[House Report 118-729]
[From the U.S. Government Publishing Office]
118th Congress } { Report
HOUSE OF REPRESENTATIVES
2d Session } { 118-729
======================================================================
STOP TERROR-FINANCING AND TAX PENALTIES ON
AMERICAN HOSTAGES ACT
_______
November 8, 2024.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Smith of Missouri, from the Committee on Ways and Means, submitted
the following
R E P O R T
[To accompany H.R. 9495]
[Including cost estimate of the Congressional Budget Office]
The Committee on Ways and Means, to whom was referred the
bill (H.R. 9495) to amend the Internal Revenue Code of 1986 to
postpone tax deadlines and reimburse paid late fees for United
States nationals who are unlawfully or wrongfully detained or
held hostage abroad, to terminate the tax-exempt status of
terrorist supporting organizations, and for other purposes,
having considered the same, reports favorably thereon with an
amendment and recommends that the bill as amended do pass.
CONTENTS
Page
I. SUMMARY AND BACKGROUND...........................................5
A. Purpose and Summary................................. 5
B. Background and Need for Legislation................. 5
C. Legislative History................................. 6
D. Designated Hearing.................................. 7
II. EXPLANATION OF THE BILL..........................................7
III. VOTE OF THE COMMITTEE...........................................16
IV. BUDGET EFFECTS OF THE BILL......................................16
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE......18
A. Committee Oversight Findings and Recommendations.... 18
B. Statement of General Performance Goals and
Objectives......................................... 18
C. Tax Complexity Analysis............................. 18
D. Information Relating to Unfunded Mandates........... 18
E. Congressional Earmarks, Limited Tax Benefits, and
Limited Tariff Benefits............................ 18
F. Duplication of Federal Programs..................... 19
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED...........19
A. Changes in Existing Law Proposed by the Bill, as
Reported........................................... 19
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Stop Terror-Financing and Tax
Penalties on American Hostages Act''.
SEC. 2. POSTPONEMENT OF TAX DEADLINES FOR HOSTAGES AND INDIVIDUALS
WRONGFULLY DETAINED ABROAD.
(a) In General.--Chapter 77 of the Internal Revenue Code of 1986 is
amended by inserting after section 7510 the following new section:
``SEC. 7511. TIME FOR PERFORMING CERTAIN ACTS POSTPONED FOR HOSTAGES
AND INDIVIDUALS WRONGFULLY DETAINED ABROAD.
``(a) Time To Be Disregarded.--
``(1) In general.--The period during which an applicable
individual was unlawfully or wrongfully detained abroad, or
held hostage abroad, shall be disregarded in determining, under
the internal revenue laws, in respect of any tax liability of
such individual--
``(A) whether any of the acts described in section
7508(a)(1) were performed within the time prescribed
thereof (determined without regard to extension under
any other provision of this subtitle for periods after
the initial date (as determined by the Secretary) on
which such individual was unlawfully or wrongfully
detained abroad or held hostage abroad),
``(B) the amount of any interest, penalty, additional
amount, or addition to the tax for periods after such
date, and
``(C) the amount of any credit or refund.
``(2) Application to spouse.--The provisions of paragraph (1)
shall apply to the spouse of any individual entitled to the
benefits of such paragraph.
``(b) Applicable Individual.--
``(1) In general.--For purposes of this section, the term
`applicable individual' means any individual who is--
``(A) a United States national unlawfully or
wrongfully detained abroad, as determined under section
302 of the Robert Levinson Hostage Recovery and
Hostage-Taking Accountability Act (22 U.S.C. 1741), or
``(B) a United States national taken hostage abroad,
as determined pursuant to the findings of the Hostage
Recovery Fusion Cell (as described in section 304 of
the Robert Levinson Hostage Recovery and Hostage-Taking
Accountability Act (22 U.S.C. 1741b)).
``(2) Information provided to treasury.--For purposes of
identifying individuals described in paragraph (1), not later
than January 1, 2025, and annually thereafter--
``(A) the Secretary of State shall provide the
Secretary with a list of the individuals described in
paragraph (1)(A), as well as any other information
necessary to identify such individuals, and
``(B) the Attorney General, acting through the
Hostage Recovery Fusion Cell, shall provide the
Secretary with a list of the individuals described in
paragraph (1)(B), as well as any other information
necessary to identify such individuals.
``(c) Modification of Treasury Databases and Information Systems.--
The Secretary shall ensure that databases and information systems of
the Department of the Treasury are updated as necessary to ensure that
statute expiration dates, interest and penalty accrual, and collection
activities are suspended consistent with the application of subsection
(a).
``(d) Refund and Abatement of Penalties and Fines Imposed Prior to
Identification as Applicable Individual.--In the case of any applicable
individual--
``(1) for whom any interest, penalty, additional amount, or
addition to the tax in respect to any tax liability for any
taxable year ending during the period described in subsection
(a)(1) was assessed or collected, and
``(2) who was, subsequent to such assessment or collection,
determined to be an individual described in subparagraph (A) or
(B) of subsection (b)(1),
the Secretary shall abate any such assessment and refund any amount
collected to such applicable individual in the same manner as any
refund of an overpayment of tax under section 6402.''.
(b) Clerical Amendment.--The table of sections for chapter 77 of the
Internal Revenue Code of 1986 is amended by inserting after the item
relating to section 7510 the following new item:
``Sec. 7511. Time for performing certain acts postponed for hostages
and individuals wrongfully detained abroad.''.
(c) Effective Date.--The amendments made by this section shall apply
to taxable years ending after the date of enactment of this Act.
SEC. 3. REFUND AND ABATEMENT OF PENALTIES AND FINES PAID BY ELIGIBLE
INDIVIDUALS.
(a) In General.--Section 7511 of the Internal Revenue Code of 1986,
as added by section 2, is amended by adding at the end the following
new subsection:
``(e) Refund and Abatement of Penalties and Fines Paid by Eligible
Individuals With Respect to Periods Prior to Date of Enactment of This
Section.--
``(1) In general.--
``(A) Establishment.--Not later than January 1, 2025,
the Secretary (in consultation with the Secretary of
State and the Attorney General) shall establish a
program to allow any eligible individual (or the spouse
or any dependent (as defined in section 152) of such
individual) to apply for a refund or an abatement of
any amount described in paragraph (2) (including
interest) to the extent such amount was attributable to
the applicable period.
``(B) Identification of individuals.--Not later than
January 1, 2025, the Secretary of State and the
Attorney General, acting through the Hostage Recovery
Fusion Cell (as described in section 304 of the Robert
Levinson Hostage Recovery and Hostage-Taking
Accountability Act (22 U.S.C. 1741b)), shall--
``(i) compile a list, based on such
information as is available, of individuals who
were applicable individuals during the
applicable period, and
``(ii) provide the list described in clause
(i) to the Secretary.
``(C) Notice.--For purposes of carrying out the
program described in subparagraph (A), the Secretary
(in consultation with the Secretary of State and the
Attorney General) shall, with respect to any individual
identified under subparagraph (B), provide notice to
such individual--
``(i) in the case of an individual who has
been released on or before the date of
enactment of this subsection, not later than 90
days after the date of enactment of this
subsection, or
``(ii) in the case of an individual who is
released after the date of enactment of this
subsection, not later than 90 days after the
date on which such individual is released,
that such individual may be eligible for a refund or an
abatement of any amount described in paragraph (2)
pursuant to the program described in subparagraph (A).
``(D) Authorization.--
``(i) In general.--Subject to clause (ii), in
the case of any refund described in
subparagraph (A), the Secretary shall issue
such refund to the eligible individual in the
same manner as any refund of an overpayment of
tax.
``(ii) Extension of limitation on time for
refund.--With respect to any refund under
subparagraph (A)--
``(I) the 3-year period of limitation
prescribed by section 6511(a) shall be
extended until the end of the 1-year
period beginning on the date that the
notice described in subparagraph (C) is
provided to the eligible individual,
and
``(II) any limitation under section
6511(b)(2) shall not apply.
``(2) Eligible individual.--For purposes of this subsection,
the term `eligible individual' means any applicable individual
who, for any taxable year ending during the applicable period,
paid or incurred any interest, penalty, additional amount, or
addition to the tax in respect to any tax liability for such
year of such individual based on a determination that an act
described in section 7508(a)(1) which was not performed by the
time prescribed therefor (without regard to any extensions).
``(3) Applicable period.--For purposes of this subsection,
the term `applicable period' means the period--
``(A) beginning on January 1, 2021, and
``(B) ending on the date of enactment of this
subsection.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years ending on or before the date of enactment of this Act.
SEC. 4. TERMINATION OF TAX-EXEMPT STATUS OF TERRORIST SUPPORTING
ORGANIZATIONS.
(a) In General.--Section 501(p) of the Internal Revenue Code of 1986
is amended by adding at the end the following new paragraph:
``(8) Application to terrorist supporting organizations.--
``(A) In general.--For purposes of this subsection,
in the case of any terrorist supporting organization--
``(i) such organization (and the designation
of such organization under subparagraph (B))
shall be treated as described in paragraph (2),
and
``(ii) the period of suspension described in
paragraph (3) with respect to such organization
shall be treated as beginning on the date that
the Secretary designates such organization
under subparagraph (B) and ending on the date
that the Secretary rescinds such designation
under subparagraph (D).
``(B) Terrorist supporting organization.--For
purposes of this paragraph, the term `terrorist
supporting organization' means any organization which
is designated by the Secretary as having provided,
during the 3-year period ending on the date of such
designation, material support or resources (within the
meaning of section 2339B of title 18, United States
Code) to an organization described in paragraph (2)
(determined after the application of this paragraph to
such organization) in excess of a de minimis amount.
``(C) Designation procedure.--
``(i) Notice requirement.--Prior to
designating any organization as a terrorist
supporting organization under subparagraph (B),
the Secretary shall mail to the most recent
mailing address provided by such organization
on the organization's annual return or notice
under section 6033 (or subsequent form
indicating a change of address) a written
notice which includes--
``(I) a statement that the Secretary
will designate such organization as a
terrorist supporting organization
unless the organization satisfies the
requirements of subclause (I) or (II)
of clause (ii),
``(II) the name of the organization
or organizations with respect to which
the Secretary has determined such
organization provided material support
or sources as described in subparagraph
(B), and
``(III) a description of such
material support or resources to the
extent consistent with national
security and law enforcement interests.
``(ii) Opportunity to cure.--In the case of
any notice provided to an organization under
clause (i), the Secretary shall, at the close
of the 90-day period beginning on the date that
such notice was sent, designate such
organization as a terrorist supporting
organization under subparagraph (B) if (and
only if) such organization has not (during such
period)--
``(I) demonstrated to the
satisfaction of the Secretary that such
organization did not provide the
material support or resources referred
to in subparagraph (B), or
``(II) made reasonable efforts to
have such support or resources returned
to such organization and certified in
writing to the Secretary that such
organization will not provide any
further support or resources to
organizations described in paragraph
(2).
A certification under subclause (II) shall not
be treated as valid if the organization making
such certification has provided any other such
certification during the preceding 5 years.
``(D) Rescission.--The Secretary shall rescind a
designation under subparagraph (B) if (and only if)--
``(i) the Secretary determines that such
designation was erroneous,
``(ii) after the Secretary receives a written
certification from an organization that such
organization did not receive the notice
described in subparagraph (C)(i)--
``(I) the Secretary determines that
it is reasonable to believe that such
organization did not receive such
notice, and
``(II) such organization satisfies
the requirements of subclause (I) or
(II) of subparagraph (C)(ii)
(determined after taking into account
the last sentence thereof), or
``(iii) the Secretary determines, with
respect to all organizations to which the
material support or resources referred to in
subparagraph (B) were provided, the periods of
suspension under paragraph (3) have ended.
A certification described in the matter preceding
subclause (I) of clause (II) shall not be treated as
valid if the organization making such certification has
provided any other such certification during the
preceding 5 years.
``(E) Administrative review by internal revenue
service independent office of appeals.--In the case of
the designation of an organization by the Secretary as
a terrorist supporting organization under subparagraph
(B), a dispute regarding such designation shall be
subject to resolution by the Internal Revenue Service
Independent Office of Appeals under section 7803(e) in
the same manner as if such designation were made by the
Internal Revenue Service and paragraph (5) of this
subsection did not apply.
``(F) Jurisdiction of united states courts.--
Notwithstanding paragraph (5), the United States
district courts shall have exclusive jurisdiction to
review a final determination with respect to an
organization's designation as a terrorist supporting
organization under subparagraph (B). In the case of any
such determination which was based on classified
information (as defined in section 1(a) of the
Classified Information Procedures Act), such
information may be submitted to the reviewing court ex
parte and in camera. For purposes of this subparagraph,
a determination with respect to an organization's
designation as a terrorist supporting organization
shall not fail to be treated as a final determination
merely because such organization fails to utilize the
dispute resolution process of the Internal Revenue
Service Independent Office of Appeals provided under
subparagraph (E).''.
(b) Effective Date.--The amendment made by this section shall apply
to designations made after the date of the enactment of this Act in
taxable years ending after such date.
I. SUMMARY AND BACKGROUND
A. Purpose and Summary
The bill, H.R. 9495, the ``Stop Terror-Financing and Tax
Penalties on American Hostages Act,'' as ordered reported by
the Committee on Ways and Means on September 11, 2024, aids
Americans wrongfully held abroad, as well as their families by
providing the Internal Revenue Service (``IRS'') with the tools
to ensure that American citizens who have been taken hostage or
wrongfully detained abroad do not incur penalties for late tax
payments while they are in captivity.
This legislation also addresses abuse of the U.S. tax-
exempt sector by prohibiting organizations from maintaining
tax-exempt status if they are found to have provided material
support or resources to a terrorist or terrorist-supporting
organization within a three-year period. As part of this
process, the bill establishes procedures for the Secretary of
the U.S. Department of the Treasury to provide notice to such
organizations, for organizations to refute the designation, or
for the designation to be rescinded.
