will be voting no and I strongly urge my 
fellow Senators to also vote no on Senator Nickles' amendment.
  I would like to take a few minutes to review the long history of this 
important provision. As you all know, the President's budget has 
included this proposal. In all of his budgets, in fact, the President 
actually continues to propose the exclusion of 50 percent of the 
capital gain for the sale of property for conservation purposes. So by 
comparison, this 25 percent proposal is modest, but still addresses the 
President's priorities.
  In addition, the Senate Finance Committee has a long history of 
building support. In both the 106th and 107th Congresses, we held 
hearings specifically discussing this proposal. We had witnesses from 
the forests of Maine to the wetlands of Louisiana and the ranches of 
Arizona. Besides, this effort brings about bipartisan support for the 
issue.
  Not only have we heard huge support for this provision from all the 
traditional conservation organizations, like the Nature Conservancy and 
the Land Trusts and Iowa's own Heritage Foundation, but I know both I 
and Senator Baucus continue to receive very vocal support from the 
farmers and ranchers who populate our States. Both the Farm Bureau and 
the Cattleman's Association have let us know that this gives our 
citizens choices to stay on the land and yet preserve the open space.
  The opportunity to give an easement, preserve our farm and ranch 
lifestyles and give up the right to ever develop the land is important 
public policy and I urge my fellow Senators to vote no on Senator 
Nickles' amendment.
  The PRESIDING OFFICER. The Senator from Montana.
  Mr. BAUCUS. Madam President, I think it is important at the outset to 
know we are including in the CARE bill incentives to help provide 
charitable contributions for good voluntary purposes, and I think this 
bill should continue to honor that thrust. The amendment before us does 
not. The amendment before us essentially is a capital gains tax 
amendment and applies generally to all property that would be sold. I 
think this is not the place for that kind of amendment.

[[Page 8858]]

  The underlying provisions of the bill provide that taxpayers who 
voluntarily sell land to a qualified conservation organization can 
exclude 25 percent of the gain on that sale from capital gains tax. The 
purpose, obviously, is to help people, most of whom are land rich and 
cash poor and do not have much income from their ranching or farm 
operations--to help by transferring the property to a conservation 
organization.
  There are many organizations in this country--a lot in my State of 
Montana--such as the Nature Conservancy, lots of very good, solid 
organizations which take land and save it for conservation purposes. 
This is very important because our country is losing a lot of land to 
development each day, each year. In fact, in the United States about 2 
acres of farmland per minute, or about 1 million per year, are lost to 
development; that is, shopping centers and new homes or what-not that 
are just taking away some of the natural land that we have in our 
country and converting it at a very rapid rate to shopping centers and 
developments.
  That is part of America. We need to build shopping centers. We need 
to also build new homes, housing tracts, and so forth. But we also need 
to remember there are other values in our country, and those are 
protecting open space and protecting farms and ranches. A lot of our 
farms and ranches are under great stress. I know the Presiding Officer 
knows that is true in her home State as is the case in every State.
  We are trying to figure out a balanced way to help those farmers and 
ranchers donate a portion of their land to a conservation organization. 
They cannot do that today because they have no income. Because they 
have no income, they can't take the usual charitable deduction. To help 
them, we are saying you don't have to worry about the charitable 
deduction; you can still get a little bit of benefit because we will 
exclude 25 percent of the gain. It is extremely important.
  I might point out, this is actually a little less generous than 
provisions suggested by the President. The President, in his budget, 
suggested an appreciably larger exclusion for this very purpose.
  The amendment before us, though, is not geared at all toward 
conservation. Essentially, it provides the same benefit, a 25-percent 
exclusion that would be available to anyone who sells property for any 
purpose. It does not have to be conservation. It would be pretty 
expensive, I might add, too--about a $1.4 billion additional cost to 
the Treasury.
  I understand the concerns the Senator has, but this is just not the 
time or place for capital gains tax reform. This is, rather, a CARE 
bill, a bill that is encouraging conservation, encouraging charitable 
giving. I urge my colleagues to not accept the amendment because I do 
not think it is properly placed in this bill.
  I reserve my time.
  The PRESIDING OFFICER. The Senator from Oklahoma.
  Mr. NICKLES. I compliment both my colleagues from Iowa and Montana 
for bringing up this bill.


                           Amendment No. 527

 (Purpose: To exclude 25 percent of gain on sales or exchanges of land 
 or water interests to any nonprofit entity for any charitable purpose)

  Madam President, this bill has a lot of good provisions in it. It has 
two provisions of which I question the value. I decided to do one 
amendment.
  One of the ones I question is, how much good does the above-line 
deduction do? If you are an individual, you have to donate $500, and 
you get a $250 deduction. So if you are in the 25-percent tax bracket, 
that means you get to save $62. And we add a lot of complexity to the 
Tax Code in the process. So I question the value of that.
  There are several other provisions in the bill that are good--
donations from IRAs to charities. The purpose of the bill is to 
increase donations to charities. I compliment the thrust of that. I 
compliment the President for trying to enact it.
  I am disappointed this bill does not do more for allowing charitable 
and/or religious groups to be eligible to participate in Federal 
programs. That is not in the bill. I am not faulting anybody. I 
compliment Senator Santorum because he worked tirelessly to get this 
bill forward. And I, as a legislator, am willing to take half a loaf.
  I think the Senator from Pennsylvania has about half of his original 
bill. I compliment him. He has been tenacious. I also compliment my 
colleague, Senator Lieberman, because he is a cosponsor of the bill. I 
worked with him on other legislation, including the religious liberty, 
freedom bill that we cosponsored some time ago.
  One of the provisions I am trying to amend right now is a provision 
that says you will have a 25-percent reduction in capital gains tax if 
you sell property for land conservation or sell to an organization that 
qualifies for land conservation. I question the wisdom of doing that. I 
say, if we are going to have a 25-percent reduction in capital gains 
tax for charitable purposes, make it for all charities.
  I happen to be a big fan of Nature Conservancy. They have a big 
facility in my State, with a lot of land, a big buffalo farm or ranch. 
I helped create that. The Nature Conservancy gets support from lots of 
corporations all across the country and my State as well. I support 
that.
  But what I question is, if we want to help charities, let's help all 
charities, so if people want to sell land to the Red Cross, they would 
get a 25-percent reduction as well, or if they want to sell land to a 
church--and the church may want to build a parking lot or build a 
bigger church on that land--let's give them the 25-percent reduction.
  Why should we say: Well, you are going to get a lower tax rate only 
if you sell to the charity we choose. That is land conservation? I 
question the wisdom of that. I do not like trying to micromanage, in 
the Tax Code, how people are going to spend their money.
  So I would encourage our colleagues, let's help all charities. I do 
not think you can defend saying: Well, I think it is fine to donate 
land to the Nature Conservancy or to the Sierra Club or to the Land 
Trust Alliance or a lot of little groups that are going to be created 
as a result of this--you don't donate the land; you sell the land--you 
can donate your land to anybody in the country--but if you want to sell 
your land, you can sell it to this group, and you are going to get a 
25-percent reduction in your capital gains tax. So we would rather give 
you that if you sell it to the Nature Conservancy but not sell it to 
the First Baptist Church in rural Iowa. To me, that does not make 
sense. Or if you want to help the Red Cross--and the Red Cross has a 
nice facility in Oklahoma, thanks to the Presiding Officer--and they 
need land, and if a farmer wants to sell that land--they could not 
afford to donate it, but they wanted to sell it--why would we say: You 
can only sell it for land conservation, and we will give you a 25-
percent reduction in your tax bill. But if you want to sell it to the 
Red Cross, or if you want to sell it to a church, or if you want to 
sell it to a children's hospital, no, we are sorry, you are out of 
luck. Congress decided that charity does not deserve the same tax 
benefits as land conservation.
  I disagree. I say, if we are going to give a lower capital gains tax 
rate, and this would be 15 percent--frankly, I think we should do it 
for all Americans, but if we are going to do it for one charity or two 
or three charities, let's do it for all charities.
  So that is the essence of my amendment. If we are going to have a 
lower capital gains tax rate on some charities, let's make it available 
for all charities.
  We have offsets in this amendment. It does not increase the deficit. 
I urge my colleagues to support the amendment.
  I reserve the remainder of my time.
  The PRESIDING OFFICER. Who yields time?
  Mr. NICKLES. Madam President, is the amendment pending?
  The PRESIDING OFFICER. No.
  Mr. NICKLES. Madam President, I apologize. I send the amendment to 
the desk and thank my colleagues for their cooperation. I thought the 
amendment was pending. I apologize to my colleagues.

[[Page 8859]]

  The PRESIDING OFFICER. The clerk will report the amendment.
  The bill clerk read as follows:

       The Senator from Oklahoma [Mr. Nickles] proposes an 
     amendment numbered 527.

  Mr. NICKLES: Madam President, I ask unanimous consent that further 
reading of the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (The amendment is printed in today's Record under ``Text of 
Amendments.'')
  The PRESIDING OFFICER (Ms. Murkowski). The Senator from Montana.
  Mr. BAUCUS. Madam President, I believe the Senator from Connecticut 
would like the floor. I yield to him such time as he wishes to consume.
  The PRESIDING OFFICER. The Senator from Connecticut.
  Mr. LIEBERMAN. Madam President, I thank my friend from Montana.
  I rise to speak in favor of the CARE Act, the Charity Aid, Recovery, 
and Empowerment Act. This began as an attempt to give support to faith-
based groups to perform good works.


                 Congratulating the UConn Women Huskies

  If I may use that as a segue for a seemingly unrelated comment, I 
want to express this morning the pride and exultation of the people of 
Connecticut whose faith in our UConn Women Huskies was vindicated last 
night as they achieved an extraordinary victory over a very tough and 
proud Tennessee team. The UConn Women won another national championship 
for the UConn Women Huskies, the fourth in the program's history.
  My congratulations to Coach Geno Auriemma, Assistant Coach Chris 
Dailey, and the great UConn women who rebuilt a lot of young talent 
that came together and made us all proud. They set an extraordinary 
example for young women all over America who, like my 15-year-old 
daughter, love basketball, love to play it, and are inspired by the 
skill and grit and team spirit of the UConn Women Huskies.
  So our faith was redeemed, and you give us faith, Lady Huskies, as we 
go on.
  Returning to the CARE Act, I must say that I am proud and, in some 
senses, relieved to join my colleagues in supporting this act. This act 
is a compromise version of the initial faith- based and community 
initiative. It comes to the Senate floor after a difficult path. But 
the important point is that we are here.
  This is a different plan than the President originally proposed. It 
is different than the plan that Senator Santorum--who I have been so 
pleased to work with as lead cosponsor with him--and I negotiated with 
the White House to address concerns that were blocking its initial 
movement.
  Perhaps most notably, it no longer contains any provisions targeted 
specifically at carving out a larger lawful space for faith-based 
groups in our social service programs. But despite this evolution, the 
heart of the proposal remains the same; and I guess, I would add, the 
soul of the proposal remains the same as well.
  That is why the CARE Act enjoys overwhelming support from America's 
philanthropic community, with endorsements from more than 1,600 
charities of all sizes and denominations, as well, as we can see, 
strong bipartisan support here in the Senate. And that is why I feel 
confident this measure will help transform the spirit of good will in 
America today into more good works at a time of growing hardship and 
make this country as good as its values are.
  Any doubt about the vitality of America's spirit was firmly laid to 
rest on September 11, 2001, when so many Americans gave so much and all 
of us collectively embraced the values of compassion and community. But 
if we truly hope to keep moving America closer to our founding ideals, 
we have to extend that commitment to helping those who continue to live 
in a different type of need--children living in poverty and despair; 
drug addicts desperate for treatment and a better life; low income 
working families who are struggling for self-sufficiency.
  Our Government, of course, runs many programs at the Federal, State, 
and local levels that aim to fill those needs as best they can by 
establishing a safety net. But all of us here, regardless of party or 
geography, recognize that Government can't do it all on its own, nor 
should it. We have long relied on a wide network of private charities 
and social service providers, community organizations and religious 
groups, what you might call the sinews of our civil society, to partner 
with the public sector, to fill in the gaps of the Government's reach 
and, in particular, to target aid to local priorities and problems. 
That is what this bill will do.
  We start with a new focus on building and leveraging the capacity of 
the small faith-based and community organizations who are often in the 
best position to help people in need because they are closest to them. 
But in many cases, they don't have the technical wherewithal to find 
the public resources to do so. So to help those groups, the CARE Act 
creates a Compassion Capital Fund authorized at $150 million a year 
that will underwrite a wide range of technical assistance efforts. But 
the bill goes beyond just expanding the pool of applicants and enlarges 
the pie of resources that is available to America's charities and 
social services providers. That will be particularly critical at this 
difficult time in our Nation's economic history when charities are 
stretched.
  I saw an article in the paper in the last 24 hours that said the 
United Way expects a significant drop in its fundraising this year 
because of the economic problems America faces. I hope and believe this 
bill will create the incentives for more giving to the United Way and a 
host of other charities, national and local. It will do so by creating 
several well targeted tax incentives over the next years that total 
$10.6 billion which, working from the general rule that most tax 
incentives are worth about 30 cents on the dollar to a taxpayer, should 
lead to new donations to charities, community-based, faith-based, of 
more than $30 billion over the next 10 years. How much good will come 
from that is wonderful to contemplate.
  Part of the CARE Act that may make as big a difference and of which I 
am particularly proud is the $1.3 billion increase in Social Service 
Block Grant (SSBG) funding over the next 2 years. The CARE Act will 
finally make good on our commitment by restoring SSBG funding to its 
authorized level of $2.8 billion over the next 2 years and in so doing 
would empower charities across the country to do good for so many 
people in need.
  I want to mention one other provision in the bill which has been a 
labor of love for me and Senator Santorum. That provision would expand 
on the use of innovative savings accounts, known as Individual 
Development Accounts (IDAs), to help low-income working families build 
wealth and achieve financial self-sufficiency. There have been a number 
of IDA demonstration projects around America that have proven 
successful in making home ownership, college, and small business not 
just a dream but a reality for thousands of low-income people 
nationwide. The CARE Act aims to build on those successes and 
significantly increase the availability of IDAs by offering America's 
financial institutions new incentives to help low-income families who 
want to save for their future which represents a whole new strategy in 
fighting poverty. It is based on a growing body of research that shows 
the best path to the middle class comes not just from hard work but 
also through savings and asset accumulation.
  In sum, this CARE Act represents a comprehensive response to a 
complicated problem. That is why it is broadly and enthusiastically 
embraced by charities all over America. This bill puts our shared 
values into action by elevating the priority we place on helping our 
most vulnerable citizens. For that I thank my colleagues for their 
support.
  I particularly thank Senator Santorum with whom it has been a 
pleasure to work in this long-time effort. His dedication, his 
commitment, his faith, his persistence, and his willingness to 
accommodate and reach common ground is a good part of the reason why we 
are on the verge of this

[[Page 8860]]

very significant accomplishment. I thank the leaders of the Finance 
Committee, Senator Grassley and Senator Baucus, and I thank my leader, 
Senator Daschle, who worked with us as we negotiated this logjam-
breaking compromise with the administration and then pushed hard among 
our ranks to have this bill considered on the Senate floor. Senator 
Daschle's staff, particularly Jennifer Duck and Andrea LaRue, has been 
indispensable to this mission.
  Finally, I thank my own staff for the dedicated work they have done 
on this exceedingly challenging but important legislation. 
Specifically, I am grateful to Laurie Rubenstein, Debbie Forrest, Dan 
Gerstein, Chuck Ludlam, and Michelle McMurray. We could not have passed 
the bill without them.
  I urge my colleagues to support the bill and yield the floor.
  The PRESIDING OFFICER. Who yields time?
  Mr. GRASSLEY. I yield such time as he might consume to the Senator 
from Pennsylvania.
  The PRESIDING OFFICER. The Senator from Pennsylvania.
  Mr. SANTORUM. I thank my colleague from Connecticut for his kind 
remarks and for his steadfast support. It was a struggle and took a lot 
of persistence. That is a virtue we have seen exhibited on this 
legislation. He has been persistently for it, has worked diligently to 
find the common ground. That is what this legislation is all about--
finding common ground. We have seen very strong bipartisan support for 
the bill. It is nice to see that every now and then on the floor of the 
Senate. We will help people who are in need of help, people who are out 
there serving our fellow man. It is a good day in the Senate that we 
are doing something positive to help those in need in society. We are 
doing it in a bipartisan way, and we are doing it in a fiscally 
responsible way. It is a win-win-win across the board.
  I thank my leader, Senator Frist. He has been a steadfast supporter 
as well. He has fought for this priority of our conference. This is one 
of the high priority items we have fought for on our side of the aisle, 
and gratefully we have seen it also as a high priority on the other 
side of the aisle. That is a wonderful thing.
  I thank Senator Daschle and Senator Reid for their cooperation and 
willingness to continue to work this issue until we could arrive at a 
point where we are successful today.
  I think we will be successful in a very overwhelming way. We have 
already seen that the House is going through the process of marking 
up--they have not done it yet, but they have a template laid out for 
their version of the bill. We are optimistic that the House will 
promptly act to move a piece of legislation with which we can go to 
conference and get a bill to the President expeditiously to help many 
in our society who are out there working on the front lines trying to 
help people in need--particularly those people of faith.
  One of the things I have heard is that the faith-based elements have 
been stripped. I counter that by saying if you look at the donations we 
are encouraging and some of these provisions that we have--for example, 
maternity group homes or food donation provisions--food donation in 
this country is overwhelmingly done by organizations of faith. They are 
the ones who collect the donations and distribute them. It is the same 
thing with maternity group homes. A large segment of those homes out 
there are faith based in nature, as well as a lot of the charitable 
giving provisions that will disproportionately have a positive impact 
on faith-based organizations. This will help faith-based organizations 
on the giving side, and, as I mentioned yesterday, the compassion 
capital fund in the bill provides technical assistance to small 
charities.
  Again, the principal beneficiaries will be small, inner-city, faith-
based organizations, these neighborhoods with many nondenominational 
churches which are already receiving technical assistance and 
instruction on how to apply for Federal funds through the charitable 
choice provisions of the 1996 Welfare Act. Already we are providing 
that assistance. This will increase that amount and will increase the 
grassroots, faith-based, inner-city entities, working in many cases in 
the most difficult neighborhoods, with the opportunity to access funds. 
Their base of funds isn't that great. They are some of the poorest 
neighborhoods in America.
  So it is a great day for those who have been working hard and 
committing their lives in some of the most difficult neighborhoods of 
the country that will be getting the resources that are much needed to 
the grassroots organizations that, as the President has said, are 
driven by their faith commitment.
  I yield the floor.
  Mr. GRASSLEY. Madam President, I move to table the----
  Mr. NICKLES. Will the Senator yield first? I am not sure we used all 
of our time.
  The PRESIDING OFFICER. There is time remaining for debate.
  Mr. NICKLES. I am happy to conclude shortly. Correct me if I am 
wrong, but I was thinking the vote was at 12:30, or are we trying to 
move it up?
  Mr. GRASSLEY. I think we should wait until 12:30. I will wait. I 
yield the floor.
  Mr. NICKLES. If the Senator wants to ask consent to move to table the 
amendment and have the vote commence at 12:30, I am happy to do that. 
Usually, when you move to table, you conclude the debate.
  Mr. GRASSLEY. Madam President, I move to table the amendment and I 
ask for the yeas and nays and then that the vote occur at 12:30.
  The PRESIDING OFFICER. Is there a sufficient second?
  There is a sufficient second.
  The yeas and nays were ordered.
  Mr. NICKLES. Madam President, parliamentary inquiry: How much time 
remains on the amendment?
  The PRESIDING OFFICER. Six and a half minutes remain for the Senator 
from Oklahoma.
  Mr. CRAIG. Will the Senator yield for a minute?
  Mr. NICKLES. I am happy to yield.
  Mr. CRAIG. I thank the Senator from Oklahoma for his amendment. I 
think it improves the legislation substantially in the context of what 
it is. This bill is not what it was. The CARE Act has all of the right 
reasons for passing the Congress--faith-based organizations gaining the 
benefit to serve people in a broader sense. We have gone beyond that 
now.
  Now we are talking about providing an opportunity for charities and 
conservation groups to buy private land, or acquire private land, and, 
for the sale of that land, to gain a benefit. In public land States 
such as mine, where private land is, and it is the single tax base of 
counties and local entities of government, as we deplete that land, for 
whatever reason, we deplete the ability of counties to provide for 
themselves and their citizens. I am struggling with this bill in the 
final analysis because of that.
  I do not oppose, obviously, the intent of CARE and the intent of 
rewarding and extending for faith-based organizations their ability to 
serve our country and its citizens. I thank my colleague for his 
amendment. I hope we will not table it. I think it clearly helps 
improve the legislation overall.
  Mr. NICKLES. Madam President, I appreciate the comments of my 
colleague and friend from Idaho. He makes a very good point. Western 
States have a lot of public land and not a lot of private land. This 
amendment says if you are going to sell land to a charity that deals 
with conservation, you get a 25 percent lower capital gains tax than if 
you sell to any other charity.
  My amendment would say if you sell to any charity, you will get a 
reduced capital gains tax. I mentioned the Nature Conservancy. They are 
big in my State. They bought one of the biggest ranches--a buffalo 
ranch--in Oklahoma. It is in the tall grass prairie. I love it. I 
helped make that happen. The Nature Conservancy is a big group. I don't 
know how great their assets are, but I guess it is in the millions of 
dollars--lots of land and lots of millions of dollars. If you sell to 
that group, you

[[Page 8861]]

get a 25 percent reduction in your capital gains tax. I don't think 
they need it, compared to a church in Oklahoma, maybe in a rural area, 
which might want to build or expand. But if you want to sell to that 
church, you have to pay a 25 percent higher tax than if you sell it to 
a conservancy group, or the Sierra Club, that wants to build a 
conservancy or other groups that might want to say: Hey, you get a 
lower deal; sell it to us.
  Let's encourage charitable contributions, but let's also encourage 
sales to charitable organizations. If we are going to do it for one 
charitable organization, let's do it for all charitable organizations. 
That is the essence of my amendment. We have paid for it. It is offset. 
I urge my colleagues to support it. If we are going to encourage 
charitable sales, let's do it for all of them, not just conservation 
groups. I urge my colleagues to vote against the motion to table.
  I yield the remainder of my time.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. NICKLES. Madam President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The PRESIDING OFFICER. The question is on agreeing to the motion to 
table amendment No. 527. The yeas and nays have been ordered. The clerk 
will call the roll.
  The assistant legislative clerk called the roll.
  The PRESIDING OFFICER. Are there any other Senators in the Chamber 
desiring to vote?
  The result was announced--yeas 62, nays 38, as follows:

                      [Rollcall Vote No. 127 Leg.]

                                YEAS--62

     Akaka
     Alexander
     Baucus
     Bayh
     Biden
     Bingaman
     Boxer
     Breaux
     Brownback
     Byrd
     Cantwell
     Carper
     Chafee
     Clinton
     Collins
     Conrad
     Corzine
     Daschle
     Dayton
     DeWine
     Dodd
     Dorgan
     Durbin
     Edwards
     Feingold
     Feinstein
     Graham (FL)
     Grassley
     Gregg
     Harkin
     Hollings
     Inouye
     Jeffords
     Kennedy
     Kerry
     Kohl
     Landrieu
     Lautenberg
     Leahy
     Levin
     Lieberman
     Lincoln
     McCain
     Mikulski
     Miller
     Murray
     Nelson (FL)
     Nelson (NE)
     Pryor
     Reed
     Reid
     Roberts
     Rockefeller
     Sarbanes
     Schumer
     Smith
     Snowe
     Stabenow
     Stevens
     Sununu
     Voinovich
     Wyden

                                NAYS--38

     Allard
     Allen
     Bennett
     Bond
     Bunning
     Burns
     Campbell
     Chambliss
     Cochran
     Coleman
     Cornyn
     Craig
     Crapo
     Dole
     Domenici
     Ensign
     Enzi
     Fitzgerald
     Frist
     Graham (SC)
     Hagel
     Hatch
     Hutchison
     Inhofe
     Johnson
     Kyl
     Lott
     Lugar
     McConnell
     Murkowski
     Nickles
     Santorum
     Sessions
     Shelby
     Specter
     Talent
     Thomas
     Warner
  The motion was agreed to.
  Mr. GRASSLEY. I move to reconsider the vote.
  Mr. SANTORUM. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.
  Mr. GRASSLEY. Madam President, it is my intention to yield back all 
of my time except for 30 seconds.