B. Background and Need for Legislation
On October 7, 2023, Israel was invaded and attacked by
Hamas, a U.S. designated terrorist organization which killed
more than 1,000 people, wounded thousands more, and took
hundreds hostage--including American citizens who remain in the
tunnels underneath Gaza. Despite Israel being an ally of the
U.S., antisemitic protests broke out across the U.S. after
October 7, many of which resulted in violence and included the
chanting of genocidal slogans and carrying of flags of
designated terrorist organizations. A Ways and Means Committee
investigation identified the use of domestic tax-exempt
organizations to finance and support these efforts, including
efforts on American college campuses. Based on these findings,
the Committee is concerned that groups may be providing
material support for chaos and illegality domestically, and
terrorism abroad. Recent history demonstrates that this risk is
serious.\1\ While hostage families have suffered immensely,
they have been flooded with antisemitism and support for the
hostage takers rather than unconditional support. This
legislation seeks to help the hostages and their families,
along with other Americans wrongfully detained abroad.
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\1\U.S. Department of Justice Press Release, Federal Judge Hands
Down Sentences in Holy Land Foundation Case, U.S. Department of Justice
Office of Public Affairs (May 27, 2009), https://www.justice.gov/opa/
pr/federal-judge-hands-downs-sentences-holy-land-foundation-case.
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Under current law, the IRS can provide tax relief to
American citizens who are held hostage or wrongfully detained
abroad, but that authority is limited in several ways that
adversely impacts hostages or individuals wrongfully detained
abroad and their families. Specifically, under current law, the
IRS does not have the authority to extend relief to taxpayers
beyond one year, nor does it have a basis for proactively
suspending or abating interest for taxpayers who have been
wrongfully detained abroad. These limitations also apply to a
hostage's spouse.
Additionally, current law is inadequate to sufficiently cut
off tax-exempt status for U.S. tax-exempt organizations that
are materially supporting terrorism. Under current law, an
entity's tax-exempt status may be suspended if it is designated
by the U.S. Department of State as a terrorist organization,
but current law does not allow the IRS to suspend the tax-
exempt status of organizations identified as having provided
material support or resources to a designated terrorist or
terrorist-supporting organization.
C. Legislative History
Background
H.R. 9495 was introduced on September 9, 2024, and was
referred to the Committee on Ways and Means.
Committee Hearings
On November 15, 2023, the Committee held a hearing
entitled, ``From Ivory Towers to Dark Corners: Investigating
the Nexus Between Antisemitism, Tax-Exempt Universities, and
Terror Financing.''\2\
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\2\H. Comm. on Ways and Means, Hearing: From Ivory Towers to Dark
Corners: Investigating the Nexus Between Antisemitism, Tax-Exempt
Universities, and Terror Financing (Nov. 15, 2023), https://
waysandmeans.house.gov/event/hearing-from-ivory-towers-to-dark-corners-
investigating-the-nexus-between-antisemitism-tax-exempt-universities-
and-terror-financing/.
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On June 13, 2024, the Committee held a hearing entitled,
``Crisis on Campus: Antisemitism, Radical Faculty, and Failure
of University Leadership.''\3\
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\3\H. Comm. on Ways and Means, Hearing on the Crisis on Campus:
Antisemitism, Radical Faculty, and the Failure of University Leadership
(June 13, 2024), https://waysandmeans.house.gov/event/hearing-on-the-
crisis-on-campus-antisemitism-radical-faculty-and-the-failure-of-
university-leadership/.
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On July 23, 2024, the Committee held a hearing entitled,
``Fueling Chaos: Tracing the Flow of Tax-Exempt Dollars to
Antisemitism.''\4\
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\4\H. Comm. on Ways and Means, Hearing on Fueling Chaos: Tracking
the Flow of Tax-Exempt Dollars to Antisemitism (July 23, 2024), https:/
/waysandmeans.house.gov/event/oversight-subcommittee-hearing-on-
fueling-chaos-tracing-the-flow-of-tax-exempt-dollars-to-antisemitism/.
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Committee Action
The Committee on Ways and Means marked up H.R. 9495, the
``Stop Terror-Financing and Tax Penalties on American Hostages
Act,'' on September 11, 2024, and ordered the bill, as amended,
favorably reported (with a quorum being present).
D. Designated Hearings
Pursuant to clause 3(c)(6) of rule XIII, the following
hearings were used to develop and consider H.R. 9495:
On November 15, 2023, the Committee held a hearing
entitled, ``From Ivory Towers to Dark Corners: Investigating
the Nexus Between Antisemitism, Tax-Exempt Universities, and
Terror Financing.''\5\
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\5\H. Comm. on Ways and Means, Hearing: From Ivory Towers to Dark
Corners: Investigating the Nexus Between Antisemitism, Tax-Exempt
Universities, and Terror Financing (Nov. 15, 2023), https://
waysandmeans.house.gov/event/hearing-from-ivory-towers-to-dark-corners-
investigating-the-nexus-between-antisemitism-tax-exempt-universities-
and-terror-financing/.
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On June 13, 2024, the Committee held a hearing entitled,
``Crisis on Campus: Antisemitism, Radical Faculty, and Failure
of University Leadership.''\6\
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\6\H. Comm. on Ways and Means, Hearing on the Crisis on Campus:
Antisemitism, Radical Faculty, and the Failure of University Leadership
(June 13, 2024), https://waysandmeans.house.gov/event/hearing-on-the-
crisis-on-campus-antisemitism-radical-faculty-and-the-failure-of-
university-leadership/.
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On July 23, 2024, the Committee held a hearing entitled,
``Fueling Chaos: Tracing the Flow of Tax-Exempt Dollars to
Antisemitism.''\7\
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\7\H. Comm. on Ways and Means, Hearing on Fueling Chaos: Tracking
the Flow of Tax-Exempt Dollars to Antisemitism (July 23, 2024), https:/
/waysandmeans.house.gov/event/oversight-subcommittee-hearing-on-
fueling-chaos-tracing-the-flow-of-tax-exempt-dollars-to-antisemitism/.
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II. EXPLANATION OF THE BILL
A. Postponement of Tax Deadlines and Abatement and Refund Procedures
for Hostages and Individuals Wrongfully Detained Abroad (secs. 2 and 3
of the Bill and new section 7511 of the Code)
PRESENT LAW
General rules establishing Code deadlines
The U.S. tax system generally relies upon self-reporting
and assessment. For most individuals, that self-reporting is in
the form of an income tax return. Persons required to file
income tax returns\8\ must file such returns in the manner
prescribed by the Secretary of the U.S. Department of the
Treasury, with any payment due, in compliance with due dates
established in the Internal Revenue Code (``IRC''), if any, or
by regulations. The IRC includes a general rule that requires
income tax returns of individuals to be filed on or before the
fifteenth day of the fourth month following the end of the
taxable year, but certain exceptions are provided both in the
IRC and in regulations.\9\
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\8\Section 6012 provides general rules identifying who must file an
income tax return.
\9\Secs. 6072 (prescribing deadlines for filing income tax returns)
and 6081 (authorization of extensions of time to file, provided tax
estimated to be due is paid with the application for extension).
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The IRC also establishes the limitation periods within
which the IRS must perform its various administrative duties,
such as assessment of taxes, interest, and any additions to tax
or penalties related to the taxes and collection of such taxes,
interest, and additions to tax. Taxes are generally required to
be assessed within three years after a taxpayer's return is
filed, regardless of whether it was timely filed.\10\ Several
exceptions may prevent the three-year limitation period from
beginning, including failure to file a return or filing a false
or fraudulent return with the intent to evade tax. In those
cases, the tax may be assessed, or a proceeding in court for
collection of such tax may commence without assessment, at any
time.\11\ After the taxes are finally determined, whether it is
through alternative payment methods, or enforced collection
activity, the IRS must collect within 10 years from the date of
assessment of tax.\12\ A refund or credit is authorized for a
taxable year only if an overpayment exists, that is, if the
amounts paid or deemed paid exceed the tax liability for that
year and a claim for such amount is timely made.\13\
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\10\Sec. 6501(a). Returns that are filed before the date they are
due are deemed filed on the due date. See sec. 6501(b)(1) and (2).
\11\Sec. 6501(c)(1), (2)c, and (3).
\12\Sec. 6502.
\13\Secs. 6402 (authority for refunding an overpayment) and 6511
(limitations period for filing a claim, including both a timely filing
requirement and a lookback period to determine amounts eligible to be
refunded).
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Special rules authorizing extensions of time for required events in the
IRC
In computing the time within which they must complete an
action required or prescribed by the IRC, persons who serve in
the U.S. Armed Forces or in support of the Armed Forces are
entitled to disregard their period of service while in
designated combat zones\14\ or serving overseas in a
contingency operation designated as such by the Secretary of
Defense,\15\ and the 180 days succeeding such period. For this
purpose, periods of hospitalization that result from such
service are included in the time that may be disregarded. The
period that may be disregarded by the taxpayer is also
disregarded in determinations by the IRS of the amount of any
underpayment interest, penalty, additional amount, or addition
to tax, and the amount of any credit or refund. Special rules
apply for the period a person is in missing status,\16\ for
certain limitations on refunds or collection actions,\17\ as
well as application of this provision to the spouse of the
taxpayer.\18\
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\14\Sec. 112.
\15\Sec. 7508.
\16\Sec. 7508(d).
\17\Secs. 7508(b) and (e).
\18\Sec. 7508(c).
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The IRC specifies a number of actions for which the
specified periods of time may generally be disregarded by
persons who serve in the U.S. Armed Forces or in support of the
Armed Forces described above. These actions include those
required of taxpayers as well as those performed by the IRS.
The former includes actions such as the filing any return of
income, estate, gift, employment, or excise tax; filing a
petition with the Tax Court for redetermination of a deficiency
or for review of a decision rendered by the Tax Court; and
actions related to refunds, such as filing a claim or bringing
suit upon such claim. Actions by the IRS for which a deadline
is extended include the assessment of any tax and related
notices, such as notice and demand for payment or collection of
the tax; the allowance of a refund; and bringing suit by the
U.S. in respect of any liability in respect of any tax. In
addition, the statute includes a residuary clause that permits
the Secretary of the Treasury to designate any other act
required or permitted under the internal revenue laws as within
the scope of section 7508(a).\19\ Finally, special rules ensure
that a taxpayer to whom the extension is available remains
entitled to overpayment interest rates.\20\
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\19\Sec. 7508(a)(1). In addition, Revenue Procedure 2018-58
supplements the list of postponed acts in section 7508(a)(1) and
Treasury Regulation section 301.7508A-1(c)(1) with an additional list
of time-sensitive acts.
\20\Sec. 7508(b).
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Another provision of the IRC, relating to disasters,
mandates a 60-day extension and authorizes the Secretary of the
Treasury to specify a period of up to one year that may be
disregarded for performing various acts under the IRC, such as
filing tax returns, paying taxes, or filing a claim for credit
or refund of tax, for eligible taxpayers. The limited relief
from deadlines under this disaster extension applies to the
same list of actions for which the specified time is
disregarded for persons in combat zones. The provision adopts
by cross reference to section 7508(b) the special rules
regarding overpayment interest for affected taxpayers. To
qualify for this extension, an eligible taxpayer must be
affected by a Federally declared disaster, a significant fire,
or a terroristic or military action.\21\
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\21\Sec. 7508A.
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Persons held hostage or wrongfully detained
Neither the provision on service in a combat zone nor the
rules on disaster relief address persons who fail to meet a tax
filing or payment deadline that arises while they are
unlawfully or wrongfully detained abroad. Federal law provides
a set of criteria for determining whether a U.S. national\22\
is a wrongfully detained person. Such determination requires
the involvement of the Hostage Recovery Fusion Cell, a multi-
agency entity that addresses coordination of efforts to
identify and recover those held hostage or wrongfully detained.
Generally, if the person detained is held by a sovereign
entity, determination of whether such person is wrongfully
detained rests with the Secretary of State using prescribed
criteria. Hostage status is determined by the Hostage Recovery
Fusion Cell, under the leadership of the Federal Bureau of
Investigation.\23\
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\22\22 U.S.C. 1741e defines ``United States national'' to mean
citizens and certain noncitizens within the scope of 8 U.S.C. secs.
1102(a)(22) and 1408 and lawful permanent residents with significant
ties to the United States.
\23\Sections 302 and 304 of the Robert Levinson Hostage Recovery
and Hostage-Taking Accountability Act, Pub. L. 116-260, div. FF, title
III, Sec. 301, Dec. 27, 2020, 134 Stat. 3091, codified at 22 U.S.C.
1741 through 1741f.
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REASONS FOR CHANGE
In recent years, the incidence of U.S. citizens or
residents abroad being wrongfully detained or held hostage has
been increasingly frequent. When they are released from
detention, they face many challenges in adjusting to a return
to their normal, daily life. That adjustment upon a return home
is made more difficult when they must face notices that they
were subject to tax inquiries, penalties or interest based on
delinquencies accruing in their absence they were unable to
avoid. The Committee learned that, while the IRS may work with
the released hostage or detainee to abate or reverse some of
those notices, the authority of the IRS may be limited to do
so, especially in cases in which the period of detention was
lengthy. Most penalties based on delinquency can be abated
based upon reasonable cause, for example, unless the
limitations period for making corrections to a year has lapsed.
Even if the limitations period is open, the IRC narrowly
restricts IRS authority to abate any interest that may have
accrued for failure to pay income tax timely. In response, the
Committee supports enactment of this bill to provide relief
similar in scope and type to those deployed to combat zones or
affected by a Federally declared disaster. It will require
reporting by agencies involved in monitoring status of U.S.
citizens or residents held abroad to the IRS to enable the IRS
to avoid sending notices during the period of detention, and to
correct any missteps in that regard with a minimum
administrative burden on the former detainee. It also requires
a limited retroactive program to extend relief to persons whose
detention was prior to enactment.
EXPLANATION OF PROVISION
The provision adds a new IRC section that extends due dates
for certain Federal tax matters for hostages and persons
wrongfully detained by providing that the period of detention
is disregarded in determining deadlines, interest, and
penalties for the person, comparable to the rules applicable to
a person deployed in a combat zone. Similar to those rules, it
extends such relief to the spouse of the hostage or detainee.
The class of applicable persons is defined by reference to
provisions of Title 22 on wrongfully detained persons or
hostages.
Under the provision, the period that may be disregarded in
redetermining time limits is the entire period during which the
person was held hostage or wrongfully detained during any
taxable year ending after date of enactment. The list in
present-law section 7508 identifying events for which a
deadline is extended is used for the new provision.
The provision uses the term ``applicable individual'' to
describe a person entitled to the extension. A person is an
applicable individual if that person is either determined to be
wrongfully detained under section 302 of the Robert Levinson
Hostage Recovery and Hostage-Taking Accountability Act or is
determined to be a hostage under findings of the Hostage
Recovery Fusion Cell. The class of applicable individuals
consists of persons who are identified on reports provided to
the Secretary of the Treasury. The provision requires the
Secretary of State to provide a list of persons wrongfully
detained, together with any identifying information available.
The Attorney General, through the Hostage Recovery Fusion Cell,
is required to provide a comparable list of persons believed to
be hostages. The initial report is due January 1, 2025, with
further reports due annually.
In addition to establishing a basis for relief from certain
deadlines prescribed by the IRC, the provision also extends
relief to persons who were assessed interest, penalties, or
additional amounts with respect to a tax liability for a
failure to meet a deadline that arose during the period of
detention for which extension is authorized. If the interest,
penalties, or fines were assessed before the person was
identified as an applicable individual, the Secretary of the
Treasury is directed to abate and refund any such amounts as
overpayments in the same manner as would apply under section
6402.
The provision also directs the Secretary of the Treasury,
in consultation with Secretary of State and the Hostage
Recovery Fusion Cell, to initiate a program under which persons
who were detained during an applicable period beginning January
1, 2021, and ending before date of enactment may seek refund of
interest and penalties assessed with respect to tax years
ending during the applicable period. This program is to be
available to eligible individuals (persons who would have been
applicable individuals but for the taxable years involved and
their dependent or spouse), to be identified by the Secretary
of State and Attorney General in reports similar to those
required with respect to applicable individuals. A person may
be both an applicable individual with respect to a taxable year
ending after date of enactment and an eligible individual with
respect to an earlier taxable year within the applicable
period. Once such persons are identified, they are entitled to
notice of the potential relief within 90 days from their
release from captivity, or, if released prior to date of
enactment, within 90 days after enactment.
After receiving notice of the program, eligible individuals
are permitted to seek abatement or claim a refund for additions
to tax and interest assessed or collected in respect of a tax
liability attributable to the applicable period. The
limitations period for filing a claim for refund or seeking
abatement is extended, so that it expires no earlier than one
year from the notice issued to the eligible individual.
Furthermore, the look-back period for determining payments that
may be within the scope of a refund claim is not applicable.
The provision also requires the Secretary of the Treasury
to make necessary updates to databases and information systems
to ensure that expiration dates, interest and penalty accrual,
and collection activities are suspended consistent with this
provision.
EFFECTIVE DATE
The provision is generally effective for applicable
individuals for taxable years ending after the date of
enactment. The special program for notifications, refunds or
abatements to eligible individuals for the applicable period
from January 1, 2021, through date of enactment, is effective
only for taxable years ending before the date of enactment.
B. Termination of Tax-Exempt Status of Terrorist Supporting
Organizations (sec. 4 of the Bill and sec. 501(p) of the Code)
PRESENT LAW
Revocation of tax-exempt status, in general
Under present law, the IRS generally issues a letter
revoking recognition of an organization's tax-exempt status
only after (1) conducting an examination of the organization,
(2) issuing a letter to the organization proposing revocation,
and (3) allowing the organization to exhaust the administrative
appeal rights that follow the issuance of the proposed
revocation letter. In the case of an organization described in
section 501(c) or (d), the revocation letter immediately is
subject to judicial review under the declaratory judgment
procedures of section 7428. To sustain a revocation of tax-
exempt status under section 7428, the IRS must demonstrate that
the organization is no longer entitled to exemption.
Suspension of tax-exempt status of terrorist organizations (section
501(p))
To combat terrorism, the Federal government has designated
a number of organizations as terrorist organizations or
supporters of terrorism under the Immigration and Nationality
Act, the International Emergency Economic Powers Act, and the
United Nations Participation Act of 1945.
The tax-exempt status of an organization that is exempt
from tax under section 501(a) is suspended for the period
during which the organization is designated or identified by
Federal authorities as a terrorist organization or supporter of
terrorism. An organization so designated or identified is also
ineligible to apply for tax-exempt status under section
501(a).\24\ The period of suspension begins on the later of (1)
the date the organization is first designated or identified or
(2) November 11, 2003,\25\ and ends on the date when all
designations or identifications with respect to the
organization have been rescinded pursuant to the law or
Executive Order under which the designation or identification
was made.\26\
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\24\Sec. 501(p)(1).
\25\The date of enactment of section 501(p)). Pub. L. No. 108-121.
\26\Sec. 501(p)(3).
---------------------------------------------------------------------------
For this purpose, a terrorist organization is an
organization that has been designated or otherwise individually
identified (1) as a terrorist organization or foreign terrorist
organization under the authority of section
212(a)(3)(B)(vi)(II) or section 219 of the Immigration and
Nationality Act; (2) in or pursuant to an Executive Order that
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 for the purpose of imposing on
such organization an economic or other sanction; or (3) in or
pursuant to an Executive Order that refers to the provision and
is issued under the authority of any Federal law if 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).\27\ During the period of suspension, no deduction for
any contribution to a terrorist organization is allowed under
the Code, including under section 170, 545(b)(2), 556(b)(2),
642(c), 2055, 2106(a)(2), or 2522.\28\
---------------------------------------------------------------------------
\27\Sec. 501(p)(2).
\28\Sec. 501(p)(4).
---------------------------------------------------------------------------
No organization or other person may challenge, under
section 7428 or any other provision of law, in any
administrative or judicial proceeding relating to the Federal
tax liability of such organization or other person, the
following: the suspension of tax-exempt status, the
ineligibility to apply for tax-exempt status, a designation or
identification (described above), the timing of the period of
suspension, or a denial of deduction (described above).\29\ The
suspended organization may maintain other suits or
administrative actions against the agency or agencies that
designated or identified the organization, for the purpose of
challenging such designation or identification (but not the
suspension of tax-exempt status under this provision).
---------------------------------------------------------------------------
\29\Sec. 501(p)(5).
---------------------------------------------------------------------------
If the tax exemption of an organization is suspended and
each designation and identification that has been made with
respect to the organization is determined to be erroneous
pursuant to the law or Executive Order making the designation
or identification, and such erroneous designation results in an
overpayment of income tax for any taxable year with respect to
such organization, a credit or refund (with interest) with
respect to such overpayment shall be made. If the operation of
any law or rule of law (including res judicata) prevents the
credit or refund at any time, the credit or refund may
nevertheless be allowed or made if the claim for such credit or
refund is filed before the close of the one-year period
beginning on the date that the last remaining designation or
identification with respect to the organization is determined
to be erroneous.\30\
---------------------------------------------------------------------------
\30\Sec. 501(p)(6).
---------------------------------------------------------------------------
The IRS is directed to update the listings of tax-exempt
organizations to take account of an organization that has had
its tax-exempt status suspended and to publish appropriate
notice to taxpayers of the suspension of such organization's
tax-exempt status and the fact that contributions to such
organization are not deductible during the period of
suspension.\31\
---------------------------------------------------------------------------
\31\Sec. 501(p)(7).
---------------------------------------------------------------------------
As of this writing, there are nine organizations on the
IRS's list of organizations suspended under section 501(p).\32\
---------------------------------------------------------------------------
\32\See https://www.irs.gov/charities-non-profits/charitable-
organizations/suspensions-pursuant-to-code-section
501p#::text=Under%20section%20501(p)%20of,under%20section%20501(p)
(last accessed on September 5, 2024).
---------------------------------------------------------------------------
REASONS FOR CHANGE
The Committee recently received testimony about links
between domestic organizations with tax-exempt status and
international terrorist organizations and believes the IRC
should not be used to subsidize or finance violent terrorism
around the world. The provision addresses this concern by
providing for the suspension of the tax-exempt status of
certain organizations that provide material support or
resources to terrorist organizations, prohibiting such
organizations from applying for tax-exempt status, and
disallowing charitable deductions for contributions to such
organizations.
The provision is carefully crafted to protect organizations
from erroneous designation as a terrorist supporting
organization through various due-process mechanisms, including
a requirement that the Secretary of the Treasury provide
written notice 90 days before such a designation, during which
time the organization has an opportunity to demonstrate that it
did not provide the material support or resources or to
undertake other specified curative actions. The provision
allows an organization to challenge a designation as a
terrorist supporting organization before the IRS Independent
Office of Appeals and to seek review of a final determination
with respect to such a designation in a U.S. district court.
EXPLANATION OF PROVISION
In General
The provision extends section 501(p) such that it applies
not only to terrorist organizations (as under present law) but
also to terrorist supporting organizations. The provision
treats a terrorist supporting organization as a terrorist
organization described in section 501(p)(2). The effect of this
treatment is that the tax-exempt status of a terrorist
supporting organization, and the eligibility of such
organization to apply for tax-exempt status, are suspended. The
period of suspension of a terrorist supporting organization is
treated as beginning on the date the Secretary of the Treasury
designates the organization as a terrorist supporting
organization and ending on the date the Secretary of the
Treasury rescinds the designation, as described below.
A terrorist supporting organization is any organization
that is designated by the Secretary of the Treasury as having
provided, during the three-year period ending on the date of
such designation, material support or resources to a terrorist
organization or terrorist supporting organization described in
section 501(p) in excess of a de minimis amount. For this
purpose, the term ``material support or resources'' is defined
by reference to section 2339B of Title 18 of the U.S. Code.\33\
---------------------------------------------------------------------------
\33\Section 2339B defines ``material support or resources'' by
reference to section 2339A of Title 18 of the U.S. Code. Section 2339A,
in turn, provides that material support or resources means ``any
property, tangible or intangible, or service, including currency or
monetary instruments or financial securities, financial services,
lodging, training, expert advice or assistance, safehouses, false
documentation or identification, communications equipment, facilities,
weapons, lethal substances, explosives, personnel (1 or more
individuals who may be or include oneself), and transportation, except
medicine or religious materials.'' The term ``training'' is defined as
``instruction or teaching designed to impart a specific skill, as
opposed to general knowledge.'' The term ``expert advice or
assistance'' is defined as ``advice or assistance derived from
scientific, technical or other specialized knowledge.''
---------------------------------------------------------------------------
Notice Requirement
Before designating an organization as a terrorist
supporting organization, the Secretary of the Treasury is
required to mail to the most recent mailing address provided to
the IRS on its most recent annual information return or notice
filed with the IRS (or subsequently submitted form indicating a
change of address) a written notice. The notice must include:
(1) a statement that the Secretary of the Treasury will
designate the organization as a terrorist supporting
organization unless the organization satisfies the requirements
outlined in the following paragraph (relating to opportunity to
cure), (2) the name of the organization or organizations with
respect to which the Secretary of the Treasury has determined
such organization provided material support or resources, and
(3) a description of such material support or resources, to the
extent consistent with national security and law enforcement
interests.
Opportunity to Cure
In the case of such a notice, the Secretary of the Treasury
shall, at the end of the 90-day period beginning on the date
the notice was sent, designate the organization as a terrorist
supporting organization if, and only if, the organization has
not during such period: (1) demonstrated to the satisfaction of
the Secretary that the organization did not provide the
material support or resources, or (2) made reasonable efforts
to have such support or resources returned to such organization
and certified in writing to the Secretary that such
organization will not provide any further support or resources
to a terrorist organization or terrorist supporting
organization described in section 501(p)(2). Such a
certification is not valid if the organization making the
certification has provided any other such certification during
the preceding five years.
Rescission of Designation
The Secretary of the Treasury shall rescind a designation
if and only if: (1) the Secretary of the Treasury determines
that the designation was erroneous; (2) after the Secretary of
the Treasury receives a certification from an organization that
it did not receive the notice described above, (a) the
Secretary of the Treasury determines that it is reasonable to
believe that the organization did not receive the notice, and
(b) the organization satisfies the above requirements relating
to curing a deficiency (that is, the organization demonstrates
that it did not provide material support or resources or made
reasonable efforts to have such support or resources returned
and makes the required certification); or (3) the Secretary of
the Treasury determines that the periods of suspension for all
organizations to which the material support or resources were
provided have ended. The certification described in (2) above
is not treated as valid if the organization making the
certification has provided any other such certification during
the preceding five years.
Administration and Judicial Review of Designation
Notwithstanding the present-law rule that disallows a
challenge to a designation as a terrorist organization in
certain administrative or judicial proceedings (section
501(p)(5)), in the case of the designation of an organization
as a terrorist supporting organization, a dispute regarding
such designation is subject to resolution by the IRS
Independent Office of Appeals (``IRS Appeals'') under section
7803(e) (which describes IRS Appeals). The dispute is subject
to IRS Appeals resolution in the same manner as if the
designation were made by the IRS. In addition, notwithstanding
section 501(p)(5), the U.S. district courts shall have
exclusive jurisdiction to review a final determination with
respect to an organization's designation as a terrorist
supporting organization. In the case of a determination that
was based on classified information (as defined in section 1(a)
of the Classified Information Procedures Act), such information
may be submitted to the reviewing court ex parte and in camera.
For purposes of such judicial review, a determination shall not
fail to be treated as a final determination merely because the
organization fails to utilize the dispute resolution process of
IRS Appeals described above.
EFFECTIVE DATE
The provision is effective for designations made after the
date of enactment in taxable years ending after such date.
III. VOTE OF THE COMMITTEE
In compliance with the Rules of the House of
Representatives, the following statement is made concerning the
vote of the Committee on Ways and Means during the markup
consideration of H.R. 9495, the ``Stop Terror-Financing and Tax
Penalties on American Hostages Act,'' on September 11, 2024.
H.R. 9495 was ordered favorably reported to the U.S. House
of Representatives as amended, by a roll call vote of 38 yeas
to 0 nays (with a quorum being present). The vote was as
follows:
----------------------------------------------------------------------------------------------------------------
Representative Yea Nay Present Representative Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Smith (MO)..................... X ...... ......... Mr. Neal............. X ...... .........
Mr. Buchanan....................... X ...... ......... Mr. Doggett.......... X ...... .........
Mr. Smith (NE)..................... X ...... ......... Mr. Thompson......... X ...... .........
Mr. Kelly.......................... X ...... ......... Mr. Larson........... X ...... .........