             Welfare Benefit Plans In Relation to title VII

  Mr. SANTORUM. Madam President, I rise today to engage the 
distinguished chairman of the Finance Committee in a colloquy regarding 
welfare benefit plans in relation to title VII of S. 476.
  Employee Welfare Benefit plans, regulated under ERISA, are employer-
sponsored plans that provide security to employees at the time of an 
event that interrupts or impairs their earning power by providing 
benefits such as death benefits, medical insurance, long-term care and 
child care.
  By way of introduction, sections 419 and 419A of the Internal Revenue 
Code set forth special rules for the deduction of contributions to a 
welfare benefit fund, including limitations on the amount of the 
deduction that would otherwise be deductible.
  Moreover, 419A(f)(6) provides that the rules of sections 419 and 419A 
do not apply in the case of a welfare benefit fund that is part of a 
plan to which more than one employer contributes and to which no 
employer normally contributes more than 10 percent of the contributions 
of all employers under the plan. This exception for 10 or more employer 
plans, however, does not apply to any plan that maintains experience 
rating arrangements with respect to individual employers.
  It is my understanding that there is ongoing review of sections 419 
and 419A as the Department of Treasury seeks to establish further 
guidance relative to 10 or more employer plans. It is my understanding 
that such considerations have contributed to uncertainty in the tax 
treatment of these plans.
  I inquire of Chairman Grassley if he is aware of the concerns 
surrounding the uncertain tax treatment of 10 or more employer plans, 
and if so, if he would agree to continue discussions with Treasury in 
an effort to achieve clarity.
  Mr. GRASSLEY. I am aware that the Treasury and Labor Departments are 
always examining the so-called welfare benefit plans because of 
aggressive uses of some arrangements. Taxpayers need certainty and 
clarity from the enforcement agencies that they can rely upon, so they 
do not run afoul of the rules and operate plans in accordance with the 
requirements of the law. It would be unwise to exclude a particular 
type of arrangement from the rules governing tax shelters, however, 
based upon some of the abuses we have seen. But we can urge the 
Treasury Department to provide clearer guidance on the many welfare 
benefit plan arrangements. I am willing to join you in writing the 
Treasury Department to ask them for clearer guidance as soon as 
practicable.
  Mr. SANTORUM. I thank the chairman for agreeing to work with me on 
this important issue.
  Mr. BROWNBACK. Mr. President, it gives me great pleasure to join with 
my colleagues today and support this magnificent bill, the Charity Aid, 
Recovery, and Empowerment Act of 2003. This was a long fought 
endeavor--one that is worthy of the effort--and an endeavor that will 
continue to promote the act of charity, but also serve as a catalyst 
for those who need help in gaining self-sufficiency.
  As you may know, the motto of my State, Kansas, is, Ad Astra Per 
Aspera or ``to the stars through difficulty.'' Indeed this is not only 
true of my State, but true of our Nation as well. The act of charity 
and benevolence is a hallmark of our great Nation and this bill will 
help to continue that legacy and provide a pathway for success for 
those in need.
  During the aftermath of the September 11 attacks on our Nation, we 
saw the best of America in one of the darkest times of our Nation's 
history. Though as a Nation we were physically and emotional battered, 
we were able to rise up and come together as one Nation united, 
determined to help those in need. Many organizations such as the 
Salvation Army, the Red Cross and countless other charities and 
nonprofit organizations stood together with the men and women who 
attended to the victims and their families. The strength and resolve of 
our Nation was truly remarkable through the benevolence shown to the 
families of those lost on that tragic day.
  It is time now that we help these and many other charitable 
organizations continue to help those in need. This bill, the CARE Act, 
will do just that. This act provides charitable giving incentives in 
the form of tax deductions for individuals and couples who do not 
itemize their tax returns--$250 for individuals and $500 for couples. 
It allows IRA holders to make charitable contributions from their 
accounts, and provides an enhanced charitable deduction for donations 
of food and books to charitable organizations.
  Additionally, it provides an expedited review process for 
organizations seeking a 501(c)(3) status designation, which makes it 
easier to qualify for Federal grants and contracts. Along those same 
lines, the bill requires the IRS to expedite the 501(c)(3) application 
for any group that needs that status to apply

[[Page 8862]]

for a government grant or contract. To further help in this arena, the 
bill requires the IRS to waive the application fee for groups whose 
annual revenues do not exceed $50,000.
  I am also pleased that we are encouraging savings accounts for those 
in our society who are in the lower income brackets. The Individual 
Development Accounts, IDA, section provides a tangible incentive for 
folks to save and become self-sufficient, which not only provides 
financial security but increases the participants' self-esteem which is 
priceless. Participants are able to withdraw these matched funds for a 
first home purchase, higher education costs, or to start a new 
business.
  Lives are dramatically changed by this program and I am pleased to 
see the Senate backing this important incentive.
  Lastly, I would like to highlight an issue that I am passionate 
about, an issue of the value of human life. I am very pleased that this 
bill will provide additional funding--$33 million to be exact--for 
helping teenage mothers achieve self-sufficiency by strengthening 
Federal support for locally run maternity group home programs. As we 
know, this was an important agenda item in the 1996 Welfare Reform 
bill. Under the 1996 law, minors are required to live at home under 
adult supervision or in a maternity group home in order to receive 
benefits. Teenagers who are provided the opportunity to live in these 
homes are more likely to continue their education or receive job 
training--this is paramount for not only economic stability but for the 
efficacy of the participant as well. These young women, who enter this 
program are less likely to have a second pregnancy, and more likely to 
find gainful employment that allows them to end a dependence upon 
Federal Government programs.
  I am positive that this bill will continue to financially aid those 
organizations that reach out to those in need and will help them to 
build on the success they have already seen in their communities.
  Indeed in my own State, I have, for several years, toured charitable 
organizations such as the Grace Center, which is a home for unwed 
mothers, and Bread of Life, which is an inner-city church that is 
leading community revitalization by partnering with schools and 
neighborhood organizations to provide scholastic, mentoring and bible 
study programs.
  As a nation, we are strongest in our ability to provide assistance to 
those in need, and to provide individuals with the tools necessary to 
succeed. Dr. King once said, ``The ultimate measure of a man is not 
where he stands in moments of comfort and confidence, but where he 
stands at times of challenge and controversy.'' These organizations 
embody the epitome of Dr. King's statement. I encourage all of my 
colleagues to support this legislation, support those organizations who 
have committed their lives to helping others and who are indeed helping 
individuals through difficulties reach for the stars.
  Mr. HATCH. Madam President, I rise today to express my support for 
the CARE Act, which is currently before the Senate. This bill is 
dedicated to improving the incentives for individuals and corporations 
to donate to charitable entities.
  Through their generosity, Americans have shown their true colors as a 
compassionate, caring people. Unfortunately, many charities have had a 
difficult time raising money since the tragedy of September 11, as the 
economy has remained weak. This bill, which is a priority for President 
Bush, will help America's charities to continue their invaluable work.
  I applaud the leadership of Chairman Grassley and Ranking Democrat 
Baucus in getting this bill through the Finance Committee and onto the 
Senate floor. I also applaud the perseverance of Senators Santorum and 
Lieberman, who have championed this bill for many months and have kept 
at it despite the discouragement of not being able to get the unanimous 
consent needed to bring it to the floor until very recently.
  The CARE Act includes several important incentives to encourage 
additional contributions to charity. One of the more important ones is 
the provision to allow individuals who do not itemize to take a 
deduction under certain circumstances. I am particularly pleased that 
the Finance Committee chose to craft this incentive as a targeted 
provision, rather than as a provision that would allow a deduction for 
the first dollar of contributions. Two-thirds of Americans do not 
itemize their deductions, but most of them do make contributions. 
Allowing a deduction for contributions that were already being made is 
not an incentive--it is a giveaway. The provision in the CARE Act 
encourages us to stretch and give more. It provides a much bigger 
incentive for Americans to donate that marginal dollar and it also 
lowers the cost of this provision to the Treasury.
  I am also very pleased that the bill includes two other provisions, 
which I have been promoting for some time. The first would simplify a 
complex area of the current law and eliminate significant roadblocks 
that now stand in the way of businesses with excess book inventory to 
donating those books to schools, libraries, and literacy programs, 
where they are much needed. Unfortunately, the current tax law benefits 
for donating such books to schools or libraries are often no greater 
than the tax benefits of sending the books to the landfill.
  The provision in the CARE Act addresses the obstacles of donating 
excess book inventory by providing a simple and clear rule whereby any 
donation of book inventory to a qualified school, library, or literacy 
program is eligible for an enhanced deduction. This means that 
booksellers and publishers would receive a higher tax benefit for 
donating the books rather than throwing them away and would thus be 
encouraged to go to the extra trouble and expense of seeking out 
qualified donees and making the contributions.
  The second provision deals with a problem that owners of S 
corporations have in donating their stock to charitable entities. Under 
the current law, a donor of S corporation stock worth $500 but having a 
tax basis of $100 would receive a deduction for ony the amount of the 
basis, or $100. A holder of shares in a C corporation, however, is 
allowed to deduct the full $500 value of the stock. There is no 
justification for this disparity in treatment between S corporations 
and C corporations, and a provision in the CARE Act corrects it.
  I am also pleased that another provision, which Senator Lincoln and I 
added as an amendment to the bill in the Finance Committee, is included 
in the CARE Act. Similar to the books provision I mentioned before, 
this provision provides a larger deduction, and therefore a stronger 
incentive, for businesses to donate their excess inventory to 
charitable entities, such as schools or churches.
  The CARE Act includes many worthwhile incentives designed to increase 
charitable contributions. Its enactment should make a real difference 
in our Nation.
  There is, however, one portion of the CARE Act in which I am 
disappointed. As an offset, the bill includes a package of measures 
designed to crack down on abusive corporate tax shelters. While I am 
certainly not in favor of abusive tax shelters, I am concerned that 
part of this package of antitax shelter provisions, known as the 
clarification of the economic substance doctrine, could also close down 
legitimate tax planning techniques and give the Internal Revenue 
Service an unprecedented degree of authority to recast the tax 
treatment of transactions it does not like, regardless of whether the 
transactions are otherwise allowed under the tax law. The provision 
would also override a significant body of case law, some of which 
reaches back almost to the inception of the income tax.
  I hope that the codification of the economic substance doctrine can 
be deleted in the conference with the House.
  All in all, however, the CARE Act is a very good bill, and it 
deserves the support of the Senate. I urge all of my colleagues to vote 
for this bill.
  Mr. FEINGOLD. Madam President, I am delighted that the Finance 
Committee has included my volunteer mileage reimbursement legislation 
in the

[[Page 8863]]

CARE Act, and I want to take this opportunity to thank Chairman 
Grassley and the ranking member Baucus for their efforts to include 
this needed provision. I am also pleased that some troubling provisions 
have been deleted from this legislation. In particular, I congratulate 
the sponsors for agreeing to drop title VIII before bringing the bill 
to the floor. Doing so strengthens this bill, and will greatly speed 
consideration of the measure.
  Under current law, when volunteers use their cars for charitable 
purposes, the volunteers may be reimbursed up to 14 cents per mile for 
their donated services without triggering a tax consequence for either 
the organization or the volunteers. If the charitable organization 
reimburses any more than that, the organization is required to file an 
information return with the IRS, and the volunteers must include the 
amount over 14 cents per mile in their taxable income. By contrast, the 
mileage reimbursement level currently permitted for businesses is 36 
cents per mile.
  At a time when Government is asking volunteers and volunteer 
organizations to bear a greater burden of delivering essential 
services, the 14 cents per mile limit is posing a very real hardship on 
charitable organizations and other nonprofit groups. I have heard from 
a number of people in Wisconsin on the need to increase this 
reimbursement limit.
  At a listening session I held in Portage County, WI, representatives 
of the local Department on Aging explained just how important volunteer 
drivers are to their ability to provide services to seniors in that 
county. The Department on Aging reported that in 2001, 54 volunteer 
drivers delivered meals to homes and transported people to medical 
appointments, meal sites, and other essential services. The Department 
noted that their volunteer drivers provided 4,676 rides, and drove 
nearly 126,000 miles. They also delivered 9,385 home-delivered meals, 
and nearly two-thirds of the drivers logged more than 100 miles per 
month in providing these needed services. Together, volunteers donated 
over 5,200 hours last year, and as the Department notes, at the rate of 
minimum wage, that amounts to over $27,000, not including other 
benefits.
  As many of my colleagues know, the senior meals program is one of the 
most vital services provided under the Older Americans Act, and 
ensuring that meals can be delivered to seniors or that seniors can be 
taken to meal sites is an essential part of that program. 
Unfortunately, federal support for the senior nutrition programs has 
stagnated in recent years. This has increased pressure on local 
programs to leverage more volunteer services to make up for lagging 
federal support. The 14 cents per mile reimbursement limit, though, 
increasingly poses a barrier to obtaining those contributions. Portage 
County reports that many of their volunteers cannot afford to offer 
their services under such a restriction. And if volunteers cannot be 
found, their services will have to be replaced by contracting with a 
provider, greatly increasing costs to the department, costs that come 
directly out of the pot of funds available to pay for meals and other 
services.
  By contrast, businesses do not face this restrictive mileage 
reimbursement limit. The comparable mileage rate for someone who works 
for a business is currently 36 cents per mile. This disparity means 
that a business hired to deliver the same meals delivered by volunteers 
for Portage County may reimburse their employees over double the amount 
permitted the volunteer without a tax consequence.
  This doesn't make sense. The 14 cents per mile volunteer 
reimbursement limit is badly outdated. According to the Congressional 
Research Service, Congress first set a reimbursement rate of 12 cents 
per mile as part of the Deficit Reduction Act of 1984, and did not 
increase it until 1997, when the level was raised slightly, to 14 cents 
per mile, as part of the Taxpayer Relief Act of 1997.
  The provision included in the CARE Act addresses this problem by 
raising the limit on volunteer mileage reimbursement to the level 
permitted to businesses, currently 36 cents per mile.
  Once again, I thank the chairman and ranking member of the Finance 
Committee for their help in including this provision in the CARE Act. 
This timely measure will help ensure that charitable organizations can 
continue to attract the volunteers who play such a critical role in 
helping to deliver services, and it will simplify the tax code both for 
nonprofit groups and the volunteers themselves.
  As I noted earlier, I am also pleased that the sponsors of the CARE 
Act agreed to drop title VIII before bringing the bill to the floor. I 
had two serious concerns about title VIII. First, it threatened to 
undermine our Nation's long-standing public policy against 
discrimination in employment. Religious organizations currently enjoy 
an exemption from title VII of the Civil Rights Act of 1964, allowing 
them to discriminate against individuals on the basis of religion when 
making employment decisions about individuals involved in religious 
services. The bill as introduced was silent on this issue and therefore 
threatened to extend this exemption and allow religious groups that 
provide federally funded social services to discriminate on the basis 
of religion in hiring, firing, or promotion decisions.
  Second, title VIII could have allowed religious organizations 
receiving Federal funds to proselytize during the provision of the 
federally funded social service. Faith-based organizations do a lot of 
good work in our society. But the Founders were right when they crafted 
the Constitution's separation of church and state provision. We need to 
protect each American's right to practice his or her religion as he or 
she chooses. I am troubled by the possibility that, regardless of good 
intentions, in practice, people who are in trouble would feel pressured 
to engage in religious activities that they are not comfortable with in 
order to get access to help, or otherwise be denied the services that 
they desperately need.
  Again, I am pleased that title VIII, the problematic faith-based 
provision, has been dropped from the version of the bill that is before 
the Senate today. Congress, however, must continue to be vigilant to 
ensure that we do not enact legislation that allows taxpayer dollars to 
be used to promote employment discrimination based on religion, or 
religious instruction, worship, or proselytization.
  Mr. INOUYE. Mr. President, I want to express my appreciation to 
Chairman Grassley and Senator Baucus for the inclusion of the hospital 
support organization provision to the CARE Act. This provision is 
important to all teaching hospital support organizations, including 
those in Hawaii. The provision would treat borrowing by these support 
organizations as qualified exceptions under the unrelated business 
income rule for debt acquisition.
  As a requirement for tax exemption status, nonprofit hospitals must 
provide significant charity services. They do this mainly by treating 
Medicaid and Medicare patients and by running an open emergency room 
that treats anyone without regard to payment. For example, Medicare and 
Medicaid admissions comprise nearly 60 percent of all admissions at the 
largest private, nonprofit hospital in my State. The demand for 
indigent or charitable hospital care will continue to grow especially 
in an economic down turn.
  A number of charitable hospitals, such as the Queen's Medical Center 
in the State of Hawaii, also provide residency training as teaching 
hospitals for our future doctors. In addition, they must extend staff 
privileges to all qualified physicians in nearly all specialties. 
Accordingly, they cannot be selective as to their patients or to their 
staff physicians. To pay for these charitable services nonprofit 
hospitals must use their endowment income as well as fees from other 
patients.
  For-profit enterprises can easily borrow or raise the capital to 
build the most up-to-date facilities to compete for the high-profit 
patients. In comparison, charitable hospitals face lower reimbursements 
for Medicaid and Medicare patients, while at the same time they 
struggle to cope with rising

[[Page 8864]]

costs for wages, supplies and insurance. In order to meet the growing 
demand for indigent care, many charitable hospitals postpone updating 
their equipment and defer modernizing their facilities. As a result, 
there is a growing trend for charitable hospitals to sell off their 
facilities to for-profit operations because they can easily secure the 
required capital to update or expand the facilities.
  In the past, Congress has allowed nonprofit schools, colleges, 
universities, and pension funds to invest in real estate with borrowed 
funds, and the income from real investments has allowed these 
institutions to meet their financial needs. Accordingly, with this 
provision, teaching hospitals' support organizations would also be 
allowed to borrow in order to repair and improve the real property held 
in the portfolio assets of their endowments, thereby increasing the 
value of the real property segment of their endowments. The resulting 
increase of income can then help cover the growing costs for more 
charitable services.
  Again, I thank Chairman Grassley and Senator Baucus for the support 
they have given me
  Mr. LEAHY. Madam President, I rise today in support of the Charity 
Aid, Recovery, and Empowerment, CARE Act of 2003. The tax provisions in 
the CARE Act will encourage increased giving to charitable 
organizations across the country. In community after community, our 
charitable organizations have seen donations drop off significantly 
because of the sluggish economy.
  The CARE Act would allow taxpayers who do not itemize tax deductions 
to write off a portion of their charitable donations for 2 years--
nonitemizers would be limited to $250 for individuals and $500 for 
couples filing joint returns. The bill would also permit tax-free 
distributions from IRAs for charitable purposes and would provide 
enhanced deductions for contributions of food, books, computers and 
conservation easements. It is important to note that the $13.1 billion 
in tax allowances in the CARE Act are fully offset by tax shelter 
legislation that would impose stiff penalties on those who try to hide 
assets from the IRS. I am also pleased that the bill reported by the 
Senate Finance Committee on February 5 contains none of the 
controversial ``charitable choice'' provisions that hindered its 
passage in the last Congress.
  There are a number of bipartisan and noncontroversial tax incentive 
provisions in the CARE Act that I have supported as stand-alone bills, 
including the Artist-Museum Partnership Act, S. 287, that I coauthored 
with Senator Bennett, and the Good Samaritan Hunger Relief Act, S. 85, 
that I coauthored with Senator Lugar.
  Senator Bennett and I introduced the Artist-Museum Partnership Act to 
enable our country to keep cherished art works in the United States and 
to preserve them in our public institutions, while erasing an inequity 
in our Tax Code that now serves as a disincentive for artists to donate 
their works to museums and libraries. Under current law, artists who 
donate self-created works are only able to deduct the cost of supplies 
such as canvas, pen, paper and ink--a sum that does not come close to 
the works' true value. This is unfair to artists and it hurts museums 
and libraries large and small that are dedicated to preserving works 
for posterity. Our bill would allow artists, writers, and composers who 
donate works to museums and libraries to take a tax deduction equal to 
the fair-market value of the work.
  In my State of Vermont, we are incredibly proud of the great works 
produced by hundreds of local artists who choose to live and work in 
the Green Mountain State. Displaying their creations in museums and 
libraries helps develop a sense of pride among Vermonters and 
strengthens a bond with Vermont, its landscape, its beauty, and its 
cultural heritage. Anyone who has gained a greater understanding of 
both the artist and the subject by contemplating a painting in a museum 
or examining an original manuscript or composition knows the tremendous 
value of these works. I would like to see more of them, not fewer, 
preserved in Vermont and across the country.
  I would like to thank Senators Allen, Bingaman, Cantwell, Chafee, 
Clinton, Cochran, Daschle, Dodd, Durbin, Feinstein, Graham of Florida, 
Jeffords, Johnson, Kennedy, Kerry, Lieberman, Lincoln, Miller, Stevens, 
and Warner for cosponsoring our bill.
  The Good Samaritan Hunger Relief Act that Senator Lugar and I 
introduced represents a great partnership between businesses and 
organizations working to alleviate hunger. The bill will increase 
donations to food banks, soup kitchens, and other hunger relief 
charities and therefore help local communities and organizations become 
the first line of defense against hunger in America.
  Under current tax law, the deduction allowed for donated food does 
not cover expenses incurred by the business. In many cases, this means 
that it is cheaper for a business or farmer to throw away leftover food 
instead of donating it to the hungry. This legislation will make it 
easier for restaurants, food processors, and farmers to contribute food 
to food banks, pantries, and homeless shelters by allowing the 
deduction of the full market value of food donated.
  Over the years, the legislation has received the endorsement of 
various hunger relief and food community organizations, including 
America's Second Harvest Food Banks, the American Farm Bureau 
Federation, the California Emergency Foodlink, the Council of Chain 
Restaurants, the Grocery Manufacturers of America, Lighthouse 
Ministries Inc., the National Restaurant Association and the Salvation 
Army. I would like to thank Senators Akaka, Allen, Bayh, Bond, Cochran, 
Dayton, DeWine, Dodd, Durbin, Ensign, Fitzgerald, Harkin, Kerry, 
Landrieu, Miller, Roberts, Santorum, Schumer, and Smith for also 
cosponsoring our bill.
  I want to thank the chairman and ranking member of the Senate Finance 
Committee for including the Artist-Museum Partnership Act and the Good 
Samaritan Hunger Relief Act in the CARE Act. As we pass this important 
legislation today, I look forward to working with my colleagues to 
ensure that the bipartisan compromises contained in the Senate bill are 
preserved.
  Mr. KERRY. Madam President, I rise today to offer my support for the 
CARE Act of 2003. Now that the objectionable ``charitable choice'' 
provisions of the bill have been removed, and the Republicans have 
agreed to pay for the tax provisions in the bill, the positives of the 
legislation clearly outweigh the negatives and the final result is 
worthy of support.
  There are several aspects of the bill of which I want to make note. 
Let me briefly mention them.
  First, several elements in the bill were included as amendments after 
several Senators, including myself, worked to add them in the Finance 
Committee. These include an enhanced tax deduction for contributions of 
food inventory, which will be very helpful for food banks assisting the 
poor; a new market-value deduction for art donated to nonprofit 
institutions by an artist during his or her lifetime; and some 
restoration of funding for the social service block grant program. 
These are all worthy provisions.
  Second, I have argued that while we have the largest deficits in 
history and face pressing domestic needs and the long-term expense of 
rebuilding Iraq, we should not have any new tax cuts that are not paid 
for. That is why I have offered a stimulus package whose costs are 
offset in future years, so we can stimulate the economy today without 
passing the bill to our kids. I am pleased that the Finance Committee 
worked in a bipartisan way to pay for the provisions in the CARE Act, 
in order to eliminate any long-term cost. Moreover, I am especially 
pleased that the major pay-for provisions in the bill are clarification 
of the economic substance doctrine and other provisions related to tax 
shelters. I introduced legislation to reform these shelters during the 
107th Congress and the Finance Committee took much of the language from 
my original bill when they needed a more comprehensive offset this 
year. Most notably, last year's

[[Page 8865]]

offsets for the CARE Act did not include the economic substance 
provision; now it represents the single largest pay-for. At a time when 
we are learning how far companies will go to abuse the tax system, 
changes to these shelter provisions come at just the right time.
  Finally, although the nonitemizer deduction for charitable 
contributions is getting the most attention in this bill, the largest 
permanent provision of the CARE Act will allow tax-free IRA rollovers 
to charitable organizations. Under the bill, people will be able to 
make planned charitable gifts out of IRAs at age 59\1/2\, and direct 
gifts at age 70\1/2\, without any tax consequence. This is language 
that I worked on with Senator Dorgan, and I worked hard in the Finance 
Committee to have the Dorgan-Kerry language included in the CARE 
markup. The new language will be very beneficial to the many colleges, 
universities, and cultural institutions throughout my home State.
  The new law will make a big difference, and it is important that 
people understand how it works. Under current law, one's itemized 
deductions are generally limited to one-half of one's income. In the 
case of a retired worker with $30,000 of annual income, but $150,000 
accumulated in an IRA, this limitation would prevent the retiree from 
making a $30,000 donation from the IRA to the charity of his or her 
choice. The entire $30,000 withdrawal from the IRA would be taxed as 
income, but only $15,000--50 percent of annual income--would be allowed 
as a charitable deduction. Under this bill, however, the entire 
contribution would be free of any tax consequence: The withdrawal would 
not be taxed as income, and the contribution would not be counted as a 
deduction. The taxpayer can simply make the transfer to the charity 
completely tax-free.
  If the objective of this bill is to increase charitable giving, this 
is the central provision that will drive that result. I thank the 
sponsors of the bill, Senators Lieberman and Santorum, and the Finance 
Committee leadership, Senators Grassley and Baucus, and I urge my 
colleagues to support the CARE Act.
  Mr. LIEBERMAN. Madam President, I am disappointed that the 
administration has put out a statement today opposing the SSBG 
provisions in this bill, especially after we negotiated a bill with the 
Administration that included those provisions. The SSBG funding is 
critically important to this bill. It funds a number of essential 
social services that have been harmed by cuts to that program. I'd like 
to put in the record here the results of a survey done by the United 
Way of America.
  In January 2000, UWA conducted an informal survey to assess the 
impact cuts to SSBG have had on local United Ways and their community 
partners. This study represents the impact of cuts from a funding level 
of $2.8 billion to SSBG in fiscal year 1995, to $1.9 billion in fiscal 
year 1999. Since conducting the survey, SSBG funding has been further 
reduced to $1.7 billion.
  Following summarizes ``The Stories Behind the Social Services Block 
Grant: A Survey by United Way of America.''

       Effect of SSBG Cuts on Health and Human Service Agencies: 
     One hundred thirty-eight agencies from 26 States responded.
       Effect on budget: 38 percent received less SSBG money in 
     1999 than in the 1995; 42 percent have been level funded for 
     the past 5 years.
       Effect on services: 17 percent of the total respondents had 
     to cut programs to compensate for SSBG cuts; 29 percent of 
     the agencies that received less SSBG money in 1999 than in 
     1995 were forced to cut programs; 32 percent of the total 
     respondents had to cut staff to compensate for SSBG cuts; 50 
     percent of the agencies that received less SSBG money in 1999 
     than in 1995 had to cut staff; 46 percent of the total 
     respondents were forced to serve fewer clients; 73 percent of 
     the agencies that received less SSBG money in 1999 than in 
     1995 were forced to serve fewer clients.
       Respondents' median 1999 grant: $70,472.00.
       Median percent of respondents' budget that SSBG represents: 
     10 percent.
       Median number of people served with respondents' SSBG 
     funds: 180.

  The survey found that further cuts to SSBG would greatly reduce the 
reach and impact programs that provide services for a full range of 
health and human services from child welfare and child care to youth 
development, job training and other work supports for those 
transitioning off welfare, assistance for domestic violence victims, 
respite care, home care services and information and referral. The 
administration's backtracking on its assurances about funding this 
program will further damage these efforts.
  Mr. BUNNING. Madam President, I would like to express my support for 
S. 476, the CARE Act. 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 incomes 
taxes, by allowing tax-free distributions from IRAs for charities and 
by encouraging donations of books, food inventory, and computers.
  I particularly would like to thank the managers of this bill for 
including a provision in the Managers' amendment that I had discussed 
in the Finance Committee earlier this year. That provision which will 
be in effect for certain tax-exempt bonds issued 1 year after the date 
of enactment of this bill, is aimed at making it easier for non-profit 
nursing and elder-care facilities to gain access to tax-exempt bond 
markets which might not otherwise be available to it. The provision was 
crafted to address some of the affordable funding issues facing the 
non-profit agencies that are attempting to provide these important and 
much-needed elder-care facilities, particularly in underserved regions 
of our country.
  As you well know, Madam President, with the aging of our population, 
the challenges facing the underserved community of the elderly will 
continue to grow. One way that we can contribute to the good work that 
these non-profit nursing homes are doing is by finding ways to help 
them gain access to affordable capital so that they can continue to 
serve this important segment of our population.
  I thank Chairman Grassley and Ranking Member Baucus of the Finance 
Committee and Mr. Santorum, the chief supporter of this bill, and their 
staffs for their assistance with this issue.
  Mr. GRASSLEY. Madam President, I rise today to speak in support of a 
key provision in the CARE Act, the restoration of $1.375 billion for 
the Social Services Block Grant Program or SSBG.
  As my colleagues know, SSBG is an extremely flexible grant program 
that states use to pay for a wide variety of social services 
activities. States have broad discretion over the use of these funds. 
In recent years, the largest expenditures for services under the SSBG 
were for child protective services, children's foster care and 
prevention and intervention services.
  Additionally, SSBG funds go to provide crucial services such as 
respite care for the elderly, adult protective services, as well as 
adoption programs.
  In 1996, during the debate over welfare reauthorization, the Congress 
and the States agreed to temporarily decrease SSBG from $2.8 billion a 
year to $2.38 billion a year, until welfare reform was firmly 
established. The agreement further stipulated that SSBG would be funded 
at $2.38 billion per year until fiscal year 2003 when it would be 
restored to $2.8 billion per year.
  We have not lived up to our promise. Funding for SSBG has been 
reduced considerably. Currently this vital program is funded at $1.7 
billion a year.
  This program is very important in my State of Iowa.
  There were over 119,708 children and adults benefitting from SSBG-
funded services in the state of Iowa in fiscal year 2000.
  Iowa spent almost half of their $29 million block grant--48 percent--
on services to persons with disabilities covering both physically 
disabled and developmentally disabled persons. Services include adult 
residential care, adult day care, community-supervised living, 
sheltered workshops and work activities.
  Iowa used $982,078 in SSBG for the prevention of abuse and neglect to 
elderly and disabled persons compared to

[[Page 8866]]

receiving only $55,927 from the title VII Elder Abuse under the Older 
Americans Act.
  I worked very hard to ensure that SSBG was included in the CARE Act. 
The reason why I felt so strongly that it be included in the bill is 
because I see an SSBG increase as one of the ways we can direct fiscal 
relief to the states.
  States are currently suffering under the worst fiscal crisis since 
World War II. I am committed to finding ways to assist the states 
manage this fiscal crisis. I view the inclusion of the restoration of 
SSBG funds as a good first step towards assisting the States make it 
through this current crisis.
  I appreciate my colleagues' hard work on this bill and look forward 
to its enactment into law.
  Mr. BAUCUS. Madam President, the CARE Act is an important piece of 
legislation that will help those organizations that are always there to 
help us. On balance, I believe the bill will encourage more charitable 
giving. And this is particularly important now, when demand on these 
organizations is out-pacing resources.
  This legislation would not have been possible without the 
contributions of many.
  First, I would like to thank the Finance Committee staff for their 
expert counsel and hard work. They spent many long hours perfecting 
this legislation. They are role models for those in public service.
  I appreciate the cooperation we received from the Republican staff 
members including Kolan Davis, Mark Prater, Dean Zerbe, Elizabeth 
Paris, Christy Mistr, and Ed McClellan.
  I want to especially thank my staff, including Jeff Forbes, John 
Angell, Russ Sullivan, Patrick Heck, and Jonathan Selib. I also want to 
mention our hardworking interns, Shawn White and Tyler Garrett.
  The Finance Committee staff worked closely with staff members from 
other Senate offices. They also were in touch with officials from the 
Administration, including Susan Brown and others from Treasury.
  The Joint Committee on Taxation provided technical assistance. Lindy 
Paull, Mary Schmitt, Roger Colinvaux, Ron Schultz, Sam Olchyk, Ray 
Beeman, and Brian Meighan. And many others. We owe many thanks for the 
assistance they provided.
  Second, I want to thank Senators Lieberman and Santorum. The CARE Act 
has been a priority for them for a long time. They have worked 
tirelessly to get this bill before the Senate. We are grateful for 
their diligence, cooperation and input.
  I also want to thank our leaders Senators Frist and Daschle for their 
decision in moving the CARE Act forward.
  I want to thank my good friend and colleague, Chairman Grassley. As 
always, he has been instrumental in ensuring a truly bipartisan bill. 
And, it continues to be a pleasure to work with him.
  Finally, I look forward to seeing this bill passed into law--and 
soon. It is my hope that the House will take up this legislation 
quickly.
  The CARE Act is one of the President's top priorities. There is a lot 
in this bill that enjoys widespread, bipartisan support.
  Together, we have been working on this bill for more than 2 years. 
There is no need for further delay.
  I urge the House to act quickly on this legislation so that we can 
have the CARE Act on the President's desk by the Memorial Day recess.
  This is a good bill. I urge my colleagues to vote for the CARE Act.
  Madam President, the CARE Act takes bold steps to combat the 
devastating problem of hunger--an issue that affects far too many of my 
constituents in Montana.
  Today, in the greatest and most prosperous nation in the world, 
hunger remains a real problem for our families.
  According to the USDA, more than 1 in 8 households were food insecure 
in Montana between 1999 and 2001. This means that they do not 
consistently know where their next meal will come from.
  And 4 percent of households in Montana--that is 32,000 people, 12,000 
of whom are children--live in conditions so severe that they are 
classified as actually experiencing hunger.
  These numbers are on the rise--Montana's hunger rate had the second 
highest jump of any state from an identical USDA study done just three 
years earlier.
  Many of these are working poor families, making gut-wrenching 
decisions between whether to spend their hard-earned money on housing, 
healthcare, child-care, or food.
  So this is an issue that concerns me deeply.
  The CARE Act will provide a valuable weapon in the war to end hunger. 
It will do so by making it easier for farmers and small businesses to 
donate surplus food to our struggling hunger relief charities.
  Simply put, these difficult economic times mean that more people are 
showing up to food pantries and soup kitchens at a time when these 
organizations are struggling the most to meet demand.
  These community groups--usually consisting solely of volunteers--are 
often ``first-responders'' in the battle against hunger.
  The CARE Act will help food pantries and soup kitchens to keep food 
on the shelves for hungry families.
  The CARE Act is also good for America's struggling farmers and 
businesses. It helps them do the right thing by donating surplus food 
that would otherwise have been thrown away.
  Here is what Peggy Grimes, of the Montana Food Bank Network has to 
say about the CARE Act:

       It has come to my attention that these struggling farmers 
     and small grocers do not receive any tax benefit for their 
     increasing donations. They have been donating out of concern 
     for their neighbors as they have been hearing reports of 
     increased food insecurity throughout Montana. . . . For 
     Montana, as an agricultural state, the Care Act will be of 
     significant benefit to both those donating food and those in 
     need of food.