Mr. Schweikert..................... X ...... ......... Mr. Blumenauer....... X ...... .........
Mr. LaHood......................... X ...... ......... Mr. Davis............ X ...... .........
Dr. Wenstrup....................... X ...... ......... Ms. Sanchez.......... X ...... .........
Mr. Arrington...................... X ...... ......... Ms. Sewell........... ...... ...... .........
Dr. Ferguson....................... X ...... ......... Ms. DelBene.......... X ...... .........
Mr. Estes.......................... ...... ...... ......... Ms. Chu.............. X ...... .........
Mr. Smucker........................ X ...... ......... Ms. Moore............ X ...... .........
Mr. Hern........................... X ...... ......... Mr. Kildee........... X ...... .........
Ms. Miller......................... X ...... ......... Mr. Beyer............ X ...... .........
Dr. Murphy......................... ...... ...... ......... Mr. Evans............ ...... ...... .........
Mr. Kustoff........................ X ...... ......... Mr. Schneider........ X ...... .........
Mr. Fitzpatrick.................... X ...... ......... Mr. Panetta.......... X ...... .........
Mr. Steube......................... X ...... ......... Mr. Gomez............ X ...... .........
Ms. Tenney......................... X ...... ......... Mr. Horsford......... X ...... .........
Mrs. Fischbach..................... X ...... ......... Mr. Moore............ X ...... .........
Mrs. Steel......................... X ...... .........
Ms. Van Duyne...................... X ...... .........
Mr. Feenstra....................... X ...... .........
Ms. Malliotakis.................... X ...... .........
Mr. Carey.......................... X ...... .........
----------------------------------------------------------------------------------------------------------------
IV. BUDGET EFFECTS OF THE BILL
A. Committee Estimate of Budgetary Effects
In compliance with clause 3(d) of rule XIII of the Rules of
the House of Representatives, the following statement is made
concerning the effects on the budget of the bill, H.R. 9495, as
reported.
The bill is estimated to have a negligible effect on
Federal fiscal year budget receipts.
B. Statement Regarding New Budget Authority and Tax Expenditures Budget
Authority
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee states that the
bill involves no new or increased budget authority.
C. Cost Estimate Prepared by the
Congressional Budget Office
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, requiring a cost estimate
prepared by the CBO, the following statement by CBO is
provided.
H.R. 9495 would modify the Internal Revenue Code to extend
deadlines for certain tax matters for hostages, people
wrongfully detained abroad, and their spouses, and would
suspend the tax-exempt status of organizations that support
terrorism.
Similar to the rules for service members in combat zones,
the bill would direct the Secretary of the Treasury, in
consultation with the Secretary of State and the Federal Bureau
of Investigation's Hostage Recovery Fusion Cell, to create a
program to allow people who were detained between 2021 and the
date of enactment to seek refunds of interest and penalties
assessed during that time.
The bill also would suspend the tax-exempt status of
organizations that support terrorism. Under current law, an
entity's tax-exempt status is suspended if the Department of
State designates it as a terrorist organization. The bill would
extend that prohibition to organizations identified as having
provided material support or resources to a terrorist or
terrorist-supporting organization within the three years prior
to being so designated. The bill also would establish
procedures for the department to provide notice to those
organizations, for organizations to refute the designation, and
for designations to be rescinded.
H.R. 9495, as ordered reported by the House Committee on
Ways and Means The Congressional Budget Act of 1974, as
amended, stipulates that revenue estimates provided by the
staff of the Joint Committee on Taxation (JCT) will be the
official estimates for all tax legislation considered by the
Congress. As such, CBO incorporates those estimates into its
cost estimates of the effects of legislation. The estimates for
the revenue provisions of H.R. 9495 were provided by JCT.\1\
---------------------------------------------------------------------------
\1\Joint Committee on Taxation, Description of H.R. 9495, the
``Stop Terror-Financing and Tax Penalties on American Hostages Act,''
JCX-37-24 (September 9, 2024), https://www.jct.gov/
publications/2024/jcx-37-24.
---------------------------------------------------------------------------
JCT estimates that enacting H.R. 9495 would result in a
negligible change in revenues over the 2024-2034 period.
CBO estimates that implementing the bill would increase
federal costs by less than $500,000 over the 2025-2029 period
for the Department of the Treasury and for the Department of
State; any related spending would be subject to the
availability of appropriated funds.
The CBO staff contact for this estimate is Nathaniel
Frentz. The estimate was reviewed by John McClelland, Director
of Tax Analysis.
Phillip L. Swagel,
Director, Congressional Budget Office.
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE
A. Committee Oversight Findings and Recommendations
With respect to clause 3(c)(1) of rule XIII of the Rules of
the House of Representatives, the Committee made findings and
recommendations that are reflected in this report.
B. Statement of General Performance Goals and Objectives
With respect to clause 3(c)(4) of rule XIII of the Rules of
the House of Representatives, the Committee advises that the
bill does not authorize funding, so no statement of general
performance goals and objectives is required.
C. Tax Complexity Analysis
Section 4022(b) of the Internal Revenue Service Reform and
Restructuring Act of 1998 (``IRS Reform Act'') requires the
staff of the Joint Committee on Taxation (in consultation with
the IRS and the U.S. Department of the Treasury) to provide a
tax complexity analysis. The complexity analysis is required
for all legislation reported by the Senate Committee on
Finance, the House Committee on Ways and Means, or any
committee of conference if the legislation includes a provision
that directly or indirectly amends the IRC and has widespread
applicability to individuals or small businesses. The staff of
the Joint Committee on Taxation has determined that there are
no provisions that are of widespread applicability to
individuals or small businesses.
D. Information Relating to Unfunded Mandates
This information is provided in accordance with section 423
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
The Committee has determined that the bill does not contain
Federal mandates on the private sector. The Committee has
determined that the bill does not impose a Federal
intergovernmental mandate on State, local, or tribal
governments.
E. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff
Benefits
With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee has carefully reviewed
the provisions of the bill, and states that the provisions of
the bill do not contain any congressional earmarks, limited tax
benefits, or limited tariff benefits within the meaning of the
rule.
F. Duplication of Federal Programs
In compliance with clause 3(c)(5) of rule XIII of the Rules
of the House of Representatives, the Committee states that no
provision of the bill establishes or reauthorizes: (1) a
program of the Federal Government known to be duplicative of
another Federal program; (2) a program included in any report
from the Government Accountability Office to Congress pursuant
to section 21 of Public Law 111-139; or (3) a program related
to a program identified in the most recent Catalog of Federal
Domestic Assistance, published pursuant to the Federal Program
Information Act (Pub. L. No. 95-220, as amended by Pub. L. No.
98-169).
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
A. Changes in Existing Law Proposed by the Bill, as Reported
Pursuant to clause 3(e) of rule XIII of the Rules of the
House of Representatives, changes in existing law proposed by
the bill are shown as follows:
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (new matter is
printed in italics and existing law in which no change is
proposed is shown in roman):
INTERNAL REVENUE CODE OF 1986
* * * * * * *
Subtitle A--Income Taxes
* * * * * * *
CHAPTER 1--NORMAL TAXES AND SURTAXES
* * * * * * *
Subchapter F--EXEMPT ORGANIZATIONS
* * * * * * *
PART I--GENERAL RULE
* * * * * * *
SEC. 501. EXEMPTION FROM TAX ON CORPORATIONS, CERTAIN TRUSTS, ETC.
(a) Exemption from taxation.--An organization described in
subsection (c) or (d) or section 401(a) shall be exempt from
taxation under this subtitle unless such exemption is denied
under section 502 or 503.
(b) Tax on unrelated business income and certain other
activities.--An organization exempt from taxation under
subsection (a) shall be subject to tax to the extent provided
in parts II, III, and VI of this subchapter, but
(notwithstanding parts II, III, and VI of this subchapter)
shall be considered an organization exempt from income taxes
for the purpose of any law which refers to organizations exempt
from income taxes.
(c) List of exempt organizations.--The following
organizations are referred to in subsection (a):
(1) Any corporation organized under Act of Congress
which is an instrumentality of the United States but
only if such corporation--
(A) is exempt from Federal income taxes--
(i) under such Act as amended and
supplemented before July 18, 1984, or
(ii) under this title without regard
to any provision of law which is not
contained in this title and which is
not contained in a revenue Act, or
(B) is described in subsection (l).
(2) Corporations organized for the exclusive purpose
of holding title to property, collecting income
therefrom, and turning over the entire amount thereof,
less expenses, to an organization which itself is
exempt under this section. Rules similar to the rules
of subparagraph (G) of paragraph (25) shall apply for
purposes of this paragraph.
(3) Corporations, and any community chest, fund, or
foundation, organized and operated exclusively for
religious, charitable, scientific, testing for public
safety, literary, or educational purposes, or to foster
national or international amateur sports competition
(but only if no part of its activities involve the
provision of athletic facilities or equipment), or for
the prevention of cruelty to children or animals, no
part of the net earnings of which inures to the benefit
of any private shareholder or individual, no
substantial part of the activities of which is carrying
on propaganda, or otherwise attempting, to influence
legislation (except as otherwise provided in subsection
(h)), and which does not participate in, or intervene
in (including the publishing or distributing of
statements), any political campaign on behalf of (or in
opposition to) any candidate for public office.
(4)(A) Civic leagues or organizations not organized
for profit but operated exclusively for the promotion
of social welfare, or local associations of employees,
the membership of which is limited to the employees of
a designated person or persons in a particular
municipality, and the net earnings of which are devoted
exclusively to charitable, educational, or recreational
purposes.
(B) Subparagraph (A) shall not apply to an entity
unless no part of the net earnings of such entity
inures to the benefit of any private shareholder or
individual.
(5) Labor, agricultural, or horticultural
organizations.
(6) Business leagues, chambers of commerce, real-
estate boards, boards of trade, or professional
football leagues (whether or not administering a
pension fund for football players), not organized for
profit and no part of the net earnings of which inures
to the benefit of any private shareholder or
individual.
(7) Clubs organized for pleasure, recreation, and
other nonprofitable purposes, substantially all of the
activities of which are for such purposes and no part
of the net earnings of which inures to the benefit of
any private shareholder.
(8) Fraternal beneficiary societies, orders, or
associations--
(A) operating under the lodge system or for
the exclusive benefit of the members of a
fraternity itself operating under the lodge
system, and
(B) providing for the payment of life, sick,
accident, or other benefits to the members of
such society, order, or association or their
dependents.
(9) Voluntary employees' beneficiary associations
providing for the payment of life, sick, accident, or
other benefits to the members of such association or
their dependents or designated beneficiaries, if no
part of the net earnings of such association inures
(other than through such payments) to the benefit of
any private shareholder or individual. For purposes of
providing for the payment of sick and accident benefits
to members of such an association and their dependents,
the term ``dependent'' shall include any individual who
is a child (as defined in section 152(f)(1)) of a
member who as of the end of the calendar year has not
attained age 27.
(10) Domestic fraternal societies, orders, or
associations, operating under the lodge system--
(A) the net earnings of which are devoted
exclusively to religious, charitable,
scientific, literary, educational, and
fraternal purposes, and
(B) which do not provide for the payment of
life, sick, accident, or other benefits.
(11) Teachers' retirement fund associations of a
purely local character, if--
(A) no part of their net earnings inures
(other than through payment of retirement
benefits) to the benefit of any private
shareholder or individual, and
(B) the income consists solely of amounts
received from public taxation, amounts received
from assessments on the teaching salaries of
members, and income in respect of investments.
(12)(A) Benevolent life insurance associations of a
purely local character, mutual ditch or irrigation
companies, mutual or cooperative telephone companies,
or like organizations; but only if 85 percent or more
of the income consists of amounts collected from
members for the sole purpose of meeting losses and
expenses.
(B) In the case of a mutual or cooperative telephone
company, subparagraph (A) shall be applied without
taking into account any income received or accrued--
(i) from a nonmember telephone company for
the performance of communication services which
involve members of the mutual or cooperative
telephone company,
(ii) from qualified pole rentals,
(iii) from the sale of display listings in a
directory furnished to the members of the
mutual or cooperative telephone company, or
(iv) from the prepayment of a loan under
section 306A, 306B, or 311 of the Rural
Electrification Act of 1936 (as in effect on
January 1, 1987).
(C) In the case of a mutual or cooperative electric
company, subparagraph (A) shall be applied without
taking into account any income received or accrued--
(i) from qualified pole rentals, or
(ii) from any provision or sale of electric
energy transmission services or ancillary
services if such services are provided on a
nondiscriminatory open access basis under an
open access transmission tariff approved or
accepted by FERC or under an independent
transmission provider agreement approved or
accepted by FERC (other than income received or
accrued directly or indirectly from a member),
(iii) from the provision or sale of electric
energy distribution services or ancillary
services if such services are provided on a
nondiscriminatory open access basis to
distribute electric energy not owned by the
mutual or electric cooperative company--
(I) to end-users who are served by
distribution facilities not owned by
such company or any of its members
(other than income received or accrued
directly or indirectly from a member),
or
(II) generated by a generation
facility not owned or leased by such
company or any of its members and which
is directly connected to distribution
facilities owned by such company or any
of its members (other than income
received or accrued directly or
indirectly from a member),
(iv) from any nuclear decommissioning
transaction, or
(v) from any asset exchange or conversion
transaction.
(D) For purposes of this paragraph, the term
``qualified pole rental'' means any rental of a pole
(or other structure used to support wires) if such pole
(or other structure)--
(i) is used by the telephone or electric
company to support one or more wires which are
used by such company in providing telephone or
electric services to its members, and
(ii) is used pursuant to the rental to
support one or more wires (in addition to the
wires described in clause (i)) for use in
connection with the transmission by wire of
electricity or of telephone or other
communications.
For purposes of the preceding sentence, the term ``rental''
includes any sale of the right to use the pole (or other
structure).
(E) For purposes of subparagraph (C)(ii), the term
``FERC'' means--
(i) the Federal Energy Regulatory Commission,
or
(ii) in the case of any utility with respect
to which all of the electricity generated,
transmitted, or distributed by such utility is
generated, transmitted, distributed, and
consumed in the same State, the State agency of
such State with the authority to regulate
electric utilities.