  Hunger in America is not a problem of lack of food. The USDA 
estimates that 96 billion pounds of food are thrown away each year.
  This is simply shameful when working families are struggling to make 
ends meet. There is a problem when it is more profitable to throw away 
food than it is to donate it to those who need it.
  The CARE Act helps solve this problem by providing incentives to 
farmers and small businesses, whose resources are also constrained in 
these economic times.
  America's Second Harvest, the nation's largest anti-hunger charity, 
estimates that the CARE Act will result in enough donated food to 
provide roughly 765 million meals over the next 10 years.
  These results are real, and I am proud to support this provision.
  The CARE Act is a win-win-win situation. It is a win for anti-hunger 
charities that work hard to ensure that America's families have food on 
the table.
  It is a win for our farmers and businesses that want to help their 
neighbors in need. And most importantly, it is a win for America's low-
income families, who will see food on their tables.
  I urge my colleagues to support the CARE Act.
  Madam President, it is a sad fact that in a large number of homes--
particularly in the homes of our poorest, most at-risk children--you 
cannot find a book. Sixty percent of kindergartners--in neighborhoods 
that performed poorly in school--did not own a single book.
  The lack of access to books poses the greatest barrier to literacy. 
That is why we must change the status quo.
  Unfortunately, the tax law functions as a disincentive to the 
charitable donation of books to schools, libraries, and literacy 
programs. Under the tax law, it is actually more economical to truck 
books to a dump than it is to give them to your local school or 
library.
  Through the title I program, however, we have nearly 15 million 
youngsters nationwide enrolled. This allows us to reach at least a 
portion of the disadvantaged children in our country.
  In my State of Montana, there are an estimated 35,000 poor children 
who qualify for the title I program. These

[[Page 8867]]

children will also benefit from the provision in the CARE Act which 
encourages the donation of books. For a child who has never owned a 
book--their first book is a prized possession.
  An increase in charitable book contributions would especially benefit 
the State of Montana. According to the Montana Library Association, the 
Montana State Library has fallen victim to a 26 percent budget cut in 
2003. These reductions will mean less money for local libraries. And 
they will mean cuts in the State subsidies that currently fund book 
purchases, interlibrary loans, and audio and other special books for 
the elderly, disabled, and sick.
  According to the Montana Commissioner of Higher Education, Montana 
universities will also receive fewer books. In the wake of the latest 
budget cuts, the state legislature has cut university budgets 8.4 
percent. That puts university funding below 1992 levels.
  The University of Montana leads the list with a 10.9 percent cut in 
state money. Followed by Montana State University at a 9.8 percent cut. 
And MSUY-Billings at a 8.5 percent cut. The libraries at Montana 
universities will experience cuts of $1.6 million for new materials.
  These cuts will not only hurt universities--they will also hurt the 
programs in which university students participate. For example, the 
Montana Reads literacy program--started by University of Montana 
President Dennison in 1997.
  This program is critical to the 60-plus University of Montana student 
volunteers who regularly tutor kindergarten through fifth grade 
Missoula students. I think it is simple common sense that a critical 
component of any successful literacy program is for the students to 
have books. These Montana tutors depend on book donations to help their 
students. The CARE Act helps them to help the elementary kids in 
Missoula.
  Of course these donations will also greatly aid adult literacy. 
Campaigns such as the Montana Adult Basic & Literacy Education, ABLE, 
program serve adults who lack sufficient mastery of basic skills to 
function in society, a high school diploma, or basic English skills. In 
Montana, 75,000 adults aged 25 and over do not have a high school 
diploma or a GED. Twenty-five thousand adults have less than a ninth 
grade education.
  Every effort we make to improve reading in Montana will suffer if we 
do not include books in the equation. The Federal Government granted 36 
Montana schools $11 million over 3 years to find reading coaches, 
family literacy programs and tutors.
  These grants are so important to Montana. But if we fail to supply 
books as part of the equation, then the grants are not put to use in 
the most efficient way. Allowing charitable donations for books ensures 
that we use taxpayer dollars more effectively. We cannot afford not to.
  Madam President, earlier this year, Senator Grassley and I 
reintroduced S. 701, the Rural Heritage Conservation Act. This bill 
will help the nation's hard-working farmers and ranchers preserve their 
heritage and way-of-life. At the same time, it promotes conservation of 
valuable open space and wildlife habitat. This legislation is included 
as a provision in the CARE Act.
  S. 701 provides targeted income tax relief to small farmers and 
ranchers who wish to make a charitable contribution of a qualified 
conservation easement.
  The bill would allow eligible farmers and ranchers to increase the 
currently deductible amount for charitable contributions of qualified 
conservation easements. That means that farmers and ranchers can deduct 
amounts up to 100 percent of adjusted gross income.
  The bill also extends the carryover period from 5 years to 15 years. 
In the case of all other landowners, the AGI limitation would be raised 
from 30 percent to 50 percent.
  Senator Grassley has worked closely with me to include the provisions 
of S. 701 in the CARE Act. I believe our bipartisan cooperation is the 
reason why we have come so far in moving this very important piece of 
legislation.
  Passing the provisions in S. 701 will mean that farmers and ranchers 
facing the potential of having to sell their ranch will have another 
financially viable option. Under this proposal, they will be able to 
choose to take advantage of the conservation easement incentives, stay 
on their land, and invest in their farming or ranching business.
  In practical terms, that means these farmers and ranchers do not have 
to sell the family farm or ranch. They can keep it in the family. This 
is so important to preserving the character and economic vitality of 
our rural communities.
  Over the past 25 years, over 3 million acres of agricultural lands 
have been lost to development in Montana alone. Many of those lands 
were lost when family farms--hit hard by tough times--were forced to 
give up their generations' old farming operations and sell to 
developers in order to pay the bills.
  We have to find additional tools to help these folks keep their land 
in agricultural production and in open space. Our legislation provides 
one of those tools.
  To illustrate why this legislation is so important, let me give you 
an example of the impact of current law on farmers and ranchers.
  Jerry Townsend was born and raised on his family's ranch in Highwood, 
Montana. He has operated the ranch since purchasing it from his parents 
in 1974. On his ranch, called the Elk Run Ranch, he raises commercial 
beef cattle.
  In 1995, Mr. Townsend donated a conservation easement to the Montana 
Land Reliance. His ``donation'' was calculated at $528,000. However, 
because his ranch is held as a C corporation, his tax deduction was 
limited to10 percent of the ranch's net income. His tax deduction over 
the six years totaled a paltry $1,998--less than one percent of the 
total value of his donation.
  In contrast, a landowner with more in income would have a much 
greater incentive to enter into an easement agreement because he or she 
would be able to deduct more of the value of the donation from their 
taxes.
  S. 701 would do nothing more than level the playing field for farmers 
and ranchers when it comes to the tax benefits of donating conservation 
easements. What should matter is the value of your land--not the amount 
of your income.
  Our conservation easement bill, and as included in the CARE Act, have 
been endorsed by 210 land trusts representing 44 States. Other 
supporters include the Montana Stockgrowers, the American Farmland 
Trust, and the Colorado Cattlemen.
  This is a win-win proposition. Farmers and ranchers will be able to 
preserve their important agricultural and ranching lands for future 
generations. They will be able to continue to operate their businesses. 
They will be able to stay on their land.
  It is a purely voluntary, incentive-based way to promote 
conservation. And it will allow us to bring people together. 
Landowners. Conservationists. The Federal Government. And local 
communities. All working together to preserve our precious natural 
resources and agricultural heritage.
  Madam President, I rise to talk about another important, but often 
overlooked, aspect of the CARE Act additional funding for the Social 
Services Block Grant, or SSBG.
  SSBG funds are very flexible. States can use these funds to assist 
abused children cope with their trauma; to help seniors live at home, 
instead of nursing homes; to provide day care for children in low-
income working families; so that we know those kids are in safe places 
while their parents work; to assist the disabled so that they can fully 
participate in our society; to help parents adopt children, so that 
every child has a loving parent.
  In my State of Montana, we use SSBG to help children with 
developmental disabilities, like those with cerebral palsy.
  SSBG is ``glue money.'' Communities use it to fill holes in the 
safety net. It is up to States and localities to decide where it goes. 
We give them a long

[[Page 8868]]

menu of options, and they use it the way they see fit, based on local 
needs. This bill provides over $1 billion more in SSBG to fill those 
holes over 2 years.
  The goal of the CARE Act is to increase compassionate activity in our 
country. We are a big-hearted country. We want to help each other. This 
bill will help turn more of that desire into action and will make sure 
Government is doing its part.
  SSBG funds support the activities of faith-related charities. We give 
the money to the States and they often contract with faith-related 
organizations to do the hands-on work that they do so well. If you want 
to support Catholic Charities, then you should support SSBG. If you 
want to support Lutheran Social Services, then you should support SSBG. 
These organizations have told me that SSBG funds are crucially 
important to them.
  The CARE Act is about increased individual giving. That is absolutely 
vital. But if the Government does less, then any increase in individual 
giving may only be filling that gap left by the withdrawal of the 
Government.
  The additional SSBG funding in this bill is our way of saying that 
the Government will keep its part of the bargain and continue to play a 
role. It is a flexible source of funds, so it won't be bureaucrats in 
Washington dictating the money will be used. And much of the funding 
will go to faith-related charities--the very organizations we want to 
bolster.
  We haven't talked much about the SSBG provision. That is a good sign. 
Around here, we tend to talk about the things we disagree about. I am 
glad we could find common ground on this provision so easily. I'm sure 
the faith-related charities will thank us for doing so.
  I commend Senators Lieberman and Santorum for their work on the CARE 
Act.
  Madam President, on February 5, 2003, the Finance Committee passed 
tax shelter legislation to offset the cost of the CARE Act.
  How appropriate it is for a bill to encourage more charitable giving 
to be paid for by those shirking their responsibility to pay their fair 
share of taxes.
  The tax shelter legislation included in the CARE Act was developed by 
the Finance Committee over the past 4 years.
  The committee has taken time to develop appropriately targeted 
legislation. Care has been taken to avoid encumbering legitimate 
business transactions. Nevertheless, we will all be burdened until we 
get this problem in check.
  Without these changes, honest businesses will continue to be burdened 
to the extent they compete against companies avoiding taxes.
  Tax shelters are carefully engineered tax transactions. Most have 
little or no economic substance. That means that they are designed to 
achieve unwarranted tax benefits rather than business profit. And, they 
place honest taxpayers at a considerable disadvantage.
  As Michael Graetz, Professor of Law at Yale University, once said: 
``a tax shelter is a deal done by very smart people that, absent tax 
considerations, would be very stupid.''
  It is time to put a stop to the unsavory practice of mining the Tax 
Code for these abusive shelters.
  These transactions are designed to take advantage of the complexity 
of the tax law to obtain benefits that Congress never intended.
  They pose a real threat to the integrity of our self-assessment 
system by eroding the public's respect of the tax law.
  Under tax shelter legislation produced by the Finance Committee, 
promoters, advisors, and taxpayers would be subject to stiff penalties 
for failing to acknowledge these transactions to the IRS.
  Treasury believes that if a taxpayer feels comfortable entering into 
a transaction; if a promoter feels comfortable selling a transaction; 
and, an advisor feels comfortable recommending a transaction, they 
should all feel comfortable disclosing the transaction to the IRS.
  We have worked closely with the Treasury Department in crafting this 
legislation. We have given Treasury authority to fine-tune the 
provisions so as to protect legitimate tax planning.
  But make no mistake, I am committed to combating abusive tax 
transactions. The tax shelter package is the first installment. It will 
not be the last.
  The tax shelter package reinforces steps already taken by Treasury by 
requiring more transparency.
  Taxpayers will now be required to disclose certain reportable 
transactions on their tax returns or face stiff penalties. Promoters 
will have to provide information to IRS on their tax avoidance 
strategies or face stiff sanctions.
  These provisions are designed to change the cost-benefit ratio of 
those contemplating engaging in egregious tax planning strategies.
  The bill would also eliminate abusive tax shelters by denying tax 
benefits with little or no economic substance.
  That means that taxpayers will have to enter into transactions for 
legitimate economic and business reasons and not purely for tax 
avoidance.
  This was the key recommendation made by the Joint Committee on 
Taxation in response to the investigation of Enron's tax transactions.
  Presently, there is lack of uniformity regarding the proper 
application of the economic substance doctrine. Some courts apply a 
conjunctive test that requires a taxpayer to establish the presence of 
both economic substance and a substantial nontax business purpose. 
Other courts have found the existence of one of these as sufficient to 
respect a transaction.
  The provision will clarify the application of the doctrine. It does 
not tell the court when to apply it.
  A tax shelter disallowed in New York should not be permitted 
elsewhere. The clarification ensures uniformity across the country.
  The tax shelter legislation included in the CARE Act is only a down 
payment. It will go a long way toward curbing abusive transactions. But 
it is not the final answer.
  Based on the Joint Committee's investigation of Enron's tax returns, 
additional steps are needed. The Joint Committee made several specific 
recommendations for additional changes. We are looking closely at these 
recommendations. Additional legislation will be forthcoming. I am 
confident we will make any additional changes with bipartisan support.
  Enron kept the IRS in the dark and out-maneuvered. The lack of 
adequate disclosure rules and the lack of sufficient IRS enforcement 
resources clearly helped Enron and its executives walk away with 
millions maybe billions. Our legislation would bring more transparency 
to these Enron-type transactions. The Enron report clearly demonstrates 
the need for meaningful shelter legislation.
  I urge my colleagues to support this measure.
  Mr. DASCHLE. Madam President, this is an important day for Senate.
  As American service men and women risk their lives to relieve the 
suffering of an oppressed people in Iraq, the Senate is setting aside 
ideological differences to energize American compassion to relieve 
suffering here at home.
  Over the past few years, the country's economic troubles have carried 
a double sting for America's charities. While more Americans are in 
need, charitable donations have dropped as families feel the pinch of 
the economic downturn. As a result, many charities have had to cut back 
on the services they provide. That means fewer meals for the hungry, 
fewer beds for the homeless, fewer safe havens for battered wives and 
children.
  This legislation, the CARE Act, expands our Nation's capacity to 
respond to the needs of its citizens who need help. With its passage, 
the Senate adds the resources of the Federal Government to the 
commitment of our charities and faith-based organizations.
  This bill won't solve every problem in our cities and towns. But it 
will get meaningful aid to organizations and institutions that are 
equipped to help those who need help the most. It also creates real 
incentives to encourage giving and makes it easier for Americans to 
come to the aid of their fellow citizens.

[[Page 8869]]

  Our country has a history of pulling together to help the less 
fortunate, and the religious community and private charities are an 
integral part of these efforts.
  I am pleased that the Senate is helping carry that spirit forward by 
reaffirming the relationship between the Federal Government and our 
community and faith-based groups.
  I want to commend Senator Lieberman and Senator Santorum for their 
leadership on this legislation.
  Throughout their work, they have kept sight of two fundamental goals: 
First, increasing assistance to those organizations that lend a hand to 
those in need; and second crafting a bill that reflects the Senate's 
strong bipartisan support for America's charities.
  Today all their hard work is being rewarded. And the result will be 
community and faith-based groups that are better equipped to tackle the 
challenges facing our families and neighborhoods today.
  This legislation increases funding for social services block grants 
and maternity homes that help teen mothers get their lives back on the 
right track. It also creates new avenues for giving, by making it 
easier to transfer retirement savings into charitable gifts and by 
expanding the range of deductible donations.
  While we are forgoing a stronger relationship between the Federal 
Government and the faith community, we have been able to accomplish 
this goal without undermining basic constitutional protections.
  I was particularly pleased that Senators Santorum and Lieberman were 
able to eliminate some of the more divisive elements of the version 
that passed the House of Representatives.
  This compromise package will not privatize Federal social service 
programs, or pre-empt State and local civil rights laws. These are 
difficult and divisive issues. But American charities need help today. 
And by passing this legislation, the Senate sends a message that when 
our citizens are in need, we cannot hold aid hostage to endless 
ideological debate. Compassion is not a partisan issue.
  All Americans, indeed, all human being, are bound by a common 
commandment to pursue justice, love kindness, and seek mercy for the 
oppressed. It is a standard that should guide all our work.
  Today, with the passage of this bill, we move a little closer to 
embodying the spirit of these words, and ever closer to fulfilling our 
obligation to one another.
  Mr. GRASSLEY. Madam President, I yield back all of my time except for 
30 seconds that I want to yield to the Senator from Pennsylvania, 
because of his hard work on this legislation.
  The PRESIDING OFFICER. I ask those who are speaking to please take 
their conversations off the floor so we can hear the Senator from 
Pennsylvania.
  Mr. SANTORUM. Madam President, I thank the chairman and ranking 
member of the Finance Committee for the tremendous bipartisan work it 
took to bring this bill to the floor, where I hope we will have a very 
strong vote on final passage. Particularly I thank the Senator from 
Connecticut, Mr. Lieberman, for his outstanding cooperation and work to 
make sure this was done in a very strong, bipartisan way.
  Finally, I thank Randy Brandt, from my staff, who has put his heart 
and soul into this legislation and just did an outstanding job. I thank 
him and yield the remainder of my time.
  The PRESIDING OFFICER. All time having been yielded back, the 
question is on the engrossment and third reading of the bill.
  The bill was ordered to be engrossed for a third reading and was read 
the third time.
  Mr. GRASSLEY. Madam President, have the yeas and nays been ordered?
  The PRESIDING OFFICER. They have not.
  Mr. GRASSLEY. I ask for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second? There is a 
sufficient second.
  The bill having been read the third time, the question is, Shall the 
bill pass?
  The clerk will call the roll.
  The legislative clerk called the roll.
  The result was announced--yeas 95, nays 5, as follows:

                      [Rollcall Vote No. 128 Leg.]

                                YEAS--95

     Akaka
     Alexander
     Allard
     Allen
     Baucus
     Bayh
     Bennett
     Biden
     Bingaman
     Bond
     Boxer
     Breaux
     Brownback
     Bunning
     Burns
     Byrd
     Campbell
     Cantwell
     Carper
     Chafee
     Chambliss
     Clinton
     Cochran
     Coleman
     Collins
     Conrad
     Cornyn
     Corzine
     Daschle
     Dayton
     DeWine
     Dodd
     Dole
     Domenici
     Dorgan
     Durbin
     Edwards
     Ensign
     Feingold
     Feinstein
     Fitzgerald
     Frist
     Graham (FL)
     Graham (SC)
     Grassley
     Gregg
     Hagel
     Harkin
     Hatch
     Hollings
     Hutchison
     Inhofe
     Inouye
     Jeffords
     Johnson
     Kennedy
     Kerry
     Kohl
     Kyl
     Landrieu
     Lautenberg
     Leahy
     Levin
     Lieberman
     Lincoln
     Lott
     Lugar
     McCain
     McConnell
     Mikulski
     Miller
     Murkowski
     Murray
     Nelson (FL)
     Nelson (NE)
     Pryor
     Reed
     Reid
     Roberts
     Rockefeller
     Santorum
     Sarbanes
     Schumer
     Sessions
     Shelby
     Smith
     Snowe
     Specter
     Stabenow
     Stevens
     Sununu
     Talent
     Voinovich
     Warner
     Wyden

                                NAYS--5

     Craig
     Crapo
     Enzi
     Nickles
     Thomas
  The bill (S. 476), as amended, was passed, as follows:

                                 S. 476

       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 ``CARE 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.--The table of contents for this Act 
     is as follows:

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 accounts 
              for charitable purposes.
Sec. 103. Charitable deduction for contributions of food inventories.
Sec. 104. Charitable deduction for contributions of book inventories.
Sec. 105. Expansion of charitable contribution allowed for scientific 
              property used for research and for computer technology 
              and equipment used for educational purposes.
Sec. 106. Modifications to encourage contributions of capital gain real 
              property made for conservation purposes.
Sec. 107. Exclusion of 25 percent of gain on sales or exchanges of land 
              or water interests to eligible entities for conservation 
              purposes.
Sec. 108. Tax exclusion for cost-sharing payments under Partners for 
              Fish and Wildlife Program.
Sec. 109. Adjustment to basis of S corporation stock for certain 
              charitable contributions.
Sec. 110. Enhanced deduction for charitable contribution of literary, 
              musical, artistic, and scholarly compositions.
Sec. 111. Mileage reimbursements to charitable volunteers excluded from 
              gross income.
Sec. 112. Extension of enhanced deduction for inventory to include 
              public schools.
Sec. 113. 10-year divestiture period for certain excess business 
              holdings of private foundations

TITLE II--PROPOSALS IMPROVING THE OVERSIGHT OF TAX-EXEMPT ORGANIZATIONS

Sec. 201. Disclosure of written determinations.
Sec. 202. Disclosure of Internet web site and name under which 
              organization does business.
Sec. 203. Modification to reporting capital transactions.
Sec. 204. Disclosure that Form 990 is publicly available.
Sec. 205. Disclosure to State officials of proposed actions related to 
              section 501(c) organizations.
Sec. 206. Expansion of penalties to preparers of Form 990.
Sec. 207. Notification requirement for entities not currently required 
              to file.

[[Page 8870]]

Sec. 208. Suspension of tax-exempt status of terrorist organizations.

     TITLE III--OTHER CHARITABLE AND EXEMPT ORGANIZATION PROVISIONS

Sec. 301. Modification of excise tax on unrelated business taxable 
              income of charitable remainder trusts.
Sec. 302. Modifications to section 512(b)(13).
Sec. 303. Simplification of lobbying expenditure limitation.
Sec. 304. Expedited review process for certain tax-exemption 
              applications.
Sec. 305. Clarification of definition of church tax inquiry.
Sec. 306. Expansion of declaratory judgment remedy to tax-exempt 
              organizations.
Sec. 307. Definition of convention or association of churches.
Sec. 308. Payments by charitable organizations to victims of war on 
              terrorism and families of astronauts killed in the line 
              of duty.
Sec. 309. Modification of scholarship foundation rules.
Sec. 310. Treatment of certain hospital support organizations as 
              qualified organizations for purposes of determining 
              acquisition indebtedness.
Sec. 311. Charitable contribution deduction for certain expenses 
              incurred in support of Native Alaskan subsistence 
              whaling.
Sec. 312. Matching grants to low-income taxpayer clinics for return 
              preparation.
Sec. 313. Exemption of qualified 501(c)(3) bonds for nursing homes from 
              Federal guarantee prohibitions.
Sec. 314. Excise taxes exemption for blood collector organizations.
Sec. 315. Pilot project for forest conservation activities.
Sec. 316. Clarification of treatment of Johnny Micheal Spann Patriot 
              Trusts.

                 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--INDIVIDUAL DEVELOPMENT ACCOUNTS

Sec. 501. Short title.
Sec. 502. Purposes.
Sec. 503. Definitions.
Sec. 504. Structure and administration of qualified individual 
              development account programs.
Sec. 505. Procedures for opening and maintaining an individual 
              development account and qualifying for matching funds.
Sec. 506. Deposits by qualified individual development account 
              programs.
Sec. 507. Withdrawal procedures.
Sec. 508. Certification and termination of qualified individual 
              development account programs.
Sec. 509. Reporting, monitoring, and evaluation.
Sec. 510. Authorization of appropriations.
Sec. 511. Matching funds for individual development accounts provided 
              through a tax credit for qualified financial 
              institutions.
Sec. 512. Account funds disregarded for purposes of certain means-
              tested Federal programs.

              TITLE VI--MANAGEMENT OF EXEMPT ORGANIZATIONS

Sec. 601. Authorization of appropriations.

                     TITLE VII--REVENUE PROVISIONS

        Subtitle A--Provisions Designed To Curtail Tax Shelters

Sec. 701. Clarification of economic substance doctrine.
Sec. 702. Penalty for failing to disclose reportable transaction.
Sec. 703. Accuracy-related penalty for listed transactions and other 
              reportable transactions having a significant tax 
              avoidance purpose.
Sec. 704. Penalty for understatements attributable to transactions 
              lacking economic substance, etc.
Sec. 705. Modifications of substantial understatement penalty for 
              nonreportable transactions.
Sec. 706. Tax shelter exception to confidentiality privileges relating 
              to taxpayer communications.
Sec. 707. Disclosure of reportable transactions.
Sec. 708. Modifications to penalty for failure to register tax 
              shelters.
Sec. 709. Modification of penalty for failure to maintain lists of 
              investors.
Sec. 710. Modification of actions to enjoin certain conduct related to 
              tax shelters and reportable transactions.
Sec. 711. Understatement of taxpayer's liability by income tax return 
              preparer.
Sec. 712. Penalty on failure to report interests in foreign financial 
              accounts.
Sec. 713. Frivolous tax submissions.
Sec. 714. Regulation of individuals practicing before the Department of 
              Treasury.
Sec. 715. Penalty on promoters of tax shelters.
Sec. 716. Statute of limitations for taxable years for which listed 
              transactions not reported.
Sec. 717. Denial of deduction for interest on underpayments 
              attributable to nondisclosed reportable and noneconomic 
              substance transactions.
Sec. 718. Authorization of appropriations for tax law enforcement.

                      Subtitle B--Other Provisions

Sec. 721. Affirmation of consolidated return regulation authority.
Sec. 722. Signing of corporate tax returns by chief executive officer.
Sec. 723. Securities civil enforcement provisions.
Sec. 724. Review of State agency blindness and disability 
              determinations.

                  TITLE VIII--COMPASSION CAPITAL FUND

Sec. 801. Support for nonprofit community-based organizations; 
              Department of Health and Human Services.
Sec. 802. Support for nonprofit community-based organizations; 
              Corporation for National and Community Service.
Sec. 803. Support for nonprofit community-based organizations; 
              Department of Justice.
Sec. 804. Support for nonprofit community-based organizations; 
              Department of Housing and Urban Development.
Sec. 805. Coordination.

                    TITLE IX--MATERNITY GROUP HOMES

Sec. 901. 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.--
     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, 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).''.
       (b) Direct Charitable Deduction.--
       (1) In general.--Subsection (b) of section 63 (defining 
     taxable income) is amended by striking ``and'' at the end of 
     paragraph (1), by striking the period at the end of paragraph 
     (2) and inserting ``, and'', and by adding at the end the 
     following new paragraph:
       ``(3) the direct charitable deduction.''.
       (2) Definition.--Section 63 is amended by redesignating 
     subsection (g) as subsection (h) and by inserting after 
     subsection (f) the following new subsection:
       ``(g) Direct Charitable Deduction.--For purposes of this 
     section, the term `direct charitable deduction' means that 
     portion of the amount allowable under section 170(a) which is 
     taken as a direct charitable deduction for the taxable year 
     under section 170(m).''.
       (3) Conforming amendment.--Subsection (d) of section 63 is 
     amended by striking ``and'' at the end of paragraph (1), by 
     striking the period at the end of paragraph (2) and inserting 
     ``, and'', and by adding at the end the following new 
     paragraph:
       ``(3) the direct charitable deduction.''.
       (c) Study.--
       (1) In general.--The Secretary of the Treasury shall study 
     the effect of the amendments made by this section on 
     increased charitable giving and taxpayer compliance, 
     including a comparison of taxpayer compliance between 
     taxpayers who itemize their charitable contributions and 
     taxpayers who claim a direct charitable deduction.
       (2) Report.--By not later than December 31, 2004, 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, 
     2002, and before January 1, 2005.

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

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

[[Page 8871]]

     `qualified charitable distribution' means any distribution 
     from an individual retirement account--
       ``(i) which is made directly by the trustee--

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

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

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

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

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

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

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

     SEC. 103. CHARITABLE DEDUCTION FOR CONTRIBUTIONS OF FOOD 
                   INVENTORIES.

       (a) In General.--Subsection (e) of section 170 (relating to 
     certain contributions of ordinary income and capital gain 
     property) is amended by adding at the end the following new 
     paragraph:
       ``(7) Application of paragraph (3) to certain contributions 
     of food inventory.--For purposes of this section--
       ``(A) Extension to individuals.--In the case of a 
     charitable contribution of apparently wholesome food--
       ``(i) paragraph (3)(A) shall be applied without regard to 
     whether the contribution is made by a C corporation, and
       ``(ii) in the case of a taxpayer other than a C 
     corporation, the aggregate amount of such contributions from 
     any trade or business (or interest therein) of the taxpayer 
     for any taxable year which may be taken into account under 
     this section shall not exceed 10 percent of the taxpayer's 
     net income from any such trade or business, computed without 
     regard to this section, for such taxable year.
       ``(B) Limitation on reduction.--In the case of a charitable 
     contribution of apparently wholesome food, notwithstanding 
     paragraph (3)(B), the amount of the reduction determined 
     under paragraph (1)(A) shall not exceed the amount by which 
     the fair market value of such property exceeds twice the 
     basis of such property.
       ``(C) Determination of basis.--If a taxpayer--
       ``(i) does not account for inventories under section 471, 
     and
       ``(ii) is not required to capitalize indirect costs under 
     section 263A,

     the taxpayer may elect, solely for purposes of paragraph 
     (3)(B), to treat the basis of any apparently wholesome food 
     as being equal to

[[Page 8872]]

     25 percent of the fair market value of such food.
       ``(D) Determination of fair market value.--In the case of a 
     charitable contribution of apparently wholesome food which is 
     a qualified contribution (within the meaning of paragraph 
     (3), as modified by subparagraph (A) of this paragraph) 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 contribution shall be determined--
       ``(i) without regard to such internal standards or such 
     lack of market and
       ``(ii) 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).
       ``(E) Apparently wholesome food.--For purposes of this 
     paragraph, the term `apparently wholesome food' has the 
     meaning given 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 paragraph.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to contributions made after the date of the 
     enactment of this Act.

     SEC. 104. CHARITABLE DEDUCTION FOR CONTRIBUTIONS OF BOOK 
                   INVENTORIES.

       (a) In General.--Section 170(e)(3) (relating to certain 
     contributions of ordinary income and capital gain 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 book inventory for 
     educational purposes.--
       ``(i) Contributions of book inventory.--In determining 
     whether a qualified book contribution is a qualified 
     contribution, subparagraph (A) shall be applied without 
     regard to whether--

       ``(I) the donee is an organization described in the matter 
     preceding clause (i) of subparagraph (A), and
       ``(II) the property is to be used by the donee solely for 
     the care of the ill, the needy, or infants.

       ``(ii) Amount of reduction.--Notwithstanding subparagraph 
     (B), the amount of the reduction determined under paragraph 
     (1)(A) shall not exceed the amount by which the fair market 
     value of the contributed property (as determined by the 
     taxpayer using a bona fide published market price for such 
     book) exceeds twice the basis of such property.
       ``(iii) Qualified book contribution.--For purposes of this 
     paragraph, the term `qualified book contribution' means a 
     charitable contribution of books, but only if the 
     requirements of clauses (iv) and (v) are met.
       ``(iv) Identity of donee.--The requirement of this clause 
     is met if the contribution is to an organization--

       ``(I) described in subclause (I) or (III) of paragraph 
     (6)(B)(i), or
       ``(II) described in section 501(c)(3) and exempt from tax 
     under section 501(a) (other than a private foundation, as 
     defined in section 509(a), which is not an operating 
     foundation, as defined in section 4942(j)(3)), which is 
     organized primarily to make books available to the general 
     public at no cost or to operate a literacy program.

       ``(v) Certification by donee.--The requirement of this 
     clause is met if, in addition to the certifications required 
     by subparagraph (A) (as modified by this subparagraph), the 
     donee certifies in writing that--

       ``(I) the books are suitable, in terms of currency, 
     content, and quantity, for use in the donee's educational 
     programs, and
       ``(II) the donee will use the books in its educational 
     programs.

       ``(vi) Bona fide published market price.--For purposes of 
     this subparagraph, the term `bona fide published market 
     price' means, with respect to any book, a price--

       ``(I) determined using the same printing and edition,
       ``(II) determined in the usual market in which such a book 
     has been customarily sold by the taxpayer, and
       ``(III) for which the taxpayer can demonstrate to the 
     satisfaction of the Secretary that the taxpayer customarily 
     sold such books in arm's length transactions within 7 years 
     preceding the contribution of such a book.''.

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

     SEC. 105. 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, 
     2002.

     SEC. 106. MODIFICATIONS TO ENCOURAGE CONTRIBUTIONS OF CAPITAL 
                   GAIN REAL PROPERTY MADE FOR CONSERVATION 
                   PURPOSES.

       (a) In General.--Section 170(h) (relating to qualified 
     conservation contribution) is amended by adding at the end 
     the following new paragraph:
       ``(7) Additional incentives for qualified conservation 
     contributions.--
       ``(A) In general.--In the case of any qualified 
     conservation contribution (as defined in paragraph (1)) made 
     by an individual--
       ``(i) subparagraph (C) of subsection (b)(1) shall not 
     apply,
       ``(ii) except as provided in subparagraph (B)(i), 
     subsections (b)(1)(A) and (d)(1) shall be applied separately 
     with respect to such contributions by treating references to 
     50 percent of the taxpayer's contribution base as references 
     to the amount of such base reduced by the amount of other 
     contributions allowable under subsection (b)(1)(A), and
       ``(iii) subparagraph (A) of subsection (d)(1) shall be 
     applied--

       ``(I) by substituting `15 succeeding taxable years' for `5 
     succeeding taxable years', and
       ``(II) by applying clause (ii) to each of the 15 succeeding 
     taxable years.

       ``(B) Special rules for eligible farmers and ranchers.--
       ``(i) In general.--In the case of any such contributions by 
     a taxpayer who is an eligible farmer or rancher for the 
     taxable year in which such contributions are made--

       ``(I) if the taxpayer is an individual, subsections 
     (b)(1)(A) and (d)(1) shall be applied separately with respect 
     to such contributions by substituting `the taxpayer's 
     contribution base reduced by the amount of other 
     contributions allowable under subsection (b)(1)(A)' for `50 
     percent of the taxpayer's contribution base' each place it 
     appears, and
       ``(II) if the taxpayer is a corporation, subsections (b)(2) 
     and (d)(2) shall be applied separately with respect to such 
     contributions, subsection (b)(2) shall be applied with 
     respect to such contributions as if such subsection did not 
     contain the words `10 percent of' and as if subparagraph (A) 
     thereof read `the deduction under this section for qualified 
     conservation contributions', and rules similar to the rules 
     of subparagraph (A)(iii) shall apply for purposes of 
     subsection (d)(2).

       ``(ii) Definition.--For purposes of clause (i), the term 
     `eligible farmer or rancher' means a taxpayer whose gross 
     income from the trade or business of farming (within the 
     meaning of section 2032A(e)(5)) is at least 51 percent of the 
     taxpayer's gross income for the taxable year, and, in the 
     case of a C corporation, the stock of which is not publicly 
     traded on a recognized exchange.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to contributions made after the date of the 
     enactment of this Act.

     SEC. 107. EXCLUSION OF 25 PERCENT OF GAIN ON SALES OR 
                   EXCHANGES OF LAND OR WATER INTERESTS TO 
                   ELIGIBLE ENTITIES FOR CONSERVATION PURPOSES.

       (a) In General.--Part III of subchapter B of chapter 1 
     (relating to items specifically excluded from gross income) 
     is amended by inserting after section 121 the following new 
     section:

     ``SEC. 121A. 25-PERCENT EXCLUSION OF GAIN ON SALES OR 
                   EXCHANGES OF LAND OR WATER INTERESTS TO 
                   ELIGIBLE ENTITIES FOR CONSERVATION PURPOSES.

       ``(a) Exclusion.--Gross income shall not include 25 percent 
     of the qualifying gain from a conservation sale of a long-
     held qualifying land or water interest.
       ``(b) Qualifying Gain.--For purposes of this section--
       ``(1) In general.--The term `qualifying gain' means any 
     gain which would be recognized as long-term capital gain, 
     reduced by the amount of any long-term capital gain 
     attributable to disqualified improvements.
       ``(2) Disqualified improvement.--For purposes of paragraph 
     (1), the term `disqualified improvement' means any building, 
     structure, or other improvement, other than--
       ``(A) any improvement which is described in section 
     175(c)(1), determined--
       ``(i) without regard to the requirements that the taxpayer 
     be engaged in farming, and
       ``(ii) without taking into account subparagraphs (A) and 
     (B) thereof, or
       ``(B) any improvement which the Secretary determines 
     directly furthers conservation purposes.
       ``(3) Special rule for sales of stock.--If the long-held 
     qualifying land or water interest is 1 or more shares of 
     stock in a qualifying land or water corporation, the 
     qualifying gain is equal to the lesser of--

[[Page 8873]]

       ``(A) the qualifying gain determined under paragraph (1), 
     or
       ``(B) the product of--
       ``(i) the percentage of such corporation's stock which is 
     transferred by the taxpayer, times
       ``(ii) the amount which would have been the qualifying gain 
     (determined under paragraph (1)) if there had been a 
     conservation sale by such corporation of all of its interests 
     in the land and water for a price equal to the product of the 
     fair market value of such interests times the ratio of--

       ``(I) the proceeds of the conservation sale of the stock, 
     to
       ``(II) the fair market value of the stock which was the 
     subject of the conservation sale.

       ``(c) Conservation Sale.--For purposes of this section, the 
     term `conservation sale' means a sale or exchange which meets 
     the following requirements:
       ``(1) Transferee is an eligible entity.--The transferee of 
     the long-held qualifying land or water interest is an 
     eligible entity.
       ``(2) Qualifying letter of intent required.--At the time of 
     the sale or exchange, such transferee provides the taxpayer 
     with a qualifying letter of intent.
       ``(3) Nonapplication to certain sales.--The sale or 
     exchange is not made pursuant to an order of condemnation or 
     eminent domain.
       ``(4) Controlling interest in stock sale required.--In the 
     case of the sale or exchange of stock in a qualifying land or 
     water corporation, at the end of the taxpayer's taxable year 
     in which such sale or exchange occurs, the transferee's 
     ownership of stock in such corporation meets the requirements 
     of section 1504(a)(2) (determined by substituting `90 
     percent' for `80 percent' each place it appears).
       ``(d) Long-Held Qualifying Land or Water Interest.--For 
     purposes of this section--
       ``(1) In general.--The term `long-held qualifying land or 
     water interest' means any qualifying land or water interest 
     owned by the taxpayer or a member of the taxpayer's family 
     (as defined in section 2032A(e)(2)) at all times during the 
     5-year period ending on the date of the sale.
       ``(2) Qualifying land or water interest.--
       ``(A) In general.--The term `qualifying land or water 
     interest' means a real property interest which constitutes--
       ``(i) a taxpayer's entire interest in land,
       ``(ii) a taxpayer's entire interest in water rights,
       ``(iii) a qualified real property interest (as defined in 
     section 170(h)(2)), or
       ``(iv) stock in a qualifying land or water corporation.
       ``(B) Entire interest.--For purposes of clause (i) or (ii) 
     of subparagraph (A)--
       ``(i) a partial interest in land or water is not a 
     taxpayer's entire interest if an interest in land or water 
     was divided in order to create such partial interest in order 
     to avoid the requirements of such clause or section 
     170(f)(3)(A), and
       ``(ii) a taxpayer's entire interest in certain land does 
     not fail to satisfy subparagraph (A)(i) solely because the 
     taxpayer has retained an interest in other land, even if the 
     other land is contiguous with such certain land and was 
     acquired by the taxpayer along with such certain land in a 
     single conveyance.
       ``(e) Other Definitions.--For purposes of this section--
       ``(1) Eligible entity.--The term `eligible entity' means--
       ``(A) a governmental unit referred to in section 170(c)(1), 
     or an agency or department thereof operated primarily for 1 
     or more of the conservation purposes specified in clause (i), 
     (ii), or (iii) of section 170(h)(4)(A), or
       ``(B) an entity which is--
       ``(i) described in section 170(b)(1)(A)(vi) or section 
     170(h)(3)(B), and
       ``(ii) organized and at all times operated primarily for 1 
     or more of the conservation purposes specified in clause (i), 
     (ii), or (iii) of section 170(h)(4)(A).
       ``(2) Qualifying letter of intent.--The term `qualifying 
     letter of intent' means a written letter of intent which 
     includes the following statement: `The transferee's intent is 
     that this acquisition will serve 1 or more of the 
     conservation purposes specified in clause (i), (ii), or (iii) 
     of section 170(h)(4)(A) of the Internal Revenue Code of 1986, 
     that the transferee's use of the property so acquired will be 
     consistent with section 170(h)(5) of such Code, and that the 
     use of the property will continue to be consistent with such 
     section, even if ownership or possession of such property is 
     subsequently transferred to another person.'
       ``(3) Qualifying land or water corporation.--The term 
     `qualifying land or water corporation' means a C corporation 
     (as defined in section 1361(a)(2)) if, as of the date of the 
     conservation sale--
       ``(A) the fair market value of the corporation's interests 
     in land or water held by the corporation at all times during 
     the preceding 5 years equals or exceeds 90 percent of the 
     fair market value of all of such corporation's assets, and
       ``(B) not more than 50 percent of the total fair market 
     value of such corporation's assets consists of water rights 
     or infrastructure related to the delivery of water, or both.
       ``(f) Tax on Subsequent Transfers or Removals of 
     Conservation Restrictions.--
       ``(1) In general.--A tax is hereby imposed on any 
     subsequent--
       ``(A) transfer by an eligible entity of ownership or 
     possession, whether by sale, exchange, or lease, of property 
     acquired directly or indirectly in--
       ``(i) a conservation sale described in subsection (a), or
       ``(ii) a transfer described in clause (i), (ii), or (iii) 
     of paragraph (4)(A), or
       ``(B) removal of a conservation restriction contained in an 
     instrument of conveyance of such property.
       ``(2) Amount of tax.--The amount of tax imposed by 
     paragraph (1) on any transfer or removal shall be equal to 
     the sum of--
       ``(A) either--
       ``(i) 20 percent of the fair market value (determined at 
     the time of the transfer) of the property the ownership or 
     possession of which is transferred, or
       ``(ii) 20 percent of the fair market value (determined at 
     the time immediately after the removal) of the property upon 
     which the conservation restriction was removed, plus
       ``(B) the product of--
       ``(i) the highest rate of tax specified in section 11, 
     times
       ``(ii) any gain or income realized by the transferor or 
     person removing such restriction as a result of the transfer 
     or removal.
       ``(3) Liability.--The tax imposed by paragraph (1) shall be 
     paid--
       ``(A) on any transfer, by the transferor, and
       ``(B) on any removal of a conservation restriction 
     contained in an instrument of conveyance, by the person 
     removing such restriction.
       ``(4) Relief from liability.--The person (otherwise liable 
     for any tax imposed by paragraph (1)) shall be relieved of 
     liability for the tax imposed by paragraph (1)--
       ``(A) with respect to any transfer if--
       ``(i) the transferee is an eligible entity which provides 
     such person, at the time of transfer, a qualifying letter of 
     intent,
       ``(ii) in any case where the transferee is not an eligible 
     entity, it is established to the satisfaction of the 
     Secretary, that the transfer of ownership or possession, as 
     the case may be, will be consistent with section 170(h)(5), 
     and the transferee provides such person, at the time of 
     transfer, a qualifying letter of intent, or
       ``(iii) tax has previously been paid under this subsection 
     as a result of a prior transfer of ownership or possession of 
     the same property, or
       ``(B) with respect to any removal of a conservation 
     restriction contained in an instrument of conveyance, if it 
     is established to the satisfaction of the Secretary that the 
     retention of the restriction was impracticable or impossible 
     and the proceeds continue to be used in a manner consistent 
     with 1 or more of the conservation purposes specified in 
     clause (i), (ii), or (iii) of section 170(h)(4)(A).
       ``(5) Administrative provisions.--For purposes of subtitle 
     F, the taxes imposed by this subsection shall be treated as 
     excise taxes with respect to which the deficiency procedures 
     of such subtitle apply.
       ``(6) Reporting.--The Secretary may require such reporting 
     as may be necessary or appropriate to further the purpose 
     under this section that any conservation use be in 
     perpetuity.''.
       (b) Clerical Amendment.--The table of sections for part III 
     of subchapter B of chapter 1 is amended by inserting after 
     the item relating to section 121 the following new item:

``Sec. 121A. 25-percent exclusion of gain on sales or exchanges of land 
              or water interests to eligible entities for conservation 
              purposes.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to sales or exchanges occurring after the date of 
     the enactment of this Act.

     SEC. 108. TAX EXCLUSION FOR COST-SHARING PAYMENTS UNDER 
                   PARTNERS FOR FISH AND WILDLIFE PROGRAM.

       (a) In General.--Section 126(a) (relating to certain cost-
     sharing payments) is amended by redesignating paragraph (10) 
     as paragraph (11) and by inserting after paragraph (9) the 
     following:
       ``(10) The Partners for Fish and Wildlife Program 
     authorized by the Fish and Wildlife Act of 1956 (16 U.S.C. 
     742a et seq.).''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to payments received after the date of the 
     enactment of this Act.

     SEC. 109. 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.''.

[[Page 8874]]

       (b) Effective Date.--The amendment made by this section 
     shall apply to contributions made after the date of the 
     enactment of this Act.

     SEC. 110. ENHANCED DEDUCTION FOR CHARITABLE CONTRIBUTION OF 
                   LITERARY, MUSICAL, ARTISTIC, AND SCHOLARLY 
                   COMPOSITIONS.

       (a) In General.--Subsection (e) of section 170 (relating to 
     certain contributions of ordinary income and capital gain 
     property), as amended by this Act, is amended by adding at 
     the end the following new paragraph:
       ``(8) Special rule for certain contributions of literary, 
     musical, artistic, or scholarly compositions.--
       ``(A) In general.--In the case of a qualified artistic 
     charitable contribution--
       ``(i) the amount of such contribution taken into account 
     under this section shall be the fair market value of the 
     property contributed (determined at the time of such 
     contribution), and
       ``(ii) no reduction in the amount of such contribution 
     shall be made under paragraph (1).
       ``(B) Qualified artistic charitable contribution.--For 
     purposes of this paragraph, the term `qualified artistic 
     charitable contribution' means a charitable contribution of 
     any literary, musical, artistic, or scholarly composition, or 
     similar property, or the copyright thereon (or both), but 
     only if--
       ``(i) such property was created by the personal efforts of 
     the taxpayer making such contribution no less than 18 months 
     prior to such contribution,
       ``(ii) the taxpayer--

       ``(I) has received a qualified appraisal of the fair market 
     value of such property in accordance with the regulations 
     under this section, and
       ``(II) attaches to the taxpayer's income tax return for the 
     taxable year in which such contribution was made a copy of 
     such appraisal,

       ``(iii) the donee is an organization described in 
     subsection (b)(1)(A),
       ``(iv) the use of such property by the donee is related to 
     the purpose or function constituting the basis for the 
     donee's exemption under section 501 (or, in the case of a 
     governmental unit, to any purpose or function described under 
     section 501(c)),
       ``(v) the taxpayer receives from the donee a written 
     statement representing that the donee's use of the property 
     will be in accordance with the provisions of clause (iv), and
       ``(vi) the written appraisal referred to in clause (ii) 
     includes evidence of the extent (if any) to which property 
     created by the personal efforts of the taxpayer and of the 
     same type as the donated property is or has been--

       ``(I) owned, maintained, and displayed by organizations 
     described in subsection (b)(1)(A), and
       ``(II) sold to or exchanged by persons other than the 
     taxpayer, donee, or any related person (as defined in section 
     465(b)(3)(C)).

       ``(C) Maximum dollar limitation; no carryover of increased 
     deduction.--The increase in the deduction under this section 
     by reason of this paragraph for any taxable year--
       ``(i) shall not exceed the artistic adjusted gross income 
     of the taxpayer for such taxable year, and
       ``(ii) shall not be taken into account in determining the 
     amount which may be carried from such taxable year under 
     subsection (d).
       ``(D) Artistic adjusted gross income.--For purposes of this 
     paragraph, the term `artistic adjusted gross income' means 
     that portion of the adjusted gross income of the taxpayer for 
     the taxable year attributable to--
       ``(i) income from the sale or use of property created by 
     the personal efforts of the taxpayer which is of the same 
     type as the donated property, and
       ``(ii) income from teaching, lecturing, performing, or 
     similar activity with respect to property described in clause 
     (i).
       ``(E) Paragraph not to apply to certain contributions.--
     Subparagraph (A) shall not apply to any charitable 
     contribution of any letter, memorandum, or similar property 
     which was written, prepared, or produced by or for an 
     individual while the individual is an officer or employee of 
     any person (including any government agency or 
     instrumentality) unless such letter, memorandum, or similar 
     property is entirely personal.
       ``(F) Copyright treated as separate property for partial 
     interest rule.--In the case of a qualified artistic 
     charitable contribution, the tangible literary, musical, 
     artistic, or scholarly composition, or similar property and 
     the copyright on such work shall be treated as separate 
     properties for purposes of this paragraph and subsection 
     (f)(3).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to contributions made after the date of the 
     enactment of this Act.

     SEC. 111. MILEAGE REIMBURSEMENTS TO CHARITABLE VOLUNTEERS 
                   EXCLUDED FROM GROSS INCOME.

       (a) In General.--Part III of subchapter B of chapter 1 is 
     amended by inserting after section 139 the following new 
     section:

     ``SEC. 139A. MILEAGE REIMBURSEMENTS TO CHARITABLE VOLUNTEERS.

       ``(a) In General.--Gross income of an individual does not 
     include amounts received, from an organization described in 
     section 170(c), as reimbursement of operating expenses with 
     respect to use of a passenger automobile for the benefit of 
     such organization. The preceding sentence shall apply only to 
     the extent that the expenses which are reimbursed would be 
     deductible under this chapter if section 274(d) were 
     applied--
       ``(1) by using the standard business mileage rate 
     established under such section, and
       ``(2) as if the individual were an employee of an 
     organization not described in section 170(c).
       ``(b) Application to Volunteer Services Only.--Subsection 
     (a) shall not apply with respect to any expenses relating to 
     the performance of services for compensation.
       ``(c) No Double Benefit.--A taxpayer may not claim a 
     deduction or credit under any other provision of this title 
     with respect to the expenses under subsection (a).
       ``(d) Exemption From Reporting Requirements.--Section 6041 
     shall not apply with respect to reimbursements excluded from 
     income under subsection (a).''.
       (b) Clerical Amendment.--The table of sections for part III 
     of subchapter B of chapter 1 is amended by inserting after 
     the item relating to section 139 the following new item:

``Sec. 139A. Mileage reimbursements to charitable volunteers.''.

       (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. 112. EXTENSION OF ENHANCED DEDUCTION FOR INVENTORY TO 
                   INCLUDE PUBLIC SCHOOLS.

       (a) In General.--Subparagraph (A) of section 170(e)(3) 
     (relating to special rule for certain contributions of 
     inventory and other property) is amended by striking ``to an 
     organization which is described in'' and all that follows 
     through the end of clause (i) and inserting ``to a qualified 
     organization, but only if--
       ``(i) the property is to be used by the donee solely for 
     the care of the ill, the needy, or infants and, in the case 
     of--

       ``(I) an organization described in section 501(c)(3) (other 
     than an organization described in subclause (II)), the use of 
     the property by the donee is related to the purpose or 
     function constituting the basis for its exemption under 
     section 501, and
       ``(II) an organization described in subsection 
     (b)(1)(A)(ii), the use of the property by the donee is 
     related to educational purposes and such property is not 
     computer technology or equipment (as defined in paragraph 
     (6)(F)(i));''.

       (b) Qualified Organization.--Paragraph (3) of section 
     170(e) of such Code is amended by redesignating subparagraph 
     (C) as subparagraph (D) and by inserting after subparagraph 
     (B) the following new subparagraph:
       ``(C) Qualified organization.--For purposes of this 
     paragraph, the term `qualified organization' means--
       ``(i) an organization which is described in section 
     501(c)(3) and is exempt under section 501(a) (other than a 
     private foundation, as defined in section 509(a), which is 
     not an operating foundation, as defined in section 
     4942(j)(3)), and
       ``(ii) an educational organization described in subsection 
     (b)(1)(A)(ii).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to contributions made after December 31, 2003.

     SEC. 113. 10-YEAR DIVESTITURE PERIOD FOR CERTAIN EXCESS 
                   BUSINESS HOLDINGS OF PRIVATE FOUNDATIONS.

       (a) In General.--Section 4943(c) (relating to excess 
     business holdings) is amended by redesignating paragraph (7) 
     as paragraph (8) and by inserting after paragraph (6) the 
     following new paragraph:
       ``(7) 10-year period to dispose of certain large gifts and 
     bequests.--
       ``(A) In General.--Paragraph (6) shall be applied by 
     substituting `10-year period' for `5-year period' if--
       ``(i) upon the election of a private foundation, it is 
     established to the satisfaction of the Secretary that--

       ``(I) the excess business holdings (or increase in excess 
     business holdings) in a business enterprise by the private 
     foundation in an amount which is not less than $1,000,000,000 
     is the result of a gift or bequest the fair market value of 
     which is not less than $1,000,000,000, and
       ``(II) after such gift or bequest, the private foundation 
     does not have effective control of such business enterprise 
     to which such gift or bequest relates,

       ``(ii) subject to subparagraph (C), the private foundation 
     submits to the Secretary with such election a reasonable plan 
     for disposing of all of the excess business holdings related 
     to such gift or bequest, and
       ``(iii) the private foundation certifies annually to the 
     Secretary that the private foundation is complying with the 
     plan submitted under this paragraph, the requirement under 
     clause (i)(II), and the rules under subparagraph (D).
       ``(B) Election.--Any election under subparagraph (A)(i) 
     shall be made not later than 6 months after the date of such 
     gift or bequest and shall--
       ``(i) establish the fair market value of such gift or 
     bequest, and
       ``(ii) include a certification that the requirement of 
     subparagraph (A)(i)(II) is met.