(F) For purposes of subparagraph (C)(iv), the term
``nuclear decommissioning transaction'' means--
(i) any transfer into a trust, fund, or
instrument established to pay any nuclear
decommissioning costs if the transfer is in
connection with the transfer of the mutual or
cooperative electric company's interest in a
nuclear power plant or nuclear power plant
unit,
(ii) any distribution from any trust, fund,
or instrument established to pay any nuclear
decommissioning costs, or
(iii) any earnings from any trust, fund, or
instrument established to pay any nuclear
decommissioning costs.
(G) For purposes of subparagraph (C)(v), the term
``asset exchange or conversion transaction'' means any
voluntary exchange or involuntary conversion of any
property related to generating, transmitting,
distributing, or selling electric energy by a mutual or
cooperative electric company, the gain from which
qualifies for deferred recognition under section 1031
or 1033, but only if the replacement property acquired
by such company pursuant to such section constitutes
property which is used, or to be used, for--
(i) generating, transmitting, distributing,
or selling electric energy, or
(ii) producing, transmitting, distributing,
or selling natural gas.
(H)(i) In the case of a mutual or cooperative
electric company described in this paragraph or an
organization described in section 1381(a)(2)(C), income
received or accrued from a load loss transaction shall
be treated as an amount collected from members for the
sole purpose of meeting losses and expenses.
(ii) For purposes of clause (i), the term ``load loss
transaction'' means any wholesale or retail sale of
electric energy (other than to members) to the extent
that the aggregate sales during the recovery period do
not exceed the load loss mitigation sales limit for
such period.
(iii) For purposes of clause (ii), the load loss
mitigation sales limit for the recovery period is the
sum of the annual load losses for each year of such
period.
(iv) For purposes of clause (iii), a mutual or
cooperative electric company's annual load loss for
each year of the recovery period is the amount (if any)
by which--
(I) the megawatt hours of electric energy
sold during such year to members of such
electric company are less than
(II) the megawatt hours of electric energy
sold during the base year to such members.
(v) For purposes of clause (iv)(II), the term ``base
year'' means--
(I) the calendar year preceding the start-up
year, or
(II) at the election of the mutual or
cooperative electric company, the second or
third calendar years preceding the start-up
year.
(vi) For purposes of this subparagraph, the recovery
period is the 7-year period beginning with the start-up
year.
(vii) For purposes of this subparagraph, the start-up
year is the first year that the mutual or cooperative
electric company offers nondiscriminatory open access
or the calendar year which includes the date of the
enactment of this subparagraph, if later, at the
election of such company.
(viii) A company shall not fail to be treated as a
mutual or cooperative electric company for purposes of
this paragraph or as a corporation operating on a
cooperative basis for purposes of section 1381(a)(2)(C)
by reason of the treatment under clause (i).
(ix) For purposes of subparagraph (A), in the case of
a mutual or cooperative electric company, income
received, or accrued, indirectly from a member shall be
treated as an amount collected from members for the
sole purpose of meeting losses and expenses.
(I) In the case of a mutual or cooperative electric
company described in this paragraph or an organization
described in section 1381(a)(2), income received or
accrued in connection with an election under section
45J(e)(1) shall be treated as an amount collected from
members for the sole purpose of meeting losses and
expenses.
(J) In the case of a mutual or cooperative telephone
or electric company described in this paragraph,
subparagraph (A) shall be applied without taking into
account any income received or accrued from--
(i) any grant, contribution, or assistance
provided pursuant to the Robert T. Stafford
Disaster Relief and Emergency Assistance Act or
any similar grant, contribution, or assistance
by any local, State, or regional governmental
entity for the purpose of relief, recovery, or
restoration from, or preparation for, a
disaster or emergency, or
(ii) any grant or contribution by any
governmental entity (other than a contribution
in aid of construction or any other
contribution as a customer or potential
customer) the purpose of which is substantially
related to providing, constructing, restoring,
or relocating electric, communication,
broadband, internet, or other utility
facilities or services.
(13) Cemetery companies owned and operated
exclusively for the benefit of their members or which
are not operated for profit; and any corporation
chartered solely for the purpose of the disposal of
bodies by burial or cremation which is not permitted by
its charter to engage in any business not necessarily
incident to that purpose and no part of the net
earnings of which inures to the benefit of any private
shareholder or individual.
(14)(A) Credit unions without capital stock organized
and operated for mutual purposes and without profit.
(B) Corporations or associations without capital
stock organized before September 1, 1957, and operated
for mutual purposes and without profit for the purpose
of providing reserve funds for, and insurance of shares
or deposits in--
(i) domestic building and loan associations,
(ii) cooperative banks without capital stock
organized and operated for mutual purposes and
without profit,
(iii) mutual savings banks not having capital
stock represented by shares, or
(iv) mutual savings banks described in
section 591(b).
(C) Corporations or associations organized before
September 1, 1957, and operated for mutual purposes and
without profit for the purpose of providing reserve
funds for associations or banks described in clause
(i), (ii), or (iii) of subparagraph (B); but only if 85
percent or more of the income is attributable to
providing such reserve funds and to investments. This
subparagraph shall not apply to any corporation or
association entitled to exemption under subparagraph
(B).
(15)(A) Insurance companies (as defined in section
816(a)) other than life (including interinsurers and
reciprocal underwriters) if--
(i)(I) the gross receipts for the taxable
year do not exceed $600,000, and
(II) more than 50 percent of such gross
receipts consist of premiums, or
(ii) in the case of a mutual insurance
company--
(I) the gross receipts of which for
the taxable year do not exceed
$150,000, and
(II) more than 35 percent of such
gross receipts consist of premiums.
Clause (ii) shall not apply to a company if any
employee of the company, or a member of the employee's
family (as defined in section 2032A(e)(2)), is an
employee of another company exempt from taxation by
reason of this paragraph (or would be so exempt but for
this sentence).
(B) For purposes of subparagraph (A), in determining
whether any company or association is described in
subparagraph (A), such company or association shall be
treated as receiving during the taxable year amounts
described in subparagraph (A) which are received during
such year by all other companies or associations which
are members of the same controlled group as the
insurance company or association for which the
determination is being made.
(C) For purposes of subparagraph (B), the term
``controlled group'' has the meaning given such term by
section 831(b)(2)(B)(ii),1 except that in
applying section 831(b)(2)(B)(ii) 1 for
purposes of this subparagraph, subparagraphs (B) and
(C) of section 1563(b)(2) shall be disregarded.
(16) Corporations organized by an association subject
to part IV of this subchapter or members thereof, for
the purpose of financing the ordinary crop operations
of such members or other producers, and operated in
conjunction with such association. Exemption shall not
be denied any such corporation because it has capital
stock, if the dividend rate of such stock is fixed at
not to exceed the legal rate of interest in the State
of incorporation or 8 percent per annum, whichever is
greater, on the value of the consideration for which
the stock was issued, and if substantially all such
stock (other than nonvoting preferred stock, the owners
of which are not entitled or permitted to participate,
directly or indirectly, in the profits of the
corporation, on dissolution or otherwise, beyond the
fixed dividends) is owned by such association, or
members thereof; nor shall exemption be denied any such
corporation because there is accumulated and maintained
by it a reserve required by State law or a reasonable
reserve for any necessary purpose.
(17)(A) A trust or trusts forming part of a plan
providing for the payment of supplemental unemployment
compensation benefits, if--
(i) under the plan, it is impossible, at any
time prior to the satisfaction of all
liabilities, with respect to employees under
the plan, for any part of the corpus or income
to be (within the taxable year or thereafter)
used for, or diverted to, any purpose other
than the providing of supplemental unemployment
compensation benefits,
(ii) such benefits are payable to employees
under a classification which is set forth in
the plan and which is found by the Secretary
not to be discriminatory in favor of employees
who are highly compensated employees (within
the meaning of section 414(q)), and
(iii) such benefits do not discriminate in
favor of employees who are highly compensated
employees (within the meaning of section
414(q)). A plan shall not be considered
discriminatory within the meaning of this
clause merely because the benefits received
under the plan bear a uniform relationship to
the total compensation, or the basic or regular
rate of compensation, of the employees covered
by the plan.
(B) In determining whether a plan meets the
requirements of subparagraph (A), any benefits provided
under any other plan shall not be taken into
consideration, except that a plan shall not be
considered discriminatory--
(i) merely because the benefits under the
plan which are first determined in a
nondiscriminatory manner within the meaning of
subparagraph (A) are then reduced by any sick,
accident, or unemployment compensation benefits
received under State or Federal law (or reduced
by a portion of such benefits if determined in
a nondiscriminatory manner), or
(ii) merely because the plan provides only
for employees who are not eligible to receive
sick, accident, or unemployment compensation
benefits under State or Federal law the same
benefits (or a portion of such benefits if
determined in a nondiscriminatory manner) which
such employees would receive under such laws if
such employees were eligible for such benefits,
or
(iii) merely because the plan provides only
for employees who are not eligible under
another plan (which meets the requirements of
subparagraph (A)) of supplemental unemployment
compensation benefits provided wholly by the
employer the same benefits (or a portion of
such benefits if determined in a
nondiscriminatory manner) which such employees
would receive under such other plan if such
employees were eligible under such other plan,
but only if the employees eligible under both
plans would make a classification which would
be nondiscriminatory within the meaning of
subparagraph (A).
(C) A plan shall be considered to meet the
requirements of subparagraph (A) during the whole of
any year of the plan if on one day in each quarter it
satisfies such requirements.
(D) The term ``supplemental unemployment compensation
benefits'' means only--
(i) benefits which are paid to an employee
because of his involuntary separation from the
employment of the employer (whether or not such
separation is temporary) resulting directly
from a reduction in force, the discontinuance
of a plant or operation, or other similar
conditions, and
(ii) sick and accident benefits subordinate
to the benefits described in clause (i).
(E) Exemption shall not be denied under subsection
(a) to any organization entitled to such exemption as
an association described in paragraph (9) of this
subsection merely because such organization provides
for the payment of supplemental unemployment benefits
(as defined in subparagraph (D)(i)).
(18) A trust or trusts created before June 25, 1959,
forming part of a plan providing for the payment of
benefits under a pension plan funded only by
contributions of employees, if--
(A) under the plan, it is impossible, at any
time prior to the satisfaction of all
liabilities with respect to employees under the
plan, for any part of the corpus or income to
be (within the taxable year or thereafter) used
for, or diverted to, any purpose other than the
providing of benefits under the plan,
(B) such benefits are payable to employees
under a classification which is set forth in
the plan and which is found by the Secretary
not to be discriminatory in favor of employees
who are highly compensated employees (within
the meaning of section 414(q)),
(C) such benefits do not discriminate in
favor of employees who are highly compensated
employees (within the meaning of section
414(q)). A plan shall not be considered
discriminatory within the meaning of this
subparagraph merely because the benefits
received under the plan bear a uniform
relationship to the total compensation, or the
basic or regular rate of compensation, of the
employees covered by the plan, and
(D) in the case of a plan under which an
employee may designate certain contributions as
deductible--
(i) such contributions do not exceed
the amount with respect to which a
deduction is allowable under section
219(b)(3),
(ii) requirements similar to the
requirements of section
401(k)(3)(A)(ii) are met with respect
to such elective contributions,
(iii) such contributions are treated
as elective deferrals for purposes of
section 402(g), and
(iv) the requirements of section
401(a)(30) are met.
For purposes of subparagraph (D)(ii), rules similar to
the rules of section 401(k)(8) shall apply. For
purposes of section 4979, any excess contribution under
clause (ii) shall be treated as an excess contribution
under a cash or deferred arrangement.
(19) A post or organization of past or present
members of the Armed Forces of the United States, or an
auxiliary unit or society of, or a trust or foundation
for, any such post or organization--
(A) organized in the United States or any of
its possessions,
(B) at least 75 percent of the members of
which are past or present members of the Armed
Forces of the United States and substantially
all of the other members of which are
individuals who are cadets or are spouses,
widows, widowers, ancestors, or lineal
descendants of past or present members of the
Armed Forces of the United States or of cadets,
and
(C) no part of the net earnings of which
inures to the benefit of any private
shareholder or individual.
(21)(A) A trust or trusts established in writing,
created or organized in the United States, and
contributed to by any person (except an insurance
company) if--
(i) the purpose of such trust or trusts is
exclusively--
(I) to satisfy, in whole or in part,
the liability of such person for, or
with respect to, claims for
compensation for disability or death
due to pneumoconiosis under Black Lung
Acts,
(II) to pay premiums for insurance
exclusively covering such liability,
(III) to pay administrative and other
incidental expenses of such trust in
connection with the operation of the
trust and the processing of claims
against such person under Black Lung
Acts, and
(IV) to pay accident or health
benefits for retired miners and their
spouses and dependents (including
administrative and other incidental
expenses of such trust in connection
therewith) or premiums for insurance
exclusively covering such benefits; and
(ii) no part of the assets of the trust may
be used for, or diverted to, any purpose other
than--
(I) the purposes described in clause
(i),
(II) investment (but only to the
extent that the trustee determines that
a portion of the assets is not
currently needed for the purposes
described in clause (i)) in qualified
investments, or
(III) payment into the Black Lung
Disability Trust Fund established under
section 9501, or into the general fund
of the United States Treasury (other
than in satisfaction of any tax or
other civil or criminal liability of
the person who established or
contributed to the trust).
(B) No deduction shall be allowed under this chapter
for any payment described in subparagraph (A)(i)(IV)
from such trust.
(C) Payments described in subparagraph (A)(i)(IV) may
be made from such trust during a taxable year only to
the extent that the aggregate amount of such payments
during such taxable year does not exceed the excess (if
any), as of the close of the preceding taxable year,
of--
(i) the fair market value of the assets of
the trust, over
(ii) 110 percent of the present value of the
liability described in subparagraph (A)(i)(I)
of such person.
The determinations under the preceding sentence shall be made
by an independent actuary using actuarial methods and
assumptions (not inconsistent with the regulations prescribed
under section 192(c)(1)(A)) each of which is reasonable and
which are reasonable in the aggregate.
(D) For purposes of this paragraph:
(i) The term ``Black Lung Acts'' means part C
of title IV of the Federal Mine Safety and
Health Act of 1977, and any State law providing
compensation for disability or death due to
that pneumoconiosis.