[[Page 8875]]

       ``(C) Reasonableness of plan.--
       ``(i) In general.--Any plan submitted under subparagraph 
     (A)(ii) shall be presumed reasonable unless the Secretary 
     notifies the private foundation to the contrary not later 
     than 6 months after the submission of such plan.
       ``(ii) Resubmission.--Upon notice by the Secretary under 
     clause (i), the private foundation may resubmit a plan and 
     shall have the burden of establishing the reasonableness of 
     such plan to the Secretary.
       ``(D) Special rules.--During any period in which an 
     election under this paragraph is in effect--
       ``(i) section 4941(d)(2) (other than subparagraph (A) 
     thereof) shall apply only with respect to any disqualified 
     person described in section 4941(a)(1)(B),
       ``(ii) section 4942(a) shall be applied by substituting 
     `third' for `second' both places it appears,
       ``(iii) section 4942(e)(1) shall be applied by substituting 
     `12 percent' for `5 percent', and
       ``(iv) section 4942(g)(1)(A) shall be applied without 
     regard to any portion of reasonable and necessary 
     administrative expenses.
       ``(E) Inflation adjustment.--In the case of any taxable 
     year beginning in a calendar year after 2003, the 
     $1,000,000,000 amount under subparagraph (A)(i)(I) shall be 
     increased by an amount equal to such dollar amount, 
     multiplied by the cost-of-living adjustment determined under 
     section 1(f)(3) for such calendar year, determined by 
     substituting `2002' for `1992' in subparagraph (B) thereof. 
     If the $1,000,000,000 amount as increased under this 
     subparagraph is not a multiple of $100,000,000, such amount 
     shall be rounded to the next lowest multiple of 
     $100,000,000.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to gifts and bequests made after the date of the 
     enactment of this Act.

TITLE II--PROPOSALS IMPROVING THE OVERSIGHT OF TAX-EXEMPT ORGANIZATIONS

     SEC. 201. DISCLOSURE OF WRITTEN DETERMINATIONS.

       (a) In General.--Section 6110(l) (relating to section not 
     to apply) is amended by striking all matter before 
     subparagraph (A) of paragraph (2) and inserting the 
     following:
       ``(l) Section Not To Apply.--
       ``(1) In general.--This section shall not apply to any 
     matter to which section 6104 or 6105 applies, except that 
     this section shall apply to any written determination and 
     related background file document relating to an organization 
     described under subsection (c) or (d) of section 501 
     (including any written determination denying an organization 
     tax-exempt status under such subsection) or a political 
     organization described in section 527 which is not required 
     to be disclosed by section 6104(a)(1)(A).
       ``(2) Additional matters.--This section shall not apply to 
     any--''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to written determinations issued after the date 
     of the enactment of this Act.

     SEC. 202. DISCLOSURE OF INTERNET WEB SITE AND NAME UNDER 
                   WHICH ORGANIZATION DOES BUSINESS.

       (a) In General.--Section 6033 (relating to returns by 
     exempt organizations) is amended by redesignating subsection 
     (h) as subsection (i) and by inserting after subsection (g) 
     the following new subsection:
       ``(h) Disclosure of Name Under Which Organization Does 
     Business and Its Internet Web Site.--Any organization which 
     is subject to the requirements of subsection (a) shall 
     include on the return required under subsection (a)--
       ``(1) any name under which such organization operates or 
     does business, and
       ``(2) the Internet web site address (if any) of such 
     organization.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to returns filed after December 31, 2003.

     SEC. 203. MODIFICATION TO REPORTING CAPITAL TRANSACTIONS.

       (a) Requirement of Summary Report.--Section 6033(c) 
     (relating to additional provisions relating to private 
     foundations) is amended by adding at the end the following 
     new sentence: ``Any information included in an annual return 
     regarding the gain or loss from the sale or other disposition 
     of stock or securities which are listed on an established 
     securities market which is required to be furnished in order 
     to calculate the tax on net investment income shall also be 
     reported in summary form with a notice that detailed 
     information is available upon request by the public.''.
       (b) Disclosure Requirement.--Section 6104(b) (relating to 
     inspection of annual information returns), as amended by this 
     Act, is amended by adding at the end the following new 
     sentence: ``With respect to any private foundation (as 
     defined in section 509(a)), any information regarding the 
     gain or loss from the sale or other disposition of stock or 
     securities which are listed on an established securities 
     market which is required to be furnished in order to 
     calculate the tax on net investment income but which is not 
     in summary form is not required to be made available to the 
     public under this subsection except upon the explicit request 
     by a member of the public to the Secretary.''.
       (c) Public Inspection Requirement.--Section 6104(d) 
     (relating to public inspection of certain annual returns, 
     applications for exemptions, and notices of status) is 
     amended by adding at the end the following new paragraph:
       ``(9) Application to private foundation capital transaction 
     information.--With respect to any private foundation (as 
     defined in section 509(a)), any information regarding the 
     gain or loss from the sale or other disposition of stock or 
     securities which are listed on an established securities 
     market which is required to be furnished in order to 
     calculate the tax on net investment income but which is not 
     in summary form is not required to be made available to the 
     public under this subsection except upon the explicit request 
     by a member of the public to the private foundation in the 
     form and manner of a request described in paragraph 
     (1)(B).''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to returns filed after December 31, 2003.

     SEC. 204. DISCLOSURE THAT FORM 990 IS PUBLICLY AVAILABLE.

       (a) In General.--The Commissioner of the Internal Revenue 
     shall notify the public in appropriate publications or other 
     materials of the extent to which an exempt organization's 
     Form 990, Form 990-EZ, or Form 990-PF is publicly available.
       (b) Effective Date.--The amendments made by this section 
     shall apply to publications or other materials issued or 
     revised after the date of the enactment of this Act.

     SEC. 205. DISCLOSURE TO STATE OFFICIALS OF PROPOSED ACTIONS 
                   RELATED TO SECTION 501(C) ORGANIZATIONS.

       (a) In General.--Subsection (c) of section 6104 is amended 
     by striking paragraph (2) and inserting the following new 
     paragraphs:
       ``(2) Disclosure of proposed actions related to charitable 
     organizations.--
       ``(A) Specific notifications.--In the case of an 
     organization to which paragraph (1) applies, the Secretary 
     may disclose to the appropriate State officer--
       ``(i) a notice of proposed refusal to recognize such 
     organization as an organization described in section 
     501(c)(3) or a notice of proposed revocation of such 
     organization's recognition as an organization exempt from 
     taxation,
       ``(ii) the issuance of a letter of proposed deficiency of 
     tax imposed under section 507 or chapter 41 or 42, and
       ``(iii) the names, addresses, and taxpayer identification 
     numbers of organizations which have applied for recognition 
     as organizations described in section 501(c)(3).
       ``(B) Additional disclosures.--Returns and return 
     information of organizations with respect to which 
     information is disclosed under subparagraph (A) may be made 
     available for inspection by or disclosed to an appropriate 
     State officer.
       ``(C) Procedures for disclosure.--Information may be 
     inspected or disclosed under subparagraph (A) or (B) only--
       ``(i) upon written request by an appropriate State officer, 
     and
       ``(ii) for the purpose of, and only to the extent necessary 
     in, the administration of State laws regulating such 
     organizations.

     Such information may only be inspected by or disclosed to 
     representatives of the appropriate State officer designated 
     as the individuals who are to inspect or to receive the 
     returns or return information under this paragraph on behalf 
     of such officer. Such representatives shall not include any 
     contractor or agent.
       ``(D) Disclosures other than by request.--The Secretary may 
     make available for inspection or disclose returns and return 
     information of an organization to which paragraph (1) applies 
     to an appropriate State officer of any State if the Secretary 
     determines that such inspection or disclosure may facilitate 
     the resolution of Federal or State issues relating to the 
     tax-exempt status of such organization.
       ``(3) Disclosure with respect to certain other exempt 
     organizations.--Upon written request by an appropriate State 
     officer, the Secretary may make available for inspection or 
     disclosure returns and return information of an organization 
     described in paragraph (2), (4), (6), (7), (8), (10), or (13) 
     of section 501(c) for the purpose of, and to the extent 
     necessary in, the administration of State laws regulating the 
     solicitation or administration of the charitable funds or 
     charitable assets of such organizations. Such information may 
     be inspected only by or disclosed only to representatives of 
     the appropriate State officer designated as the individuals 
     who are to inspect or to receive the returns or return 
     information under this paragraph on behalf of such officer. 
     Such representatives shall not include any contractor or 
     agent.
       ``(4) Use in civil judicial and administrative 
     proceedings.--Returns and return information disclosed 
     pursuant to this subsection may be disclosed in civil 
     administrative and civil judicial proceedings pertaining to 
     the enforcement of State laws regulating such organizations 
     in a manner prescribed by the Secretary similar to that for 
     tax administration proceedings under section 6103(h)(4).
       ``(5) No disclosure if impairment.--Returns and return 
     information shall not be disclosed under this subsection, or 
     in any proceeding described in paragraph (4), to the

[[Page 8876]]

     extent that the Secretary determines that such disclosure 
     would seriously impair Federal tax administration.
       ``(6) Definitions.--For purposes of this subsection--
       ``(A) Return and return information.--The terms `return' 
     and `return information' have the respective meanings given 
     to such terms by section 6103(b).
       ``(B) Appropriate state officer.--The term `appropriate 
     State officer' means--
       ``(i) the State attorney general,
       ``(ii) in the case of an organization to which paragraph 
     (1) applies, any other State official charged with overseeing 
     organizations of the type described in section 501(c)(3), and
       ``(iii) in the case of an organization to which paragraph 
     (3) applies, the head of an agency designated by the State 
     attorney general as having primary responsibility for 
     overseeing the solicitation of funds for charitable 
     purposes.''.
       (b) Conforming Amendments.--
       (1) Subsection (a) of section 6103 is amended--
       (A) by inserting ``or any appropriate State officer who has 
     or had access to returns or return information under section 
     6104(c)'' after ``this section'' in paragraph (2), and
       (B) by striking ``or subsection (n)'' in paragraph (3) and 
     inserting ``subsection (n), or section 6104(c)''.
       (2) Subparagraph (A) of section 6103(p)(3) is amended by 
     inserting ``and section 6104(c)'' after ``section'' in the 
     first sentence.
       (3) Paragraph (4) of section 6103(p), 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) or any appropriate 
     State officer (as defined in section 6104(c))''.
       (4) The heading for paragraph (1) of section 6104(c) is 
     amended by inserting ``for charitable organizations''.
       (5) Paragraph (2) of section 7213(a) is amended by 
     inserting ``or under section 6104(c)'' after ``6103''.
       (6) Paragraph (2) of section 7213A(a) is amended by 
     inserting ``or 6104(c)'' after ``6103''.
       (7) Paragraph (2) of section 7431(a) is amended by 
     inserting ``(including any disclosure in violation of section 
     6104(c))'' after ``6103''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act 
     but shall not apply to requests made before such date.

     SEC. 206. EXPANSION OF PENALTIES TO PREPARERS OF FORM 990.

       (a) In General.--Section 6695 (relating to other assessable 
     penalties with respect to the preparation of income tax 
     returns for other persons) is amended by adding at the end 
     the following new subsections:
       ``(h) Certain Omissions and Misrepresentations.--
       ``(1) In general.--Any person who prepares for compensation 
     any return under section 6033 who omits or misrepresents any 
     information with respect to such return which was known or 
     should have been known by such person shall pay a penalty of 
     $250 with respect to such return.
       ``(2) Exception for minor, inadvertent omissions.--
     Paragraph (1) shall not apply to minor, inadvertent 
     omissions.
       ``(3) Rules for determining return preparer.--For purposes 
     of this subsection and subsection (i), any reference to a 
     person who prepares for compensation a return under section 
     6033--
       ``(A) shall include any person who employs 1 or more 
     persons to prepare for compensation a return under section 
     6033, and
       ``(B) shall not include any person who would be described 
     in clause (i), (ii), (iii), or (iv) of section 7701(a)(36)(B) 
     if such section referred to a return under section 6033.
       ``(i) Willful or Reckless Conduct.--
       ``(1) In general.--Any person who prepares for compensation 
     any return under section 6033 who recklessly or intentionally 
     misrepresents any information or recklessly or intentionally 
     disregards any rule or regulation with respect to such return 
     shall pay a penalty of $1,000 with respect to such return.
       ``(2) Coordination with other penalties.--With respect to 
     any return, the amount of the penalty payable by any person 
     by reason of paragraph (1) shall be reduced by the amount of 
     the penalty paid by such person by reason of subsection (h) 
     or section 6694.''.
       (b) Conforming Amendments.--
       (1) The heading for section 6695 is amended by inserting 
     ``AND OTHER'' after ``INCOME TAX''.
       (2) The item relating to section 6695 in the table of 
     sections for part I of subchapter B of chapter 68 is amended 
     by inserting ``and other'' after ``income tax''.
       (c) Effective Date.--The amendments made by this section 
     shall apply with respect to documents prepared after the date 
     of the enactment of this Act.

     SEC. 207. NOTIFICATION REQUIREMENT FOR ENTITIES NOT CURRENTLY 
                   REQUIRED TO FILE.

       (a) In General.--Section 6033 (relating to returns by 
     exempt organizations), as amended by this Act, is amended by 
     redesignating subsection (i) as subsection (j) and by 
     inserting after subsection (h) the following new subsection:
       ``(i) Additional Notification Requirements.--Any 
     organization the gross receipts of which in any taxable year 
     result in such organization being referred to in subsection 
     (a)(2)(A)(ii) or (a)(2)(B)--
       ``(1) shall furnish annually, at such time and in such 
     manner as the Secretary may by forms or regulations 
     prescribe, information setting forth--
       ``(A) the legal name of the organization,
       ``(B) any name under which such organization operates or 
     does business,
       ``(C) the organization's mailing address and Internet web 
     site address (if any),
       ``(D) the organization's taxpayer identification number,
       ``(E) the name and address of a principal officer, and
       ``(F) evidence of the continuing basis for the 
     organization's exemption from the filing requirements under 
     subsection (a)(1), and
       ``(2) upon the termination of the existence of the 
     organization, shall furnish notice of such termination.''.
       (b) Loss of Exempt Status for Failure To File Return or 
     Notice.--Section 6033 (relating to returns by exempt 
     organizations), as amended by subsection (a), is amended by 
     redesignating subsection (j) as subsection (k) and by 
     inserting after subsection (i) the following new subsection:
       ``(j) Loss of Exempt Status for Failure To File Return or 
     Notice.--
       ``(1) In general.--If an organization described in 
     subsection (a)(1) or (i) fails to file an annual return or 
     notice required under either subsection for 3 consecutive 
     years, such organization's status as an organization exempt 
     from tax under section 501(a) shall be considered revoked on 
     and after the date set by the Secretary for the filing of the 
     third annual return or notice. The Secretary shall publish 
     and maintain a list of any organization the status of which 
     is so revoked.
       ``(2) Application necessary for reinstatement.--Any 
     organization the tax-exempt status of which is revoked under 
     paragraph (1) must apply in order to obtain reinstatement of 
     such status regardless of whether such organization was 
     originally required to make such an application.
       ``(3) Retroactive reinstatement if reasonable cause shown 
     for failure.--If upon application for reinstatement of status 
     as an organization exempt from tax under section 501(a), an 
     organization described in paragraph (1) can show to the 
     satisfaction of the Secretary evidence of reasonable cause 
     for the failure described in such paragraph, the 
     organization's exempt status may, in the discretion of the 
     Secretary, be reinstated effective from the date of the 
     revocation under such paragraph.''.
       (c) No Declaratory Judgment Relief.--Section 7428(b) 
     (relating to limitations) is amended by adding at the end the 
     following new paragraph:
       ``(4) Nonapplication for certain revocations.--No action 
     may be brought under this section with respect to any 
     revocation of status described in section 6033(j)(1).''.
       (d) No Inspection Requirement.--Section 6104(b) (relating 
     to inspection of annual information returns) is amended by 
     inserting ``(other than subsection (i) thereof)'' after 
     ``6033''.
       (e) No Disclosure Requirement.--Section 6104(d)(3) 
     (relating to exceptions from disclosure requirements) is 
     amended by redesignating subparagraph (B) as subparagraph (C) 
     and by inserting after subparagraph (A) the following new 
     subparagraph:
       ``(B) Nondisclosure of annual notices.--Paragraph (1) shall 
     not require the disclosure of any notice required under 
     section 6033(i).''.
       (f) No Monetary Penalty for Failure To Notify.--Section 
     6652(c)(1) (relating to annual returns under section 6033 or 
     6012(a)(6)) is amended by adding at the end the following new 
     subparagraph:
       ``(E) No penalty for certain annual notices.--This 
     paragraph shall not apply with respect to any notice required 
     under section 6033(i).''.
       (g) Secretarial Outreach Requirements.--
       (1) Notice requirement.--The Secretary of the Treasury 
     shall notify in a timely manner every organization described 
     in section 6033(i) of the Internal Revenue Code of 1986 (as 
     added by this section) of the requirement under such section 
     6033(i) and of the penalty established under section 
     6033(j)--
       (A) by mail, in the case of any organization the identity 
     and address of which is included in the list of exempt 
     organizations maintained by the Secretary, and
       (B) by Internet or other means of outreach, in the case of 
     any other organization.
       (2) Loss of status penalty for failure to file return.--The 
     Secretary of the Treasury shall publicize in a timely manner 
     in appropriate forms and instructions and through other 
     appropriate means, the penalty established under section 
     6033(j) of such Code for the failure to file a return under 
     section 6033(a)(1) of such Code.
       (h) Effective Date.--The amendments made by this section 
     shall apply to notices and returns with respect to annual 
     periods beginning after 2003.

     SEC. 208. SUSPENSION OF TAX-EXEMPT STATUS OF TERRORIST 
                   ORGANIZATIONS.

       (a) In General.--Section 501 of the Internal Revenue Code 
     of 1986 (relating to exemption from tax on corporations, 
     certain

[[Page 8877]]

     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 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.

     TITLE III--OTHER CHARITABLE AND EXEMPT ORGANIZATION PROVISIONS

     SEC. 301. MODIFICATION OF 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 which 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) 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, 
     2002.

     SEC. 302. 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, 
     2000.
       (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. 303. 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, 
     2002.

[[Page 8878]]



     SEC. 304. EXPEDITED REVIEW PROCESS FOR CERTAIN TAX-EXEMPTION 
                   APPLICATIONS.

       (a) In General.--The Secretary of the Treasury or the 
     Secretary's delegate (in this section, referred to as the 
     ``Secretary'') shall adopt procedures to expedite the 
     consideration of applications for exempt status under section 
     501(c)(3) of the Internal Revenue Code of 1986 filed after 
     December 31, 2003, by any organization that--
       (1) is organized and operated for the primary purpose of 
     providing social services;
       (2) is seeking a contract or grant under a Federal, State, 
     or local program that provides funding for social services 
     programs;
       (3) establishes that, under the terms and conditions of the 
     contract or grant program, an organization is required to 
     obtain such exempt status before the organization is eligible 
     to apply for a contract or grant;
       (4) includes with its exemption application a copy of its 
     completed Federal, State, or local contract or grant 
     application; and
       (5) meets such other criteria as the Secretary deems 
     appropriate for expedited consideration.

     The Secretary may prescribe other similar circumstances in 
     which such organizations may be entitled to expedited 
     consideration.
       (b) Waiver of Application Fee for Exempt Status.--Any 
     organization that meets the conditions described in 
     subsection (a) (without regard to paragraph (3) of that 
     subsection) is entitled to a waiver of any fee for an 
     application for exempt status under section 501(c)(3) of the 
     Internal Revenue Code of 1986 if the organization certifies 
     that the organization has had (or expects to have) average 
     annual gross receipts of not more than $50,000 during the 
     preceding 4 years (or, in the case of an organization not in 
     existence throughout the preceding 4 years, during such 
     organization's first 4 years).
       (c) Social Services Defined.--For purposes of this 
     section--
       (1) In general.--The term ``social services'' means 
     services directed at helping people in need, reducing 
     poverty, improving outcomes of low-income children, 
     revitalizing low-income communities, and empowering low-
     income families and low-income individuals to become self-
     sufficient, including--
       (A) child care services, protective services for children 
     and adults, services for children and adults in foster care, 
     adoption services, services related to the management and 
     maintenance of the home, day care services for adults, and 
     services to meet the special needs of children, older 
     individuals, and individuals with disabilities (including 
     physical, mental, or emotional disabilities);
       (B) transportation services;
       (C) job training and related services, and employment 
     services;
       (D) information, referral, and counseling services;
       (E) the preparation and delivery of meals, and services 
     related to soup kitchens or food banks;
       (F) health support services;
       (G) literacy and mentoring programs;
       (H) services for the prevention and treatment of juvenile 
     delinquency and substance abuse, services for the prevention 
     of crime and the provision of assistance to the victims and 
     the families of criminal offenders, and services related to 
     the intervention in, and prevention of, domestic violence; 
     and
       (I) services related to the provision of assistance for 
     housing under Federal law.
       (2) Exclusions.--The term does not include a program having 
     the purpose of delivering educational assistance under the 
     Elementary and Secondary Education Act of 1965 (20 U.S.C. 
     6301 et seq.) or under the Higher Education Act of 1965 (20 
     U.S.C. 1001 et seq.).

     SEC. 305. 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. 306. 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 section 501(c) (other than 
     paragraph (3)) or 501(d) 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 December 31, 
     2002.

     SEC. 307. DEFINITION OF CONVENTION OR ASSOCIATION OF 
                   CHURCHES.

       Section 7701 (relating to definitions) is amended by 
     redesignating subsection (n) as subsection (o) and by 
     inserting after subsection (m) the following new subsection:
       ``(n) Convention or association of churches.--For purposes 
     of this title, any organization which is otherwise a 
     convention or association of churches shall not fail to so 
     qualify merely because the membership of such organization 
     includes individuals as well as churches or because 
     individuals have voting rights in such organization.''.

     SEC. 308. PAYMENTS BY CHARITABLE ORGANIZATIONS TO VICTIMS OF 
                   WAR ON TERRORISM AND FAMILIES OF ASTRONAUTS 
                   KILLED IN THE LINE OF DUTY.

       (a) In General.--For purposes of the Internal Revenue Code 
     of 1986--
       (1) any payment made by an organization described in 
     section 501(c)(3) of such Code to--
       (A) a member of the Armed Forces of the United States, or 
     to an individual of such member's immediate family, by reason 
     of the death, injury, wounding, or illness of such member 
     incurred as the result of the military response of the United 
     States to the terrorist attacks against the United States on 
     September 11, 2001, or
       (B) an individual of an astronaut's immediate family by 
     reason of the death of such astronaut occurring in the line 
     of duty after December 31, 2002,

     shall be treated as related to the purpose or function 
     constituting the basis for such organization's exemption 
     under section 501 of such Code if such payment is made using 
     an objective formula which is consistently applied, and
       (2) in the case of a private foundation (as defined in 
     section 509 of such Code), any payment described in paragraph 
     (1) shall not be treated as made to a disqualified person for 
     purposes of section 4941 of such Code.
       (b) Effective Dates.--This section shall apply to--
       (1) payments described in subsection (a)(1)(A) made after 
     the date of the enactment of this Act and before September 
     11, 2004, and
       (2) payments described in subsection (a)(1)(B) made after 
     December 31, 2002.

     SEC. 309. MODIFICATION OF SCHOLARSHIP FOUNDATION RULES.

       In applying the limitations on the percentage of 
     scholarship grants which may be awarded after the date of the 
     enactment of this Act, to children of current or former 
     employees under Revenue Procedure 76-47, such percentage 
     shall be increased to 35 percent of the eligible applicants 
     to be considered by the selection committee and to 20 percent 
     of individuals eligible for the grants, but only if the 
     foundation awarding the grants demonstrates that, in addition 
     to meeting the other requirements of Revenue Procedure 76-47, 
     it provides a comparable number and aggregate amount of 
     grants during the same program year to individuals who are 
     not such employees, children or dependents of such employees, 
     or affiliated with the employer of such employees.

     SEC. 310. TREATMENT OF CERTAIN HOSPITAL SUPPORT ORGANIZATIONS 
                   AS QUALIFIED ORGANIZATIONS FOR PURPOSES OF 
                   DETERMINING ACQUISITION INDEBTEDNESS.

       (a) In General.--Subparagraph (C) of section 514(c)(9) 
     (relating to real property acquired by a qualified 
     organization) is amended by striking ``or'' at the end of 
     clause (ii), by striking the period at the end of clause 
     (iii) and inserting ``; or'', and by adding at the end the 
     following new clause:

       ``(iv) a qualified hospital support organization (as 
     defined in subparagraph (I)).''.

       (b) Qualified Hospital Support Organizations.--Paragraph 
     (9) of section 514(c) is amended by adding at the end the 
     following new subparagraph:
       ``(I) Qualified hospital support organizations.--For 
     purposes of subparagraph (C)(iv), the term `qualified 
     hospital support organization' means, with respect to any 
     eligible indebtedness (including any qualified refinancing of 
     such eligible indebtedness), a support organization (as 
     defined in section 509(a)(3)) which supports a hospital 
     described in section 119(d)(4)(B) and with respect to which--

       ``(i) more than half of the organization's assets (by 
     value) at any time since its organization--

       ``(I) were acquired, directly or indirectly, by 
     testamentary gift or devise, and
       ``(II) consisted of real property, and

       ``(ii) the fair market value of the organization's real 
     estate acquired, directly or indirectly, by gift or devise, 
     exceeded 25 percent of the fair market value of all 
     investment assets held by the organization immediately

[[Page 8879]]

     prior to the time that the eligible indebtedness was 
     incurred.

     For purposes of this subparagraph, the term `eligible 
     indebtedness' means indebtedness secured by real property 
     acquired by the organization, directly or indirectly, by gift 
     or devise, the proceeds of which are used exclusively to 
     acquire any leasehold interest in such real property or for 
     improvements on, or repairs to, such real property. A 
     determination under clauses (i) and (ii) of this subparagraph 
     shall be made each time such an eligible indebtedness (or the 
     qualified refinancing of such an eligible indebtedness) is 
     incurred. For purposes of this subparagraph, a refinancing of 
     such an eligible indebtedness shall be considered qualified 
     if such refinancing does not exceed the amount of the 
     refinanced eligible indebtedness immediately before the 
     refinancing.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to indebtedness incurred after December 31, 2003.

     SEC. 311. CHARITABLE CONTRIBUTION DEDUCTION FOR CERTAIN 
                   EXPENSES INCURRED IN SUPPORT OF NATIVE ALASKAN 
                   SUBSISTENCE WHALING.

       (a) In General.--Section 170 (relating to charitable, etc., 
     contributions and gifts), as amended by this Act, is amended 
     by redesignating subsection (n) as subsection (o) and by 
     inserting after subsection (m) the following new subsection:
       ``(n) Expenses Paid by Certain Whaling Captains in Support 
     of Native Alaskan Subsistence Whaling.--
       ``(1) In general.--In the case of an individual who is 
     recognized by the Alaska Eskimo Whaling Commission as a 
     whaling captain charged with the responsibility of 
     maintaining and carrying out sanctioned whaling activities 
     and who engages in such activities during the taxable year, 
     the amount described in paragraph (2) (to the extent such 
     amount does not exceed $10,000 for the taxable year) shall be 
     treated for purposes of this section as a charitable 
     contribution.
       ``(2) Amount described.--
       ``(A) In general.--The amount described in this paragraph 
     is the aggregate of the reasonable and necessary whaling 
     expenses paid by the taxpayer during the taxable year in 
     carrying out sanctioned whaling activities.
       ``(B) Whaling expenses.--For purposes of subparagraph (A), 
     the term `whaling expenses' includes expenses for--
       ``(i) the acquisition and maintenance of whaling boats, 
     weapons, and gear used in sanctioned whaling activities,
       ``(ii) the supplying of food for the crew and other 
     provisions for carrying out such activities, and
       ``(iii) storage and distribution of the catch from such 
     activities.
       ``(3) Sanctioned whaling activities.--For purposes of this 
     subsection, the term `sanctioned whaling activities' means 
     subsistence bowhead whale hunting activities conducted 
     pursuant to the management plan of the Alaska Eskimo Whaling 
     Commission.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to contributions made after December 31, 2003.

     SEC. 312. MATCHING GRANTS TO LOW-INCOME TAXPAYER CLINICS FOR 
                   RETURN PREPARATION.

       (a) In General.--Chapter 77 (relating to miscellaneous 
     provisions) is amended by inserting after section 7526 the 
     following new section:

     ``SEC. 7526A. RETURN PREPARATION CLINICS FOR LOW-INCOME 
                   TAXPAYERS.

       ``(a) In General.--The Secretary may, subject to the 
     availability of appropriated funds, make grants to provide 
     matching funds for the development, expansion, or 
     continuation of qualified return preparation clinics.
       ``(b) Definitions.--For purposes of this section--
       ``(1) Qualified return preparation clinic.--
       ``(A) In general.--The term `qualified return preparation 
     clinic' means a clinic which--
       ``(i) does not charge more than a nominal fee for its 
     services (except for reimbursement of actual costs incurred), 
     and
       ``(ii) operates programs which assist low-income taxpayers 
     in preparing and filing their Federal income tax returns, 
     including schedules reporting sole proprietorship or farm 
     income.
       ``(B) Assistance to low-income taxpayers.--A clinic is 
     treated as assisting low-income taxpayers under subparagraph 
     (A)(ii) if at least 90 percent of the taxpayers assisted by 
     the clinic have incomes which do not exceed 250 percent of 
     the poverty level, as determined in accordance with criteria 
     established by the Director of the Office of Management and 
     Budget.
       ``(2) Clinic.--The term `clinic' includes--
       ``(A) a clinical program at an eligible educational 
     institution (as defined in section 529(e)(5)) which satisfies 
     the requirements of paragraph (1) through student assistance 
     of taxpayers in return preparation and filing, and
       ``(B) an organization described in section 501(c) and 
     exempt from tax under section 501(a) which satisfies the 
     requirements of paragraph (1).
       ``(c) Special Rules and Limitations.--
       ``(1) Aggregate limitation.--Unless otherwise provided by 
     specific appropriation, the Secretary shall not allocate more 
     than $10,000,000 per year (exclusive of costs of 
     administering the program) to grants under this section.
       ``(2) Other applicable rules.--Rules similar to the rules 
     under paragraphs (2) through (5) of section 7526(c) shall 
     apply with respect to the awarding of grants to qualified 
     return preparation clinics.''.
       (b) Clerical Amendment.--The table of sections for chapter 
     77 is amended by inserting after the item relating to section 
     7526 the following new item:

``Sec. 7526A. Return preparation clinics for low-income taxpayers.''.

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

     SEC. 313. EXEMPTION OF QUALIFIED 501(C)(3) BONDS FOR NURSING 
                   HOMES FROM FEDERAL GUARANTEE PROHIBITIONS.

       (a) In General.--Section 149(b)(3) (relating to exceptions) 
     is amended by adding at the end the following new 
     subparagraph:
       ``(E) Exception for qualified 501(c)(3) bonds for nursing 
     homes.--
       ``(i) In general.--Paragraph (1) shall not apply to any 
     qualified 501(c)(3) bond issued before the date which is 1 
     year after the date of the enactment of this subparagraph for 
     the benefit of an organization described in section 
     501(c)(3), if such bond is part of an issue the proceeds of 
     which are used to finance 1 or more of the following 
     facilities primarily for the benefit of the elderly:

       ``(I) Licensed nursing home facility.
       ``(II) Licensed or certified assisted living facility.
       ``(III) Licensed personal care facility.
       ``(IV) Continuing care retirement community.

       ``(ii) Limitation.--With respect to any calendar year, 
     clause (i) shall not apply to any bond described in such 
     clause 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 for 
     such calendar year exceeds $15,000,000.
       ``(iii) Continuing care retirement community.--For purposes 
     of this subparagraph, the term `continuing care retirement 
     community' means a community which provides, on the same 
     campus, a continuum 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.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to bonds issued after the date of the enactment 
     of this Act.

     SEC. 314. 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)) 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:

[[Page 8880]]

       ``(E) sold to a qualified blood collector organization's 
     (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)),'' 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.--For 
     purposes of this title, 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.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply with respect to 
     excise taxes imposed on sales or uses occurring on or after 
     October 1, 2003.
       (2) Refund of gasoline tax.--For purposes of section 
     6421(c) of the Internal Revenue Code of 1986 and any other 
     provision that allows for a refund or a payment in respect of 
     an excise tax payable at a level before the sale to a 
     qualified blood collector organization, the amendments made 
     by this section shall apply with respect to sales to a 
     qualified collector organization on or after October 1, 2003.

     SEC. 315. 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 issued for a qualified organization, and
       (C) such bond is issued before December 31, 2006.
       (3) Limitation on aggregate amount issued.--
       (A) In general.--The maximum aggregate face amount of bonds 
     which may be issued under this subsection shall not exceed 
     $2,000,000,000 for all projects (excluding refunding bonds).
       (B) Allocation of limitation.--The limitation described in 
     subparagraph (A) shall be allocated by the Secretary of the 
     Treasury among qualified organizations based on criteria 
     established by the Secretary not later than 180 days after 
     the date of the enactment of this section, after consultation 
     with the Chief of the Forest Service.
       (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 which at 
     the time of acquisition or immediately thereafter are subject 
     to a conservation restriction described in subsection (c)(2),
       (B) capitalized 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 which is 180 days 
     after the 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,
       (ii) with respect to which a written acknowledgement has 
     been obtained by the qualified organization from the State or 
     local governments with jurisdiction over such land that the 
     acquisition lessens the burdens of such government with 
     respect to such land, and
       (iii) 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 of a qualified organization 
     occurring after the date on which there is no outstanding 
     qualified forest conservation bond with respect to such 
     qualified organization 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 (3), 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 the Internal 
     Revenue Code of 1986 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--

[[Page 8881]]

       (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 non-profit 
     organization, if such person controls directly or indirectly 
     more than 25 percent of the governing body of such 
     organization.

     SEC. 316. CLARIFICATION OF TREATMENT OF JOHNNY MICHEAL SPANN 
                   PATRIOT TRUSTS.

       (a) Clarification of Tax-Exempt Status of Trusts.--
       (1) In general.--Subsection (b) of section 601 of the 
     Homeland Security Act of 2002 is amended to read as follows:
       ``(b) Designation of Johnny Micheal Spann Patriot Trusts.--
     Any charitable corporation, fund, foundation, or trust (or 
     separate fund or account thereof) which is described in 
     section 501(c)(3) of the Internal Revenue Code of 1986 and 
     exempt from tax under section 501(a) of such Code and meets 
     the requirements described in subsection (c) shall be 
     eligible to designate itself as a `Johnny Micheal Spann 
     Patriot trust'.''.
       (2) Conforming amendment.--Section 601(c)(3) of such Act is 
     amended by striking ``based'' and all that follows through 
     ``Trust''.
       (b) Publicly Available Audits.--Section 601(c)(7) of the 
     Homeland Security Act of 2002 is amended by striking ``shall 
     be filed with the Internal Revenue Service, and shall be open 
     to public inspection'' and inserting ``shall be open to 
     public inspection consistent with section 6104(d)(1) of the 
     Internal Revenue Code of 1986''.
       (c) Clarification of Required Distributions to Private 
     Foundation.--
       (1) In general.--Section 601(c)(8) of the Homeland Security 
     Act of 2002 is amended by striking ``not placed'' and all 
     that follows and inserting ``not so distributed shall be 
     contributed to a private foundation which is described in 
     section 509(a) of the Internal Revenue Code of 1986 and 
     exempt from tax under section 501(a) of such Code and which 
     is dedicated to such beneficiaries not later than 36 months 
     after the end of the fiscal year in which such funds, 
     donations, or earnings are received.''.
       (2) Conforming amendments.--Section 601(c) of such Act is 
     amended--
       (A) by striking ``(or, if placed in a private foundation, 
     held in trust for)'' in paragraph (1) and inserting ``(or 
     contributed to a private foundation described in paragraph 
     (8) for the benefit of)'', and
       (B) by striking ``invested in a private foundation'' in 
     paragraph (2) and inserting ``contributed to a private 
     foundation described in paragraph (8)''.
       (d) Requirements for Distributions From Trusts.--Section 
     601(c)(9)(A) of the Homeland Security Act of 2002 is amended 
     by striking ``should'' and inserting ``shall''.
       (e) Regulations Regarding Notification of Trust 
     Beneficiaries.--Section 601(f) of the Homeland Security Act 
     of 2002 is amended by striking ``this section'' and inserting 
     ``subsection (e)''.
       (f) Effective Date.--The amendments made by this section 
     shall take effect as if included in the enactment of section 
     601 of the Homeland Security Act of 2002.

                 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 2003, 
     the amount shall be $1,975,000,000, and 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 2003 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 2002 and each fiscal year thereafter.

                TITLE V--INDIVIDUAL DEVELOPMENT ACCOUNTS

     SEC. 501. SHORT TITLE.

       This title may be cited as the ``Savings for Working 
     Families Act of 2003''.

     SEC. 502. PURPOSES.

       The purposes of this title are to provide for the 
     establishment of individual development account programs that 
     will--
       (1) provide individuals and families with limited means an 
     opportunity to accumulate assets and to enter the financial 
     mainstream,
       (2) promote education, homeownership, and the development 
     of small businesses,
       (3) stabilize families and build communities, and
       (4) support continued United States economic expansion.

     SEC. 503. DEFINITIONS.

       As used in this title:
       (1) Eligible individual.--
       (A) In general.--The term ``eligible individual'' means, 
     with respect to any taxable year, an individual who--
       (i) has attained the age of 18 but not the age of 61 as of 
     the last day of such taxable year,
       (ii) is a citizen or lawful permanent resident (within the 
     meaning of section 7701(b)(6) of the Internal Revenue Code of 
     1986) of the United States as of the last day of such taxable 
     year,
       (iii) was not a student (as defined in section 151(c)(4) of 
     such Code) for the immediately preceding taxable year,
       (iv) is not an individual with respect to whom a deduction 
     under section 151 of such Code is allowable to another 
     taxpayer for a taxable year of the other taxpayer ending 
     during the immediately preceding taxable year of the 
     individual,
       (v) is not a taxpayer described in subsection (c), (d), or 
     (e) of section 6402 of such Code for the immediately 
     preceding taxable year,
       (vi) is not a taxpayer described in section 1(d) of such 
     Code for the immediately preceding taxable year, and
       (vii) is a taxpayer the modified adjusted gross income of 
     whom for the immediately preceding taxable year does not 
     exceed--

[[Page 8882]]

       (I) $18,000, in the case of a taxpayer described in section 
     1(c) of such Code,
       (II) $30,000, in the case of a taxpayer described in 
     section 1(b) of such Code, and
       (III) $38,000, in the case of a taxpayer described in 
     section 1(a) of such Code.

       (B) Inflation adjustment.--
       (i) In general.--In the case of any taxable year beginning 
     after 2004, each dollar amount referred to in subparagraph 
     (A)(vii) 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) of the Internal Revenue Code of 1986 for the 
     calendar year in which the taxable year begins, by 
     substituting ``2003'' for ``1992''.

       (ii) Rounding.--If any amount as adjusted under clause (i) 
     is not a multiple of $50, such amount shall be rounded to the 
     nearest multiple of $50.
       (C) Modified adjusted gross income.--For purposes of 
     subparagraph (A)(v), the term ``modified adjusted gross 
     income'' means adjusted gross income--
       (i) determined without regard to sections 86, 893, 911, 
     931, and 933 of the Internal Revenue Code of 1986, and
       (ii) increased by the amount of interest received or 
     accrued by the taxpayer during the taxable year which is 
     exempt from tax.
       (2) Individual development account.--The term ``Individual 
     Development Account'' means an account established for an 
     eligible individual as part of a qualified individual 
     development account program, but only if the written 
     governing instrument creating the account meets the following 
     requirements:
       (A) The owner of the account is the individual for whom the 
     account was established.
       (B) No contribution will be accepted unless it is in cash, 
     and, except in the case of any qualified rollover, 
     contributions will not be accepted for the taxable year in 
     excess of $1,500 on behalf of any individual.
       (C) The trustee of the account is a qualified financial 
     institution.
       (D) The assets of the account will not be commingled with 
     other property except in a common trust fund or common 
     investment fund.
       (E) Except as provided in section 507(b), any amount in the 
     account may be paid out only for the purpose of paying the 
     qualified expenses of the account owner.
       (3) Parallel account.--The term ``parallel account'' means 
     a separate, parallel individual or pooled account for all 
     matching funds and earnings dedicated to an Individual 
     Development Account owner as part of a qualified individual 
     development account program, the trustee of which is a 
     qualified financial institution.
       (4) Qualified financial institution.--The term ``qualified 
     financial institution'' means any person authorized to be a 
     trustee of any individual retirement account under section 
     408(a)(2) of the Internal Revenue Code of 1986.
       (5) Qualified individual development account program.--The 
     term ``qualified individual development account program'' 
     means a program established upon approval of the Secretary 
     under section 504 after December 31, 2002, under which--
       (A) Individual Development Accounts and parallel accounts 
     are held in trust by a qualified financial institution, and
       (B) additional activities determined by the Secretary, in 
     consultation with the Secretary of Health and Human Services, 
     as necessary to responsibly develop and administer accounts, 
     including recruiting, providing financial education and other 
     training to Account owners, and regular program monitoring, 
     are carried out by the qualified financial institution.
       (6) Qualified expense distribution.--
       (A) In general.--The term ``qualified expense 
     distribution'' means any amount paid (including through 
     electronic payments) or distributed out of an Individual 
     Development Account or a parallel account established for an 
     eligible individual if such amount--
       (i) is used exclusively to pay the qualified expenses of 
     the Individual Development Account owner or such owner's 
     spouse or dependents,
       (ii) is paid by the qualified financial institution--

       (I) except as otherwise provided in this clause, directly 
     to the unrelated third party to whom the amount is due,
       (II) in the case of any qualified rollover, directly to 
     another Individual Development Account and parallel account, 
     or
       (III) in the case of a qualified final distribution, 
     directly to the spouse, dependent, or other named beneficiary 
     of the deceased Account owner, and

       (iii) is paid after the Account owner has completed a 
     financial education course if required under section 505(b).
       (B) Qualified expenses.--
       (i) In general.--The term ``qualified expenses'' means any 
     of the following expenses approved by the qualified financial 
     institution:

       (I) Qualified higher education expenses.
       (II) Qualified first-time homebuyer costs.
       (III) Qualified business capitalization or expansion costs.
       (IV) Qualified rollovers.
       (V) Qualified final distribution.

       (ii) Qualified higher education expenses.--

       (I) In general.--The term ``qualified higher education 
     expenses'' has the meaning given such term by section 
     529(e)(3) of the Internal Revenue Code of 1986, determined by 
     treating the Account owner, the owner's spouse, or one or 
     more of the owner's dependents as a designated beneficiary, 
     and reduced as provided in section 25A(g)(2) of such Code.
       (II) Coordination with other benefits.--The amount of 
     expenses which may be taken into account for purposes of 
     section 135, 529, or 530 of such Code for any taxable year 
     shall be reduced by the amount of any qualified higher 
     education expenses taken into account as qualified expense 
     distributions during such taxable year.

       (iii) Qualified first-time homebuyer costs.--The term 
     ``qualified first-time homebuyer costs'' means qualified 
     acquisition costs (as defined in section 72(t)(8)(C) of the 
     Internal Revenue Code of 1986) with respect to a principal 
     residence (within the meaning of section 121 of such Code) 
     for a qualified first-time homebuyer (as defined in section 
     72(t)(8)(D)(i) of such Code).
       (iv) Qualified business capitalization or expansion 
     costs.--

       (I) In general.--The term ``qualified business 
     capitalization or expansion costs'' means qualified 
     expenditures for the capitalization or expansion of a 
     qualified business pursuant to a qualified business plan.
       (II) Qualified expenditures.--The term ``qualified 
     expenditures'' means expenditures normally associated with 
     starting or expanding a business and included in a qualified 
     business plan, including costs for capital, plant, and 
     equipment, inventory expenses, and attorney and accounting 
     fees.
       (III) Qualified business.--The term ``qualified business'' 
     means any business that does not contravene any law.
       (IV) Qualified business plan.--The term ``qualified 
     business plan'' means a business plan which has been approved 
     by the qualified financial institution and which meets such 
     requirements as the Secretary may specify.

       (v) Qualified rollovers.--The term ``qualified rollover'' 
     means the complete distribution of the amounts in an 
     Individual Development Account and parallel account to 
     another Individual Development Account and parallel account 
     established in another qualified financial institution for 
     the benefit of the Account owner.
       (vi) Qualified final distribution.--The term ``qualified 
     final distribution'' means, in the case of a deceased Account 
     owner, the complete distribution of the amounts in the 
     Individual Development Account and parallel account directly 
     to the spouse, any dependent, or other named beneficiary of 
     the deceased.
       (7) Secretary.--The term ``Secretary'' means the Secretary 
     of the Treasury.

     SEC. 504. STRUCTURE AND ADMINISTRATION OF QUALIFIED 
                   INDIVIDUAL DEVELOPMENT ACCOUNT PROGRAMS.

       (a) Establishment of Qualified Individual Development 
     Account Programs.--Any qualified financial institution may 
     apply to the Secretary for approval to establish 1 or more 
     qualified individual development account programs which meet 
     the requirements of this title and for an allocation of the 
     Individual Development Account limitation under section 
     45G(i)(3) of the Internal Revenue Code of 1986 with respect 
     to such programs.
       (b) Basic Program Structure.--
       (1) In general.--All qualified individual development 
     account programs shall consist of the following 2 components 
     for each participant:
       (A) An Individual Development Account to which an eligible 
     individual may contribute cash in accordance with section 
     505.
       (B) A parallel account to which all matching funds shall be 
     deposited in accordance with section 506.
       (2) Tailored ida programs.--A qualified financial 
     institution may tailor its qualified individual development 
     account program to allow matching funds to be spent on 1 or 
     more of the categories of qualified expenses.
       (3) No fees may be charged to idas.--A qualified financial 
     institution may not charge any fees to any Individual 
     Development Account or parallel account under a qualified 
     individual development account program.
       (c) Coordination With Public Housing Agency Individual 
     Savings Accounts.--Section 3(e)(2) of the United States 
     Housing Act of 1937 (42 U.S.C. 1437a(e)(2)) is amended by 
     inserting ``or in any Individual Development Account 
     established under the Savings for Working Families Act of 
     2003'' after ``subsection''.
       (d) Tax Treatment of Parallel Accounts.--
       (1) In general.--Chapter 77 (relating to miscellaneous 
     provisions) is amended by adding at the end the following new 
     section:

     ``SEC. 7528. TAX INCENTIVES FOR INDIVIDUAL DEVELOPMENT 
                   PARALLEL ACCOUNTS.

       ``For purposes of this title--
       ``(1) any account described in section 504(b)(1)(B) of the 
     Savings for Working Families Act of 2003 shall be exempt from 
     taxation,
       ``(2) except as provided in section 45G, no item of income, 
     expense, basis, gain, or loss with respect to such an account 
     may be taken into account, and

[[Page 8883]]

       ``(3) any amount withdrawn from such an account shall not 
     be includible in gross income.''.
       (2) Conforming amendment.--The table of sections for 
     chapter 77 is amended by adding at the end the following new 
     item:

``Sec. 7528. Tax incentives for individual development parallel 
              accounts.''.

       (e) Coordination of certain expenses.--Section 25A(g)(2) is 
     amended by striking ``and'' at the end of subparagraph (C), 
     by striking the period at the end of subparagraph (D) and 
     inserting ``, and'', and by adding at the end the following 
     new subparagraph:
       ``(D) a qualified expense distribution with respect to 
     qualified higher education expenses from an Individual 
     Development Account or a parallel account under section 
     507(a) of the Savings for Working Families Act of 2003.''.

     SEC. 505. PROCEDURES FOR OPENING AND MAINTAINING AN 
                   INDIVIDUAL DEVELOPMENT ACCOUNT AND QUALIFYING 
                   FOR MATCHING FUNDS.

       (a) Opening an Account.--An eligible individual may open an 
     Individual Development Account with a qualified financial 
     institution upon certification that such individual has never 
     maintained any other Individual Development Account (other 
     than an Individual Development Account to be terminated by a 
     qualified rollover).
       (b) Required Completion of Financial Education Course.--
       (1) In general.--Before becoming eligible to withdraw funds 
     to pay for qualified expenses, owners of Individual 
     Development Accounts must complete 1 or more financial 
     education courses specified in the qualified individual 
     development account program.
       (2) Standard and applicability of course.--The Secretary, 
     in consultation with representatives of qualified individual 
     development account programs and financial educators, shall 
     not later than January 1, 2004, establish minimum quality 
     standards for the contents of financial education courses and 
     providers of such courses described in paragraph (1) and a 
     protocol to exempt individuals from the requirement under 
     paragraph (1) in the case of hardship, lack of need, the 
     attainment of age 65, or a qualified final distribution.
       (c) Proof of Status as an Eligible Individual.--Federal 
     income tax forms for the immediately preceding taxable year 
     and any other evidence of eligibility which may be required 
     by a qualified financial institution shall be presented to 
     such institution at the time of the establishment of the 
     Individual Development Account and in any taxable year in 
     which contributions are made to the Account to qualify for 
     matching funds under section 506(b)(1)(A).
       (d) Special Rule in the Case of Married Individuals.--For 
     purposes of this title, if, with respect to any taxable year, 
     2 married individuals file a Federal joint income tax return, 
     then not more than 1 of such individuals may be treated as an 
     eligible individual with respect to the succeeding taxable 
     year.

     SEC. 506. DEPOSITS BY QUALIFIED INDIVIDUAL DEVELOPMENT 
                   ACCOUNT PROGRAMS.

       (a) Parallel Accounts.--The qualified financial institution 
     shall deposit all matching funds for each Individual 
     Development Account into a parallel account at a qualified 
     financial institution.
       (b) Regular Deposits of Matching Funds.--
       (1) In general.--Subject to paragraph (2), the qualified 
     financial institution shall deposit into the parallel account 
     with respect to each eligible individual the following 
     amounts:
       (A) A dollar-for-dollar match for the first $500 
     contributed by the eligible individual into an Individual 
     Development Account with respect to any taxable year of such 
     individual.
       (B) Any matching funds provided by State, local, or private 
     sources in accordance with the matching ratio set by those 
     sources.
       (2) Timing of deposits.--A deposit of the amounts described 
     in paragraph (1) shall be made into a parallel account--
       (A) in the case of amounts described in paragraph (1)(A), 
     not later than 30 days after the end of the calendar quarter 
     during which the contribution described in such paragraph was 
     made, and
       (B) in the case of amounts described in paragraph (1)(B), 
     not later than 2 business days after such amounts were 
     provided.
       (3) Cross reference.--

  For allowance of tax credit for Individual Development Account 
subsidies, including matching funds, see section 45G of the Internal 
Revenue Code of 1986.

       (c) Deposit of Matching Funds Into Individual Development 
     Account of Individual Who Has Attained Age 65.--In the case 
     of an Individual Development Account owner who attains the 
     age of 65, the qualified financial institution shall deposit 
     the funds in the parallel account with respect to such 
     individual into the Individual Development Account of such 
     individual on the later of--
       (1) the day which is the 1-year anniversary of the deposit 
     of such funds in the parallel account, or
       (2) the first business day of the taxable year of such 
     individual following the taxable year in which such 
     individual attained age 65.
       (d) Uniform Accounting Regulations.--To ensure proper 
     recordkeeping and determination of the tax credit under 
     section 45G of the Internal Revenue Code of 1986, the 
     Secretary shall prescribe regulations with respect to 
     accounting for matching funds in the parallel accounts.
       (e) Regular Reporting of Accounts.--Any qualified financial 
     institution shall report the balances in any Individual 
     Development Account and parallel account of an individual on 
     not less than an annual basis to such individual.

     SEC. 507. WITHDRAWAL PROCEDURES.

       (a) Withdrawals for Qualified Expenses.--
       (1) In general.--An Individual Development Account owner 
     may withdraw funds in order to pay qualified expense 
     distributions from such individual's--
       (A) Individual Development Account, but only from funds 
     which have been on deposit in such Account for at least 1 
     year, and
       (B) parallel account, but only--
       (i) from matching funds which have been on deposit in such 
     parallel account for at least 1 year,
       (ii) from earnings in such parallel account, after all 
     matching funds described in clause (i) have been withdrawn, 
     and
       (iii) to the extent such withdrawal does not result in a 
     remaining balance in such parallel account which is less than 
     the remaining balance in the Individual Development Account 
     after such withdrawal.
       (2) Procedure.--Upon receipt of a withdrawal request which 
     meets the requirements of paragraph (1), the qualified 
     financial institution shall directly transfer the funds 
     electronically to the distributees described in section 
     503(6)(A)(ii). If a distributee is not equipped to receive 
     funds electronically, the qualified financial institution may 
     issue such funds by paper check to the distributee.
       (b) Withdrawals for Nonqualified Expenses.--An Individual 
     Development Account owner may withdraw any amount of funds 
     from the Individual Development Account for purposes other 
     than to pay qualified expense distributions, but if, after 
     such withdrawal, the amount in the parallel account of such 
     owner (excluding earnings on matching funds) exceeds the 
     amount remaining in such Individual Development Account, then 
     such owner shall forfeit from the parallel account the lesser 
     of such excess or the amount withdrawn.
       (c) Withdrawals From Accounts of Noneligible Individuals.--
     If the individual for whose benefit an Individual Development 
     Account is established ceases to be an eligible individual, 
     such account shall remain an Individual Development Account, 
     but such individual shall not be eligible for any further 
     matching funds under section 506(b)(1)(A) for contributions 
     which are made to the Account during any taxable year when 
     such individual is not an eligible individual.
       (d) Effect of Pledging Account as Security.--If, during any 
     taxable year of the individual for whose benefit an 
     Individual Development Account is established, that 
     individual uses the Account, the individual's parallel 
     account, or any portion thereof as security for a loan, the 
     portion so used shall be treated as a withdrawal of such 
     portion from the Individual Development Account for purposes 
     other than to pay qualified expenses.

     SEC. 508. CERTIFICATION AND TERMINATION OF QUALIFIED 
                   INDIVIDUAL DEVELOPMENT ACCOUNT PROGRAMS.

       (a) Certification Procedures.--Upon establishing a 
     qualified individual development account program under 
     section 504, a qualified financial institution shall certify 
     to the Secretary at such time and in such manner as may be 
     prescribed by the Secretary and accompanied by any 
     documentation required by the Secretary, that--
       (1) the accounts described in subparagraphs (A) and (B) of 
     section 504(b)(1) are operating pursuant to all the 
     provisions of this title, and
       (2) the qualified financial institution agrees to implement 
     an information system necessary to monitor the cost and 
     outcomes of the qualified individual development account 
     program.
       (b) Authority To Terminate Qualified IDA Program.--If the 
     Secretary determines that a qualified financial institution 
     under this title is not operating a qualified individual 
     development account program in accordance with the 
     requirements of this title (and has not implemented any 
     corrective recommendations directed by the Secretary), the 
     Secretary shall terminate such institution's authority to 
     conduct the program. If the Secretary is unable to identify a 
     qualified financial institution to assume the authority to 
     conduct such program, then any funds in a parallel account 
     established for the benefit of any individual under such 
     program shall be deposited into the Individual Development 
     Account of such individual as of the first day of such 
     termination.

     SEC. 509. REPORTING, MONITORING, AND EVALUATION.