(ii) The term ``qualified investments''
means--
(I) public debt securities of the
United States,
(II) obligations of a State or local
government which are not in default as
to principal or interest, and
(III) time or demand deposits in a
bank (as defined in section 581) or an
insured credit union (within the
meaning of section 101(7) of the
Federal Credit Union Act, 12 U.S.C.
1752(7)) located in the United States.
(iii) The term ``miner'' has the same meaning
as such term has when used in section 402(d) of
the Black Lung Benefits Act (30 U.S.C. 902(d)).
(iv) The term ``incidental expenses''
includes legal, accounting, actuarial, and
trustee expenses.
(22) A trust created or organized in the United
States and established in writing by the plan sponsors
of multiemployer plans if--
(A) the purpose of such trust is
exclusively--
(i) to pay any amount described in
section 4223(c) or (h) of the Employee
Retirement Income Security Act of 1974,
and
(ii) to pay reasonable and necessary
administrative expenses in connection
with the establishment and operation of
the trust and the processing of claims
against the trust,
(B) no part of the assets of the trust may be
used for, or diverted to, any purpose other
than--
(i) the purposes described in
subparagraph (A), or
(ii) the investment in securities,
obligations, or time or demand deposits
described in clause (ii) of paragraph
(21)(D),
(C) such trust meets the requirements of
paragraphs (2), (3), and (4) of section
4223(b), 4223(h), or, if applicable, section
4223(c) of the Employee Retirement Income
Security Act of 1974, and
(D) the trust instrument provides that, on
dissolution of the trust, assets of the trust
may not be paid other than to plans which have
participated in the plan or, in the case of a
trust established under section 4223(h) of such
Act, to plans with respect to which employers
have participated in the fund.
(23) Any association organized before 1880 more than
75 percent of the members of which are present or past
members of the Armed Forces and a principal purpose of
which is to provide insurance and other benefits to
veterans or their dependents.
(24) A trust described in section 4049 of the
Employee Retirement Income Security Act of 1974 (as in
effect on the date of the enactment of the Single-
Employer Pension Plan Amendments Act of 1986).
(25)(A) Any corporation or trust which--
(i) has no more than 35 shareholders or
beneficiaries,
(ii) has only 1 class of stock or beneficial
interest, and
(iii) is organized for the exclusive purposes
of--
(I) acquiring real property and
holding title to, and collecting income
from, such property, and
(II) remitting the entire amount of
income from such property (less
expenses) to 1 or more organizations
described in subparagraph (C) which are
shareholders of such corporation or
beneficiaries of such trust.
For purposes of clause (iii), the term ``real
property'' shall not include any interest as a tenant
in common (or similar interest) and shall not include
any indirect interest.
(B) A corporation or trust shall be described in
subparagraph (A) without regard to whether the
corporation or trust is organized by 1 or more
organizations described in subparagraph (C).
(C) An organization is described in this subparagraph
if such organization is--
(i) a qualified pension, profit sharing, or
stock bonus plan that meets the requirements of
section 401(a),
(ii) a governmental plan (within the meaning
of section 414(d)),
(iii) the United States, any State or
political subdivision thereof, or any agency or
instrumentality of any of the foregoing, or
(iv) any organization described in paragraph
(3).
(D) A corporation or trust shall in no event be
treated as described in subparagraph (A) unless such
corporation or trust permits its shareholders or
beneficiaries--
(i) to dismiss the corporation's or trust's
investment adviser, following reasonable
notice, upon a vote of the shareholders or
beneficiaries holding a majority of interest in
the corporation or trust, and
(ii) to terminate their interest in the
corporation or trust by either, or both, of the
following alternatives, as determined by the
corporation or trust:
(I) by selling or exchanging their
stock in the corporation or interest in
the trust (subject to any Federal or
State securities law) to any
organization described in subparagraph
(C) so long as the sale or exchange
does not increase the number of
shareholders or beneficiaries in such
corporation or trust above 35, or
(II) by having their stock or
interest redeemed by the corporation or
trust after the shareholder or
beneficiary has provided 90 days notice
to such corporation or trust.
(E)(i) For purposes of this title--
(I) a corporation which is a qualified
subsidiary shall not be treated as a separate
corporation, and
(II) all assets, liabilities, and items of
income, deduction, and credit of a qualified
subsidiary shall be treated as assets,
liabilities, and such items (as the case may
be) of the corporation or trust described in
subparagraph (A).
(ii) For purposes of this subparagraph, the term
``qualified subsidiary'' means any corporation if, at
all times during the period such corporation was in
existence, 100 percent of the stock of such corporation
is held by the corporation or trust described in
subparagraph (A).
(iii) For purposes of this subtitle, if any
corporation which was a qualified subsidiary ceases to
meet the requirements of clause (ii), such corporation
shall be treated as a new corporation acquiring all of
its assets (and assuming all of its liabilities)
immediately before such cessation from the corporation
or trust described in subparagraph (A) in exchange for
its stock.
(F) For purposes of subparagraph (A), the term ``real
property'' includes any personal property which is
leased under, or in connection with, a lease of real
property, but only if the rent attributable to such
personal property (determined under the rules of
section 856(d)(1)) for the taxable year does not exceed
15 percent of the total rent for the taxable year
attributable to both the real and personal property
leased under, or in connection with, such lease.
(G)(i) An organization shall not be treated as
failing to be described in this paragraph merely by
reason of the receipt of any otherwise disqualifying
income which is incidentally derived from the holding
of real property.
(ii) Clause (i) shall not apply if the amount of
gross income described in such clause exceeds 10
percent of the organization's gross income for the
taxable year unless the organization establishes to the
satisfaction of the Secretary that the receipt of gross
income described in clause (i) in excess of such
limitation was inadvertent and reasonable steps are
being taken to correct the circumstances giving rise to
such income.
(26) Any membership organization if--
(A) such organization is established by a
State exclusively to provide coverage for
medical care (as defined in section 213(d)) on
a not-for-profit basis to individuals described
in subparagraph (B) through--
(i) insurance issued by the
organization, or
(ii) a health maintenance
organization under an arrangement with
the organization,
(B) the only individuals receiving such
coverage through the organization are
individuals--
(i) who are residents of such State,
and
(ii) who, by reason of the existence
or history of a medical condition--
(I) are unable to acquire
medical care coverage for such
condition through insurance or
from a health maintenance
organization, or
(II) are able to acquire such
coverage only at a rate which
is substantially in excess of
the rate for such coverage
through the membership
organization,
(C) the composition of the membership in such
organization is specified by such State, and
(D) no part of the net earnings of the
organization inures to the benefit of any
private shareholder or individual.
A spouse and any qualifying child (as defined in
section 24(c)) of an individual described in
subparagraph (B) (without regard to this sentence)
shall be treated as described in subparagraph (B).
(27)(A) Any membership organization if--
(i) such organization is established before
June 1, 1996, by a State exclusively to
reimburse its members for losses arising under
workmen's compensation acts,
(ii) such State requires that the membership
of such organization consist of--
(I) all persons who issue insurance
covering workmen's compensation losses
in such State, and
(II) all persons and governmental
entities who self-insure against such
losses, and
(iii) such organization operates as a non-
profit organization by--
(I) returning surplus income to its
members or workmen's compensation
policyholders on a periodic basis, and
(II) reducing initial premiums in
anticipation of investment income.
(B) Any organization (including a mutual insurance
company) if--
(i) such organization is created by State law
and is organized and operated under State law
exclusively to--
(I) provide workmen's compensation
insurance which is required by State
law or with respect to which State law
provides significant disincentives if
such insurance is not purchased by an
employer, and
(II) provide related coverage which
is incidental to workmen's compensation
insurance,
(ii) such organization must provide workmen's
compensation insurance to any employer in the
State (for employees in the State or
temporarily assigned out-of-State) which seeks
such insurance and meets other reasonable
requirements relating thereto,
(iii)(I) the State makes a financial
commitment with respect to such organization
either by extending the full faith and credit
of the State to the initial debt of such
organization or by providing the initial
operating capital of such organization, and
(II) in the case of periods after the date of
enactment of this subparagraph, the assets of
such organization revert to the State upon
dissolution or State law does not permit the
dissolution of such organization, and
(iv) the majority of the board of directors
or oversight body of such organization are
appointed by the chief executive officer or
other executive branch official of the State,
by the State legislature, or by both.
(28) The National Railroad Retirement Investment
Trust established under section 15(j) of the Railroad
Retirement Act of 1974.
(29) CO-OP health insurance issuers.--
(A) In general.--A qualified nonprofit health
insurance issuer (within the meaning of section
1322 of the Patient Protection and Affordable
Care Act) which has received a loan or grant
under the CO-OP program under such section, but
only with respect to periods for which the
issuer is in compliance with the requirements
of such section and any agreement with respect
to the loan or grant.
(B) Conditions for exemption.--Subparagraph
(A) shall apply to an organization only if--
(i) the organization has given notice
to the Secretary, in such manner as the
Secretary may by regulations prescribe,
that it is applying for recognition of
its status under this paragraph,
(ii) except as provided in section
1322(c)(4) of the Patient Protection
and Affordable Care Act, no part of the
net earnings of which inures to the
benefit of any private shareholder or
individual,
(iii) no substantial part of the
activities of which is carrying on
propaganda, or otherwise attempting, to
influence legislation, and
(iv) the organization does not
participate in, or intervene in
(including the publishing or
distributing of statements), any
political campaign on behalf of (or in
opposition to) any candidate for public
office.
(d) Religious and apostolic organizations.--The following
organizations are referred to in subsection (a): Religious or
apostolic associations or corporations, if such associations or
corporations have a common treasury or community treasury, even
if such associations or corporations engage in business for the
common benefit of the members, but only if the members thereof
include (at the time of filing their returns) in their gross
income their entire pro rata shares, whether distributed or
not, of the taxable income of the association or corporation
for such year. Any amount so included in the gross income of a
member shall be treated as a dividend received.
(e) Cooperative hospital service organizations.--For purposes
of this title, an organization shall be treated as an
organization organized and operated exclusively for charitable
purposes, if--
(1) such organization is organized and operated
solely--
(A) to perform, on a centralized basis, one
or more of the following services which, if
performed on its own behalf by a hospital which
is an organization described in subsection
(c)(3) and exempt from taxation under
subsection (a), would constitute activities in
exercising or performing the purpose or
function constituting the basis for its
exemption: data processing, purchasing
(including the purchasing of insurance on a
group basis), warehousing, billing and
collection (including the purchase of patron
accounts receivable on a recourse basis), food,
clinical, industrial engineering, laboratory,
printing, communications, record center, and
personnel (including selection, testing,
training, and education of personnel) services;
and
(B) to perform such services solely for two
or more hospitals each of which is--
(i) an organization described in
subsection (c)(3) which is exempt from
taxation under subsection (a),
(ii) a constituent part of an
organization described in subsection
(c)(3) which is exempt from taxation
under subsection (a) and which, if
organized and operated as a separate
entity, would constitute an
organization described in subsection
(c)(3), or
(iii) owned and operated by the
United States, a State, the District of
Columbia, or a possession of the United
States, or a political subdivision or
an agency or instrumentality of any of
the foregoing;
(2) such organization is organized and operated on a
cooperative basis and allocates or pays, within 81/2
months after the close of its taxable year, all net
earnings to patrons on the basis of services performed
for them; and
(3) if such organization has capital stock, all of
such stock outstanding is owned by its patrons.
For purposes of this title, any organization which, by reason
of the preceding sentence, is an organization described in
subsection (c)(3) and exempt from taxation under subsection
(a), shall be treated as a hospital and as an organization
referred to in section 170(b)(1)(A)(iii).
(f) Cooperative service organizations of operating
educational organizations.--For purposes of this title, if an
organization is--
(1) organized and operated solely to hold, commingle,
and collectively invest and reinvest (including
arranging for and supervising the performance by
independent contractors of investment services related
thereto) in stocks and securities, the moneys
contributed thereto by each of the members of such
organization, and to collect income therefrom and turn
over the entire amount thereof, less expenses, to such
members,
(2) organized and controlled by one or more such
members, and
(3) comprised solely of members that are
organizations described in clause (ii) or (iv) of
section 170(b)(1)(A)--
(A) which are exempt from taxation under
subsection (a), or
(B) the income of which is excluded from
taxation under section 115,
then such organization shall be treated as an
organization organized and operated exclusively for
charitable purposes.
(g) Definition of agricultural.--For purposes of subsection
(c)(5), the term ``agricultural'' includes the art or science
of cultivating land, harvesting crops or aquatic resources, or
raising livestock.
(h) Expenditures by public charities to influence
legislation.--
(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--
(A) makes lobbying expenditures in excess of
the lobbying ceiling amount for such
organization for each taxable year, or
(B) makes grass roots expenditures in excess
of the grass roots ceiling amount for such
organization for each taxable year.
(2) Definitions.--For purposes of this subsection--
(A) Lobbying expenditures.--The term
``lobbying expenditures'' means expenditures
for the purpose of influencing legislation (as
defined in section 4911(d)).
(B) Lobbying ceiling amount.--The lobbying
ceiling amount for any organization for any
taxable year is 150 percent of the lobbying
nontaxable amount for such organization for
such taxable year, determined under section
4911.
(C) Grass roots expenditures.--The term
``grass roots expenditures'' means expenditures
for the purpose of influencing legislation (as
defined in section 4911(d) without regard to
paragraph (1)(B) thereof).
(D) Grass roots ceiling amount.--The grass
roots ceiling amount for any organization for
any taxable year is 150 percent of the grass
roots nontaxable amount for such organization
for such taxable year, determined under section
4911.
(3) Organizations to which this subsection applies.--
This subsection shall apply to any organization which
has elected (in such manner and at such time as the
Secretary may prescribe) to have the provisions of this
subsection apply to such organization and which, for
the taxable year which includes the date the election
is made, is described in subsection (c)(3) and--
(A) is described in paragraph (4), and
(B) is not a disqualified organization under
paragraph (5).
(4) Organizations permitted to elect to have this
subsection apply.--An organization is described in this
paragraph if it is described in--
(A) section 170(b)(1)(A)(ii) (relating to
educational institutions),
(B) section 170(b)(1)(A)(iii) (relating to
hospitals and medical research organizations),
(C) section 170(b)(1)(A)(iv) (relating to
organizations supporting government schools),
(D) section 170(b)(1)(A)(vi) (relating to
organizations publicly supported by charitable
contributions),
(E) section 170(b)(1)(A)(ix) (relating to
agricultural research organizations),
(F) section 509(a)(2) (relating to
organizations publicly supported by admissions,
sales, etc.), or
(G) section 509(a)(3) (relating to
organizations supporting certain types of
public charities) except that for purposes of
this subparagraph, section 509(a)(3) shall be
applied without regard to the last sentence of
section 509(a).
(5) Disqualified organizations.--For purposes of
paragraph (3) an organization is a disqualified
organization if it is--
(A) described in section 170(b)(1)(A)(i)
(relating to churches),
(B) an integrated auxiliary of a church or of
a convention or association of churches, or
(C) a member of an affiliated group of
organizations (within the meaning of section
4911(f)(2)) if one or more members of such
group is described in subparagraph (A) or (B).
(6) Years for which election is effective.--An
election by an organization under this subsection shall
be effective for all taxable years of such organization
which--
(A) end after the date the election is made,
and
(B) begin before the date the election is
revoked by such organization (under regulations
prescribed by the Secretary).
(7) No effect on certain organizations.--With respect
to any organization for a taxable year for which--
(A) such organization is a disqualified
organization (within the meaning of paragraph
(5)), or
(B) an election under this subsection is not
in effect for such organization,
nothing in this subsection or in section 4911 shall be
construed to affect the interpretation of the phrase,
``no substantial part of the activities of which is
carrying on propaganda, or otherwise attempting, to
influence legislation,'' under subsection (c)(3).
(8) Affiliated organizations.--For rules regarding
affiliated organizations, see section 4911(f).
(i) Prohibition of discrimination by certain social clubs.--
Notwithstanding subsection (a), an organization which is
described in subsection (c)(7) shall not be exempt from
taxation under subsection (a) for any taxable year if, at any
time during such taxable year, the charter, bylaws, or other
governing instrument, of such organization or any written
policy statement of such organization contains a provision
which provides for discrimination against any person on the
basis of race, color, or religion. The preceding sentence to
the extent it relates to discrimination on the basis of
religion shall not apply to--
(1) an auxiliary of a fraternal beneficiary society
if such society--
(A) is described in subsection (c)(8) and
exempt from tax under subsection (a), and
(B) limits its membership to the members of a
particular religion, or
(2) a club which in good faith limits its membership
to the members of a particular religion in order to
further the teachings or principles of that religion,
and not to exclude individuals of a particular race or
color.
(j) Special rules for certain amateur sports organizations.--
(1) In general.--In the case of a qualified amateur
sports organization--
(A) the requirement of subsection (c)(3) that
no part of its activities involve the provision
of athletic facilities or equipment shall not
apply, and
(B) such organization shall not fail to meet
the requirements of subsection (c)(3) merely
because its membership is local or regional in
nature.
(2) Qualified amateur sports organization defined.--
For purposes of this subsection, the term ``qualified
amateur sports organization'' means any organization
organized and operated exclusively to foster national
or international amateur sports competition if such
organization is also organized and operated primarily
to conduct national or international competition in
sports or to support and develop amateur athletes for
national or international competition in sports.
(k) Treatment of certain organizations providing child
care.--For purposes of subsection (c)(3) of this section and
sections 170(c)(2), 2055(a)(2), and 2522(a)(2), the term
``educational purposes'' includes the providing of care of
children away from their homes if--
(1) substantially all of the care provided by the
organization is for purposes of enabling individuals to
be gainfully employed, and
(2) the services provided by the organization are
available to the general public.
(l) Government corporations exempt under subsection (c)(1).--
For purposes of subsection (c)(1), the following organizations
are described in this subsection:
(1) The Central Liquidity Facility established under
title III of the Federal Credit Union Act (12 U.S.C.
1795 et seq.).
(2) The Resolution Trust Corporation established
under section 21A 1 of the Federal Home Loan
Bank Act.
(3) The Resolution Funding Corporation established
under section 21B of the Federal Home Loan Bank Act.
(4) The Patient-Centered Outcomes Research Institute
established under section 1181(b) of the Social
Security Act.
(m) Certain organizations providing commercial-type insurance
not exempt from tax.--
(1) Denial of tax exemption where providing
commercial-type insurance is substantial part of
activities.--An organization described in paragraph (3)
or (4) of subsection (c) shall be exempt from tax under
subsection (a) only if no substantial part of its
activities consists of providing commercial-type
insurance.
(2) Other organizations taxed as insurance companies
on insurance business.--In the case of an organization
described in paragraph (3) or (4) of subsection (c)
which is exempt from tax under subsection (a) after the
application of paragraph (1) of this subsection--
(A) the activity of providing commercial-type
insurance shall be treated as an unrelated
trade or business (as defined in section 513),
and
(B) in lieu of the tax imposed by section 511
with respect to such activity, such
organization shall be treated as an insurance
company for purposes of applying subchapter L
with respect to such activity.
(3) Commercial-type insurance.--For purposes of this
subsection, the term ``commercial-type insurance''
shall not include--
(A) insurance provided at substantially below
cost to a class of charitable recipients,
(B) incidental health insurance provided by a
health maintenance organization of a kind
customarily provided by such organizations,
(C) property or casualty insurance provided
(directly or through an organization described
in section 414(e)(3)(B)(ii)) by a church or
convention or association of churches for such
church or convention or association of
churches,
(D) providing retirement or welfare benefits
(or both) by a church or a convention or
association of churches (directly or through an
organization described in section 414(e)(3)(A)
or 414(e)(3)(B)(ii)) for the employees
(including employees described in section
414(e)(3)(B)) of such church or convention or
association of churches or the beneficiaries of
such employees, and
(E) charitable gift annuities.
(4) Insurance includes annuities.--For purposes of
this subsection, the issuance of annuity contracts
shall be treated as providing insurance.
(5) Charitable gift annuity.--For purposes of
paragraph (3)(E), the term ``charitable gift annuity''
means an annuity if--
(A) a portion of the amount paid in
connection with the issuance of the annuity is
allowable as a deduction under section 170 or
2055, and
(B) the annuity is described in section
514(c)(5) (determined as if any amount paid in
cash in connection with such issuance were
property).
(n) Charitable risk pools.--
(1) In general.--For purposes of this title--
(A) a qualified charitable risk pool shall be
treated as an organization organized and
operated exclusively for charitable purposes,
and
(B) subsection (m) shall not apply to a
qualified charitable risk pool.
(2) Qualified charitable risk pool.--For purposes of
this subsection, the term ``qualified charitable risk
pool'' means any organization--
(A) which is organized and operated solely to
pool insurable risks of its members (other than
risks related to medical malpractice) and to
provide information to its members with respect
to loss control and risk management,
(B) which is comprised solely of members that
are organizations described in subsection
(c)(3) and exempt from tax under subsection
(a), and
(C) which meets the organizational
requirements of paragraph (3).
(3) Organizational requirements.--An organization
(hereinafter in this subsection referred to as the
``risk pool'') meets the organizational requirements of
this paragraph if--
(A) such risk pool is organized as a
nonprofit organization under State law
provisions authorizing risk pooling
arrangements for charitable organizations,
(B) such risk pool is exempt from any income
tax imposed by the State (or will be so exempt
after such pool qualifies as an organization
exempt from tax under this title),
(C) such risk pool has obtained at least
$1,000,000 in startup capital from nonmember
charitable organizations,
(D) such risk pool is controlled by a board
of directors elected by its members, and
(E) the organizational documents of such risk
pool require that--
(i) each member of such pool shall at
all times be an organization described
in subsection (c)(3) and exempt from
tax under subsection (a),
(ii) any member which receives a
final determination that it no longer
qualifies as an organization described
in subsection (c)(3) shall immediately
notify the pool of such determination
and the effective date of such
determination, and
(iii) each policy of insurance issued
by the risk pool shall provide that
such policy will not cover the insured
with respect to events occurring after
the date such final determination was
issued to the insured.
An organization shall not cease to qualify as a
qualified charitable risk pool solely by reason of the
failure of any of its members to continue to be an
organization described in subsection (c)(3) if, within
a reasonable period of time after such pool is notified
as required under subparagraph (E)(ii), such pool takes
such action as may be reasonably necessary to remove
such member from such pool.
(4) Other definitions.--For purposes of this
subsection--
(A) Startup capital.--The term ``startup
capital'' means any capital contributed to, and
any program-related investments (within the
meaning of section 4944(c)) made in, the risk
pool before such pool commences operations.
(B) Nonmember charitable organization.--The
term ``nonmember charitable organization''
means any organization which is described in
subsection (c)(3) and exempt from tax under
subsection (a) and which is not a member of the
risk pool and does not benefit (directly or
indirectly) from the insurance coverage
provided by the pool to its members.
(o) Treatment of hospitals participating in provider-
sponsored organizations.--An organization shall not fail to be
treated as organized and operated exclusively for a charitable
purpose for purposes of subsection (c)(3) solely because a
hospital which is owned and operated by such organization
participates in a provider-sponsored organization (as defined
in section 1855(d) of the Social Security Act), whether or not
the provider-sponsored organization is exempt from tax. For
purposes of subsection (c)(3), any person with a material
financial interest in such a provider-sponsored organization
shall be treated as a private shareholder or individual with
respect to the hospital.
(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), 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.
(8) Application to terrorist supporting
organizations.--
(A) In general.--For purposes of this
subsection, in the case of any terrorist
supporting organization--
(i) such organization (and the
designation of such organization under
subparagraph (B)) shall be treated as
described in paragraph (2), and
(ii) the period of suspension
described in paragraph (3) with respect
to such organization shall be treated
as beginning on the date that the
Secretary designates such organization
under subparagraph (B) and ending on
the date that the Secretary rescinds
such designation under subparagraph
(D).
(B) Terrorist supporting organization.--For
purposes of this paragraph, the term
``terrorist supporting organization'' means any
organization which is designated by the
Secretary as having provided, during the 3-year
period ending on the date of such designation,
material support or resources (within the
meaning of section 2339B of title 18, United
States Code) to an organization described in
paragraph (2) (determined after the application
of this paragraph to such organization) in
excess of a de minimis amount.
(C) Designation procedure.--
(i) Notice requirement.--Prior to
designating any organization as a
terrorist supporting organization under
subparagraph (B), the Secretary shall
mail to the most recent mailing address
provided by such organization on the
organization's annual return or notice
under section 6033 (or subsequent form
indicating a change of address) a
written notice which includes--
(I) a statement that the
Secretary will designate such
organization as a terrorist
supporting organization unless
the organization satisfies the
requirements of subclause (I)
or (II) of clause (ii),
(II) the name of the
organization or organizations
with respect to which the
Secretary has determined such
organization provided material
support or sources as described
in subparagraph (B), and
(III) a description of such
material support or resources
to the extent consistent with
national security and law
enforcement interests.
(ii) Opportunity to cure.--In the
case of any notice provided to an
organization under clause (i), the
Secretary shall, at the close of the
90-day period beginning on the date
that such notice was sent, designate
such organization as a terrorist
supporting organization under
subparagraph (B) if (and only if) such
organization has not (during such
period)--
(I) demonstrated to the
satisfaction of the Secretary
that such organization did not
provide the material support or
resources referred to in
subparagraph (B), or
(II) made reasonable efforts
to have such support or
resources returned to such
organization and certified in
writing to the Secretary that
such organization will not
provide any further support or
resources to organizations
described in paragraph (2).
A certification under subclause (II)
shall not be treated as valid if the
organization making such certification
has provided any other such
certification during the preceding 5
years.
(D) Rescission.--The Secretary shall rescind
a designation under subparagraph (B) if (and
only if)--
(i) the Secretary determines that
such designation was erroneous,
(ii) after the Secretary receives a
written certification from an
organization that such organization did
not receive the notice described in
subparagraph (C)(i)--
(I) the Secretary determines
that it is reasonable to
believe that such organization
did not receive such notice,
and
(II) such organization
satisfies the requirements of
subclause (I) or (II) of
subparagraph (C)(ii)
(determined after taking into
account the last sentence
thereof), or
(iii) the Secretary determines, with
respect to all organizations to which
the material support or resources
referred to in subparagraph (B) were
provided, the periods of suspension
under paragraph (3) have ended.
A certification described in the matter
preceding subclause (I) of clause (II) shall
not be treated as valid if the organization
making such certification has provided any
other such certification during the preceding 5
years.
(E) Administrative review by internal revenue
service independent office of appeals.--In the
case of the designation of an organization by
the Secretary as a terrorist supporting
organization under subparagraph (B), a dispute
regarding such designation shall be subject to
resolution by the Internal Revenue Service
Independent Office of Appeals under section
7803(e) in the same manner as if such
designation were made by the Internal Revenue
Service and paragraph (5) of this subsection
did not apply.
(F) Jurisdiction of united states courts.--
Notwithstanding paragraph (5), the United
States district courts shall have exclusive
jurisdiction to review a final determination
with respect to an organization's designation
as a terrorist supporting organization under
subparagraph (B). In the case of any such
determination which was based on classified
information (as defined in section 1(a) of the
Classified Information Procedures Act), such
information may be submitted to the reviewing
court ex parte and in camera. For purposes of
this subparagraph, a determination with respect
to an organization's designation as a terrorist
supporting organization shall not fail to be
treated as a final determination merely because
such organization fails to utilize the dispute
resolution process of the Internal Revenue
Service Independent Office of Appeals provided
under subparagraph (E).
(q) Special rules for credit counseling organizations.--
(1) In general.--An organization with respect to
which the provision of credit counseling services is a
substantial purpose shall not be exempt from tax under
subsection (a) unless such organization is described in
paragraph (3) or (4) of subsection (c) and such
organization is organized and operated in accordance
with the following requirements:
(A) The organization--
(i) provides credit counseling
services tailored to the specific needs
and circumstances of consumers,
(ii) makes no loans to debtors (other
than loans with no fees or interest)
and does not negotiate the making of
loans on behalf of debtors,
(iii) provides services for the
purpose of improving a consumer's
credit record, credit history, or
credit rating only to the extent that
such services are incidental to
providing credit counseling services,
and
(iv) does not charge any separately
stated fee for services for the purpose
of improving any consumer's credit
record, credit history, or credit
rating.