       (a) Responsibilities of Qualified Financial Institutions.--
       (1) In general.--Each qualified financial institution that 
     operates a qualified individual development account program 
     under

[[Page 8884]]

     section 504 shall report annually to the Secretary within 90 
     days after the end of each calendar year on--
       (A) the number of individuals making contributions into 
     Individual Development Accounts and the amounts contributed,
       (B) the amounts contributed into Individual Development 
     Accounts by eligible individuals and the amounts deposited 
     into parallel accounts for matching funds,
       (C) the amounts withdrawn from Individual Development 
     Accounts and parallel accounts, and the purposes for which 
     such amounts were withdrawn,
       (D) the balances remaining in Individual Development 
     Accounts and parallel accounts, and
       (E) such other information needed to help the Secretary 
     monitor the effectiveness of the qualified individual 
     development account program (provided in a non-individually-
     identifiable manner).
       (2) Additional reporting requirements.--Each qualified 
     financial institution that operates a qualified individual 
     development account program under section 504 shall report at 
     such time and in such manner as the Secretary may prescribe 
     any additional information that the Secretary requires to be 
     provided for purposes of administering and supervising the 
     qualified individual development account program. This 
     additional data may include, without limitation, identifying 
     information about Individual Development Account owners, 
     their Accounts, additions to the Accounts, and withdrawals 
     from the Accounts.
       (b) Responsibilities of the Secretary.--
       (1) Monitoring protocol.--Not later than 12 months after 
     the date of the enactment of this Act, the Secretary, in 
     consultation with the Secretary of Health and Human Services, 
     shall develop and implement a protocol and process to monitor 
     the cost and outcomes of the qualified individual development 
     account programs established under section 504.
       (2) Annual reports.--For each year after 2004, the 
     Secretary shall submit a progress report to Congress on the 
     status of such qualified individual development account 
     programs. Such report shall, to the extent data are 
     available, include from a representative sample of qualified 
     individual development account programs information on--
       (A) the characteristics of participants, including age, 
     gender, race or ethnicity, marital status, number of 
     children, employment status, and monthly income,
       (B) deposits, withdrawals, balances, uses of Individual 
     Development Accounts, and participant characteristics,
       (C) the characteristics of qualified individual development 
     account programs, including match rate, economic education 
     requirements, permissible uses of accounts, staffing of 
     programs in full time employees, and the total costs of 
     programs, and
       (D) process information on program implementation and 
     administration, especially on problems encountered and how 
     problems were solved.
       (3) Reauthorization report on cost and outcomes of idas.--
       (A) In general.--Not later than July 1, 2008, the Secretary 
     of the Treasury shall submit a report to Congress and the 
     chairmen and ranking members of the Committee on Finance, the 
     Committee on Banking, Housing, and Urban Affairs, and the 
     Committee on Health, Education, Labor, and Pensions of the 
     Senate and the Committee on Ways and Means, the Committee on 
     Banking and Financial Services, and the Committee on 
     Education and the Workforce of the House of Representatives, 
     in which the Secretary shall--
       (i) summarize the previously submitted annual reports 
     required under paragraph (2),
       (ii) from a representative sample of qualified individual 
     development account programs, include an analysis of--

       (I) the economic, social, and behavioral outcomes,
       (II) the changes in savings rates, asset holdings, and 
     household debt, and overall changes in economic stability,
       (III) the changes in outlooks, attitudes, and behavior 
     regarding savings strategies, investment, education, and 
     family,
       (IV) the integration into the financial mainstream, 
     including decreased reliance on alternative financial 
     services, and increase in acquisition of mainstream financial 
     products, and
       (V) the involvement in civic affairs, including 
     neighborhood schools and associations,

     associated with participation in qualified individual 
     development account programs,

       (iii) from a representative sample of qualified individual 
     development account programs, include a comparison of 
     outcomes associated with such programs with outcomes 
     associated with other Federal Government social and economic 
     development programs, including asset building programs, and
       (iv) make recommendations regarding the reauthorization of 
     the qualified individual development account programs, 
     including--

       (I) recommendations regarding reforms that will improve the 
     cost and outcomes of such programs, including the ability to 
     help low income families save and accumulate productive 
     assets,
       (II) recommendations regarding the appropriate levels of 
     subsidies to provide effective incentives to financial 
     institutions and Account owners under such programs, and
       (III) recommendations regarding how such programs should be 
     integrated into other Federal poverty reduction, asset 
     building, and community development policies and programs.

       (B) Authorization.--There is authorized to be appropriated 
     $2,500,000, for carrying out the purposes of this paragraph.
       (4) Use of accounts in rural areas encouraged.--The 
     Secretary shall develop methods to encourage the use of 
     Individual Development Accounts in rural areas.

     SEC. 510. AUTHORIZATION OF APPROPRIATIONS.

       There is authorized to be appropriated to the Secretary 
     $1,000,000 for fiscal year 2004 and for each fiscal year 
     through 2012, for the purposes of implementing this title, 
     including the reporting, monitoring, and evaluation required 
     under section 509, to remain available until expended.

     SEC. 511. MATCHING FUNDS FOR INDIVIDUAL DEVELOPMENT ACCOUNTS 
                   PROVIDED THROUGH A TAX CREDIT FOR QUALIFIED 
                   FINANCIAL INSTITUTIONS.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business related credits) is amended 
     by adding at the end the following new section:

     ``SEC. 45G. INDIVIDUAL DEVELOPMENT ACCOUNT INVESTMENT CREDIT.

       ``(a) Determination of Amount.--For purposes of section 38, 
     the individual development account investment credit 
     determined under this section with respect to any eligible 
     entity for any taxable year is an amount equal to the 
     individual development account investment provided by such 
     eligible entity during the taxable year under an individual 
     development account program established under section 504 of 
     the Savings for Working Families Act of 2003.
       ``(b) Applicable Tax.--For the purposes of this section, 
     the term `applicable tax' means the excess (if any) of--
       ``(1) the tax imposed under this chapter (other than the 
     taxes imposed under the provisions described in subparagraphs 
     (C) through (Q) of section 26(b)(2)), over
       ``(2) the credits allowable under subpart B (other than 
     this section) and subpart D of this part.
       ``(c) Individual Development Account Investment.--For 
     purposes of this section, the term `individual development 
     account investment' means, with respect to an individual 
     development account program in any taxable year, an amount 
     equal to the sum of--
       ``(1) the aggregate amount of dollar-for-dollar matches 
     under such program under section 506(b)(1)(A) of the Savings 
     for Working Families Act of 2003 for such taxable year, plus
       ``(2) $50 with respect to each Individual Development 
     Account maintained--
       ``(A) as of the end of such taxable year, but only if such 
     taxable year is within the 7-taxable-year period beginning 
     with the taxable year in which such Account is opened, and
       ``(B) with a balance of not less than $100 (other than the 
     taxable year in which such Account is opened).
       ``(d) Eligible Entity.--For purposes of this section, 
     except as provided in regulations, the term `eligible entity' 
     means a qualified financial institution.
       ``(e) Other Definitions.--For purposes of this section, any 
     term used in this section and also in the Savings for Working 
     Families Act of 2003 shall have the meaning given such term 
     by such Act.
       ``(f) Denial of Double Benefit.--
       ``(1) In general.--No deduction or credit (other than under 
     this section) shall be allowed under this chapter with 
     respect to any expense which--
       ``(A) is taken into account under subsection (c)(1)(A) in 
     determining the credit under this section, or
       ``(B) is attributable to the maintenance of an Individual 
     Development Account.
       ``(2) Determination of amount.--Solely for purposes of 
     paragraph (1)(B), the amount attributable to the maintenance 
     of an Individual Development Account shall be deemed to be 
     the dollar amount of the credit allowed under subsection 
     (c)(l)(B) for each taxable year such Individual Development 
     Account is maintained.
       ``(g) Credit May Be Transferred.--
       ``(1) In general.--An eligible entity may transfer any 
     credit allowable to the eligible entity under subsection (a) 
     to any person other than to another eligible entity which is 
     exempt from tax under this title. The determination as to 
     whether a credit is allowable shall be made without regard to 
     the tax-exempt status of the eligible entity.
       ``(2) Consent required for revocation.--Any transfer under 
     paragraph (1) may be revoked only with the consent of the 
     Secretary.
       ``(h) Regulations.--The Secretary may prescribe such 
     regulations as may be necessary or appropriate to carry out 
     this section, including
       ``(1) such regulations as necessary to insure that any 
     credit described in subsection (g)(1) is claimed once and not 
     retransferred by a transferee, and
       ``(2) regulations providing for a recapture of the credit 
     allowed under this section (notwithstanding any termination 
     date described in subsection (i)) in cases where there is a 
     forfeiture under section 507(b) of the Savings

[[Page 8885]]

     for Working Families Act of 2003 in a subsequent taxable year 
     of any amount which was taken into account in determining the 
     amount of such credit.
       ``(i) Application of Section.--
       ``(1) In general.--This section shall apply to any 
     expenditure made in any taxable year ending after December 
     31, 2004, and beginning on or before January 1, 2012, with 
     respect to any Individual Development Account which--
       ``(A) is opened before January 1, 2012, and
       ``(B) as determined by the Secretary, when added to all of 
     the previously opened Individual Development Accounts, does 
     not exceed--
       ``(i) 100,000 Accounts if opened after December 31, 2004, 
     and before January 1, 2007,
       ``(ii) an additional 100,000 Accounts if opened after 
     December 31, 2006, and before January 1, 2009, but only if, 
     except as provided in paragraph (4), the total number of 
     Accounts described in clause (i) are opened and the Secretary 
     determines that such Accounts are being reasonably and 
     responsibly administered, and
       ``(iii) an additional 100,000 Accounts if opened after 
     December 31, 2008, and before January 1, 2012, but only if 
     the total number of Accounts described in clauses (i) and 
     (ii) are opened and the Secretary makes a determination 
     described in paragraph (2).
     Notwithstanding the preceding sentence, this section shall 
     apply to amounts which are described in subsection (c)(1)(A) 
     and which are timely deposited into a parallel account during 
     the 30-day period following the end of last taxable year 
     beginning before January 1, 2012.
       ``(2) Determination with respect to third group of 
     accounts.--A determination is described in this paragraph if 
     the Secretary determines that--
       ``(A) substantially all of the previously opened Accounts 
     have been reasonably and responsibly administered prior to 
     the date of the determination,
       ``(B) the individual development account programs have 
     increased net savings of participants in the programs,
       ``(C) participants in the individual development account 
     programs have increased Federal income tax liability and 
     decreased utilization of Federal assistance programs relative 
     to similarly situated individuals that did not participate in 
     the individual development account programs, and
       ``(D) the sum of the estimated increased Federal tax 
     liability and reduction of Federal assistance program 
     benefits to participants in the individual development 
     account programs is greater than the cost of the individual 
     development account programs to the Federal government.
       ``(3) Determination of limitation.--The limitation on the 
     number of Individual Development Accounts under paragraph 
     (1)(B) shall be allocated by the Secretary among qualified 
     individual development account programs selected by the 
     Secretary and, in the case of the limitation under clause 
     (iii) of such paragraph, shall be equally divided among the 
     States.
       ``(4) Special rule if smaller number of accounts are 
     opened.--For purposes of paragraph (1)(B)(ii)--
       ``(i) In general.--If less than 100,000 Accounts are opened 
     before January 1, 2007, such paragraph shall be applied by 
     substituting ``applicable number of Accounts' for `100,000 
     Accounts'.
       ``(ii) Applicable number.--For purposes of clause (i), the 
     applicable number equals the lesser of--

       ``(I) 75,000, or
       ``(II) 3 times the number of Accounts opened before January 
     1, 2007.''.

       (b) Credit Treated as Business Credit.--Section 38(b) 
     (relating to current year business credit) is amended by 
     striking ``plus'' at the end of paragraph (14), by striking 
     the period at the end of paragraph (15) and inserting ``, 
     plus'', and by adding at the end the following new paragraph:
       ``(16) the individual development account investment credit 
     determined under section 45G(a).''.
       (c) No Carrybacks.--Subsection (d) of section 39 (relating 
     to carryback and carryforward of unused credits) is amended 
     by adding at the end the following:
       ``(11) No carryback of section 45g credit before effective 
     date.--No portion of the unused business credit for any 
     taxable year which is attributable to the individual 
     development account investment credit determined under 
     section 45G may be carried back to a taxable year ending 
     before January 1, 2004.''.
       (d) Conforming Amendment.--The table of sections for 
     subpart C of part IV of subchapter A of chapter 1 is amended 
     by adding at the end the following new item:

``Sec. 45G. Individual development account investment credit.''.

       (e) Report Regarding Account Maintenance Fees.--The 
     Secretary of the Treasury shall study the adequacy of the 
     amount specified in section 45G(c)(2) of the Internal Revenue 
     Code of 1986 (as added by this section). Not later than 
     December 31, 2009, the Secretary of the Treasury shall report 
     the findings of the study described in the preceding sentence 
     to Congress.
       (f) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending after December 31, 2004.

     SEC. 512. ACCOUNT FUNDS DISREGARDED FOR PURPOSES OF CERTAIN 
                   MEANS-TESTED FEDERAL PROGRAMS.

       Notwithstanding any other provision of Federal law (other 
     than the Internal Revenue Code of 1986) that requires 
     consideration of 1 or more financial circumstances of an 
     individual, for the purpose of determining eligibility to 
     receive, or the amount of, any assistance or benefit 
     authorized by such provision to be provided to or for the 
     benefit of such individual, any amount (including earnings 
     thereon) in any Individual Development Account of such 
     individual and any matching deposit made on behalf of such 
     individual (including earnings thereon) in any parallel 
     account shall be disregarded for such purpose with respect to 
     any period during which such individual maintains or makes 
     contributions into such Individual Development Account.

              TITLE VI--MANAGEMENT OF EXEMPT ORGANIZATIONS

     SEC. 601. AUTHORIZATION OF APPROPRIATIONS.

       (a) In General.--There is authorized to be appropriated to 
     the Secretary of the Treasury $80,000,000 for each fiscal 
     year to carry out the administration of exempt organizations 
     by the Internal Revenue Service.
       (b) Implementation of Section 527.--There is authorized to 
     be appropriated to the Secretary of the Treasury $3,000,000 
     to carry out the provisions of Public Laws 106-230 and 107-
     276 relating to section 527 of the Internal Revenue Code of 
     1986.

                     TITLE VII--REVENUE PROVISIONS

        Subtitle A--Provisions Designed To Curtail Tax Shelters

     SEC. 701. CLARIFICATION OF ECONOMIC SUBSTANCE DOCTRINE.

       (a) In General.--Section 7701, as amended by this Act, is 
     amended by redesignating subsection (o) as subsection (p) and 
     by inserting after subsection (n) the following new 
     subsection:
       ``(o) 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 is any Federal tax 
     effects, also apart from any foreign, State, or local tax 
     effects) the taxpayer's economic position, and
       ``(II) the taxpayer has a substantial nontax purpose for 
     entering into such transaction and the transaction is a 
     reasonable means of accomplishing such purpose.

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

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

       ``(C) Treatment of fees and foreign taxes.--Fees and other 
     transaction expenses and foreign taxes shall be taken into 
     account as expenses in determining pre-tax profit under 
     subparagraph (B)(ii).
       ``(2) Special rules for transactions with tax-indifferent 
     parties.--
       ``(A) Special rules for financing transactions.--The form 
     of a transaction which is in substance the borrowing of money 
     or the acquisition of financial capital directly or 
     indirectly from a tax-indifferent party shall not be 
     respected if the present value of the deductions to be 
     claimed with respect to the transaction is substantially in 
     excess of the present value of the anticipated economic 
     returns of the person lending the money or providing the 
     financial capital. A public offering shall be treated as a 
     borrowing, or an acquisition of financial capital, from a 
     tax-indifferent party if it is reasonably expected that at 
     least 50 percent of the offering will be placed with tax-
     indifferent parties.
       ``(B) Artificial income shifting and basis adjustments.--
     The form of a transaction with a tax-indifferent party shall 
     not be respected if--
       ``(i) it results in an allocation of income or gain to the 
     tax-indifferent party in excess of such party's economic 
     income or gain, or
       ``(ii) it results in a basis adjustment or shifting of 
     basis on account of overstating the income or gain of the 
     tax-indifferent party.
       ``(3) Definitions and special rules.--For purposes of this 
     subsection--
       ``(A) Economic substance doctrine.--The term `economic 
     substance doctrine' means the common law doctrine under which 
     tax benefits under subtitle A with respect to a transaction 
     are not allowable if the transaction does not have economic 
     substance or lacks a business purpose.
       ``(B) Tax-indifferent party.--The term `tax-indifferent 
     party' means any person or entity not subject to tax imposed 
     by subtitle

[[Page 8886]]

     A. A person shall be treated as a tax-indifferent party with 
     respect to a transaction if the items taken into account with 
     respect to the transaction have no substantial impact on such 
     person's liability under subtitle A.
       ``(C) Exception for personal transactions of individuals.--
     In the case of an individual, this subsection shall apply 
     only to transactions entered into in connection with a trade 
     or business or an activity engaged in for the production of 
     income.
       ``(D) Treatment of lessors.--In applying subclause (I) of 
     paragraph (1)(B)(ii) to the lessor of tangible property 
     subject to a lease, 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 15, 
     2004.

     SEC. 702. 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.--The term `high net worth 
     individual' means, with respect to a transaction, a natural 
     person whose net worth exceeds $2,000,000 immediately before 
     the transaction.
       ``(c) Definitions.--For purposes of this section--
       ``(1) Reportable transaction.--The term `reportable 
     transaction' means any transaction with respect to which 
     information is required to be included with a return or 
     statement because, as determined under regulations prescribed 
     under section 6011, such transaction is of a type which the 
     Secretary determines as having a potential for tax avoidance 
     or evasion.
       ``(2) Listed transaction.--Except as provided in 
     regulations, the term `listed transaction' means a reportable 
     transaction which is the same as, or substantially similar 
     to, a transaction specifically identified by the Secretary as 
     a tax avoidance transaction for purposes of section 6011.
       ``(d) Authority To Rescind Penalty.--
       ``(1) In general.--The Commissioner of Internal Revenue may 
     rescind all or any portion of any penalty imposed by this 
     section with respect to any violation if--
       ``(A) the violation is with respect to a reportable 
     transaction other than a listed transaction,
       ``(B) the person on whom the penalty is imposed has a 
     history of complying with the requirements of this title,
       ``(C) it is shown that the violation is due to an 
     unintentional mistake of fact;
       ``(D) imposing the penalty would be against equity and good 
     conscience, and
       ``(E) rescinding the penalty would promote compliance with 
     the requirements of this title and effective tax 
     administration.
       ``(2) Discretion.--The exercise of authority under 
     paragraph (1) shall be at the sole discretion of the 
     Commissioner and may be delegated only to the head of the 
     Office of Tax Shelter Analysis. The Commissioner, in the 
     Commissioner's sole discretion, may establish a procedure to 
     determine if a penalty should be referred to the Commissioner 
     or the head of such Office for a determination under 
     paragraph (1).
       ``(3) No appeal.--Notwithstanding any other provision of 
     law, any determination under this subsection may not be 
     reviewed in any administrative or judicial proceeding.
       ``(4) Records.--If a penalty is rescinded under paragraph 
     (1), the Commissioner shall place in the file in the Office 
     of the Commissioner the opinion of the Commissioner or the 
     head of the Office of Tax Shelter Analysis with respect to 
     the determination, including--
       ``(A) the facts and circumstances of the transaction,
       ``(B) the reasons for the rescission, and
       ``(C) the amount of the penalty rescinded.
       ``(5) Report.--The Commissioner shall each year report to 
     the Committee on Ways and Means of the House of 
     Representatives and the Committee on Finance of the Senate--
       ``(A) a summary of the total number and aggregate amount of 
     penalties imposed, and rescinded, under this section, and
       ``(B) a description of each penalty rescinded under this 
     subsection and the reasons therefor.
       ``(e) Penalty Reported to SEC.--In the case of a person--
       ``(1) which is required to file periodic reports under 
     section 13 or 15(d) of the Securities Exchange Act of 1934 or 
     is required to be consolidated with another person for 
     purposes of such reports, and
       ``(2) which--
       ``(A) is required to pay a penalty under this section with 
     respect to a listed transaction,
       ``(B) is required to pay a penalty under section 6662A with 
     respect to any reportable transaction at a rate prescribed 
     under section 6662A(c), or
       ``(C) is required to pay a penalty under section 6662B with 
     respect to any noneconomic substance transaction,

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

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

     SEC. 703. 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.

[[Page 8887]]

       ``(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 (2), (3), 
     (4), and (5) of section 6707A(d) shall apply for purposes of 
     subparagraph (A).
       ``(d) Definitions of Reportable and Listed Transactions.--
     For purposes of this section, the terms `reportable 
     transaction' and `listed transaction' have the respective 
     meanings given to such terms by section 6707A(c).
       ``(e) Special Rules.--
       ``(1) Coordination with penalties, etc., on other 
     understatements.--In the case of an understatement (as 
     defined in section 6662(d)(2))--
       ``(A) the amount of such understatement (determined without 
     regard to this paragraph) shall be increased by the aggregate 
     amount of reportable transaction understatements and 
     noneconomic substance transaction understatements for 
     purposes of determining whether such understatement is a 
     substantial understatement under section 6662(d)(1), and
       ``(B) the addition to tax under section 6662(a) shall apply 
     only to the excess of the amount of the substantial 
     understatement (if any) after the application of subparagraph 
     (A) over the aggregate amount of reportable transaction 
     understatements and noneconomic substance transaction 
     understatements.
       ``(2) Coordination with other penalties.--
       ``(A) Application of fraud penalty.--References to an 
     underpayment in section 6663 shall be treated as including 
     references to a reportable transaction understatement and a 
     noneconomic substance transaction understatement.
       ``(B) No double penalty.--This section shall not apply to 
     any portion of an understatement on which a penalty is 
     imposed under section 6662B or 6663.
       ``(3) Special rule for amended returns.--Except as provided 
     in regulations, in no event shall any tax treatment included 
     with an amendment or supplement to a return of tax be taken 
     into account in determining the amount of any reportable 
     transaction understatement or noneconomic substance 
     transaction understatement if the amendment or supplement is 
     filed after the earlier of the date the taxpayer is first 
     contacted by the Secretary regarding the examination of the 
     return or such other date as is specified by the Secretary.
       ``(4) Noneconomic substance transaction understatement.--
     For purposes of this subsection, the term `noneconomic 
     substance transaction understatement' has the meaning given 
     such term by section 6662B(c).
       ``(5) Cross reference.--

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

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

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

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

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

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

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

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

       (2) Conforming amendment.--The heading for subsection (c) 
     of section 6664 is amended by inserting ``for Underpayments'' 
     after ``Exception''.
       (d) Conforming Amendments.--
       (1) Subparagraph (C) of section 461(i)(3) is amended by 
     striking ``section 6662(d)(2)(C)(iii)'' and inserting 
     ``section 1274(b)(3)(C)''.
       (2) Paragraph (3) of section 1274(b) is amended--
       (A) by striking ``(as defined in section 
     6662(d)(2)(C)(iii))'' in subparagraph (B)(i), and
       (B) by adding at the end the following new subparagraph:
       ``(C) Tax shelter.--For purposes of subparagraph (B), the 
     term `tax shelter' means--
       ``(i) a partnership or other entity,
       ``(ii) any investment plan or arrangement, or
       ``(iii) any other plan or arrangement,
     if a significant purpose of such partnership, entity, plan, 
     or arrangement is the avoidance or evasion of Federal income 
     tax.''.
       (3) Section 6662(d)(2) is amended by striking subparagraphs 
     (C) and (D).
       (4) Section 6664(c)(1) is amended by striking ``this part'' 
     and inserting ``section 6662 or 6663''.
       (5) Subsection (b) of section 7525 is amended by striking 
     ``section 6662(d)(2)(C)(iii)'' and inserting ``section 
     1274(b)(3)(C)''.
       (6)(A) The heading for section 6662 is amended to read as 
     follows:

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

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

``Sec. 6662. Imposition of accuracy-related penalty on underpayments.
``Sec. 6662A. Imposition of accuracy-related penalty on understatements 
              with respect to reportable transactions.''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending after the date of the 
     enactment of this Act.

     SEC. 704. 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

[[Page 8888]]

     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 applies.
       ``(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(o)(1)) for the transaction giving 
     rise to the claimed benefit or the transaction was not 
     respected under section 7701(o)(2), or
       ``(B) the transaction fails to meet the requirements of any 
     similar rule of law.
       ``(d) Rules Applicable To Compromise of Penalty.--
       ``(1) In general.--If the 1st letter of proposed deficiency 
     which allows the taxpayer an opportunity for administrative 
     review in the Internal Revenue Service Office of Appeals has 
     been sent with respect to a penalty to which this section 
     applies, only the Commissioner of Internal Revenue may 
     compromise all or any portion of such penalty.
       ``(2) Applicable rules.--The rules of paragraphs (2), (3), 
     (4), and (5) of section 6707A(d) shall apply for purposes of 
     paragraph (1).
       ``(e) Coordination With Other Penalties.--Except as 
     otherwise provided in this part, the penalty imposed by this 
     section shall be in addition to any other penalty imposed by 
     this title.
       ``(f) Cross References.--

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

``Sec. 6662B. Penalty for understatements attributable to transactions 
              lacking economic substance, etc.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to transactions entered into after February 15, 
     2004.

     SEC. 705. 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. 706. 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. 707. DISCLOSURE OF REPORTABLE TRANSACTIONS.

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

     ``SEC. 6111. DISCLOSURE OF REPORTABLE TRANSACTIONS.

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

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

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

       ``(a) In General.--Each material advisor (as defined in 
     section 6111) with respect to any reportable transaction (as 
     defined in section 6707A(c)) shall maintain, in such manner 
     as the Secretary may by regulations prescribe, a list--
       ``(1) identifying each person with respect to whom such 
     advisor acted as such a material advisor with respect to such 
     transaction, and
       ``(2) containing such other information as the Secretary 
     may by regulations require.

     This section shall apply without regard to whether a material 
     advisor is required to file a return under section 6111 with 
     respect to such transaction.''.
       (B) Section 6112 is amended by redesignating subsection (c) 
     as subsection (b).
       (C) Section 6112(b), as redesignated by subparagraph (B), 
     is amended--
       (i) by inserting ``written'' before ``request'' in 
     paragraph (1)(A), and
       (ii) by striking ``shall prescribe'' in paragraph (2) and 
     inserting ``may prescribe''.
       (D) The item relating to section 6112 in the table of 
     sections for subchapter B of chapter 61 is amended to read as 
     follows:

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

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

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

``Sec. 6708. Failure to maintain lists of advisees with respect to 
              reportable transactions.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to transactions with respect to which material 
     aid, assistance, or advice referred to in section 
     6111(b)(1)(A)(i) of the Internal Revenue Code of 1986 (as 
     added by this section) is provided after the date of the 
     enactment of this Act.

     SEC. 708. 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:

[[Page 8889]]



     ``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. 709. 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. 710. 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. 711. 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. 712. PENALTY ON FAILURE TO REPORT INTERESTS IN FOREIGN 
                   FINANCIAL ACCOUNTS.

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

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

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

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

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

     SEC. 713. 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--

[[Page 8890]]

       ``(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. 714. 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. 715. 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. 716. 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 in taxable years beginning after 
     the date of the enactment of this Act.

     SEC. 717. DENIAL OF DEDUCTION FOR INTEREST ON UNDERPAYMENTS 
                   ATTRIBUTABLE TO NONDISCLOSED REPORTABLE AND 
                   NONECONOMIC SUBSTANCE TRANSACTIONS.

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

     SEC. 718. AUTHORIZATION OF APPROPRIATIONS FOR TAX LAW 
                   ENFORCEMENT.

       There is authorized to be appropriated $300,000,000 for 
     each fiscal year beginning after September 30, 2002, for the 
     purpose of carrying out tax law enforcement to combat tax 
     avoidance transactions and other tax shelters, including the 
     use of offshore financial accounts to conceal taxable income.

                      Subtitle B--Other Provisions

     SEC. 721. 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).

[[Page 8891]]

       (c) Effective Date.--The provisions of this section shall 
     apply to taxable years beginning before, on, or after the 
     date of the enactment of this Act.

     SEC. 722. SIGNING OF CORPORATE TAX RETURNS BY CHIEF EXECUTIVE 
                   OFFICER.

       (a) In General.--Section 6062 (relating to signing of 
     corporation returns) is amended by striking the first 
     sentence and inserting the following new sentence: ``The 
     return of a corporation with respect to income shall be 
     signed by the chief executive officer of such corporation (or 
     other such officer of the corporation as the Secretary may 
     designate if the corporation does not have a chief executive 
     officer). The preceding sentence shall not apply to any 
     return of a regulated investment company (within the meaning 
     of section 851).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to returns filed after the date of the enactment 
     of this Act.

     SEC. 723. SECURITIES CIVIL ENFORCEMENT PROVISIONS.

       (a) Authority To Assess Civil Money Penalties.--
       (1) Securities act of 1933.--Section 8A of the Securities 
     Act of 1933 (15 U.S.C. 77h-1) is amended by adding at the end 
     the following new subsection:
       ``(g) Authority of the Commission To Assess Money 
     Penalty.--
       ``(1) In general.--In any cease-and-desist proceeding under 
     subsection (a), the Commission may impose a civil monetary 
     penalty if it finds, on the record after notice and 
     opportunity for hearing, that a person is violating, has 
     violated, or is or was a cause of the violation of, any 
     provision of this title or any rule or regulation thereunder, 
     and that such penalty is in the public interest.
       ``(2) Maximum amount of penalty.--
       ``(A) First tier.--The maximum amount of penalty for each 
     act or omission described in paragraph (1) shall be $100,000 
     for a natural person or $250,000 for any other person.
       ``(B) Second tier.--Notwithstanding subparagraph (A), the 
     maximum amount of penalty for such act or omission described 
     in paragraph (1) shall be $500,000 for a natural person or 
     $1,000,000 for any other person, if the act or omission 
     involved fraud, deceit, manipulation, or deliberate or 
     reckless disregard of a statutory or regulatory requirement.
       ``(C) Third tier.--Notwithstanding subparagraphs (A) and 
     (B), the maximum amount of penalty for each act or omission 
     described in paragraph (1) shall be $1,000,000 for a natural 
     person or $2,000,000 for any other person, if--
       ``(i) the act or omission involved fraud, deceit, 
     manipulation, or deliberate or reckless disregard of a 
     statutory or regulatory requirement; and
       ``(ii) such act or omission directly or indirectly resulted 
     in substantial losses or created a significant risk of 
     substantial losses to other persons or resulted in 
     substantial pecuniary gain to the person who committed the 
     act or omission.
       ``(3) Evidence concerning ability to pay.--In any 
     proceeding in which the Commission or the appropriate 
     regulatory agency may impose a penalty under this section, a 
     respondent may present evidence of the ability of the 
     respondent to pay such penalty. The Commission or the 
     appropriate regulatory agency may, in its discretion, 
     consider such evidence in determining whether the penalty is 
     in the public interest. Such evidence may relate to the 
     extent of the person's ability to continue in business and 
     the collectability of a penalty, taking into account any 
     other claims of the United States or third parties upon the 
     assets of that person and the amount of the assets of that 
     person.''.
       (2) Securities exchange act of 1934.--Section 21B(a) of the 
     Securities Exchange Act of 1934 (15 U.S.C. 78u-2(a)) is 
     amended--
       (A) in paragraph (4), by striking ``supervision;'' and all 
     that follows through the end of the subsection and inserting 
     ``supervision.'';
       (B) by redesignating paragraphs (1) through (4) as 
     subparagraphs (A) through (D), respectively, and moving the 
     margins 2 ems to the right;
       (C) by inserting ``that such penalty is in the public 
     interest and'' after ``hearing,'';
       (D) by striking ``In any proceeding'' and inserting the 
     following:
       ``(1) In general.--In any proceeding''; and
       (E) by adding at the end the following:
       ``(2) Other money penalties.--In any proceeding under 
     section 21C against any person, the Commission may impose a 
     civil monetary penalty if it finds, on the record after 
     notice and opportunity for hearing, that such person is 
     violating, has violated, or is or was a cause of the 
     violation of, any provision of this title or any rule or 
     regulation thereunder, and that such penalty is in the public 
     interest.''.
       (3) Investment company act of 1940.--Section 9(d)(1) of the 
     Investment Company Act of 1940 (15 U.S.C. 80a-9(d)(1)) is 
     amended--
       (A) in subparagraph (C), by striking ``therein;'' and all 
     that follows through the end of the paragraph and inserting 
     ``supervision.'';
       (B) by redesignating subparagraphs (A) through (C) as 
     clauses (i) through (iii), respectively, and moving the 
     margins 2 ems to the right;
       (C) by inserting ``that such penalty is in the public 
     interest and'' after ``hearing,'';
       (D) by striking ``In any proceeding'' and inserting the 
     following:
       ``(A) In general.--In any proceeding''; and
       (E) by adding at the end the following:
       ``(B) Other money penalties.--In any proceeding under 
     subsection (f) against any person, the Commission may impose 
     a civil monetary penalty if it finds, on the record after 
     notice and opportunity for hearing, that such person is 
     violating, has violated, or is or was a cause of the 
     violation of, any provision of this title or any rule or 
     regulation thereunder, and that such penalty is in the public 
     interest.''.
       (4) Investment advisers act of 1940.--Section 203(i)(1) of 
     the Investment Advisers Act of 1940 (15 U.S.C. 80b-3(i)(1)) 
     is amended--
       (A) in subparagraph (D), by striking ``supervision;'' and 
     all that follows through the end of the paragraph and 
     inserting ``supervision.'';
       (B) by redesignating subparagraphs (A) through (D) as 
     clauses (i) through (iv), respectively, and moving the 
     margins 2 ems to the right;
       (C) by inserting ``that such penalty is in the public 
     interest and'' after ``hearing,'';
       (D) by striking ``In any proceeding'' and inserting the 
     following:
       ``(A) In general.--In any proceeding''; and
       (E) by adding at the end the following:
       ``(B) Other money penalties.--In any proceeding under 
     subsection (k) against any person, the Commission may impose 
     a civil monetary penalty if it finds, on the record after 
     notice and opportunity for hearing, that such person is 
     violating, has violated, or is or was a cause of the 
     violation of, any provision of this title or any rule or 
     regulation thereunder, and that such penalty is in the public 
     interest.''.
       (b) Increased Maximum Civil Money Penalties.--
       (1) Securities act of 1933.--Section 20(d)(2) of the 
     Securities Act of 1933 (15 U.S.C. 77t(d)(2)) is amended--
       (A) in subparagraph (A)(i)--
       (i) by striking ``$5,000'' and inserting ``$100,000''; and
       (ii) by striking ``$50,000'' and inserting ``$250,000'';
       (B) in subparagraph (B)(i)--
       (i) by striking ``$50,000'' and inserting ``$500,000''; and
       (ii) by striking ``$250,000'' and inserting ``$1,000,000''; 
     and
       (C) in subparagraph (C)(i)--
       (i) by striking ``$100,000'' and inserting ``$1,000,000''; 
     and
       (ii) by striking ``$500,000'' and inserting ``$2,000,000''.
       (2) Securities exchange act of 1934.--
       (A) Penalties.--Section 32 of the Securities Exchange Act 
     of 1934 (15 U.S.C. 78ff) is amended--
       (i) in subsection (b), by striking ``$100'' and inserting 
     ``$10,000''; and
       (ii) in subsection (c)--

       (I) in paragraph (1)(B), by striking ``$10,000'' and 
     inserting ``$500,000''; and
       (II) in paragraph (2)(B), by striking ``$10,000'' and 
     inserting ``$500,000''.

       (B) Insider trading.--Section 21A(a)(3) of the Securities 
     Exchange Act of 1934 (15 U.S.C. 78u-1(a)(3)) is amended by 
     striking ``$1,000,000'' and inserting ``$2,000,000''.
       (C) Administrative proceedings.--Section 21B(b) of the 
     Securities Exchange Act of 1934 (15 U.S.C. 78u-2(b)) is 
     amended--
       (i) in paragraph (1)--

       (I) by striking ``$5,000'' and inserting ``$100,000''; and
       (II) by striking ``$50,000'' and inserting ``$250,000'';

       (ii) in paragraph (2)--

       (I) by striking ``$50,000'' and inserting ``$500,000''; and
       (II) by striking ``$250,000'' and inserting ``$1,000,000''; 
     and

       (iii) in paragraph (3)--

       (I) by striking ``$100,000'' and inserting ``$1,000,000''; 
     and
       (II) by striking ``$500,000'' and inserting ``$2,000,000''.

       (D) Civil actions.--Section 21(d)(3)(B) of the Securities 
     Exchange Act of 1934 (15 U.S.C. 78u(d)(3)(B)) is amended--
       (i) in clause (i)--

       (I) by striking ``$5,000'' and inserting ``$100,000''; and
       (II) by striking ``$50,000'' and inserting ``$250,000'';

       (ii) in clause (ii)--

       (I) by striking ``$50,000'' and inserting ``$500,000''; and
       (II) by striking ``$250,000'' and inserting ``$1,000,000''; 
     and

       (iii) in clause (iii)--

       (I) by striking ``$100,000'' and inserting ``$1,000,000''; 
     and
       (II) by striking ``$500,000'' and inserting ``$2,000,000''.

       (3) Investment company act of 1940.--
       (A) Ineligibility.--Section 9(d)(2) of the Investment 
     Company Act of 1940 (15 U.S.C. 80a-9(d)(2)) is amended--
       (i) in subparagraph (A)--

       (I) by striking ``$5,000'' and inserting ``$100,000''; and
       (II) by striking ``$50,000'' and inserting ``$250,000'';

       (ii) in subparagraph (B)--

       (I) by striking ``$50,000'' and inserting ``$500,000''; and

[[Page 8892]]

       (II) by striking ``$250,000'' and inserting ``$1,000,000''; 
     and

       (iii) in subparagraph (C)--

       (I) by striking ``$100,000'' and inserting ``$1,000,000''; 
     and
       (II) by striking ``$500,000'' and inserting ``$2,000,000''.

       (B) Enforcement of investment company act.--Section 
     42(e)(2) of the Investment Company Act of 1940 (15 U.S.C. 
     80a-41(e)(2)) is amended--
       (i) in subparagraph (A)--

       (I) by striking ``$5,000'' and inserting ``$100,000''; and
       (II) by striking ``$50,000'' and inserting ``$250,000'';

       (ii) in subparagraph (B)--

       (I) by striking ``$50,000'' and inserting ``$500,000''; and
       (II) by striking ``$250,000'' and inserting ``$1,000,000''; 
     and

       (iii) in subparagraph (C)--

       (I) by striking ``$100,000'' and inserting ``$1,000,000''; 
     and
       (II) by striking ``$500,000'' and inserting ``$2,000,000''.

       (4) Investment advisers act of 1940.--
       (A) Registration.--Section 203(i)(2) of the Investment 
     advisers Act of 1940 (15 U.S.C. 80b-3(i)(2)) is amended--
       (i) in subparagraph (A)--

       (I) by striking ``$5,000'' and inserting ``$100,000''; and
       (II) by striking ``$50,000'' and inserting ``$250,000'';

       (ii) in subparagraph (B)--

       (I) by striking ``$50,000'' and inserting ``$500,000''; and
       (II) by striking ``$250,000'' and inserting ``$1,000,000''; 
     and

       (iii) in subparagraph (C)--

       (I) by striking ``$100,000'' and inserting ``$1,000,000''; 
     and
       (II) by striking ``$500,000'' and inserting ``$2,000,000''.

       (B) Enforcement of investment advisers act.--Section 
     209(e)(2) of the Investment advisers Act of 1940 (15 U.S.C. 
     80b-9(e)(2)) is amended--
       (i) in subparagraph (A)--

       (I) by striking ``$5,000'' and inserting ``$100,000''; and
       (II) by striking ``$50,000'' and inserting ``$250,000'';

       (ii) in subparagraph (B)--

       (I) by striking ``$50,000'' and inserting ``$500,000''; and
       (II) by striking ``$250,000'' and inserting ``$1,000,000''; 
     and

       (iii) in subparagraph (C)--

       (I) by striking ``$100,000'' and inserting ``$1,000,000''; 
     and
       (II) by striking ``$500,000'' and inserting ``$2,000,000''.

       (c) Authority To Obtain Financial Records.--Section 21(h) 
     of the Securities Exchange Act of 1934 (15 U.S.C. 78u(h)) is 
     amended--
       (1) by striking paragraphs (2) through (8);
       (2) in paragraph (9), by striking ``(9)(A)'' and all that 
     follows through ``(B) The'' and inserting ``(3) The'';
       (3) by inserting after paragraph (1), the following:
       ``(2) Access to financial records.--
       ``(A) In general.--Notwithstanding section 1105 or 1107 of 
     the Right to Financial Privacy Act of 1978, the Commission 
     may obtain access to and copies of, or the information 
     contained in, financial records of any person held by a 
     financial institution, including the financial records of a 
     customer, without notice to that person, when it acts 
     pursuant to a subpoena authorized by a formal order of 
     investigation of the Commission and issued under the 
     securities laws or pursuant to an administrative or judicial 
     subpoena issued in a proceeding or action to enforce the 
     securities laws.
       ``(B) Nondisclosure of requests.--If the Commission so 
     directs in its subpoena, no financial institution, or 
     officer, director, partner, employee, shareholder, 
     representative or agent of such financial institution, shall, 
     directly or indirectly, disclose that records have been 
     requested or provided in accordance with subparagraph (A), if 
     the Commission finds reason to believe that such disclosure 
     may--
       ``(i) result in the transfer of assets or records outside 
     the territorial limits of the United States;
       ``(ii) result in improper conversion of investor assets;
       ``(iii) impede the ability of the Commission to identify, 
     trace, or freeze funds involved in any securities 
     transaction;
       ``(iv) endanger the life or physical safety of an 
     individual;
       ``(v) result in flight from prosecution;
       ``(vi) result in destruction of or tampering with evidence;
       ``(vii) result in intimidation of potential witnesses; or
       ``(viii) otherwise seriously jeopardize an investigation or 
     unduly delay a trial.
       ``(C) Transfer of records to government authorities.--The 
     Commission may transfer financial records or the information 
     contained therein to any government authority, if the 
     Commission proceeds as a transferring agency in accordance 
     with section 1112 of the Right to Financial Privacy Act of 
     1978 (12 U.S.C. 3412), except that a customer notice shall 
     not be required under subsection (b) or (c) of that section 
     1112, if the Commission determines that there is reason to 
     believe that such notification may result in or lead to any 
     of the factors identified under clauses (i) through (viii) of 
     subparagraph (B) of this paragraph.'';
       (4) by striking paragraph (10); and
       (5) by redesignating paragraphs (11), (12), and (13) as 
     paragraphs (4), (5), and (6), respectively.

     SEC. 724. REVIEW OF STATE AGENCY BLINDNESS AND DISABILITY 
                   DETERMINATIONS.

       Section 1633 of the Social Security Act (42 U.S.C. 1383b) 
     is amended by adding at the end the following:
       ``(e)(1) The Commissioner of Social Security shall review 
     determinations, made by State agencies pursuant to subsection 
     (a) in connection with applications for benefits under this 
     title on the basis of blindness or disability, that 
     individuals who have attained 18 years of age are blind or 
     disabled as of a specified onset date. The Commissioner of 
     Social Security shall review such a determination before any 
     action is taken to implement the determination.
       ``(2)(A) In carrying out paragraph (1), the Commissioner of 
     Social Security shall review--
       ``(i) at least 25 percent of all determinations referred to 
     in paragraph (1) that are made in fiscal year 2004; and
       ``(ii) at least 50 percent of all such determinations that 
     are made in fiscal year 2005 or thereafter.
       ``(B) In carrying out subparagraph (A), the Commissioner of 
     Social Security shall, to the extent feasible, select for 
     review the determinations which the Commissioner of Social 
     Security identifies as being the most likely to be 
     incorrect.''.

                  TITLE VIII--COMPASSION CAPITAL FUND

     SEC. 801. SUPPORT FOR NONPROFIT COMMUNITY-BASED 
                   ORGANIZATIONS; DEPARTMENT OF HEALTH AND HUMAN 
                   SERVICES.

       (a) Support for Nongovernmental Organizations.--The 
     Secretary of Health and Human Services (referred to in this 
     section as ``the Secretary'') may award grants to and enter 
     into cooperative agreements with nongovernmental 
     organizations, to--
       (1) provide technical assistance for community-based 
     organizations, which may include--
       (A) grant writing and grant management assistance, which 
     may include assistance provided through workshops and other 
     guidance;
       (B) legal assistance with incorporation;
       (C) legal assistance to obtain tax-exempt status; and
       (D) information on, and referrals to, other nongovernmental 
     organizations that provide expertise in accounting, on legal 
     issues, on tax issues, in program development, and on a 
     variety of other organizational topics;
       (2) provide information and assistance for community-based 
     organizations on capacity building;
       (3) provide for community-based organizations information 
     on and assistance in identifying and using best practices for 
     delivering assistance to persons, families, and communities 
     in need;
       (4) provide information on and assistance in utilizing 
     regional intermediary organizations to increase and 
     strengthen the capabilities of nonprofit community-based 
     organizations;
       (5) assist community-based organizations in replicating 
     social service programs of demonstrated effectiveness; and
       (6) encourage research on the best practices of social 
     service organizations.
       (b) Support for States.--The Secretary--
       (1) may award grants to and enter into cooperative 
     agreements with States and political subdivisions of States 
     to provide seed money to establish State and local offices of 
     faith-based and community initiatives; and
       (2) shall provide technical assistance to States and 
     political subdivisions of States in administering the 
     provisions of this Act.
       (c) Applications.--To be eligible to receive a grant or 
     enter into a cooperative agreement under this section, a 
     nongovernmental organization, State, or political subdivision 
     shall submit an application to the Secretary at such time, in 
     such manner, and containing such information as the Secretary 
     may require.
       (d) Limitation.--In order to widely disburse limited 
     resources, no community-based organization (other than a 
     direct recipient of a grant or cooperative agreement from the 
     Secretary) may receive more than 1 grant or cooperative 
     agreement under this section for the same purpose.
       (e) Authorization of Appropriations.--There are authorized 
     to be appropriated to carry out this section $85,000,000 for 
     fiscal year 2003, and such sums as may be necessary for each 
     of fiscal years 2004 through 2007.
       (f) Definition.--In this section, the term ``community-
     based organization'' means a nonprofit corporation or 
     association that has--
       (1) not more than 6 full-time equivalent employees who are 
     engaged in the provision of social services; or
       (2) a current annual budget (current as of the date the 
     entity seeks assistance under this section) for the provision 
     of social services, compiled and adopted in good faith, of 
     less than $450,000.

[[Page 8893]]



     SEC. 802. SUPPORT FOR NONPROFIT COMMUNITY-BASED 
                   ORGANIZATIONS; CORPORATION FOR NATIONAL AND 
                   COMMUNITY SERVICE.

       (a) Support for Nongovernmental Organizations.--The 
     Corporation for National and Community Service (referred to 
     in this section as ``the Corporation'') may award grants to 
     and enter into cooperative agreements with nongovernmental 
     organizations and State Commissions on National and Community 
     Service established under section 178 of the National and 
     Community Service Act of 1990 (42 U.S.C. 12638), to--
       (1) provide technical assistance for community-based 
     organizations, which may include--
       (A) grant writing and grant management assistance, which 
     may include assistance provided through workshops and other 
     guidance;
       (B) legal assistance with incorporation;
       (C) legal assistance to obtain tax-exempt status; and
       (D) information on, and referrals to, other nongovernmental 
     organizations that provide expertise in accounting, on legal 
     issues, on tax issues, in program development, and on a 
     variety of other organizational topics;
       (2) provide information and assistance for community-based 
     organizations on capacity building;
       (3) provide for community-based organizations information 
     on and assistance in identifying and using best practices for 
     delivering assistance to persons, families, and communities 
     in need;
       (4) provide information on and assistance in utilizing 
     regional intermediary organizations to increase and 
     strengthen the capabilities of community-based organizations;
       (5) assist community-based organizations in replicating 
     social service programs of demonstrated effectiveness; and
       (6) encourage research on the best practices of social 
     service organizations.
       (b) Applications.--To be eligible to receive a grant or 
     enter into a cooperative agreement under this section, a 
     nongovernmental organization, State Commission, State, or 
     political subdivision shall submit an application to the 
     Corporation at such time, in such manner, and containing such 
     information as the Corporation may require.
       (c) Limitation.--In order to widely disburse limited 
     resources, no community-based organization (other than a 
     direct recipient of a grant or cooperative agreement from the 
     Secretary) may receive more than 1 grant or cooperative 
     agreement under this section for the same purpose.
       (d) Authorization of Appropriations.--There are authorized 
     to be appropriated to carry out this section $15,000,000 for 
     fiscal year 2003, and such sums as may be necessary for each 
     of fiscal years 2004 through 2007.
       (e) Definition.--In this section, the term ``community-
     based organization'' means a nonprofit corporation or 
     association that has--
       (1) not more than 6 full-time equivalent employees who are 
     engaged in the provision of social services; or
       (2) a current annual budget (current as of the date the 
     entity seeks assistance under this section) for the provision 
     of social services, compiled and adopted in good faith, of 
     less than $450,000.

     SEC. 803. SUPPORT FOR NONPROFIT COMMUNITY-BASED 
                   ORGANIZATIONS; DEPARTMENT OF JUSTICE.

       (a) Support for Nongovernmental Organizations.--The 
     Attorney General may award grants to and enter into 
     cooperative agreements with nongovernmental organizations, 
     to--
       (1) provide technical assistance for community-based 
     organizations, which may include--
       (A) grant writing and grant management assistance, which 
     may include assistance provided through workshops and other 
     guidance;
       (B) legal assistance with incorporation;
       (C) legal assistance to obtain tax-exempt status; and
       (D) information on, and referrals to, other nongovernmental 
     organizations that provide expertise in accounting, on legal 
     issues, on tax issues, in program development, and on a 
     variety of other organizational topics;
       (2) provide information and assistance for community-based 
     organizations on capacity building;
       (3) provide for community-based organizations information 
     on and assistance in identifying and using best practices for 
     delivering assistance to persons, families, and communities 
     in need;
       (4) provide information on and assistance in utilizing 
     regional intermediary organizations to increase and 
     strengthen the capabilities of nonprofit community-based 
     organizations;
       (5) assist community-based organizations in replicating 
     social service programs of demonstrated effectiveness; and
       (6) encourage research on the best practices of social 
     service organizations.
       (b) Applications.--To be eligible to receive a grant or 
     enter into a cooperative agreement under this section, a 
     nongovernmental organization, State, or political subdivision 
     shall submit an application to the Attorney General at such 
     time, in such manner, and containing such information as the 
     Attorney General may require.
       (c) Limitation.--In order to widely disburse limited 
     resources, no community-based organization (other than a 
     direct recipient of a grant or cooperative agreement from the 
     Attorney General) may receive more than 1 grant or 
     cooperative agreement under this section for the same 
     purpose.
       (d) Authorization of Appropriations.--There are authorized 
     to be appropriated to carry out this section $35,000,000 for 
     fiscal year 2003, and such sums as may be necessary for each 
     of fiscal years 2004 through 2007.
       (e) Definition.--In this section, the term ``community-
     based organization'' means a nonprofit corporation or 
     association that has--
       (1) not more than 6 full-time equivalent employees who are 
     engaged in the provision of social services; or
       (2) a current annual budget (current as of the date the 
     entity seeks assistance under this section) for the provision 
     of social services, compiled and adopted in good faith, of 
     less than $450,000.

     SEC. 804. SUPPORT FOR NONPROFIT COMMUNITY-BASED 
                   ORGANIZATIONS; DEPARTMENT OF HOUSING AND URBAN 
                   DEVELOPMENT.

       (a) Support for Nongovernmental Organizations.--The 
     Secretary of Housing and Urban Development (referred to in 
     this section ``the Secretary'') may award grants to and enter 
     into cooperative agreements with nongovernmental 
     organizations, to--
       (1) provide technical assistance for community-based 
     organizations, which may include--
       (A) grant writing and grant management assistance, which 
     may include assistance provided through workshops and other 
     guidance;
       (B) legal assistance with incorporation;
       (C) legal assistance to obtain tax-exempt status; and
       (D) information on, and referrals to, other nongovernmental 
     organizations that provide expertise in accounting, on legal 
     issues, on tax issues, in program development, and on a 
     variety of other organizational topics;
       (2) provide information and assistance for community-based 
     organizations on capacity building;
       (3) provide for community-based organizations information 
     on and assistance in identifying and using best practices for 
     delivering assistance to persons, families, and communities 
     in need;
       (4) provide information on and assistance in utilizing 
     regional intermediary organizations to increase and 
     strengthen the capabilities of community-based organizations;
       (5) assist community-based organizations in replicating 
     social service programs of demonstrated effectiveness; and
       (6) encourage research on the best practices of social 
     service organizations.
       (b) Applications.--To be eligible to receive a grant or 
     enter into a cooperative agreement under this section, a 
     nongovernmental organization, State, or political subdivision 
     shall submit an application to the Secretary at such time, in 
     such manner, and containing such information as the Secretary 
     may require.
       (c) Limitation.--In order to widely disburse limited 
     resources, no community-based organization (other than a 
     direct recipient of a grant or cooperative agreement from the 
     Secretary) may receive more than 1 grant or cooperative 
     agreement under this section for the same purpose.
       (d) Authorization of Appropriations.--There are authorized 
     to be appropriated to carry out this section $15,000,000 for 
     fiscal year 2003, and such sums as may be necessary for each 
     of fiscal years 2004 through 2007.
       (e) Definition.--In this section, the term ``community-
     based organization'' means a nonprofit corporation or 
     association that has--
       (1) not more than 6 full-time equivalent employees who are 
     engaged in the provision of social services; or
       (2) a current annual budget (current as of the date the 
     entity seeks assistance under this section) for the provision 
     of social services, compiled and adopted in good faith, of 
     less than $450,000.

     SEC. 805. COORDINATION.

       The Secretary of Health and Human Services, the Corporation 
     for National and Community Service, the Attorney General, and 
     the Secretary of Housing and Urban Development shall 
     coordinate their activities under this title to ensure--
       (1) nonduplication of activities under this title; and
       (2) an equitable distribution of resources under this 
     title.

                    TITLE IX--MATERNITY GROUP HOMES

     SEC. 901. 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 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.''.

[[Page 8894]]

       (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)''.
     Passed the Senate April 9, 2003.
     Attest:
     Secretary.

  The PRESIDING OFFICER (Mr. Talent). Under the previous order, S. 476 
will be held at the desk.
  Mr. GRASSLEY. Madam President, I want to take a brief moment to thank 
the many, many people that helped bring President Bush's words 
supporting charities and charitable giving into reality.
  First, I thank my colleague, Senator Baucus. I appreciate his 
bipartisanship on this matter. The people of Montana are well served by 
his leadership on the Senate Finance Committee. In addition, I thank 
the Democratic staff on the Finance Committee, Russ Sullivan, Pat Heck 
and Jon Selib, for their work.
  At this time, I should also commend the work of my staff on the 
Finance Committee, Dean Zerbe for the charitable provisions and Ed 
McClellan for the corporate shelter legislation. In addition, Mark 
Prater, Elizabeth Paris, Christy Mistr and Diann Howland were critical 
in putting this bill together.
  It is clear that without the drive and energy of Senators Santorum 
and Lieberman we would not have had this success. I thank them for 
their efforts and their staff: Randy Brandt and Chuck Ludlam.
  I also thank all those behind the scenes who have toiled on the CARE 
Act. Roger Colvineaux, Ron Schultz, Joe Naga from the Joint Committee 
on Taxation, as well as Mark Mathiesen from Legislative Counsel who did 
all the drafting.
  Finally, let me note just a few of the members of the administration 
who ably served the President in this effort: Jim Towey, David Kuo, and 
Susan Brown at Treasury.
  Thanks to all for their efforts.
  Mr. MILLER. Mr. President, I rise today to express my thanks for the 
Senate's passage of S. 476, the CARE Act, which included my amendment 
requiring chief executive officers to sign their company's tax returns.
  And I especially thank Senator Grassley and Senator Baucus and their 
staffs for working with me on this issue.
  I offered this amendment last summer when we were debating the 
corporate governance bill amid the corporate scandals involving Enron, 
World Com, and others. In these corporate scandals, the corporate big 
shots got the gold mine while the poor employees and innocent 
stockholders got the shaft.
  Now, I am as probusiness as anyone in this body. As Governor and 
Senator I have worked to give tax cuts and tax incentives and pay for 
the training of their employees, all to provide a probusiness 
environment in which the entrepreneurial spirit can thrive and prosper 
and create jobs.
  But folks, there comes a time when so much greed and so many lies 
become so bad--even if it is by only a few--that something has to be 
done. The corporate governance bill we passed last summer will go a 
long way to protect the investor, provide some security for the worker 
and restore confidence in the market place.
  My amendment today will help even more. It is only two short 
paragraphs, but it goes to the very essence of fairness. It simply says 
that when the tax man cometh, we all--workers and high-dollar bosses 
alike--must face him just alike without any go-betweens, liability 
firewalls or corporate veils.
  The standard 1040 tax form that individuals must fill out each year 
says:

       Under penalties of perjury, I declare that I have examined 
     this return and accompanying schedules and statements, and to 
     the best of my knowledge and belief they are true, correct 
     and complete.

  If Joe Sixpack is required to sign this oath for his family, why 
shouldn't Josepheus Chardonnay be required to sign that same oath for 
his big corporation?
  So, my amendment simply requires that henceforth the chief executive 
officer of all publicly owned and publicly traded corporations must 
sign the corporation's annual Federal tax return.
  Currently, there is an IRS rule that corporations can designate any 
corporate officer to sign their tax return. But that won't get it, Mr. 
president. Let's be specific. The CEO is the one who must sign the tax 
return and must be accountable for it.
  Where I come from it is expected that those being paid to mind the 
store should at least know whether the store is losing or making money.
  If any CEO is not willing to sign the company tax return, if they are 
not willing to take steps to satisfy themselves that their corporation 
is accurately reporting financial information--then those CEOs have no 
right to the prestige and respect that goes with the position they 
hold.
  What is good for the goose is good for the gander.
  So, I thank my colleagues for holding our CEOs to the same standard 
that we now impose upon our average wage earners.

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