(B) The organization does not refuse to
provide credit counseling services to a
consumer due to the inability of the consumer
to pay, the ineligibility of the consumer for
debt management plan enrollment, or the
unwillingness of the consumer to enroll in a
debt management plan.
(C) The organization establishes and
implements a fee policy which--
(i) requires that any fees charged to
a consumer for services are reasonable,
(ii) allows for the waiver of fees if
the consumer is unable to pay, and
(iii) except to the extent allowed by
State law, prohibits charging any fee
based in whole or in part on a
percentage of the consumer's debt, the
consumer's payments to be made pursuant
to a debt management plan, or the
projected or actual savings to the
consumer resulting from enrolling in a
debt management plan.
(D) At all times the organization has a board
of directors or other governing body--
(i) which is controlled by persons
who represent the broad interests of
the public, such as public officials
acting in their capacities as such,
persons having special knowledge or
expertise in credit or financial
education, and community leaders,
(ii) not more than 20 percent of the
voting power of which is vested in
persons who are employed by the
organization or who will benefit
financially, directly or indirectly,
from the organization's activities
(other than through the receipt of
reasonable directors' fees or the
repayment of consumer debt to creditors
other than the credit counseling
organization or its affiliates), and
(iii) not more than 49 percent of the
voting power of which is vested in
persons who are employed by the
organization or who will benefit
financially, directly or indirectly,
from the organization's activities
(other than through the receipt of
reasonable directors' fees).
(E) The organization does not own more than
35 percent of--
(i) the total combined voting power
of any corporation (other than a
corporation which is an organization
described in subsection (c)(3) and
exempt from tax under subsection (a))
which is in the trade or business of
lending money, repairing credit, or
providing debt management plan
services, payment processing, or
similar services,
(ii) the profits interest of any
partnership (other than a partnership
which is an organization described in
subsection (c)(3) and exempt from tax
under subsection (a)) which is in the
trade or business of lending money,
repairing credit, or providing debt
management plan services, payment
processing, or similar services, and
(iii) the beneficial interest of any
trust or estate (other than a trust
which is an organization described in
subsection (c)(3) and exempt from tax
under subsection (a)) which is in the
trade or business of lending money,
repairing credit, or providing debt
management plan services, payment
processing, or similar services.
(F) The organization receives no amount for
providing referrals to others for debt
management plan services, and pays no amount to
others for obtaining referrals of consumers.
(2) Additional requirements for organizations
described in subsection (c)(3).--
(A) In general.--In addition to the
requirements under paragraph (1), an
organization with respect to which the
provision of credit counseling services is a
substantial purpose and which is described in
paragraph (3) of subsection (c) shall not be
exempt from tax under subsection (a) unless
such organization is organized and operated in
accordance with the following requirements:
(i) The organization does not solicit
contributions from consumers during the
initial counseling process or while the
consumer is receiving services from the
organization.
(ii) The aggregate revenues of the
organization which are from payments of
creditors of consumers of the
organization and which are attributable
to debt management plan services do not
exceed the applicable percentage of the
total revenues of the organization.
(B) Applicable percentage.--
(i) In general.--For purposes of
subparagraph (A)(ii), the applicable
percentage is 50 percent.
(ii) Transition rule.--
Notwithstanding clause (i), in the case
of an organization with respect to
which the provision of credit
counseling services is a substantial
purpose and which is described in
paragraph (3) of subsection (c) and
exempt from tax under subsection (a) on
the date of the enactment of this
subsection, the applicable percentage
is--
(I) 80 percent for the first
taxable year of such
organization beginning after
the date which is 1 year after
the date of the enactment of
this subsection, and
(II) 70 percent for the
second such taxable year
beginning after such date, and
(III) 60 percent for the
third such taxable year
beginning after such date.
(3) Additional requirement for organizations
described in subsection (c)(4).--In addition to the
requirements under paragraph (1), an organization with
respect to which the provision of credit counseling
services is a substantial purpose and which is
described in paragraph (4) of subsection (c) shall not
be exempt from tax under subsection (a) unless such
organization notifies the Secretary, in such manner as
the Secretary may by regulations prescribe, that it is
applying for recognition as a credit counseling
organization.
(4) Credit counseling services; debt management plan
services.--For purposes of this subsection--
(A) Credit counseling services.--The term
``credit counseling services'' means--
(i) the providing of educational
information to the general public on
budgeting, personal finance, financial
literacy, saving and spending
practices, and the sound use of
consumer credit,
(ii) the assisting of individuals and
families with financial problems by
providing them with counseling, or
(iii) a combination of the activities
described in clauses (i) and (ii).
(B) Debt management plan services.--The term
``debt management plan services'' means
services related to the repayment,
consolidation, or restructuring of a consumer's
debt, and includes the negotiation with
creditors of lower interest rates, the waiver
or reduction of fees, and the marketing and
processing of debt management plans.
(r) Additional requirements for certain hospitals.--
(1) In general.--A hospital organization to which
this subsection applies shall not be treated as
described in subsection (c)(3) unless the
organization--
(A) meets the community health needs
assessment requirements described in paragraph
(3),
(B) meets the financial assistance policy
requirements described in paragraph (4),
(C) meets the requirements on charges
described in paragraph (5), and
(D) meets the billing and collection
requirement described in paragraph (6).
(2) Hospital organizations to which subsection
applies.--
(A) In general.--This subsection shall apply
to--
(i) an organization which operates a
facility which is required by a State
to be licensed, registered, or
similarly recognized as a hospital, and
(ii) any other organization which the
Secretary determines has the provision
of hospital care as its principal
function or purpose constituting the
basis for its exemption under
subsection (c)(3) (determined without
regard to this subsection).
(B) Organizations with more than 1 hospital
facility.--If a hospital organization operates
more than 1 hospital facility--
(i) the organization shall meet the
requirements of this subsection
separately with respect to each such
facility, and
(ii) the organization shall not be
treated as described in subsection
(c)(3) with respect to any such
facility for which such requirements
are not separately met.
(3) Community health needs assessments.--
(A) In general.--An organization meets the
requirements of this paragraph with respect to
any taxable year only if the organization--
(i) has conducted a community health
needs assessment which meets the
requirements of subparagraph (B) in
such taxable year or in either of the 2
taxable years immediately preceding
such taxable year, and
(ii) has adopted an implementation
strategy to meet the community health
needs identified through such
assessment.
(B) Community health needs assessment.--A
community health needs assessment meets the
requirements of this paragraph if such
community health needs assessment--
(i) takes into account input from
persons who represent the broad
interests of the community served by
the hospital facility, including those
with special knowledge of or expertise
in public health, and
(ii) is made widely available to the
public.
(4) Financial assistance policy.--An organization
meets the requirements of this paragraph if the
organization establishes the following policies:
(A) Financial assistance policy.--A written
financial assistance policy which includes--
(i) eligibility criteria for
financial assistance, and whether such
assistance includes free or discounted
care,
(ii) the basis for calculating
amounts charged to patients,
(iii) the method for applying for
financial assistance,
(iv) in the case of an organization
which does not have a separate billing
and collections policy, the actions the
organization may take in the event of
non-payment, including collections
action and reporting to credit
agencies, and
(v) measures to widely publicize the
policy within the community to be
served by the organization.
(B) Policy relating to emergency medical
care.--A written policy requiring the
organization to provide, without
discrimination, care for emergency medical
conditions (within the meaning of section 1867
of the Social Security Act (42 U.S.C. 1395dd))
to individuals regardless of their eligibility
under the financial assistance policy described
in subparagraph (A).
(5) Limitation on charges.--An organization meets the
requirements of this paragraph if the organization--
(A) limits amounts charged for emergency or
other medically necessary care provided to
individuals eligible for assistance under the
financial assistance policy described in
paragraph (4)(A) to not more than the amounts
generally billed to individuals who have
insurance covering such care, and
(B) prohibits the use of gross charges.
(6) Billing and collection requirements.--An
organization meets the requirement of this paragraph
only if the organization does not engage in
extraordinary collection actions before the
organization has made reasonable efforts to determine
whether the individual is eligible for assistance under
the financial assistance policy described in paragraph
(4)(A).
(7) Regulatory authority.--The Secretary shall issue
such regulations and guidance as may be necessary to
carry out the provisions of this subsection, including
guidance relating to what constitutes reasonable
efforts to determine the eligibility of a patient under
a financial assistance policy for purposes of paragraph
(6).
* * * * * * *
Subtitle F--Procedure and Administration
* * * * * * *
CHAPTER 77--MISCELLANEOUS PROVISIONS
Sec. 7501. Liability for taxes withheld or collected.
* * * * * * *
Sec. 7511. Time for performing certain acts postponed for hostages and
individuals wrongfully detained abroad.
* * * * * * *
SEC. 7511. TIME FOR PERFORMING CERTAIN ACTS POSTPONED FOR HOSTAGES AND
INDIVIDUALS WRONGFULLY DETAINED ABROAD.
(a) Time to Be Disregarded.--
(1) In general.--The period during which an
applicable individual was unlawfully or wrongfully
detained abroad, or held hostage abroad, shall be
disregarded in determining, under the internal revenue
laws, in respect of any tax liability of such
individual--
(A) whether any of the acts described in
section 7508(a)(1) were performed within the
time prescribed thereof (determined without
regard to extension under any other provision
of this subtitle for periods after the initial
date (as determined by the Secretary) on which
such individual was unlawfully or wrongfully
detained abroad or held hostage abroad),
(B) the amount of any interest, penalty,
additional amount, or addition to the tax for
periods after such date, and
(C) the amount of any credit or refund.
(2) Application to spouse.--The provisions of
paragraph (1) shall apply to the spouse of any
individual entitled to the benefits of such paragraph.
(b) Applicable Individual.--
(1) In general.--For purposes of this section, the
term ``applicable individual'' means any individual who
is--
(A) a United States national unlawfully or
wrongfully detained abroad, as determined under
section 302 of the Robert Levinson Hostage
Recovery and Hostage-Taking Accountability Act
(22 U.S.C. 1741), or
(B) a United States national taken hostage
abroad, as determined pursuant to the findings
of the Hostage Recovery Fusion Cell (as
described in section 304 of the Robert Levinson
Hostage Recovery and Hostage-Taking
Accountability Act (22 U.S.C. 1741b)).
(2) Information provided to treasury.--For purposes
of identifying individuals described in paragraph (1),
not later than January 1, 2025, and annually
thereafter--
(A) the Secretary of State shall provide the
Secretary with a list of the individuals
described in paragraph (1)(A), as well as any
other information necessary to identify such
individuals, and
(B) the Attorney General, acting through the
Hostage Recovery Fusion Cell, shall provide the
Secretary with a list of the individuals
described in paragraph (1)(B), as well as any
other information necessary to identify such
individuals.
(c) Modification of Treasury Databases and Information
Systems.--The Secretary shall ensure that databases and
information systems of the Department of the Treasury are
updated as necessary to ensure that statute expiration dates,
interest and penalty accrual, and collection activities are
suspended consistent with the application of subsection (a).
(d) Refund and Abatement of Penalties and Fines Imposed Prior
to Identification as Applicable Individual.--In the case of any
applicable individual--
(1) for whom any interest, penalty, additional
amount, or addition to the tax in respect to any tax
liability for any taxable year ending during the period
described in subsection (a)(1) was assessed or
collected, and
(2) who was, subsequent to such assessment or
collection, determined to be an individual described in
subparagraph (A) or (B) of subsection (b)(1),
the Secretary shall abate any such assessment and refund any
amount collected to such applicable individual in the same
manner as any refund of an overpayment of tax under section
6402.
(e) Refund and abatement of penalties and fines paid by
eligible individuals with respect to periods prior to date of
enactment of this section
(1) In general
(A) Establishment Not later than January 1,
2025, the Secretary (in consultation with the
Secretary of State and the Attorney General)
shall establish a program to allow any eligible
individual (or the spouse or any dependent (as
defined in section 152) of such individual) to
apply for a refund or an abatement of any
amount described in paragraph (2) (including
interest) to the extent such amount was
attributable to the applicable period.
(B) Identification of individuals Not later
than January 1, 2025, the Secretary of State
and the Attorney General, acting through the
Hostage Recovery Fusion Cell (as described in
section 304 of the Robert Levinson Hostage
Recovery and Hostage-Taking Accountability Act
(22 U.S.C. 1741b)), shall--
(i) compile a list, based on such
information as is available, of
individuals who were applicable
individuals during the applicable
period, and
(ii) provide the list described in
clause (i) to the Secretary.
(C) Notice For purposes of carrying out the
program described in subparagraph (A), the
Secretary (in consultation with the Secretary
of State and the Attorney General) shall, with
respect to any individual identified under
subparagraph (B), provide notice to such
individual--
(i) in the case of an individual who
has been released on or before the date
of enactment of this subsection, not
later than 90 days after the date of
enactment of this subsection, or
(ii) in the case of an individual who
is released after the date of enactment
of this subsection, not later than 90
days after the date on which such
individual is released,
that such individual may be eligible for a
refund or an abatement of any amount described
in paragraph (2) pursuant to the program
described in subparagraph (A).
(D) Authorization
(i) In general Subject to clause
(ii), in the case of any refund
described in subparagraph (A), the
Secretary shall issue such refund to
the eligible individual in the same
manner as any refund of an overpayment
of tax.
(ii) Extension of limitation on time
for refund With respect to any refund
under subparagraph (A)--
(I) the 3-year period of
limitation prescribed by
section 6511(a) shall be
extended until the end of the
1-year period beginning on the
date that the notice described
in subparagraph (C) is provided
to the eligible individual, and
(II) any limitation under
section 6511(b)(2) shall not
apply.
(2) Eligible individual For purposes of this
subsection, the term ``eligible individual'' means any
applicable individual who, for any taxable year ending
during the applicable period, paid or incurred any
interest, penalty, additional amount, or addition to
the tax in respect to any tax liability for such year
of such individual based on a determination that an act
described in section 7508(a)(1) which was not performed
by the time prescribed therefor (without regard to any
extensions).
(3) Applicable period For purposes of this
subsection, the term ``applicable period'' means the
period--
(A) beginning on January 1, 2021, and
(B) ending on the date of enactment of this
subsection.
* * * * * * *
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